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2008-04-01 2008-06-30
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2008-01-01 2008-06-30
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2009-06-30 0000908255
2008-12-31 0000908255
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iso4217:USD xbrli:shares
xbrli:shares
iso4217:USD
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Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<!-- xbrl,ns --> <div style="font-family: 'Times New Roman',Times,serif">
<div align="LEFT" style="font-size: 10pt; margin-top: 0pt"><b></b></div>
<div align="left"> </div> <div align="left" style="font-size:
10pt; margin-top: 0pt"><b> </b> </div> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(1) Basis of
Presentation</b> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The accompanying unaudited consolidated financial
statements of BorgWarner Inc. and Consolidated Subsidiaries (the “Company”)
have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes necessary for a comprehensive presentation of financial position,
results of operations and cash flow activity required by GAAP for complete
financial statements. In the opinion of management, all normal recurring adjustments
necessary for a fair presentation of results have been included. Operating
results for the three and six months ended June 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009. The balance sheet as of December 31,
2008 was derived from the audited financial statements as of that date. For
further information, refer to the consolidated financial statements and footnotes
thereto included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">We have reclassified certain 2008 amounts to conform
to the presentation of our 2009 Condensed Consolidated Statement of Operations.
The financial statements should be read in conjunction with the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2008. The Company’s presentation of the Condensed Consolidated Balance
Sheets, Condensed Consolidated Statements of Operations, Reporting Segments
Note and Comprehensive Income (Loss) Note have been adjusted to conform with
the requirements of Statement of Financial Accounting Standard No. 160,
Non-controlling Interest in Consolidated Financial Statements, (“FAS
160”). See Note 18 to the Condensed Consolidated Financial Statements
for more information regarding the Company’s first quarter 2009
adoption of FAS 160. </div> <div align="left" style="font-size: 10pt;
margin-top: 6pt">Management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the financial statements and accompanying
notes, as well as the amounts of revenues and expenses reported during the
periods covered by those financial statements and accompanying notes. Actual
results could differ from these estimates. </div> </div> </body>
</html>
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Tagged Note 2 - us-gaap:ResearchDevelopmentAndComputerSoftwareDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(2) Research
and Development</b> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The following table presents the Company’s
gross and net expenditures on research and development (“R&D”)
activities: </div> <div align="center"> <table style="font-size:
10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="52%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three
Months Ended</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px
solid #000000"><b>June 30,</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"
style="border-bottom: 0px solid #000000"><b>June 30,</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Gross
R&D expenditures </div></td> <td> </td>
<td align="left">$</td> <td align="right">50.8</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">71.7</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">99.3</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">138.7</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Customer
reimbursements </div></td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(15.0</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(13.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(31.0</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(23.4</td>
<td nowrap="nowrap">)</td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net
R&D expenditures </div></td> <td> </td>
<td align="left">$</td> <td align="right">35.8</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">57.8</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">68.3</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">115.3</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The Company’s net R&D
expenditures are included in the selling, general and administrative expenses
of the Condensed 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 million
in any of the periods presented. </div> </div> </body> </html>
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--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 3 - us-gaap:IncomeTaxDisclosureTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(3) Income Taxes</b> </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company’s
provision for income taxes is normally based on an estimated tax rate for
the year applied to the year-to-date federal, state and foreign income. However,
due to unprecedented depressed global economic conditions there is significant
uncertainty regarding industry production volumes for the remainder of the
year. This precludes us from making a reliable estimate of the annual effective
tax rate for the year. Accordingly, we have made our 2009 income tax provision
pursuant to Financial Accounting Standards Board (“FASB”)
Interpretation No. 18, Accounting for Income Taxes in Interim Periods,
which provides that tax (or benefit) in each foreign jurisdiction that is
not subject to a valuation allowance be separately computed as ordinary income/(loss)
occurs within the jurisdiction for the quarter. The actual global effective
tax rate for the six months is calculated to be a benefit of 39%, which resulted
in a 36% tax rate (benefit) for the second quarter. This represents
an income tax benefit of ($25.7) million on the loss of ($65.9) million for
the first six months of 2009. It results in a ($19.1) million benefit on the
loss of ($53.0) million for the second quarter of 2009. </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30,
2009, the balance of gross unrecognized tax benefits was $61.2 million.
Included in the balance at June 30, 2009 was $50.9 million
of tax positions that are permanent in nature and, if recognized, would reduce
the global effective tax rate. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">During the first quarter of 2008, the Company made
a $6.6 million cash payment to the Internal Revenue Service (“IRS”)
to resolve agreed upon issues of the ongoing IRS examination of the Company’s
2002-2004 tax years. Also, there was a reduction in the first quarter of 2008
of $6.7 million related to the Company’s unrecognized tax benefits
balance due to settlement of the agreed upon issues primarily related to the
Extraterritorial Income Exclusion for the 2002-2004 tax years. The Company
is currently in the process of settling the disputed issues with appeals related
to the 2002-2004 IRS audit. Upon settlement of the IRS audits related to the
periods 2002-2004, the gross unrecognized tax benefits balance will be reevaluated.
Possible changes related to other examinations cannot be reasonably estimated
within the next 12 months. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The Company recognizes interest and penalties related
to unrecognized tax benefits in income tax expense. The Company had accrued
approximately $11.4 million for the payment of interest and penalties
at December 31, 2008. The Company had approximately $12.3 million
for the payment of interest and penalties accrued at June 30, 2009.
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, and various states and foreign jurisdictions. The Company is
no longer subject to income tax examinations by tax authorities in its major
tax jurisdictions as follows: </div> <div align="center"> <table
style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0"
width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="88%"> </td> <td width="5%"> </td>
<td width="7%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center">Years No Longer</td> </tr>
<tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 1px solid #000000">Tax Jurisdiction</td> <td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000">Subject
to Audit</td> </tr> <!-- End Table Head --> <!-- Begin
Table Body --> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">U.S. Federal </div></td>
<td> </td> <td align="center" valign="top" nowrap="nowrap">2001
and prior</td> </tr> <tr valign="bottom"> <td> <div
style="margin-left:15px; text-indent:-15px">Brazil </div></td>
<td> </td> <td align="center" valign="top">2002
and prior</td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">France
</div></td> <td> </td> <td align="center"
valign="top">2006 and prior</td> </tr> <tr valign="bottom">
<td> <div style="margin-left:15px; text-indent:-15px">Germany
</div></td> <td> </td> <td align="center"
valign="top">2002 and prior</td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Hungary </div></td> <td> </td>
<td align="center" valign="top">2004 and prior</td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Italy
</div></td> <td> </td> <td align="center"
valign="top">2002 and prior</td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Japan </div></td> <td> </td>
<td align="center" valign="top">2006 and prior</td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">South
Korea </div></td> <td> </td> <td align="center"
valign="top">2004 and prior</td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">United Kingdom </div></td> <td> </td>
<td align="center" valign="top">2006 and prior</td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">In certain tax jurisdictions the
Company may have more than one taxpayer. The table above reflects the status
of the major taxpayer in each major tax jurisdiction. </div> </div>
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Tagged Note 4 - bwa:SalesOfReceivablesTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(4) Sales of Receivables</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The
Company securitized and sold certain receivables through third party financial
institutions without recourse. The amount sold would vary each month based
on the amount of underlying receivables. The maximum size of the facility
was set at $50 million since fourth quarter of 2003. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On April 24,
2009 the Company’s $50 million receivables securitization
facility matured and was not renewed. The impact of this maturity was an increase
in receivables of $50 million and a decrease in cash of $50 million
in the second quarter of 2009. This is reflected as a Financing activity in
the Condensed Consolidated Statements of Cash Flows. </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt">During the six-month
periods ended June 30, 2009 and 2008, total cash proceeds from sales
of accounts receivable were $200 million and $300 million,
respectively. The Company paid servicing fees related to these receivables
for the three and six months ended June 30, 2009 and 2008 of $0.1
million and $0.4 million and $0.4 million and $1.0 million,
respectively. These amounts are recorded in interest expense and finance charges
in the Condensed Consolidated Statements of Operations. </div> </div>
</body> </html>
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Tagged Note 5 - us-gaap:InventoryDisclosureTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(5) Inventories</b> </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Inventories
are valued at the lower of cost or market. The cost of U.S. inventories is
determined by the last-in, first-out (“LIFO”) method,
while the operations outside the U.S. use the first-in, first-out (“FIFO”)
or average-cost methods. Inventories consisted of the following: </div>
<div align="center"> <table style="font-size: 10pt; text-align: left"
cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin
Table Head --> <tr valign="bottom"> <td width="78%"> </td>
<td width="5%"> </td> <td width="2%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>     June
30,     </b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>December 31,</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000">(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Raw
material and supplies </div></td> <td> </td>
<td align="left">$</td> <td align="right">190.8</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">260.7</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Work
in progress </div></td> <td> </td> <td> </td>
<td align="right">67.8</td> <td> </td> <td> </td>
<td> </td> <td align="right">95.7</td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Finished goods </div></td>
<td> </td> <td> </td> <td align="right">70.8</td>
<td> </td> <td> </td> <td> </td>
<td align="right">111.4</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">FIFO
inventories </div></td> <td> </td> <td> </td>
<td align="right">329.4</td> <td> </td> <td> </td>
<td> </td> <td align="right">467.8</td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">LIFO reserve </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(15.9</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(16.6</td> <td nowrap="nowrap">)</td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Inventories,
net </div></td> <td> </td> <td align="left">$</td>
<td align="right">313.5</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">451.2</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <!-- End Table Body -->
</table> </div> </div> </body> </html>
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--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 6 - us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(6) Property,
Plant & Equipment</b> </div> <div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0"
cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="78%"> </td> <td width="5%"> </td>
<td width="2%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000"></td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>     June
30,     </b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>December 31,</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td>(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Land
and buildings </div></td> <td> </td> <td
align="left">$</td> <td align="right">624.3</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">619.8</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Machinery
and equipment </div></td> <td> </td> <td> </td>
<td align="right">1,745.3</td> <td> </td>
<td> </td> <td> </td> <td align="right">1,756.1</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Capital
leases </div></td> <td> </td> <td> </td>
<td align="right">1.1</td> <td> </td> <td> </td>
<td> </td> <td align="right">1.1</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Construction in progress </div></td> <td> </td>
<td> </td> <td align="right">150.3</td> <td> </td>
<td> </td> <td> </td> <td align="right">160.0</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total
property, plant & equipment </div></td> <td> </td>
<td> </td> <td align="right">2,521.0</td>
<td> </td> <td> </td> <td> </td>
<td align="right">2,537.0</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:30px;
text-indent:-15px">Less accumulated depreciation </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(1,104.5</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(1,047.4</td> <td nowrap="nowrap">)</td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">  </div></td>
<td> </td> <td> </td> <td align="right">1,416.5</td>
<td> </td> <td> </td> <td> </td>
<td align="right">1,489.6</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Tooling, net of amortization </div></td>
<td> </td> <td> </td> <td align="right">85.6</td>
<td> </td> <td> </td> <td> </td>
<td align="right">96.6</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:45px; text-indent:-15px">Property, plant &
equipment — net </div></td> <td> </td>
<td align="left">$</td> <td align="right">1,502.1</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">1,586.2</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <!-- Folio -->
<!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 6pt">Interest costs capitalized during the six-month
periods ended June 30, 2009 and June 30, 2008 were $5.4
million and $5.5 million, respectively. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009 and
December 31, 2008, accounts payable of $28.7 million and
$43.2 million, respectively, were related to property, plant and
equipment purchases. </div> <div align="left" style="font-size: 10pt;
margin-top: 6pt">As of June 30, 2009 and December 31,
2008, specific assets of $3.6 million and $7.4 million,
respectively, were pledged as collateral under certain of the Company’s
long-term debt agreements. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">As a result of the impairment charges recorded in
the third and fourth quarters of 2008, depreciation expense for the three
and six months ended June 30, 2009 was reduced by approximately $3 million
and $6 million, respectively. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">During the first quarter of 2009, based on current
market conditions and asset utilization rates, the Company elected to extend
the useful lives of certain machinery and equipment. As a result of this change
in estimate, depreciation expense for the three and six months ended June 30,
2009 was reduced by approximately $5 million and $9 million,
respectively. </div> </div> </body> </html>
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XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 7 - us-gaap:ProductWarrantyDisclosureTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(7) Product Warranty</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The
Company provides warranties on some of its products. The warranty terms are
typically from one to three years. Provisions for estimated expenses related
to product warranty are made at the time products are sold. These estimates
are established using historical information about the nature, frequency,
and average cost of warranty claims. Management actively studies trends of
warranty claims and takes action to improve product quality and minimize warranty
claims. While management believes that the warranty accrual is appropriate,
actual claims incurred could differ from the original estimates, requiring
adjustments to the accrual. The accrual is recorded in both long-term and
short-term liabilities on the balance sheet. The following table summarizes
the activity in the warranty accrual accounts: </div> <div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0"
cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="76%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px
solid #000000"><b>June 30,</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000">(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Beginning
balance </div></td> <td> </td> <td align="left">$</td>
<td align="right">82.1</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">70.1</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Provision </div></td>
<td> </td> <td> </td> <td align="right">15.4</td>
<td> </td> <td> </td> <td> </td>
<td align="right">21.8</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Payments </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(30.0</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(16.1</td> <td nowrap="nowrap">)</td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Currency translation </div></td> <td> </td>
<td> </td> <td align="right">0.4</td> <td> </td>
<td> </td> <td> </td> <td align="right">4.3</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Ending
balance </div></td> <td> </td> <td align="left">$</td>
<td align="right">67.9</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">80.1</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <!-- End Table Body -->
</table> </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">The product warranty liability is classified in the consolidated balance
sheet as follows: </div> <div align="center"> <table style="font-size:
10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="76%"> </td>
<td width="5%"> </td> <td width="2%"> </td>
<td width="7%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>     June
30,     </b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>December 31,</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000">(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accounts
payable and accrued expenses </div></td> <td> </td>
<td align="left">$</td> <td align="right">42.0</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">51.4</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other
non-current liabilities </div></td> <td> </td>
<td> </td> <td align="right">25.9</td> <td> </td>
<td> </td> <td> </td> <td align="right">30.7</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total
product warranty liability </div></td> <td> </td>
<td align="left">$</td> <td align="right">67.9</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">82.1</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <!-- Folio -->
<!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family:
'Times New Roman',Times,serif"> </div> </body> </html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 8 - us-gaap:DebtDisclosureTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(8) Notes Payable and Long-Term
Debt</b> </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">Following is a summary of notes payable and long-term debt, including
the current portion. The weighted average interest rate on all borrowings
outstanding as of June 30, 2009 and December 31, 2008 was
6.0% and 5.0%, respectively. </div> <div align="center"> <table
style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0"
width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="52%"> </td> <td width="5%"> </td>
<td width="3%"> </td> <td width="1%"> </td>
<td width="3%"> </td> <td width="5%"> </td>
<td width="3%"> </td> <td width="1%"> </td>
<td width="3%"> </td> <td width="5%"> </td>
<td width="3%"> </td> <td width="1%"> </td>
<td width="3%"> </td> <td width="5%"> </td>
<td width="3%"> </td> <td width="1%"> </td>
<td width="3%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000"> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px
solid #000000"><b>June 30, 2009</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px
solid #000000"><b>December 31, 2008</b></td> </tr>
<tr style="font-size: 8pt" valign="bottom"> <td>(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">Long-Term</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">Long-Term</td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr style="font-size: 1px"> <td> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Bank borrowings and other </div></td> <td> </td>
<td align="right">$</td> <td align="right">51.6</td>
<td> </td> <td> </td> <td align="right">$</td>
<td align="right">0.5</td> <td> </td> <td> </td>
<td align="right">$</td> <td align="right">130.7</td>
<td> </td> <td> </td> <td align="right">$</td>
<td align="right">1.0</td> <td> </td> </tr>
<tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:15px;
text-indent:-15px">Term loans due through 2015 (at an average rate of 4.1%
in 2009 and 4.9% in 2008) </div></td> <td> </td>
<td> </td> <td align="right">44.2</td> <td> </td>
<td> </td> <td> </td> <td align="right">8.5</td>
<td> </td> <td> </td> <td> </td>
<td align="right">53.1</td> <td> </td> <td> </td>
<td> </td> <td align="right">12.9</td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">6.50% Senior Notes
due 2/17/09, net of unamortized discount (a) </div></td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">136.7</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">3.50% Convertible Notes due 4/15/12, net of unamortized
discount </div></td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">321.7</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">5.75%
Senior Notes due 11/01/16, net of unamortized discount (a) </div></td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">149.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">149.2</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">8.00%
Senior Notes due 10/01/19, net of unamortized discount (a) </div></td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">133.9</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">133.9</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">7.125% Senior Notes due 02/15/29,
net of unamortized discount </div></td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">119.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">119.2</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> </tr> <tr valign="bottom">
<td> <div style="margin-left:15px; text-indent:-15px">Carrying
amount of notes payable and long-term debt </div></td> <td> </td>
<td> </td> <td align="right">95.8</td> <td> </td>
<td> </td> <td> </td> <td align="right">733.0</td>
<td> </td> <td> </td> <td> </td>
<td align="right">320.5</td> <td> </td> <td> </td>
<td> </td> <td align="right">416.2</td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Impact of derivatives
on debt (a) </div></td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">33.2</td>
<td> </td> <td> </td> <td> </td>
<td align="right">0.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">43.4</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Total notes payable and long-term debt </div></td>
<td> </td> <td align="right">$</td> <td
align="right">95.8</td> <td> </td> <td> </td>
<td align="right">$</td> <td align="right">766.2</td>
<td> </td> <td> </td> <td align="right">$</td>
<td align="right">320.7</td> <td> </td> <td> </td>
<td align="right">$</td> <td align="right">459.6</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> </td> <td> </td> <td colspan="7"
align="left" style="border-top: 3px double #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
3px double #000000"> </td> </tr> <!-- End Table
Body --> </table> </div> <div align="left"> <div style="font-size:
3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000"> 
</div> </div> <table width="100%" border="0" cellpadding="0"
cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td
width="3%"></td> <td width="1%"></td> <td width="96"></td>
</tr> <tr valign="top"> <td nowrap="nowrap" align="left">(a)</td>
<td> </td> <td>In 2006, the Company entered into
several interest rate swaps that had the effect of converting $325.0 million
of fixed rate notes to variable rates. The weighted average effective interest
rate of these borrowings, including the effects of outstanding swaps as noted
in Note 10 was 5.3% as of December 31, 2008. In the first quarter
of 2009, $100 million in interest rate swaps related to the Company’s
2009 fixed rate debt matured and the Company terminated $150 million
in interest rate swap agreements related to the Company’s 2016 fixed
rate debt and $75 million of interest rate swap agreements related
to the Company’s 2019 fixed rate debt. As a result of the first
quarter 2009 swap terminations, a $34.5 million gain remained in
debt to be amortized over the remaining lives of the respective 2016 and 2019
debt. As of June 30, 2009, the unamortized portion was $33.2 million.</td>
</tr> </table> <div align="left" style="font-size: 10pt; margin-top:
6pt">The Company has a multi-currency revolving credit facility, which
provided for borrowings up to $600 million through July 22,
2009. On April 30, 2009, the Company extended its revolving credit
facility for 18 months, maturing January 22, 2011. The facility
was reduced to $250 million beginning July 23, 2009. The
facility is now secured by unperfected pledges of the Company’s
equity interests in its subsidiaries and certain assets. No secured party
is entitled to perfect its lien on any of the collateral until the long term
unsecured senior, non-credit enhanced debt rating of the Company is less than
or equal to BB+ by Standard & Poor’s and less
than or equal to Ba1 by Moody’s. The Company’s credit
rating as of June 30, 2009 was BBB by Standard & Poor’s
and Ba1 by Moody’s. The three key covenants of the credit agreement
are a net worth test, a debt compared to EBITDA (“Earnings Before
Interest, Taxes, Depreciation and Amortization”) test, and an interest
coverage test. The Company was in compliance with all covenants at June 30,
2009 and expects to remain compliant in future periods. At June 30,
2009 and December 31, 2008 there were no outstanding borrowings under
the facility. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">The Company’s 6.5% Senior Notes of $136.7 million
matured on February 17, 2009. The Company had outstanding letters
of credit at June 30, 2009 and December 31, 2008 of $15.2 million
and $21.4 million, respectively. The letters of credit typically act as a
guarantee of payment to certain third parties in accordance with specified
terms and conditions. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">On April 9, 2009, the Company issued $373.8 million
in convertible senior notes due April 15, 2012. Under FASB Staff
Position No. APB 14-1, Accounting for Convertible Debt Instruments
That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)
(“FSP APB 14-1”), the Company must account for the convertible
senior notes by bifurcating the instrument between their liability and equity
components. The value of the debt component is based on the fair value of
issuing a similar nonconvertible debt security. The equity component of the
convertible debt security is calculated by deducting the value of the liability
from the proceeds received at issuance. Therefore, the Company’s
June 30, 2009 Condensed Consolidated Balance Sheet includes an increase
in debt of $321.7 million and an increase in capital in excess of
par of $34.6 million. Additionally, FSP APB 14-1 requires us to accrete
the discounted carrying value of the convertible notes to their face value
over the term of the notes. The Company’s interest expense associated
with this bond accretion is based on the effective interest rate of the convertible
senior notes of 9.365%. The total interest expense related to the convertible
notes in the Company’s Consolidated Statement of Operations was
$7.4 million for the second quarter, of which $4.2 million
was non-cash. For the full year of 2009, interest expense related to the convertible
notes will be approximately $22.5 million, of which approximately $12.8 million
will be non-cash. The notes will pay interest semi-annually of $6.5 million,
which is at a coupon rate of 3.50% per year, beginning in October of this
year. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">Holders of the notes may convert their notes at their option at any
time prior to the close of business on the second scheduled trading day immediately
preceding the maturity date of the notes, in multiples of $1,000 principal
amount. The initial conversion rate for the notes is 30.4706 shares of the
Company’s common stock per $1,000 principal amount of notes (representing
an initial conversion price of approximately $32.82 per share of common stock).
The conversion price represents a conversion premium of 27.5% over the last
reported sale price of the Company’s common stock on the New York
Stock Exchange on April 6, 2009, of $25.74 per share. As of June 30,
2009, the if-converted value of the 3.50% Convertible Senior Notes was approximately
$15.2 million. In conjunction with the note offering, the Company
entered into a bond hedge overlay at a net pre-tax cost of $25.2 million,
effectively raising the conversion premium to 50.0%, or approximately $38.61
per share. Upon conversion, the Company will pay or deliver cash, shares of
our common stock or a combination thereof at our election. The convertible
senior notes were issued under the Company’s $750 million
universal shelf registration filed with the Securities and Exchange Commission,
leaving approximately $376 million available as of June 30,
2009. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">As of June 30, 2009 and December 31, 2008, the estimated
fair values of the Company’s senior unsecured notes totaled $743.1 million
and $532.3 million, respectively. The estimated fair values were
$19.1 million higher at June 30, 2009 and $6.7 million
lower at December 31, 2008 than their respective carrying values.
Fair market values are developed by the use of estimates obtained from brokers
and other appropriate valuation techniques based on information available
as of quarter-end and year-end. The fair value estimates do not necessarily
reflect the values the Company could realize in the current markets. </div>
</div> </body> </html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 9 - us-gaap:FairValueDisclosuresTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(9) Fair Value Measurements</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">On
January 1, 2009, the Company fully adopted as required, Statement
of Financial Accounting Standards No. 157 – “Fair
Value Measurements” (“SFAS 157”) which expands
the disclosure of fair value measurements and its impact on the Company’s
financial statements. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">Statement No. 157 emphasizes that fair
value is a market-based measurement, not an entity specific measurement. Therefore,
a fair value measurement should be determined based on assumptions that market
participants would use in pricing an asset or liability. As a basis for considering
market participant assumptions in fair value measurements, SFAS 157 establishes
a fair value hierarchy, which prioritizes the inputs used in measuring fair
values as follows: </div> <div align="left" style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size:
10pt; background: transparent; color: #000000; text-align: left"> <tr>
<td width="3%"></td> <td width="1%"></td> <td></td>
</tr> <tr valign="top"> <td nowrap="nowrap" align="left">     Level
1:</td> <td> </td> <td>Observable inputs
such as quoted prices in active markets;</td> </tr> </table>
</div> <div align="left" style="margin-top: 6pt"> <table width="100%"
border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background:
transparent; color: #000000; text-align: left"> <tr> <td width="3%"></td>
<td width="1%"></td> <td></td> </tr> <tr
valign="top"> <td nowrap="nowrap" align="left">     Level
2:</td> <td> </td> <td>Inputs, other than
quoted prices in active markets, that are observable either directly or indirectly;
and</td> </tr> </table> </div> <div align="left"
style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0"
cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000;
text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td>
<td></td> </tr> <tr valign="top"> <td nowrap="nowrap"
align="left">     Level 3:</td>
<td> </td> <td>Unobservable inputs in which there
is little or no market data, which require the reporting entity to develop
its own assumptions.</td> </tr> </table> </div> <!--
Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div
style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 6pt">Assets and liabilities measured
at fair value are based on one or more of the following three valuation techniques
noted in SFAS 157: </div> <div style="margin-top: 6pt"> <table
width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size:
10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color:
#000000; background: transparent"> <td width="4%" style="background:
transparent"> </td> <td width="3%" nowrap="nowrap" align="left">A.</td>
<td width="1%"> </td> <td>Market approach: Prices
and other relevant information generated by market transactions involving
identical or comparable assets or liabilities.</td> </tr> <tr>
<td style="font-size: 6pt"> </td> </tr> <tr
valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left">B.</td> <td width="1%"> </td>
<td>Cost approach: Amount that would be required to replace the service
capacity of an asset (replacement cost).</td> </tr> <tr>
<td style="font-size: 6pt"> </td> </tr> <tr
valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left">C.</td> <td width="1%"> </td>
<td>Income approach: Techniques to convert future amounts to a single
present amount based upon market expectations (including present value techniques,
option-pricing and excess earnings models).</td> </tr> </table>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The
following table classifies the assets and liabilities measured at fair value
during the period ended June 30, 2009: </div> <div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0"
cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="40%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="7%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="10"
style="border-bottom: 1px solid #000000"><b>Basis of Fair Value Measurements</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Quoted</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Prices
in</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Active</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Significant</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Balance
at</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Markets for</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Observable</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td nowrap="nowrap" align="left"></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June
30,</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Identical Items</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Inputs</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Inputs</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center"><b>Valuation</b></td> </tr> <tr
style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level
2)</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>(Level 3)</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" style="border-bottom:
1px solid #000000"><b>Technique</b></td> </tr>
<!-- End Table Head --> <!-- Begin Table Body --> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Assets: </div></td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td align="center" valign="top"> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Commodity contracts </div></td> <td> </td>
<td align="left">$</td> <td align="right">6.5</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">—</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">6.5</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">—</td>
<td> </td> <td> </td> <td align="center"
valign="top">A</td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign
exchange contracts </div></td> <td> </td>
<td> </td> <td align="right">4.0</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">4.0</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td align="center"
valign="top">A</td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Fixed assets </div></td>
<td> </td> <td> </td> <td align="right">11.7</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">11.7</td> <td> </td> <td> </td>
<td align="center" valign="top">B</td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td align="center"
valign="top"> </td> </tr> <tr valign="bottom"><!--
Blank Space --> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td align="center" valign="top"> </td> </tr> <tr
valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td align="left">$</td> <td align="right">22.2</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">—</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">10.5</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">11.7</td>
<td> </td> <td> </td> <td align="center"
valign="top"> </td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td align="center"
valign="top"> </td> </tr> <tr valign="bottom"><!--
Blank Space --> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td align="center" valign="top"> </td> </tr> <tr
valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Liabilities:
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td align="center" valign="top"> </td> </tr> <tr
valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Commodity contracts </div></td> <td> </td>
<td align="left">$</td> <td align="right">2.6</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">—</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">2.6</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">—</td>
<td> </td> <td> </td> <td align="center"
valign="top">A</td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td> <td> </td> <td> </td>
<td align="right">26.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">26.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td align="center"
valign="top">A</td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net
investment hedge contracts </div></td> <td> </td>
<td> </td> <td align="right">43.4</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">43.4</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td align="center"
valign="top">A</td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td align="center"
valign="top"> </td> </tr> <tr valign="bottom"><!--
Blank Space --> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td align="center" valign="top"> </td> </tr> <tr
valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td align="left">$</td>
<td align="right">72.2</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">—</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">72.2</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">—</td>
<td> </td> <td> </td> <td align="center"
valign="top"> </td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td align="center"
valign="top"> </td> </tr> <!-- End Table Body -->
</table> </div> <div align="left" style="font-size: 10pt; margin-top:
10pt">The change in the fair value of the Company’s net fixed
assets impaired in 2009 is as follows: </div> <div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0"
cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="88%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair Value<br
/> Measurements<br /> Using Significant</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Unobservable
<br /> Inputs</b></td> <td> </td> </tr>
<tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net
book value prior to impairment </div></td> <td> </td>
<td align="left">$</td> <td align="right">48.0</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:30px; text-indent:-15px">Asset impairment charge
</div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(36.3</td>
<td nowrap="nowrap">)</td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net
book value after impairment </div></td> <td> </td>
<td align="left">$</td> <td align="right">11.7</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <!-- End Table Body -->
</table> </div> </div> </body> </html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 10 - us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(10) Financial
Instruments</b> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">On January 1, 2009, the Company adopted
as required, Statement of Financial Accounting Standards No. 161,
“Disclosures about Derivative Instruments and Hedging Activities”
(“SFAS 161”) which expands the disclosure of financial
instruments. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">The Company’s financial instruments include cash, marketable
securities, trade receivables, trade payables, and notes payable. Due to the
short-term nature of these instruments, their book value approximates their
fair value. The Company’s financial instruments also include long-term
debt, interest rate and currency swaps, commodity forward contracts, and foreign
currency forward contracts. All derivative contracts are placed with counterparties
that have an S&P, or equivalent, investment grade credit rating at
the time of the contracts’ placement. At June 30, 2009
the Company had no derivative contracts that contained credit risk related
contingent features. </div> <div align="left" style="font-size: 10pt;
margin-top: 6pt">The Company selectively uses cross-currency swaps to hedge
the foreign currency exposure associated with our net investment in certain
foreign operations (net investment hedges). Fair values of cross currency
swaps are based on observable inputs, such as interest rate, yield curves,
credit risks, currency exchange rates and other external valuation methodology
(Level 2 inputs under SFAS 157). </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The Company uses certain commodity derivative instruments
to protect against commodity price changes related to forecasted raw material
and supplies purchases. The primary purpose of our commodity price hedging
activities is to manage the volatility associated with these forecasted purchases.
The Company primarily utilizes forward and option contracts, which are designated
as cash flow hedges. The fair values for certain commodity derivative instruments
are based on Level 2 evidence (for example, future prices reported on commodity
exchanges) under SFAS 157. To the extent that derivative instruments are deemed
to be effective as defined by FAS 133, gains and losses arising from these
contracts are deferred in other comprehensive income or loss. Such gains and
losses will be reclassified into income as the underlying operating transactions
are realized. Gains and losses not qualifying for deferral treatment have
been credited/charged to income as they are recognized. </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt">The Company uses
foreign exchange forward and option contracts to protect against exchange
rate movements for forecasted cash flows for purchases, operating expenses
or sales transactions designated in currencies other than the functional currency
of the operating unit. Most contracts mature in less than one year, however,
certain long-term commitments are covered by forward currency arrangements
to protect against currency risk through 2011. Foreign currency contracts
require the Company, at a future date, to either buy or sell foreign currency
in exchange for the operating units’ local currency. To the extent
that derivative instruments are deemed to be effective as defined by FAS 133,
gains and losses arising from these contracts are deferred in other comprehensive
income or loss. Such gains and losses will be reclassified into income as
the underlying operating transactions are realized. Gains and losses not qualifying
for deferral treatment have been credited/charged to income as they are recognized.
The fair values of foreign exchange forward and option contracts are based
on Level 2 inputs under SFAS 157, such as quoted exchange rates by various
exchanges. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">In 2006, the Company entered into a series of interest rate swap agreements
to effectively convert a portion of its senior notes from fixed to variable
interest rates and were designated as fair value hedges for the senior notes.
In the first quarter of 2009, $100 million of interest rate swap
agreements relating to the 2009 fixed-rate debt matured. Also, in the first
quarter of 2009, the Company terminated $150 million of interest
rate swap agreements relating to the 2016 fixed rate debt and $75 million
of interest rate swap agreements relating to the 2019 fixed rate debt. The
early termination of the 2016 and 2019 interest rate swap agreements resulted
in a gain of $34.5 million that will be amortized as a reduction
of interest expense over the remaining life of the respective 2016 and 2019
debt. The Company recognized $5.7 million in interest expense in
the first quarter of 2009 as a result of the early termination. This early
termination also resulted in the Company receiving net cash proceeds of $30.0 million,
which is recognized in the Financing section of the Condensed Consolidated
Statement of Cash Flows. As of June 30, 2009, there were no outstanding
interest rate swap agreements. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">Effectiveness for cash flow, fair value and net
investment hedges is assessed at the inception of the hedging relationship
and quarterly, thereafter. Ineffectiveness is measured quarterly and results
are recognized in earnings. </div> <!-- Folio --> <!-- /Folio
--> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times
New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top:
6pt">The Company selectively uses cross-currency swaps to hedge the foreign
currency exposure associated with our net investment in certain foreign operations
(net investment hedges). At June 30, 2009 the following cross-currency
swaps were outstanding: </div> <div align="center"> <table
style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0"
width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="40%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="6%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="6%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="6%"> </td>
<td width="1%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px
solid #000000"><b>Cross-Currency Swaps</b></td> </tr>
<tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 0px solid #000000"><b> </b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td>(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"
style="border-bottom: 1px solid #000000"><b>in USD</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"
style="border-bottom: 1px solid #000000"><b>in Local Currency</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"
style="border-bottom: 1px solid #000000"><b>Duration</b></td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Floating
$ to Floating <font face="'Times New Roman',times,serif">€</font>
</div></td> <td> </td> <td align="right">$</td>
<td align="right">75.0</td> <td> </td> <td> </td>
<td align="right"><font face="'Times New Roman',times,serif">€</font></td>
<td align="right">58.5</td> <td> </td> <td> </td>
<td colspan="3" align="center">Nov - 16</td> </tr> <tr
valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Floating
$ to Floating ¥ </div></td> <td> </td>
<td align="right">$</td> <td align="right">150.0</td>
<td> </td> <td> </td> <td align="right">¥</td>
<td align="right">17,581.5</td> <td> </td>
<td> </td> <td colspan="3" align="center">Oct -
19</td> </tr> <!-- End Table Body --> </table> </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At June 30,
2009 the following commodity derivative contracts were outstanding: </div>
<div align="center"> <table style="font-size: 10pt; text-align: left"
cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin
Table Head --> <tr valign="bottom"> <td width="8%"> </td>
<td width="37%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="7%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="9"
style="border-bottom: 1px solid #000000"><b>Commodity Hedges</b></td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Volume</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Units
of</b></td> <td> </td> <td nowrap="nowrap"
align="center"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
1px solid #000000"><b>Commodity</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px
solid #000000"><b>Hedged</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px
solid #000000"><b>Measure</b></td> <td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Duration</b></td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Nickel </div></td>
<td> </td> <td> </td> <td align="right">1,302</td>
<td> </td> <td> </td> <td NOWRAP
colspan="3" valign="top" align="center">Metric Tons </td>
<td> </td> <td align="center" valign="top">Dec
- 10</td> </tr> <tr valign="bottom"> <td> <div
style="margin-left:15px; text-indent:-15px">Copper </div></td>
<td> </td> <td> </td> <td align="right">1,432</td>
<td> </td> <td> </td> <td colspan="3"
valign="top" align="center">Metric Tons</td> <td> </td>
<td align="center" valign="top">Dec - 10</td> </tr> <tr
valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Aluminum </div></td> <td> </td>
<td> </td> <td align="right">504</td> <td> </td>
<td> </td> <td colspan="3" valign="top" align="center">Metric
Tons</td> <td> </td> <td align="center" valign="top">Dec
- 10</td> </tr> <tr valign="bottom"> <td> <div
style="margin-left:15px; text-indent:-15px">Platinum </div></td>
<td> </td> <td> </td> <td align="right">510</td>
<td> </td> <td> </td> <td colspan="3"
valign="top" align="center">Troy Oz.</td> <td> </td>
<td align="center" valign="top">Dec - 09</td> </tr> <tr
valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Natural Gas </div></td> <td> </td>
<td> </td> <td align="right">334,584</td>
<td> </td> <td> </td> <td colspan="3"
valign="top" align="center">MMBtu</td> <td> </td>
<td align="center" valign="top">Dec - 10</td> </tr> <!--
End Table Body --> </table> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">At June 30, 2009 the following foreign
exchange derivative contracts were outstanding: </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">(millions) </div> <div
align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0"
border="0" cellpadding="0" width="100%"> <!-- Begin Table Head -->
<tr valign="bottom"> <td width="10%"> </td> <td
width="35%"> </td> <td nowrap="nowrap" width="12%" align="center"
valign="top"> </td> <td width="5%"> </td>
<td width="3%"> </td> <td width="1%"> </td>
<td width="3%"> </td> <td width="5%"> </td>
<td width="7%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td nowrap="nowrap" align="center" colspan="9"
style="border-bottom: 1px solid #000000"><b>Currency Hedges</b></td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left"><b>Functional</b></td> <td> </td>
<td align="center" valign="top"><b>Traded</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Notional
in</b></td> <td> </td> <td nowrap="nowrap"
align="center"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
1px solid #000000"><b>Currency</b></td> <td> </td>
<td align="center" valign="top" style="border-bottom: 1px solid #000000"><b>Currency</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"
style="border-bottom: 1px solid #000000"><b>Traded Currency</b></td>
<td> </td> <td nowrap="nowrap" align="center" style="border-bottom:
1px solid #000000"><b>Duration</b></td> </tr> <!--
End Table Head --> <!-- Begin Table Body --> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Brazilian Real </div></td> <td> </td>
<td align="center" valign="top">US Dollar</td> <td> </td>
<td> </td> <td align="right">4.8</td> <td> </td>
<td> </td> <td align="center" valign="top">Dec
- 09</td> </tr> <tr valign="bottom"> <td> <div
style="margin-left:15px; text-indent:-15px">British Pound </div></td>
<td> </td> <td align="center" valign="top">Euro</td>
<td> </td> <td> </td> <td align="right">127.0</td>
<td> </td> <td> </td> <td align="center"
valign="top">Dec - 11</td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Euro
</div></td> <td> </td> <td align="center"
valign="top">Hungarian Forint</td> <td> </td>
<td> </td> <td align="right">4,712.4</td>
<td> </td> <td> </td> <td align="center"
valign="top">Dec - 10</td> </tr> <tr valign="bottom">
<td> <div style="margin-left:15px; text-indent:-15px">Euro </div></td>
<td> </td> <td align="center" valign="top">British
Pound</td> <td> </td> <td> </td>
<td align="right">2.3</td> <td> </td> <td> </td>
<td align="center" valign="top">Dec - 09</td> </tr> <tr
valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Euro </div></td> <td> </td>
<td align="center" valign="top">US Dollar</td> <td> </td>
<td> </td> <td align="right">13.7</td> <td> </td>
<td> </td> <td align="center" valign="top">Dec
- 09</td> </tr> <tr valign="bottom"> <td> <div
style="margin-left:15px; text-indent:-15px">Euro </div></td>
<td> </td> <td align="center" valign="top">Japanese
Yen</td> <td> </td> <td> </td>
<td align="right">1,348.2</td> <td> </td>
<td> </td> <td align="center" valign="top">Dec
- 09</td> </tr> <tr valign="bottom" style="background: #cceeff">
<td> <div style="margin-left:15px; text-indent:-15px">Indian Rupee
</div></td> <td> </td> <td align="center"
valign="top">US Dollar</td> <td> </td> <td> </td>
<td align="right">10.4</td> <td> </td> <td> </td>
<td align="center" valign="top">Dec - 11</td> </tr> <tr
valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Korean
Won </div></td> <td> </td> <td align="center"
valign="top">Euro</td> <td> </td> <td> </td>
<td align="right">56.5</td> <td> </td> <td> </td>
<td align="center" valign="top">Dec - 10</td> </tr> <tr
valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Korean Won </div></td> <td> </td>
<td align="center" valign="top">Japanese Yen</td> <td> </td>
<td> </td> <td align="right">574.0</td> <td> </td>
<td> </td> <td align="center" valign="top">Dec
- 09</td> </tr> <tr valign="bottom"> <td> <div
style="margin-left:15px; text-indent:-15px">Mexican Peso </div></td>
<td> </td> <td align="center" valign="top">US Dollar</td>
<td> </td> <td> </td> <td align="right">2.9</td>
<td> </td> <td> </td> <td align="center"
valign="top">Dec - 09</td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">US
Dollar </div></td> <td> </td> <td align="center"
valign="top">Indian Rupee</td> <td> </td> <td> </td>
<td align="right">511.4</td> <td> </td> <td> </td>
<td align="center" valign="top">Dec - 11</td> </tr> <tr
valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">US
Dollar </div></td> <td> </td> <td align="center"
valign="top">Euro</td> <td> </td> <td> </td>
<td align="right">55.0</td> <td> </td> <td> </td>
<td align="center" valign="top">Jul - 09</td> </tr> <tr
valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">US Dollar </div></td> <td> </td>
<td align="center" valign="top">Japanese Yen</td> <td> </td>
<td> </td> <td align="right">47.3</td> <td> </td>
<td> </td> <td align="center" valign="top">Dec
- 09 </td> </tr> <!-- End Table Body --> </table>
</div> <!-- Folio --> <!-- /Folio --> </div> <!--
PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt"> At June 30,
2009 the following amounts were recorded in the Company’s balance
sheet as being payable to or receivable from counterparties. </div>
<div align="center"> <table style="font-size: 10pt; text-align: left"
cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin
Table Head --> <tr valign="bottom"> <td width="22%"> </td>
<td width="5%"> </td> <td width="7%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="7%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000">(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="5"> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="5"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000"><b>Derivatives
Designated as Hedging</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px
solid #000000"><b>Assets</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px
solid #000000"><b>Liabilities</b></td> </tr> <tr
style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 1px solid #000000"> <b>Instruments under</b>
<b>Statement 133 </b></td> <td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"
style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td nowrap="nowrap" align="center" style="border-bottom:
1px solid #000000"><b>Location</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px
solid #000000"><b>2009</b></td> </tr> <!-- End
Table Head --> <!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign
Exchange Contracts </div></td> <td> </td>
<td align="left" valign="top" nowrap="nowrap">Prepayments and Other
Current Assets</td> <td> </td> <td align="right">$</td>
<td align="right">3.9</td> <td> </td> <td> </td>
<td align="left" valign="top" nowrap="nowrap">Accounts Payable and Accrued
Expenses</td> <td> </td> <td align="right" valign="top">$</td>
<td align="right" valign="top">18.1</td> <td valign="top"> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">  </div></td>
<td> </td> <td align="left" valign="top">Other
Non-Current Assets</td> <td> </td> <td> </td>
<td align="right">0.1</td> <td> </td> <td> </td>
<td align="left" valign="top">Other Non-Current Liabilities</td>
<td> </td> <td align="right" valign="top"> </td>
<td align="right" valign="top">8.1</td> <td valign="top"> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Commodity Contracts </div></td> <td> </td>
<td align="left" valign="top">Prepayments and Other Current Assets</td>
<td> </td> <td> </td> <td align="right">4.4</td>
<td> </td> <td> </td> <td align="left"
valign="top">Accounts Payable and Accrued Expenses</td> <td> </td>
<td align="right" valign="top"> </td> <td align="right"
valign="top">2.6</td> <td valign="top"> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td align="left" valign="top">Other Non-Current Assets</td> <td> </td>
<td> </td> <td align="right">2.1</td> <td> </td>
<td> </td> <td align="left" valign="top">Other
Non-Current Liabilities</td> <td> </td> <td
align="right" valign="top"> </td> <td align="right" valign="top">—</td>
<td valign="top"> </td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Net Investment Hedges </div></td> <td> </td>
<td align="left" valign="top">Prepayments and Other Current Assets</td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td align="left"
valign="top">Accounts Payable and Accrued Expenses</td> <td> </td>
<td align="right" valign="top"> </td> <td align="right"
valign="top">—</td> <td valign="top"> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">  </div></td>
<td> </td> <td align="left" valign="top">Other
Non-Current Assets</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td align="left" valign="top">Other
Non-Current Liabilities</td> <td> </td> <td
align="right" valign="top"> </td> <td align="right" valign="top">43.4</td>
<td valign="top"> </td> </tr> <!-- End Table
Body --> </table> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">Netted in the $43.4 million carrying value
of the Net Investment Hedges is a $4.3 million favorable adjustment
for non-performance risk in accordance with FAS 157. </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt">The table below shows
deferred losses at the end of the period reported in other comprehensive income
(loss) (OCI) and amounts expected to be reclassified to income or
loss within the next twelve months. The loss expected to be reclassified to
income or loss in one year or less assumes no change in the current relationship
of the hedged item and June 30, 2009 market rates. </div> <div
align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0"
border="0" cellpadding="0" width="100%"> <!-- Begin Table Head -->
<tr valign="bottom"> <td width="22%"> </td> <td
width="58%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000"><b> </b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Gain/(Loss)</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Gain/(Loss) Expected to</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td>(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>in OCI at</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>be Reclassified to Income</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
1px solid #000000"><b>Contract Type</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>June 30, 2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>in One Year or Less</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign
Exchange </div></td> <td> </td> <td nowrap="nowrap"
align="left">$</td> <td align="right">(17.3</td> <td
nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap"
align="left">$</td> <td align="right">(9.4</td> <td
nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Commodity </div></td>
<td> </td> <td> </td> <td align="right">2.6</td>
<td> </td> <td> </td> <td> </td>
<td align="right">0.9</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Net Investment Hedges </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(39.2</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Total </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(53.9</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(8.5</td> <td nowrap="nowrap">)</td>
</tr> <!-- End Table Body --> </table> </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt">The following tables
represent gains (losses) related to hedge transactions for the three
and six months ended June 30, 2009. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">Cash Flow hedges held during the
period resulted in the following gains and losses recorded in income. The
effective portion of gains or losses exactly offset losses or gains in the
underlying transaction that they were designated to hedge, and are recorded
on the same line in the income statement. Ineffectiveness resulting from imperfect
matches between changes in value of hedge contracts and changes in value of
the underlying transaction are immediately recognized in earnings. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Derivatives
Designated as Cash Flow Hedging Instruments under Statement 133</b></u>
</div> <div align="center"> <table style="font-size: 10pt;
text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="28%"> </td>
<td width="5%"> </td> <td width="7%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="7%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000"> </td>
<td> </td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6">Gain/(Loss) Reclassified</td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6">Gain/(Loss)</td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6">from OCI to Income</td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6">Recognized in Income</td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6" style="border-bottom: 1px solid #000000">(Effective
Portion)</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6" style="border-bottom: 1px solid #000000">(Ineffective
Portion)</td> <td> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td>(millions)</td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2">Three Months Ended</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2">Six
Months Ended</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2">Three Months Ended</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2">Six
Months Ended</td> <td> </td> </tr> <tr
style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 1px solid #000000">Contract Type</td> <td> </td>
<td nowrap="nowrap" align="LEFT" style="border-bottom: 1px solid #000000">Location</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2009</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2009</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="LEFT" style="border-bottom:
1px solid #000000">Location</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000">June 30, 2009</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2009</td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Foreign Exchange </div></td>
<td> </td> <td align="left" valign="top">Sales</td>
<td> </td> <td nowrap="nowrap" align="right">$</td>
<td align="right">(1.8</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="right">$</td>
<td align="right">(8.1</td> <td nowrap="nowrap">)</td>
<td> </td> <td align="left" valign="top" nowrap="nowrap">SG&A
Expense</td> <td> </td> <td nowrap="nowrap"
align="right" valign="top">$</td> <td align="right" valign="top">(1.9</td>
<td nowrap="nowrap" valign="top">)</td> <td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td> <td align="right"
valign="top">(1.3</td> <td nowrap="nowrap" valign="top">)</td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Foreign Exchange </div></td> <td> </td>
<td align="left" valign="top" nowrap="nowrap">Cost of Goods Sold</td>
<td> </td> <td> </td> <td align="right">1.3</td>
<td> </td> <td> </td> <td> </td>
<td align="right">3.2</td> <td> </td> <td> </td>
<td align="left" valign="top">SG&A Expense</td> <td> </td>
<td align="right" valign="top"> </td> <td align="right"
valign="top">0.5</td> <td valign="top"> </td>
<td> </td> <td align="right" valign="top"> </td>
<td align="right" valign="top">0.8</td> <td valign="top"> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Foreign Exchange </div></td>
<td> </td> <td align="left" valign="top">SG&A
Expense</td> <td> </td> <td nowrap="nowrap"
align="right"> </td> <td align="right">(0.4</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="right"> </td> <td align="right">(0.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td
align="left" valign="top">SG&A Expense</td> <td> </td>
<td align="right" valign="top"> </td> <td align="right"
valign="top">—</td> <td valign="top"> </td>
<td> </td> <td align="right" valign="top"> </td>
<td align="right" valign="top">—</td> <td valign="top"> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Commodity </div></td> <td> </td>
<td align="left" valign="top">Cost of Goods Sold</td> <td> </td>
<td nowrap="nowrap" align="right"> </td> <td align="right">(2.5</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="right"> </td> <td align="right">(7.0</td>
<td nowrap="nowrap">)</td> <td> </td> <td
align="left" valign="top" nowrap="nowrap">Cost of Goods Sold</td>
<td> </td> <td align="right" valign="top"> </td>
<td align="right" valign="top">1.5</td> <td valign="top"> </td>
<td> </td> <td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">(1.4</td> <td nowrap="nowrap"
valign="top">)</td> </tr> <!-- End Table Body --> </table>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Net
investment hedges are derivative contracts entered into to hedge against changes
in exchange rates that affect the overall value of net investments in foreign
entities. Gains and losses on net investment hedges are recorded in other
comprehensive income or loss and are used to offset equivalent losses or gains
in the value of net investments that are recorded in translation gains and
losses which is also a component of other comprehensive income or loss. </div>
<!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK
--> <div style="font-family: 'Times New Roman',Times,serif"> <div
align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Derivatives
Designated as Net Investment Hedges under Statement 133</b></u>
</div> <div align="center"> <table style="font-size: 10pt;
text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="28%"> </td>
<td width="5%"> </td> <td width="7%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="7%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6">Gain/(Loss) Reclassified</td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6">Gain/(Loss)
Recognized</td> <td> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6">from OCI to Income</td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6">in Income</td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6" style="border-bottom: 1px solid #000000">(Effective
Portion)</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6" style="border-bottom: 1px solid #000000">(Ineffective
Portion)</td> <td> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td>(millions)</td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2">Three Months Ended</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2">Six
Months Ended</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2">Three Months Ended</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2">Six
Months Ended</td> <td> </td> </tr> <tr
style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 1px solid #000000">Contract Type</td> <td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000">Location</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2009</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2009</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="LEFT" style="border-bottom:
1px solid #000000">Location</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000">June 30, 2009</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2009</td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cross-Currency
Swap </div></td> <td> </td> <td align="left"
valign="top">(None)</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td align="left"
valign="top" nowrap="nowrap">Interest Expense</td> <td> </td>
<td align="left" valign="top">$</td> <td align="right" valign="top">6.6</td>
<td valign="top"> </td> <td> </td>
<td align="left" valign="top">$</td> <td align="right" valign="top">0.9</td>
<td valign="top"> </td> </tr> <!-- End Table
Body --> </table> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The Company may also enter into derivative contracts
that are not designated as hedging instruments as defined by FAS 133. Undesignated
derivative instruments substantially pertain to foreign exchange contracts
that are used to offset the impact of foreign currency denominated assets
and liabilities. The company does not apply hedge accounting because the gain
(loss) on the derivative contract is generally offset by the SFAS
No. 52, “Foreign Currency Translation,” (SFAS
No. 52) remeasurement gain (loss) of the foreign currency
asset or liability in the same reporting period. </div> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><u><b>Derivatives
Not Designated as Hedging Instruments under Statement 133</b></u>
</div> <div align="center"> <table style="font-size: 10pt;
text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="14%"> </td>
<td width="35%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6"><b>(Loss) Recorded in</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"
style="border-bottom: 1px solid #000000"><b>Income on Derivative</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td>(millions)</td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Three
Months Ended</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Six Months Ended</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
1px solid #000000"><b>Contract Type</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px
solid #000000"><b>Location</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>June 30, 2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom"> <td> <div
style="margin-left:15px; text-indent:-15px">Foreign Exchange </div></td>
<td> </td> <td colspan="3" align="center" nowrap="nowrap">SG&A
Expense</td> <td> </td> <td align="left" valign="top">$</td>
<td align="right">(0.7</td> <td nowrap="nowrap">)</td>
<td> </td> <td align="left" valign="top">$</td>
<td align="right">(1.8</td> <td nowrap="nowrap">)</td>
</tr> <!-- End Table Body --> </table> </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt">At June 30,
2009 derivative instruments that are designated as fair value hedging instruments
as defined by FAS 133 were immaterial. </div> </div> </body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 11 - us-gaap:PensionAndOtherPostretirementBenefitsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(11) Retirement
Benefit Plans</b> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The Company has a number of defined benefit pension
plans and other post employment benefit plans covering eligible salaried and
hourly employees and their dependents. The other post employment benefit plans,
which provide medical and life insurance benefits, are unfunded plans. The
estimated contributions to the Company’s defined benefit pension
plans for 2009 range from $15 to $35 million, of which $6.7 million
has been contributed through the first six months of the year. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On February 26,
2009, the Company’s subsidiary, BorgWarner Diversified Transmission
Products Inc. (“DTP”), entered into a Plant Shutdown Agreement
with the United Auto Workers (“UAW”) for its Muncie, Indiana
automotive component plant (the “Muncie Plant”). Management
subsequently wound-down production activity at the plant, with operations
effectively ceased as of March 31, 2009. As a result of the closure
of the Muncie Plant, the Company recorded a curtailment gain of $41.9 million
in the first quarter of 2009. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The Plant Shutdown Agreement with the UAW for the
Muncie Plant also included a settlement of a portion of the UAW retiree health
care obligation, resulting in the remeasurement of the retiree medical plan.
The financial impact of this settlement resulted in expense recognition of
$14.0 million, a $47.2 million reduction to retirement-related liabilities,
a $27.2 million increase in accumulated other comprehensive income
and a $34.0 million increase in accounts payable and accrued expenses
in the first quarter of 2009. The $34.0 million in accounts payable
and accrued expenses will be paid in monthly installments, which began in
May 2009 and will conclude in April 2010. With the plant
closing announcement, the Company has entered into discussions with the Pension
Benefit Guaranty Corporation regarding potential funding of the Muncie Plant’s
defined benefit pension plan. </div> <!-- Folio --> <!-- /Folio
--> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times
New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top:
6pt">The combined pre-tax impact of these actions was a net gain of $27.9 million,
comprised of a $41.9 million curtailment gain and $14.0 million settlement
loss on the Company’s Condensed Consolidated Statements of Operations
as of March 31, 2009. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The weighted average discount rate used to determine
the benefit obligation of the Company’s retiree medical plan as
of March 31, 2009 was 8.00%. This represents a 100 basis point increase
from the 7.00% weighted average discount rate used at year-end 2008. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009,
the Company announced its plan to freeze its defined benefit plan at its Bradford
plant in the United Kingdom in consultation with affected employees and their
representatives. The effect of this change is expected to be that participants
in the Bradford defined benefit plan will cease to accrue defined benefits
after October 1, 2009. Future pension benefits will be earned within
an existing defined contribution plan going forward. The financial impact
of this change was a $3.7 million reduction to retirement-related
liabilities, a $3.5 increase in accumulated other comprehensive income and
$0.2 million in income recognition in the second quarter of 2009.
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The
weighted average discount rate used to determine the benefit obligation of
the Company’s Bradford defined benefit plan as of June 30,
2009 was 6.50%. This represents a 25 basis point increase from the 6.25% weighted
average discount rate used at year-end 2008. </div> <!-- Folio -->
<!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 6pt">The components of net periodic benefit cost recorded
in the Company’s Condensed Consolidated Statements of Operations
are as follows: </div> <div align="center"> <table style="font-size:
10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="28%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
<td width="5%"> </td> <td width="3%"> </td>
<td width="1%"> </td> <td width="3%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="7"><b>Other post</b></td> </tr>
<tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px
solid #000000"><b>Pension benefits</b></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 0px
solid #000000"><b>employment</b></td> </tr> <tr
style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 1px solid #000000">Three months ended June 30,</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="7"
style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="7"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="7"
style="border-bottom: 1px solid #000000"><b>benefits</b></td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">US</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">Non-US</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">US</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3">Non-US</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr style="font-size: 1px"> <td> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td
nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px"><b>Components
of net periodic benefit cost:</b> </div></td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Service
cost </div></td> <td> </td> <td align="right">$</td>
<td align="right">—</td> <td> </td>
<td> </td> <td align="right">$</td> <td
align="right">2.3</td> <td> </td> <td> </td>
<td align="right">$</td> <td align="right">0.5</td>
<td> </td> <td> </td> <td align="right">$</td>
<td align="right">2.4</td> <td> </td> <td> </td>
<td align="right">$</td> <td align="right">0.2</td>
<td> </td> <td> </td> <td align="right">$</td>
<td align="right">0.7</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Interest cost </div></td>
<td> </td> <td> </td> <td align="right">5.1</td>
<td> </td> <td> </td> <td> </td>
<td align="right">4.4</td> <td> </td> <td> </td>
<td> </td> <td align="right">5.1</td> <td> </td>
<td> </td> <td> </td> <td align="right">4.8</td>
<td> </td> <td> </td> <td> </td>
<td align="right">4.8</td> <td> </td> <td> </td>
<td> </td> <td align="right">5.8</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Expected return on plan assets </div></td>
<td> </td> <td nowrap="nowrap" align="right"> </td>
<td align="right">(4.0</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="right"> </td>
<td align="right">(2.4</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="right"> </td>
<td align="right">(7.1</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="right"> </td>
<td align="right">(3.4</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Settlement/Curtailment
</div></td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Amortization of unrecognized
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:30px; text-indent:-15px">prior service benefit
</div></td> <td> </td> <td nowrap="nowrap"
align="right"> </td> <td align="right">(0.2</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="right"> </td>
<td align="right">(1.3</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="right"> </td>
<td align="right">(5.4</td> <td nowrap="nowrap">)</td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Amortization of unrecognized
loss </div></td> <td> </td> <td> </td>
<td align="right">1.8</td> <td> </td> <td> </td>
<td> </td> <td align="right">0.2</td> <td> </td>
<td> </td> <td> </td> <td align="right">0.5</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">1.5</td>
<td> </td> <td> </td> <td> </td>
<td align="right">2.7</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Net periodic benefit cost (benefit) </div></td>
<td> </td> <td align="right">$</td> <td
align="right">2.7</td> <td> </td> <td> </td>
<td align="right">$</td> <td align="right">4.5</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="right">$</td> <td align="right">(1.0</td> <td
nowrap="nowrap">)</td> <td> </td> <td align="right">$</td>
<td align="right">3.8</td> <td> </td> <td> </td>
<td align="right">$</td> <td align="right">5.2</td>
<td> </td> <td> </td> <td align="right">$</td>
<td align="right">3.8</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 3px double #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
3px double #000000"> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 3px double #000000"> </td>
</tr> <!-- End Table Body --> </table> </div> <div
align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0"
border="0" cellpadding="0" width="100%"> <!-- Begin Table Head -->
<tr valign="bottom"> <td width="28%"> </td> <td
width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6"><b>Other post</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000">(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="14"
style="border-bottom: 1px solid #000000"><b>Pension benefits</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>employment</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
1px solid #000000">Six months ended June 30,</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>benefits</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2">US</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2">Non-US</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2">US</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2">Non-US</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr style="font-size: 1px"> <td> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td nowrap="nowrap"> <div style="margin-left:15px;
text-indent:-15px"><b>Components of net periodic benefit cost:</b>
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Service cost </div></td>
<td> </td> <td align="left">$</td> <td
align="right">0.3</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">5.0</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">1.0</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">4.8</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">0.4</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">1.3</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest
cost </div></td> <td> </td> <td> </td>
<td align="right">10.5</td> <td> </td> <td> </td>
<td> </td> <td align="right">8.1</td> <td> </td>
<td> </td> <td> </td> <td align="right">10.2</td>
<td> </td> <td> </td> <td> </td>
<td align="right">9.6</td> <td> </td> <td> </td>
<td> </td> <td align="right">10.3</td> <td> </td>
<td> </td> <td> </td> <td align="right">11.6</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Expected return on
plan assets </div></td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(8.1</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(4.6</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(14.2</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(6.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Settlement/Curtailment
</div></td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(61.9</td>
<td nowrap="nowrap">)*</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Amortization of unrecognized </div></td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:30px;
text-indent:-15px">prior service benefit </div></td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(0.2</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(9.3</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(10.7</td> <td nowrap="nowrap">)</td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Amortization of unrecognized
loss </div></td> <td> </td> <td> </td>
<td align="right">3.7</td> <td> </td> <td> </td>
<td> </td> <td align="right">0.5</td> <td> </td>
<td> </td> <td> </td> <td align="right">1.0</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">4.3</td>
<td> </td> <td> </td> <td> </td>
<td align="right">5.4</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
1px solid #000000"> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Net periodic benefit cost (benefit) </div></td>
<td> </td> <td align="left">$</td> <td
align="right">6.2</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">9.0</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="left">$</td> <td align="right">(2.0</td> <td
nowrap="nowrap">)</td> <td> </td> <td align="left">$</td>
<td align="right">7.5</td> <td> </td> <td> </td>
<td nowrap="nowrap" align="left">$</td> <td align="right">(56.2</td>
<td nowrap="nowrap">)</td> <td> </td> <td
align="left">$</td> <td align="right">7.6</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
3px double #000000"> </td> <td> </td>
<td colspan="7" align="left" style="border-top: 3px double #000000"> </td>
<td> </td> <td colspan="7" align="left" style="border-top:
3px double #000000"> </td> </tr> <!-- End Table
Body --> </table> </div> <div align="left"> <div style="font-size:
3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000"> 
</div> </div> <table width="100%" border="0" cellpadding="0"
cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td
width="3%"></td> <td width="1%"></td> <td width="96"></td>
</tr> <tr valign="top"> <td nowrap="nowrap" align="left"><b>*</b></td>
<td> </td> <td>Note: In the six months ended June 30,
2009 table above, the settlement/curtailment of $61.9 million was offset by
the $34.0 million cost to settle, resulting in a net pre-tax gain
of $27.9 million.</td> </tr> </table> </div> </body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 12 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(12) Stock-Based
Compensation</b> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">Under the Company’s 1993 Stock Incentive
Plan (“1993 Plan”), the Company granted options to purchase
shares of the Company’s common stock at the fair market value on
the date of grant. The options vest over periods up to three years and have
a term of ten years from date of grant. As of December 31, 2003,
there were no options available for future grants under the 1993 Plan. The
1993 Plan expired at the end of 2003 and was replaced by the Company’s
2004 Stock Incentive Plan, which was amended at the Company’s 2009
Annual Stockholders Meeting, among other things, to increase the number of
shares available for issuance under the Plan. Under the BorgWarner Inc. Amended
and Restated 2004 Stock Incentive Plan (“2004 Stock Incentive Plan”),
the number of shares authorized for grant was 12,500,000, of which approximately
2,700,000 shares are available for future issuance. As of June 30,
2009, there were a total of 5,462,118 outstanding options under the 1993 and
2004 Stock Incentive Plans. </div> <!-- Folio --> <!-- /Folio
--> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times
New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top:
6pt">Stock option compensation expense reduced income before income taxes
and net earnings for the three months ended June 30, 2009 and 2008
by $2.4 million and $1.9 million ($0.02 per basic and diluted
share) and by $3.5 million and $2.7 million ($0.02 per basic
and diluted share), respectively. Stock option compensation expense reduced
income before income taxes and net earnings for the six months ended June 30,
2009 and 2008 by $4.1 million and $3.2 million ($0.03 per
basic and diluted share) and by $7.1 million and $5.3 million
($0.05 and $0.04 per basic and diluted shares, respectively). Stock option
compensation expense affected both operating activities ($4.1 million
and $7.1 million non-cash charge backs) and financing activities
($0.9 million and $1.8 million tax benefits) of the Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2009 and 2008, respectively. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">Total unrecognized compensation cost related to
nonvested stock options at June 30, 2009 was approximately $3.5 million.
This cost is expected to be recognized over the next 0.6 years. On
a weighted average basis, this cost is expected to be recognized over 0.3 years.
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">A
summary of the plans’ shares under option as of and for the six
months ended June 30, 2009 is as follows: </div> <div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0"
cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="52%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Weighted</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Shares</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Weighted</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Aggregate</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Under</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Average</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Intrinsic</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Option</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Exercise</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Value</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>(thousands)</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Life
(in years)</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>(in millions)</b></td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Outstanding at December 31,
2008 </div></td> <td> </td> <td> </td>
<td align="right">5,798</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">27.86</td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:30px;
text-indent:-15px">Exercised </div></td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(10</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">13.25</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(195</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">29.63</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at March 31,
2009 </div></td> <td> </td> <td> </td>
<td align="right">5,593</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">27.82</td>
<td> </td> <td> </td> <td> </td>
<td align="right">6.5</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">4.9</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Exercised
</div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(119</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">21.37</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:30px; text-indent:-15px">Forfeited </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(48</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">31.04</td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:30px; text-indent:-15px">Other </div></td>
<td> </td> <td> </td> <td align="right">36</td>
<td> </td> <td> </td> <td> </td>
<td align="right">25.72</td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at June 30,
2009 </div></td> <td> </td> <td> </td>
<td align="right">5,462</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">27.92</td>
<td> </td> <td> </td> <td> </td>
<td align="right">6.2</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">35.3</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <tr valign="bottom"><!--
Blank Space --> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Options exercisable at June 30,
2009 </div></td> <td> </td> <td> </td>
<td align="right">4,091</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">26.48</td>
<td> </td> <td> </td> <td> </td>
<td align="right">5.9</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">32.0</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <!-- End Table Body -->
</table> </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">At its November 2007 meeting, our Compensation Committee
decided that restricted common stock would be awarded in place of stock options
for long-term incentive award grants to employees. These restricted shares
for employees vest fifty percent after two years and the remainder after three
years from the date of grant. The Company also grants restricted common stock
to its non-employee directors. For non-employee directors restricted shares
vest ratably on the anniversary of the date of the grant over a period of
three years. The market value of the Company’s restricted common
stock at the date of grant determines the value of the restricted common stock.
In February 2009, 1,000,643 restricted shares were granted to employees
under the 2004 Stock Incentive Plan. The value of the awards is recorded as
unearned compensation within capital in excess of par value in stockholders’
equity, and is amortized as compensation expense over the restriction periods.
The Company recognized compensation expense related to restricted common stock
of $4.0 million and $2.6 million for the three months ended
June 30, 2009 and 2008, respectively and $7.7 million and
$4.6 million for the six months ended June 30, 2009 and
2008, respectively. </div> <!-- Folio --> <!-- /Folio -->
</div> <!-- PAGEBREAK --> <div style="font-family: 'Times New
Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top:
6pt">A summary of the status of the Company’s nonvested restricted
stock as of and for the six months ended June 30, 2009 is as follows:
</div> <div align="center"> <table style="font-size: 10pt;
text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="76%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Shares</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"> </td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Subject
to</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Restriction</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2"><b>Average</b></td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>(thousands)</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Nonvested
at December 31, 2008 </div></td> <td> </td>
<td> </td> <td align="right">661.5</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">45.29</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Granted
</div></td> <td> </td> <td> </td>
<td align="right">1,000.6</td> <td> </td>
<td> </td> <td> </td> <td align="right">20.30</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(23.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">37.73</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Nonvested
at March 31, 2009 </div></td> <td> </td>
<td> </td> <td align="right">1,638.2</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">30.14</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"><!-- Blank Space --> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Granted
</div></td> <td> </td> <td> </td>
<td align="right">43.3</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">27.78</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:30px; text-indent:-15px">Lapsed </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(8.7</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">58.00</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(35.7</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">30.59</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Nonvested
at June 30, 2009 </div></td> <td> </td>
<td> </td> <td align="right">1,637.1</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">29.92</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">In calculating earnings or loss
per share, earnings or loss are the same for the basic and diluted calculations.
Shares increased for diluted earnings per share for the three and six months
ended June 30, 2008 by 2,132,000 and 2,178,000, respectively due
to the effects of stock options issued and issuable and restricted shares
issued under the 1993 Plan and 2004 Stock Incentive Plan. There was no dilutive
impact to the weighted average shares outstanding for the three and six months
ended June 30, 2009 due to the Company’s net loss. </div>
</div> </body> </html>
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XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 13 - us-gaap:ComprehensiveIncomeNoteTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(13) Comprehensive Income</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The
amounts presented as changes in accumulated other comprehensive income, net
of related taxes, are added to net earnings (loss) resulting in comprehensive
income. The following table summarizes the components of comprehensive income
on an after-tax basis for the three and six month periods ended June 30,
2009 and 2008. </div> <div align="center"> <table style="font-size:
10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="52%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three
months ended</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px
solid #000000"><b>June 30,</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"
style="border-bottom: 0px solid #000000"><b>June 30,</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign
currency translation adjustments, net </div></td> <td> </td>
<td align="left">$</td> <td align="right">66.0</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="left">$</td> <td align="right">(4.8</td> <td
nowrap="nowrap">)</td> <td> </td> <td align="left">$</td>
<td align="right">7.7</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">108.9</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Market value change
in hedge instruments, net </div></td> <td> </td>
<td> </td> <td align="right">21.5</td> <td> </td>
<td> </td> <td> </td> <td align="right">11.5</td>
<td> </td> <td> </td> <td> </td>
<td align="right">48.1</td> <td> </td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(21.3</td>
<td nowrap="nowrap">)</td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Defined benefit post employment plans, net </div></td>
<td> </td> <td> </td> <td align="right">4.5</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">6.0</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Bond hedge on 3.50% convertible notes, net </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(36.7</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(36.7</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Warrant on 3.50% convertible
notes, net </div></td> <td> </td> <td> </td>
<td align="right">31.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">31.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Unrealized gain (loss)
on available-for-sale securities, net </div></td> <td> </td>
<td> </td> <td align="right">0.2</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(0.1</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">0.2</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:30px; text-indent:-15px">Change in accumulated other
comprehensive income </div></td> <td> </td>
<td> </td> <td align="right">86.7</td> <td> </td>
<td> </td> <td> </td> <td align="right">6.6</td>
<td> </td> <td> </td> <td> </td>
<td align="right">56.5</td> <td> </td> <td> </td>
<td> </td> <td align="right">87.6</td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:15px;
text-indent:-15px">Net earnings (loss) attributable to BorgWarner
Inc. </div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(35.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">87.5</td> <td> </td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(42.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">176.2</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:30px; text-indent:-15px">Comprehensive income </div></td>
<td> </td> <td> </td> <td align="right">50.8</td>
<td> </td> <td> </td> <td> </td>
<td align="right">94.1</td> <td> </td> <td> </td>
<td> </td> <td align="right">13.6</td> <td> </td>
<td> </td> <td> </td> <td align="right">263.8</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive income
(loss) attributable to the noncontrolling interest </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(0.6</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(2.9</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(2.0</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">2.2</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Comprehensive
income attributable to BorgWarner Inc. </div></td> <td> </td>
<td align="left">$</td> <td align="right">50.2</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">91.2</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">11.6</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">266.0</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> </div> </body>
</html>
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Tagged Note 14 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(14) Contingencies</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">In
the normal course of business the Company and its subsidiaries are parties
to various commercial and legal claims, actions and complaints, including
matters involving warranty claims, intellectual property claims, general liability
and various other risks. It is not possible to predict with certainty whether
or not the Company and its subsidiaries will ultimately be successful in any
of these commercial and legal matters or, if not, what the impact might be.
The Company’s environmental and product liability contingencies
are discussed separately below. The Company’s management does not
expect that the results in any of these commercial and legal claims, actions
and complaints will have a material adverse effect on the Company’s
results of operations, financial position or cash flows. </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Litigation
</b></u> </div> <div align="left" style="font-size: 10pt;
margin-top: 6pt">In January 2006, DTP, a subsidiary of the Company,
filed a declaratory judgment action in United States District Court, Southern
District of Indiana (Indianapolis Division) against the United Automobile,
Aerospace, and Agricultural Implements Workers of America (“UAW”)
Local No. 287 and Gerald Poor, individually and as the representative
of a defendant class. DTP sought the Court’s affirmation that DTP
did not violate the Labor-Management Relations Act or the Employee Retirement
Income Security Act by unilaterally amending certain medical plans effective
April 1, 2006 and October 1, 2006, prior to the expiration
of the current collective bargaining agreements. On September 10,
2008, the Court found that DTP’s reservation of the right to make
such amendments reducing the level of benefits provided to retirees was limited
by its collectively bargained health insurance agreement with the UAW, which
did not expire until April 24, 2009. Thus, the amendments were untimely.
In 2008 the Company recorded a charge of $4.0 million as a result
of the Court’s decision. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">DTP filed a declaratory judgment action in the United
States District Court, Southern District of Indiana (Indianapolis Division)
against the UAW Local No. 287 and Jim Barrett and others individually,
and as representatives of a defendant class, on February 26, 2009
again seeking the Court’s affirmation that DTP will not violate
the Labor — Management Relations Act or the Employment Retirement
Income Security Act (ERISA) by modifying the level of benefits provided
retirees to make them comparable to other Company retiree benefit plans after
April 24, 2009. Certain retirees, on behalf of themselves and others,
filed a mirror-image action in the United States District Court, Eastern District
of Michigan (Southern District) on March 11, 2009. Both actions are
pending. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">The Company has communicated its plan to modify the level of benefits
provided to the retirees to make them comparable to other Company retiree
benefit plans effective May 1, 2009. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt"><u><b>Environmental</b></u>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">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 37 such sites. Responsibility
for clean-up and other remedial activities at a Superfund site is typically
shared among PRPs based on an allocation formula. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">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. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">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 June 30, 2009 of $12.3 million.
The Company has accrued amounts that do not exceed $4.0 million related
to any individual site and we do not believe that the costs related to any
of these 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. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">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, dismissal with prejudice of these lawsuits. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Four additional
lawsuits were filed against Kuhlman Electric and others, including the Company,
in 2007 and 2008 on behalf of approximately 340 plaintiffs, alleging personal
injury relating to the alleged environmental contamination. Given the early
stage of the litigation, the Company cannot make any predictions as to the
outcome, but its current intent is to vigorously defend against the suits.
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Conditional
Asset Retirement Obligations</b></u> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">In March 2005, the FASB
issued Interpretation No. 47, Accounting for Conditional Asset Retirement
Obligations — an interpretation of FASB Statement No. 143
(“FIN 47”), which requires the Company to recognize legal
obligations to perform asset retirements in which the timing and/or method
of settlement are conditional on a future event that may or may not be within
the control of the entity. Certain government regulations require the removal
and disposal of asbestos from an existing facility at the time the facility
undergoes major renovations or is demolished. The liability exists because
the facility will not last forever, but it is conditional on future renovations
(even if there are no immediate plans to remove the materials, which pose
no health or safety hazard in their current condition). Similarly, government
regulations require the removal or closure of underground storage tanks and
above ground storage tanks when their use ceases, the disposal of polychlorinated
biphenyl transformers and capacitors when their use ceases, and the disposal
of used furnace bricks and liners, and lead-based paint in conjunction with
facility renovations or demolition. The Company currently has 32 manufacturing
locations that have been identified as containing these items. The fair value
to remove and dispose of this material has been estimated and recorded at
$1.7 million as of June 30, 2009 and $1.4 million as of December 31,
2008. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt"><u><b>Product Liability</b></u> </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Like many
other industrial companies who have historically operated in the U.S., the
Company (or parties the Company is obligated to indemnify) continues to be
named as one of many defendants in asbestos-related personal injury actions.
We believe that the Company’s involvement is limited because, in
general, these claims relate to a few types of automotive friction products
that were manufactured many years ago and contained encapsulated asbestos.
The nature of the fibers, the encapsulation and the manner of use lead the
Company to believe that these products are highly unlikely to cause harm.
As of June 30, 2009 and December 31, 2008 the Company had
approximately 24,000 and 27,000 pending asbestos-related product liability
claims, respectively. Of the 24,000 outstanding claims at June 30,
2009, approximately 13,000 were pending in just three jurisdictions, where
significant tort and judicial reform activities are underway. </div>
<!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK
--> <div style="font-family: 'Times New Roman',Times,serif"> <div
align="left" style="font-size: 10pt; margin-top: 6pt">The Company’s
policy is to aggressively defend against these lawsuits and the Company has
been successful in obtaining dismissal of many claims without any payment.
The Company expects that the vast majority of the pending asbestos-related
product liability claims where it is a defendant (or has an obligation to
indemnify a defendant) will result in no payment being made by the Company
or its insurers. In the first six months of 2009, of the approximately 3,400
claims resolved, only 104 (3.1%) resulted in any payment being made to a claimant
by or on behalf of the Company. In 2008, of the approximately 17,500 claims
resolved, only 210 (1.2%) resulted in any payment being made to a claimant
by or on behalf of the Company. Prior to June 2004, the settlement
and defense costs associated with all claims were covered by the Company’s
primary layer insurance coverage, and these carriers administered, defended,
settled and paid all claims under a funding arrangement. In June 2004,
primary layer insurance carriers notified the Company of the alleged exhaustion
of their policy limits. This led the Company to access the next available
layer of insurance coverage. Since June 2004, secondary layer insurers
have paid asbestos-related litigation defense and settlement expenses pursuant
to a funding arrangement. To date, the Company has paid $63.0 million
in defense and indemnity in advance of insurers’ reimbursement and
has received $15.4 million in cash from insurers. The outstanding
balance of $47.6 million is expected to be fully recovered. Timing
of the recovery is dependent on final resolution of the declaratory judgment
action referred to below. At December 31, 2008, insurers owed $35.9 million
in association with these claims. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">At June 30, 2009, the Company has an estimated
liability of $40.3 million for future claims resolutions, with a
related asset of $40.3 million to recognize the insurance proceeds
receivable by the Company for estimated losses related to claims that have
yet to be resolved. Insurance carrier reimbursement of 100% is expected based
on the Company’s experience, its insurance contracts and decisions
received to date in the declaratory judgment action referred to below. At
December 31, 2008, the comparable value of the insurance receivable
and accrued liability was $34.7 million. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The amounts recorded in the Consolidated
Balance Sheets related to the estimated future settlement of existing claims
are as follows: </div> <div align="center"> <table style="font-size:
10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="66%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="10%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="10%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June
30,</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Assets:
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
</tr> <tr valign="bottom"> <td> <div style="margin-left:30px;
text-indent:-15px">Prepayments and other current assets </div></td>
<td> </td> <td align="left">$</td> <td
align="right">22.7</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">22.1</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other
non-current assets </div></td> <td> </td>
<td> </td> <td align="right">17.6</td> <td> </td>
<td> </td> <td> </td> <td align="right">12.6</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:45px; text-indent:-15px">Total insurance receivable
</div></td> <td> </td> <td align="left">$</td>
<td align="right">40.3</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">34.7</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <tr valign="bottom"><!--
Blank Space --> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Liabilities: </div></td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Accounts
payable and accrued expenses </div></td> <td> </td>
<td align="left">$</td> <td align="right">22.7</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">22.1</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:30px; text-indent:-15px">Other non-current liabilities
</div></td> <td> </td> <td> </td>
<td align="right">17.6</td> <td> </td> <td> </td>
<td> </td> <td align="right">12.6</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Total
accrued liability </div></td> <td> </td>
<td align="left">$</td> <td align="right">40.3</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">34.7</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The Company cannot reasonably
estimate possible losses, if any, in excess of those for which it has accrued,
because it cannot predict how many additional claims may be brought against
the Company (or parties the Company has an obligation to indemnify) in the
future, the allegations in such claims, the possible outcomes, or the impact
of tort reform legislation that may be enacted at the State or Federal levels.
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">A
declaratory judgment action was filed in January 2004 in the Circuit
Court of Cook County, Illinois by Continental Casualty Company and related
companies (“CNA”) against the Company and certain of its
other historical general liability insurers. CNA provided the Company with
both primary and additional layer insurance, and, in conjunction with other
insurers, is currently defending and indemnifying the Company in its pending
asbestos-related product liability claims. The lawsuit seeks to determine
the extent of insurance coverage available to the Company including whether
the available limits exhaust on a “per occurrence” or
an “aggregate” basis, and to determine how the applicable
coverage responsibilities should be apportioned. On August 15, 2005,
the Court issued an interim order regarding the apportionment matter. The
interim order has the effect of making insurers responsible for all defense
and settlement costs pro rata to time-on-the-risk, with the pro-ration method
to hold the insured harmless for periods of bankrupt or unavailable coverage.
Appeals of the interim order were denied. However, the issue is reserved for
appellate review at the end of the action. In addition to the primary insurance
available for asbestos-related claims, the Company has substantial additional
layers of insurance available for potential future asbestos-related product
claims. As such, the Company continues to believe that its coverage is sufficient
to meet foreseeable liabilities. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">Although it is impossible to predict the outcome
of pending or future claims or the impact of tort reform legislation that
may be enacted at the State or Federal levels, due to the encapsulated nature
of the products, the Company’s experiences in aggressively defending
and resolving claims in the past, and the Company’s significant
insurance coverage with solvent carriers as of the date of this filing, management
does not believe that asbestos-related product liability claims are likely
to have a material adverse effect on the Company’s results of operations,
cash flows or financial condition. </div> </div> </body>
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Tagged Note 15 - bwa:LeasesAndCommitmentsTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(15) Leases and Commitments</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The
Company has guaranteed the residual values of certain leased machinery and
equipment at one of its facilities. The guarantees extend through the maturity
of the underlying lease, which is in September 2010. In the event
the Company exercises its option not to purchase the machinery and equipment,
the Company has guaranteed a residual value of $7.7 million. The
Company has accrued $4.1 million as a loss on this guarantee, which
is expected to be paid in 2009. </div> </div> </body> </html>
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Tagged Note 16 - us-gaap:RestructuringAndRelatedActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(16) Restructuring</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">In
the second quarter of 2009, the Company took additional restructuring actions.
The Company reduced its North American workforce by approximately 550 people,
or 12%; its European workforce by approximately 150 people, or 2%; and its
Asian workforce by approximately 60 people, or 3% in the second quarter. The
net restructuring expense recognized in the second quarter was $9.0 million
for employee termination benefits. In addition to employee termination costs,
the Company recorded $36.3 million of asset impairment and $5.0 million
of other charges in the second quarter of 2009 related to the North American
and European restructuring. The combined 2009 restructuring expenses of $50.3 million
are broken out by segment as follows: Engine $27.2 million, Drivetrain
$19.7 million and Corporate $3.4 million. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">Included in the second quarter
of 2009 asset impairment charge is $22.3 million related to one of
the Company’s European locations. During the second quarter of 2009
circumstances caused the Company to evaluate the long range outlook of the
facility using an undiscounted and discounted cash flow model, both of which
indicated that assets were impaired. The Company then used an estimate of
cost replacement to determine the fair value of the assets at the facility.
This reduction of asset value was included in the Engine segment. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On July 31,
2008, the Company announced a restructuring of its operations to align ongoing
operations with a continuing, fundamental market shift in the auto industry.
As a continuation of the Company’s third quarter restructuring,
on December 11, 2008, the Company announced plans for additional
restructuring actions. As a result of these third and fourth quarter 2008
restructuring actions, the Company has reduced its North American workforce
by approximately 2,400 people, or 33%; its European workforce by approximately
1,600 people, or 18%; and its Asian workforce by approximately 400 people,
or 17%. The restructuring expense recognized in 2008 for employee termination
benefits is $54.6 million. In addition to employee termination costs,
the Company recorded $72.9 million of asset impairment charges in
2008 related to the North American and European restructuring. The combined
2008 restructuring expenses of $127.5 million are broken out by segment
as follows: Engine $85.3 million, Drivetrain $40.9 million
and Corporate $1.3 million. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">Estimates of restructuring expense are based on
information available at the time such charges are recorded. Due to the inherent
uncertainty involved in estimating restructuring expenses, actual amounts
paid for such activities may differ from amounts initially recorded. Accordingly,
the Company may record revisions of previous estimates by adjusting previously
established accruals. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The following table displays a rollforward of the
employee related and other restructuring accruals recorded within the Company’s
Consolidated Balance Sheet and the related cash flow activity for the three
and six months ended June 30, 2009: </div> <div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0"
cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="52%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px
solid #000000"><b>Employee Related and Other Costs</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>Drivetrain</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>Engine</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Corporate</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance
at December 31, 2008 </div></td> <td> </td>
<td align="left">$</td> <td align="right">21.0</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">29.3</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">0.7</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">51.0</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash
payments </div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(5.6</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(7.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(0.4</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(13.9</td>
<td nowrap="nowrap">)</td> </tr> <tr valign="bottom"
style="background: #cceeff"> <td> <div style="margin-left:15px;
text-indent:-15px">Translation adjustment </div></td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(0.3</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(1.0</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(1.3</td> <td nowrap="nowrap">)</td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Balance
at March 31, 2009 </div></td> <td> </td>
<td align="left">$</td> <td align="right">15.1</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">20.4</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">0.3</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">35.8</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"><!-- Blank Space --> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
<td> </td> <td> </td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Provision </div></td>
<td> </td> <td align="left">$</td> <td
align="right">6.0</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">4.6</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">3.4</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">14.0</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Cash payments </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(7.0</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(9.9</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(1.4</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(18.3</td> <td nowrap="nowrap">)</td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Translation adjustment
</div></td> <td> </td> <td> </td>
<td align="right">0.6</td> <td> </td> <td> </td>
<td> </td> <td align="right">1.0</td> <td> </td>
<td> </td> <td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">1.6</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Balance
at June 30, 2009 </div></td> <td> </td>
<td align="left">$</td> <td align="right">14.7</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">16.1</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">2.3</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">33.1</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The Company made cash payments
of $32.2 million during 2009 related to the 2008 and 2009 restructuring
actions. Future cash payments for these restructuring activities are expected
to be complete by the middle of 2010. </div> </div> </body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 17 - us-gaap:SegmentReportingDisclosureTextBlock--> <div
style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(17) Reporting
Segments</b> </div> <div align="left" style="font-size: 10pt;
margin-top: 6pt">The Company’s business is comprised of two reporting
segments: Engine and Drivetrain. These reporting segments are strategic business
groups, which are managed separately as each represents a specific grouping
of related automotive components and systems. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The Company allocates resources
to each segment based upon the projected after-tax return on invested capital
(“ROIC”) of its business initiatives. The ROIC is comprised
of projected earnings before interest, income taxes and noncontrolling interest
(“EBIT”) adjusted for income taxes compared to the projected
average capital investment required. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">EBIT is considered a “non-GAAP financial
measure.” Generally, a non-GAAP financial measure is a numerical
measure of a company’s financial performance, financial position
or cash flows that excludes (or includes) amounts that are included in (or
excluded from) the most directly comparable measure calculated and presented
in accordance with GAAP. EBIT is defined as earnings before interest, income
taxes and noncontrolling interest. “Earnings” is intended
to mean net earnings as presented in the Consolidated Statements of Operations
under GAAP. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">The Company believes that EBIT is useful to demonstrate the operational
profitability of our segments by excluding interest and income taxes, which
are generally accounted for across the entire Company on a consolidated basis.
EBIT is also one of the measures used by the Company to determine resource
allocation within the Company. Although the Company believes that EBIT enhances
understanding of our business and performance, it should not be considered
an alternative to, or more meaningful than, net earnings or cash flows from
operations as determined in accordance with GAAP. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The following tables present net
sales, segment EBIT and total assets for the Company’s reporting
segments. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt"><u><b>Net Sales by Reporting Segment</b></u>
</div> <div align="center"> <table style="font-size: 10pt;
text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="52%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three
months ended</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px
solid #000000"><b>June 30,</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"
style="border-bottom: 0px solid #000000"><b>June 30,</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td>(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Engine
</div></td> <td> </td> <td align="left">$</td>
<td align="right">670.4</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">1,109.0</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">1,294.9</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">2,207.1</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Drivetrain
</div></td> <td> </td> <td> </td>
<td align="right">248.8</td> <td> </td> <td> </td>
<td> </td> <td align="right">414.4</td> <td> </td>
<td> </td> <td> </td> <td align="right">447.0</td>
<td> </td> <td> </td> <td> </td>
<td align="right">824.2</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Inter-segment eliminations
</div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(3.0</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(6.8</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(6.2</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(15.8</td>
<td nowrap="nowrap">)</td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:30px; text-indent:-15px">Net sales </div></td>
<td> </td> <td align="left">$</td> <td
align="right">916.2</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">1,516.6</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">1,735.7</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">3,015.5</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt"><u><b>Segment Earnings
(Loss) Before Interest and Income Taxes</b></u> </div> <div
align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0"
border="0" cellpadding="0" width="100%"> <!-- Begin Table Head -->
<tr valign="bottom"> <td width="52%"> </td> <td
width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three
months ended</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px
solid #000000"><b>June 30,</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="6"
style="border-bottom: 0px solid #000000"><b>June 30,</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td>(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Engine
</div></td> <td> </td> <td align="left">$</td>
<td align="right">44.0</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">126.4</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">79.9</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">264.3</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Drivetrain </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(8.8</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">21.8</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(41.5</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">40.1</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Segment earnings before interest
and income taxes (“Segment EBIT”) </div></td>
<td> </td> <td> </td> <td align="right">35.2</td>
<td> </td> <td> </td> <td> </td>
<td align="right">148.2</td> <td> </td> <td> </td>
<td> </td> <td align="right">38.4</td> <td> </td>
<td> </td> <td> </td> <td align="right">304.4</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Muncie closure retiree
obligation net gain </div></td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
<td> </td> <td> </td> <td align="right">27.9</td>
<td> </td> <td> </td> <td> </td>
<td align="right">—</td> <td> </td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Corporate, including
equity in affiliates’ earnings and stock-based compensation </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(29.6</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(17.6</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(55.0</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(39.9</td> <td nowrap="nowrap">)</td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Consolidated
earnings before interest and taxes (“EBIT”) </div></td>
<td> </td> <td> </td> <td align="right">5.6</td>
<td> </td> <td> </td> <td> </td>
<td align="right">130.6</td> <td> </td> <td> </td>
<td> </td> <td align="right">11.3</td> <td> </td>
<td> </td> <td> </td> <td align="right">264.5</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring
expense </div></td> <td> </td> <td> </td>
<td align="right">50.3</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> <td> </td> <td> </td>
<td align="right">50.3</td> <td> </td> <td> </td>
<td> </td> <td align="right">—</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Interest income </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(0.7</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(2.3</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(1.2</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(4.2</td> <td nowrap="nowrap">)</td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Interest expense and
finance charges </div></td> <td> </td> <td> </td>
<td align="right">9.0</td> <td> </td> <td> </td>
<td> </td> <td align="right">10.8</td> <td> </td>
<td> </td> <td> </td> <td align="right">28.1</td>
<td> </td> <td> </td> <td> </td>
<td align="right">17.3</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Earnings
(loss) before income taxes and noncontrolling interest </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(53.0</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">122.1</td>
<td> </td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(65.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">251.4</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Provision (benefit) for
income taxes </div></td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(19.1</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">29.8</td> <td> </td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(25.7</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">63.4</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net
earnings (loss) </div></td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(33.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">92.3</td> <td> </td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(40.2</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">188.0</td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Net earnings attributable to
the noncontrolling interest </div></td> <td> </td>
<td> </td> <td align="right">2.0</td> <td> </td>
<td> </td> <td> </td> <td align="right">4.8</td>
<td> </td> <td> </td> <td> </td>
<td align="right">2.7</td> <td> </td> <td> </td>
<td> </td> <td align="right">11.8</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net
earnings (loss) attributable to BorgWarner Inc. </div></td>
<td> </td> <td nowrap="nowrap" align="left">$</td>
<td align="right">(35.9</td> <td nowrap="nowrap">)</td>
<td> </td> <td align="left">$</td> <td
align="right">87.5</td> <td> </td> <td> </td>
<td nowrap="nowrap" align="left">$</td> <td align="right">(42.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td
align="left">$</td> <td align="right">176.2</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt"><u><b>Total Assets</b></u>
</div> <div align="center"> <table style="font-size: 10pt;
text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="76%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June
30,</b></td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td>(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000"><b>2009</b></td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td> </tr> <!-- End Table Head -->
<!-- Begin Table Body --> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Engine
</div></td> <td> </td> <td align="left">$</td>
<td align="right">2,861.5</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">3,065.3</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Drivetrain
</div></td> <td> </td> <td> </td>
<td align="right">1,104.0</td> <td> </td>
<td> </td> <td> </td> <td align="right">1,211.8</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total
</div></td> <td> </td> <td> </td>
<td align="right">3,965.5</td> <td> </td>
<td> </td> <td> </td> <td align="right">4,277.1</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Corporate, including
equity in affiliates <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td> <td> </td> <td> </td>
<td align="right">645.5</td> <td> </td> <td> </td>
<td> </td> <td align="right">366.9</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:30px; text-indent:-15px">Total assets </div></td>
<td> </td> <td align="left">$</td> <td
align="right">4,611.0</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">4,644.0</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <!-- End Table Body -->
</table> </div> <div align="left"> <div style="font-size:
3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000"> 
</div> </div> <table width="100%" border="0" cellpadding="0"
cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td
width="3%"></td> <td width="1%"></td> <td width="96"></td>
</tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup
style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td> <td>Corporate assets, including equity
in affiliates, are net of trade receivables securitized and sold to third
parties, and include cash, deferred income taxes and investments &
advances.</td> </tr> </table> </div> </body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
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--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 18 - us-gaap:ScheduleOfNewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"
style="font-size: 10pt; margin-top: 12pt"><b>(18) New Accounting
Pronouncements</b> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">In September 2006, the Financial Accounting
Standards Board (“FASB”) issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (“FAS
157”). FAS 157 defines fair value, establishes a framework for measuring
fair value in GAAP and expands disclosures about fair value measurements.
On January 1, 2009, the Company fully adopted as required, FAS 157.
See Note 9 to the Consolidated Financial Statements for more information regarding
the implementation of FAS 157. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">In December 2007, the FASB issued Statement
of Financial Accounting Standards No. 141 (Revised 2007), Business
Combinations (“FAS 141(R)”). FAS 141(R) establishes principles
and requirements for recognizing identifiable assets acquired, liabilities
assumed, noncontrolling interest in the acquiree, goodwill acquired in the
combination or the gain from a bargain purchase, and disclosure requirements.
Under this revised statement, all costs incurred to effect an acquisition
will be recognized separately from the acquisition. Also, restructuring costs
that are expected but the acquirer is not obligated to incur will be recognized
separately from the acquisition. On January 1, 2009, the Company adopted FAS
141(R). In the first quarter of 2009, the Company expensed $4.8 million related
to on-going acquisition related activity. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">In December 2007, the
FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements (“FAS
160”). Effective January 1, 2009, the Company adopted FAS
160. For consolidated subsidiaries that are less than wholly owned, the third
party holdings of equity interests are referred to as noncontrolling interests.
The portion of net income (loss) attributable to noncontrolling interests
for such subsidiaries is presented as net income (loss) applicable
to non-controlling interest on the consolidated statement of operation, and
the portion of stockholders’ equity of such subsidiaries is presented
as noncontrolling interest on the consolidated balance sheet. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The adoption
of FAS 160 did not have a material impact on the Company’s financial
condition, results of operations or cash flows. However, it did impact the
presentation and disclosure of noncontrolling (minority) interests
in our consolidated financial statements and notes to the consolidated financial
statements. As a result of the retrospective presentation and disclosure requirements
of SFAS 160, the Company was required to reflect the change in presentation
and disclosure for the period ending March 31, 2009 and all periods
presented in future filings. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">The principal effect on the prior year balance sheets
related to the adoption of SFAS 160 is summarized as follows: </div>
<div align="center"> <table style="font-size: 10pt; text-align: left"
cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin
Table Head --> <tr valign="bottom"> <td width="88%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000; font-size: 10pt"><u>Balance
Sheet</u></td> <td> </td> <td nowrap="nowrap"
align="center" colspan="2" style="border-bottom: 0px solid #000000"> </td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000;">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000">December 31, 2008</td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Total stockholders’
equity, as previously reported </div></td> <td> </td>
<td align="left">$</td> <td align="right">2,006.0</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Increase for SFAS 160
reclass of non-controlling interest </div></td> <td> </td>
<td> </td> <td align="right">31.5</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Total stockholders’
equity, as adjusted </div></td> <td> </td>
<td align="left">$</td> <td align="right">2,037.5</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td> </tr> <!-- End Table Body -->
</table> </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">The principal effect on the prior year statement of operations related
to the adoption of SFAS 160 is summarized as follows: </div> <div
align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0"
border="0" cellpadding="0" width="100%"> <!-- Begin Table Head -->
<tr valign="bottom"> <td width="76%"> </td> <td
width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000; font-size: 10pt"><u>Consolidated
Statement of Operations</u></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px
solid #000000">Three Months Ended</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 0px solid #000000">Six Months Ended</td> <td> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000">(millions)</td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2008</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2008</td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Net earnings, as previously
reported </div></td> <td> </td> <td align="left">$</td>
<td align="right">87.5</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">176.2</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">SFAS No. 160
reclass of non-controlling interest </div></td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(4.8</td>
<td nowrap="nowrap">)</td> <td> </td> <td
nowrap="nowrap" align="left"> </td> <td align="right">(11.8</td>
<td nowrap="nowrap">)</td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net
earnings, as adjusted </div></td> <td> </td>
<td align="left">$</td> <td align="right">92.3</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">188.0</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Less:
Net earnings attributable to noncontrolling interest </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(4.8</td> <td nowrap="nowrap">)</td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(11.8</td> <td nowrap="nowrap">)</td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Net earnings attributable to
BorgWarner Inc. </div></td> <td> </td> <td
align="left">$</td> <td align="right">87.5</td> <td> </td>
<td> </td> <td align="left">$</td> <td
align="right">176.2</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <!-- Folio -->
<!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 6pt">The principal effect on the prior year statement
of cash flows related to the adoption of SFAS 160 is summarized as follows:
</div> <div align="center"> <table style="font-size: 10pt;
text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="88%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="border-bottom: 0px solid #000000; font-size: 10pt"><u>Statement
of Cash Flows</u></td> <td> </td> <td
nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid
#000000">Six Months Ended</td> <td> </td> </tr>
<tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"
style="border-bottom: 0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000">June 30, 2008</td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Net earnings, as previously
reported </div></td> <td> </td> <td align="left">$</td>
<td align="right">176.2</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">SFAS
No. 160 reclass of non-controlling interest </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(11.8</td> <td nowrap="nowrap">)</td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Net earnings, as adjusted </div></td>
<td> </td> <td align="left">$</td> <td
align="right">188.0</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Less:
Net earnings attributable to noncontrolling interest </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(11.8</td> <td nowrap="nowrap">)</td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Net earnings attributable to
BorgWarner Inc. </div></td> <td> </td> <td
align="left">$</td> <td align="right">176.2</td> <td> </td>
</tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0"
cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom">
<td width="88%"> </td> <td width="5%"> </td>
<td width="1%"> </td> <td width="5%"> </td>
<td width="1%"> </td> </tr> <tr style="font-size:
8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="font-size:
10pt"><u>Statement of Cash Flows</u></td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2">Six Months Ended</td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000">June 30, 2008</td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Equity in affiliates’
earnings, net of dividends received, minority interest and other, as previously
reported </div></td> <td> </td> <td align="left">$</td>
<td align="right">28.1</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Less:
SFAS No. 160 reclass of non-controlling interest </div></td>
<td> </td> <td> </td> <td align="right">(11.8</td>
<td nowrap="nowrap">)</td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Equity
in affiliates’ earnings, net of dividends received and other </div></td>
<td> </td> <td align="left">$</td> <td
align="right">16.3</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The principal effect on the prior
year comprehensive income related to the adoption of SFAS 160 is summarized
as follows: </div> <div align="center"> <table style="font-size:
10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --> <tr valign="bottom"> <td width="76%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap"
align="left" style="font-size: 10pt"><u>Comprehensive Income (Loss)</u></td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2">Three
Months Ended</td> <td> </td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2">Six Months Ended</td>
<td> </td> </tr> <tr style="font-size: 8pt"
valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom:
0px solid #000000">(millions)</td> <td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px
solid #000000">June 30, 2008</td> <td> </td>
<td> </td> <td nowrap="nowrap" align="center" colspan="2"
style="border-bottom: 1px solid #000000">June 30, 2008</td> <td> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Comprehensive income, as previously
reported </div></td> <td> </td> <td align="left">$</td>
<td align="right">91.2</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">266.0</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">SFAS No. 160
reclass of non-controlling interest </div></td> <td> </td>
<td nowrap="nowrap" align="left"> </td> <td align="right">(2.9</td>
<td nowrap="nowrap">)</td> <td> </td> <td> </td>
<td align="right">2.2</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Comprehensive income, as adjusted
</div></td> <td> </td> <td align="left">$</td>
<td align="right">94.1</td> <td> </td> <td> </td>
<td align="left">$</td> <td align="right">263.8</td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Less: Comprehensive
income (loss) attributable to noncontrolling interest </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(2.9</td> <td nowrap="nowrap">)</td>
<td> </td> <td> </td> <td align="right">2.2</td>
<td> </td> </tr> <tr style="font-size: 1px">
<td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Comprehensive
income attributable to BorgWarner Inc. </div></td> <td> </td>
<td align="left">$</td> <td align="right">91.2</td>
<td> </td> <td> </td> <td align="left">$</td>
<td align="right">266.0</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">In March 2008, the FASB
issued Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (“FAS 161”).
FAS 161 requires entities to provide enhanced disclosures about how and why
an entity uses derivative instruments, how derivative instruments and related
hedged items are accounted for under Statement 133 and its related interpretations,
and how derivative instruments and related hedged items affect an entity’s
financial position, financial performance, and cash flows. On January 1,
2009, the Company adopted FAS 161. See Note 10 to the Consolidated Financial
Statements for more information regarding the implementation of <font style="white-space:
nowrap">FAS 161.</font> </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">In May 2008, the FASB issued FASB Staff
Position No. APB 14-1, Accounting for Convertible Debt Instruments
That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)
(“FSP APB 14-1”). Under FSP APB 14-1, an entity must separately
account for the liability and equity components of the convertible debt instruments
that may be settled entirely or partially in cash upon conversion in a manner
that reflects the issuer’s interest cost. FSP APB 14-1 is effective
for fiscal years beginning after December 15, 2008, and for interim
periods within those fiscal years, with retrospective application required.
As a result of our adoption of FSP APB 14-1 for fiscal 2009 and the Company’s
April 9, 2009 issuance of $373.8 million convertible senior
notes due April 15, 2012, we recorded the equity and liability components
of the notes on our June 30, 2009 Condensed Consolidated Balance
Sheet. Additionally, FSP APB 14-1 requires us to accrete the discounted carrying
value of the convertible notes to their face value over the term of the notes.
The Company’s interest expense associated with this amortization
is based on the effective interest rate of the convertible senior notes of
9.365%. The financial statement impact to the Company’s Consolidated
Statement of Operations for the second quarter will be interest expense recognition
of approximately $7.4 million, of which $4.2 million is
non-cash. For the full year of 2009, interest expense will be approximately
$22.5 million, of which approximately $12.8 million will be non-cash.
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">See
Note 8 to the Condensed Consolidated Financial Statements for more information
regarding this issuance. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">In December 2008, the FASB issued Staff
Position 132(R)-1, Employers’ Disclosures about Postretirement Benefit
Plan Assets (“FAS 132(R)-1”). FAS 132(R)-1 requires entities
to provide enhanced disclosures about how investment allocation decisions
are made, the major categories of plan assets, the inputs and valuation techniques
used to measure fair value of plan assets, the effect of fair value measurements
using significant unobservable inputs on changes in plan assets for the period,
and significant concentrations of risk within plan assets. FAS 132(R)-1 is
effective for the Company beginning with its year ending December 31,
2009. The Company is currently assessing the potential impacts, if any, on
its consolidated financial statements. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">In May 2009, the FASB issued Statement
of Financial Accounting Standards No. 165, Subsequent Events (“FAS
165”). FAS 165 requires entities to disclose the date through which
subsequent events have been evaluated, as well as whether that date is the
date the financial statements were issued or the date the financial statements
were available to be issued. The Company adopted FAS 165 in the second quarter
of 2009 and has evaluated all subsequent events through July 29,
2009 (the date the Company’s financial statements are issued). </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009,
the FASB issued Statement of Financial Accounting Standards No. 166,
Accounting for Transfer of Financial Assets – an amendment of FASB
Statement No. 140 (“FAS 166”). FAS 166 removes
the concept of a qualifying special-purpose entity from Statement 140 and
removes the exception from applying FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, to qualifying special-purpose entities. This
Statement modifies the financial-components approach used in Statement 140
and limits the circumstances in which a financial asset, or portion of a financial
asset, should be derecognized. Additionally, enhanced disclosures are required
to provide financial statement users with greater transparency about transfers
of financial assets and a transferor’s continuing involvement with
transferred financial assets. FAS 166 is effective for the Company beginning
with its quarter ending March 31, 2010. The adoption of FAS 166 is
not expected to have a material impact on the Company’s consolidated
financial position, results of operations or cash flows. </div> <div
align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009,
the FASB issued Statement of Financial Accounting Standards No. 167,
Amendments to FASB Interpretation No. 46(R) (“FAS 167”).
FAS 167 amends Interpretation No. 46(R) to require ongoing reassessments
of whether an enterprise is the primary beneficiary of a variable interest
entity. Additionally, FAS 167 requires enhanced disclosures that will provide
users of financial statements with more transparent information about an enterprise’s
involvement in variable interest entities. FAS 167 is effective for the Company
beginning with its quarter ending March 31, 2010. The adoption of
FAS 167 is not expected to have a material impact on the Company’s
consolidated financial position, results of operations or cash flows. </div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009,
the FASB issued Statement of Financial Accounting Standards No. 168,
The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles. This FASB instituted a major change in the
way accounting standards are organized. The accounting standards Codification
became the single official source of authoritative, nongovernmental U.S. generally
accepted accounting principles (“GAAP”). After final approval
by the FASB only one level of authoritative GAAP will exist, other than guidance
issued by the Securities and Exchange Commission. All other literature will
be non-authoritative. The Codification is effective for the Company beginning
with its quarter ending September 30, 2009. The adoption of the Codification
will have no impact on the Company’s consolidated financial position,
results of operations or cash flows. </div> <!-- Folio --> <!--
/Folio --> </div> <!-- PAGEBREAK --> <div style="font-family:
'Times New Roman',Times,serif"> </div> </body> </html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD
XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"
--> <html> <head></head> <body> <!-- Begin Block
Tagged Note 19 - bwa:RecentTransactionsTextBlock--> <div style="font-family:
'Times New Roman',Times,serif"> <div align="left" style="font-size:
10pt; margin-top: 12pt"><b>(19) Recent Transactions</b>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>BERU
AG – Domination and Profit Transfer Agreement and “Squeeze-out”
of Minority Shareholders</b></u> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2008,
the Company and BERU AG (“BERU”) completed a Domination
and Profit Transfer Agreement (“DPTA”), giving BorgWarner
full control of BERU. Under this agreement BERU is obligated to transfer 100%
of its annual profits or losses to the Company. Upon request of BERU minority
shareholders, the Company is obligated to purchase their shares for a cash
payment of <font face="'Times New Roman',times,serif">€</font>71.32
per share. Those BERU minority shareholders who did not sell their shares
are entitled to receive an annual compensatory payment (perpetual dividend)
of <font face="'Times New Roman',times,serif">€</font>4.23
(net) per share. The DPTA is a binding agreement. However, certain
minority shareholders of BERU initiated an appraisal proceeding in the German
court system that challenged the valuation of the <font face="'Times New
Roman',times,serif">€</font>71.32 purchase price and <font
face="'Times New Roman',times,serif">€</font>4.23 annual
compensatory payment (perpetual dividend). </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">On January 7, 2009 the
Company informed BERU of its intention to purchase the remaining outstanding
shares at that time of approximately 4%, using the required German legal process
referred to as a “squeeze-out” to complete the 100% ownership.
This process included an affirmative vote of BERU shareholders at its May 20,
2009 annual shareholder meeting. The registration of the “squeeze-out”
was challenged by certain minority shareholders of BERU with the commercial
register in June 2009. The “squeeze-out” share
price passed by the BERU shareholders in May 2009 was <font face="'Times
New Roman',times,serif">€</font>73.39. The increase in
price per share of <font face="'Times New Roman',times,serif">€</font>2.07
resulting from the “squeeze out” was reflected as an increase
to the Company’s total DPTA obligation. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">The DPTA obligation as of June 30,
2009 was approximately <font face="'Times New Roman',times,serif">€</font>23.0
($32.2) million, and approximates the cost if all remaining shares were purchased
by the Company at <font face="'Times New Roman',times,serif">€</font>73.39
per share. As of June 30, 2009, the DPTA obligation is presented
in the Condensed Consolidated Balance Sheet as $32.2 million in current
liabilities. </div> <div align="left" style="font-size: 10pt; margin-top:
6pt">The table below summarizes activity related to the Company’s
DPTA obligation as of June 30, 2009 as follows (in millions): </div>
<div align="center"> <table style="font-size: 10pt; text-align: left"
cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin
Table Head --> <tr valign="bottom"> <td width="88%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
<td width="5%"> </td> <td width="1%"> </td>
</tr> <!-- End Table Head --> <!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff"> <td> <div
style="margin-left:15px; text-indent:-15px">Domination and Profit Transfer
Agreement Obligation at December 31, 2008 </div></td>
<td> </td> <td align="left">$</td> <td
align="right">44.0</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Shares
Purchased During the Three Months Ended March 31, 2009 </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(12.2</td> <td nowrap="nowrap">)</td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Translation Adjustment
</div></td> <td> </td> <td nowrap="nowrap"
align="left"> </td> <td align="right">(2.1</td>
<td nowrap="nowrap">)</td> </tr> <tr style="font-size:
1px"> <td> <div style="margin-left:15px; text-indent:-15px"> 
</div></td> <td> </td> <td nowrap="nowrap"
colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td> </tr> <tr valign="bottom"> <td>
<div style="margin-left:15px; text-indent:-15px">Domination and Profit
Transfer Agreement Obligation at March 31, 2009 </div></td>
<td> </td> <td> </td> <td align="right">29.7</td>
<td> </td> </tr> <tr valign="bottom" style="background:
#cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Share
Resolution to <font face="'Times New Roman',times,serif">€</font>73.39
per Share </div></td> <td> </td> <td> </td>
<td align="right">0.9</td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Shares
Purchased During the Three Months Ended June 30, 2009 </div></td>
<td> </td> <td nowrap="nowrap" align="left"> </td>
<td align="right">(0.7</td> <td nowrap="nowrap">)</td>
</tr> <tr valign="bottom" style="background: #cceeff"> <td>
<div style="margin-left:15px; text-indent:-15px">Translation Adjustment
</div></td> <td> </td> <td> </td>
<td align="right">2.3</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid
#000000"> </td> <td> </td> </tr>
<tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Domination
and Profit Transfer Agreement Obligation at June 30, 2009 </div></td>
<td> </td> <td align="left">$</td> <td
align="right">32.2</td> <td> </td> </tr>
<tr style="font-size: 1px"> <td> <div style="margin-left:15px;
text-indent:-15px">  </div></td> <td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double
#000000"> </td> <td> </td> </tr>
<!-- End Table Body --> </table> </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009,
the portion of the acquisition related to the DPTA represents a non-cash transaction
of <font face="'Times New Roman',times,serif">€</font>23.0
($32.2) million. For the three months and six months ended June 30,
2009, the costs related to the annual perpetual dividend arrangement are reported
as interest expense in the Consolidated Statement of Operations of $1.1 million
and $1.6 million, respectively. </div> <div align="left"
style="font-size: 10pt; margin-top: 6pt">As a result of the tendering of
shares, the Company owned approximately 97% of all BERU’s outstanding
shares at June 30, 2009. The tendering of approximately 1.3% of BERU
shares, at a cost of $12.9 million, has been reflected as an Investing
activity in the Consolidated Statements of Cash Flows for the six months ended
June 30, 2009. On May 22, 2009 the Company paid the annual
perpetual dividend of $1.9 million, which is reflected as an Investing
activity in the Consolidated Statement of Cash Flows for the six months ended
June 30, 2009. </div> <!-- Folio --> <!-- /Folio -->
</div> <!-- PAGEBREAK --> <div style="font-family: 'Times New
Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top:
6pt">For a description of our earlier acquisition of BERU, see Note 20
to the Notes to Consolidated Financial Statements in our most recently filed
Annual Report on Form 10-K. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt"><u><b>Acquisition of Etatech, Inc. Technology</b></u>
</div> <div align="left" style="font-size: 10pt; margin-top: 6pt">On
June 2, 2009, the Company announced the purchase of advanced gasoline
ignition technology and related intellectual property from Florida-based Etatech,
Inc. The high-frequency ignition technology enables high-performing, lean
burning engines to significantly improve fuel economy and reduce emissions
compared with conventional combustion technologies. Amortization expense of
approximately $0.2 million was incurred in the second quarter of
2009 with respect to this acquisition. </div> <div align="left" style="font-size:
10pt; margin-top: 6pt">For the six months ended June 30, 2009,
a $7.5 million payment has been reflected as an investing activity
in the Consolidated Statement of Cash Flows. </div> </div> </body>
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false
--12-31
2009-06-30
10-Q
0000908255
116653717
Yes
Large Accelerated
Filer 5200000000
BORGWARNER
INC. No Yes
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* The Company had a loss for the
quarter and six months ended June 30, 2009. As a result, diluted loss per
share is the same as basic, as any dilutive securities would reduce the loss
per share. Therefore, diluted shares are equal to basic shares outstanding
for the three and six months ended June 30, 2009.