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STOCK-BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company has granted restricted common stock and restricted stock units (collectively, “restricted stock”) and performance share units as long-term incentive awards to employees and non-employee directors under the BorgWarner Inc. 2018 Stock Incentive Plan, as amended (“2018 Plan”) and the BorgWarner Inc. 2023 Stock Incentive Plan (“2023 Plan”). The Company’s Board of Directors adopted the 2023 Plan as a replacement to the 2018 Plan in April 2023, and the Company’s stockholders approved the 2023 Plan at the annual meeting of stockholders on April 26, 2023. The 2023 Plan authorizes the issuance of a total of 11.3 million shares and approximately 9.1 million shares were available for future issuance as of December 31, 2023. Restricted Stock: The value of restricted stock is determined by the market value of the Company’s common stock at the date of grant. In 2023, restricted stock in the amount of 1.3 million shares and less than 0.1 million shares were granted to employees and non-employee directors, respectively. The value of the awards is recognized as compensation expense ratably over the restriction periods, generally two or three years. As of December 31, 2023, there was $42 million of unrecognized compensation expense related to restricted stock that will be recognized over a weighted average period of approximately 1.7 years. Restricted stock compensation expense from continuing operations recorded in the Consolidated Statements of Operations is as follows:
| Year Ended December 31,
(in millions, except per share data) | 2023 |  | 2022 |  | 2021
Restricted stock compensation expense | $ | 37 |  |  | $ | 28 |  |  | $ | 27 |
Restricted stock compensation expense, net of tax | $ | 28 |  |  | $ | 21 |  |  | $ | 20 |
A summary of the status of the Company’s nonvested restricted stock for employees and non-employee directors is as follows:
| Shares subject to restriction (thousands) |  | Weighted average grant date fair value
Nonvested at January 1, 2021 | 2,140 |  |  | $ | 39.58 |
Granted | 1,175 |  |  | $ | 43.66 |
Vested | (845) |  |  | $ | 43.34 |
Forfeited | (107) |  |  | $ | 39.86 |
Nonvested at December 31, 2021 | 2,363 |  |  | $ | 40.24 |
Granted | 1,060 |  |  | $ | 44.32 |
Vested | (862) |  |  | $ | 38.68 |
Forfeited | (188) |  |  | $ | 42.09 |
Nonvested at December 31, 2022 | 2,373 |  |  | $ | 42.47 |
Granted | 1,099 |  |  | $ | 48.19 |
Vested | (917) |  |  | $ | 39.80 |
Forfeited | (111) |  |  | $ | 44.63 |
PHINIA spin-off awards transferred 1 | (389) |  |  | $ | 45.80 |
PHINIA spin-off adjustment 2 | 274 |  |  | $ | — |
Nonvested at December 31, 2023 | 2,329 |  |  | $ | 40.57 |
________________ 1 Represents the cancellation of awards outstanding as of Distribution Date held by PHINIA employees. PHINIA employees were granted PHINIA restricted stock after the spin-off replacing the cancelled awards. 2 Represents the adjustment of unvested awards using a conversion ratio of 1.13 to 1 to preserve the intrinsic value of the awards prior to spin-off as authorized by the 2023 Plan and 2018 Plan. Performance share units: The Company grants performance share units to members of senior management that vest at the end of three-year periods based the following metrics: •Total Stockholder Return Units: This performance metric is based on the Company’s market performance in terms of total shareholder return relative to a peer group of automotive companies. Based on the Company’s relative ranking within the performance peer group, it is possible for none of the awards to vest or for a range of up to 200% of the target shares to vest. The Company recognizes compensation expense relating to this performance share plan ratably over the performance period regardless of whether the market conditions are expected to be achieved. Compensation expense associated with the performance share plans is calculated using a lattice model (Monte Carlo simulation). As of December 31, 2023, there was $10 million of unrecognized compensation expense related to total stockholder return units that will be recognized over a weighted average period of approximately 1.7 years. •Relative Revenue Growth Units: This performance metric is based on the Company’s performance in terms of revenue growth relative to the vehicle market over three-year performance periods. Based on the Company’s relative revenue growth in excess of the industry vehicle production, it is possible for none of the awards to vest or for a range of up to 200% of the target shares to vest. The value of this performance share award is determined by the market value of the Company’s common stock at the date of grant. The Company recognizes compensation expense relating to this performance share plan over the performance period based on the number of shares expected to vest at the end of each reporting period. The actual performance of the Company is evaluated quarterly and the expense is adjusted according to the new projections. As of December 31, 2022, these awards were fully expensed. •Adjusted Earnings Per Share Units: Introduced in the first quarter of 2020, this performance metric is based on the Company’s earnings per share adjusted for certain one-time items and non-operating gains and losses against a pre-defined target measured in the third year of the performance period. The value of this performance share award is determined by the adjusted earnings per share performance. The Company recognizes compensation expense relating to this performance share plan over the performance period based on the number of shares expected to vest at the end of each reporting period. The actual performance of the Company is evaluated quarterly and the expense is adjusted according to the new projections. As of December 31, 2022, these awards were fully expensed. •eProduct Revenue Mix: Introduced in the first quarter of 2021, this performance metric is based on the Company’s total revenue derived from eProducts in relation to its total proforma revenue in the third year of the performance period. Based on the Company’s eProduct revenue mix, it is possible for none of the awards to vest or for a range of up to 200% of the target shares to vest. The value of this performance share award is determined by the market value of the Company’s common stock at the date of grant. The Company recognizes compensation expense relating to this performance share plan over the performance period based on the number of shares expected to vest at the end of each reporting period. The actual performance of the Company is evaluated quarterly and the expense is adjusted according to the new projections. As of December 31, 2023, there was $7 million of unrecognized compensation expense related to the eProduct revenue mix units that will be recognized over a weighted average period of approximately 1.6 years. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2023. •Cumulative Free Cash Flow: Introduced in the first quarter of 2021, this performance metric is based on the Company’s performance in terms of its operating cash flow less capital expenditures over the three-year performance periods. Based on the Company’s cumulative free cash flow, it is possible for none of the awards to vest or for a range of up to 200% of the target shares to vest. The value of this performance share award is determined by the market value of the Company’s common stock at the date of grant. The Company recognizes compensation expense relating to this performance share plan over the performance period based on the number of shares expected to vest at the end of each reporting period. The actual performance of the Company is evaluated quarterly and the expense is adjusted according to the new projections. As of December 31, 2023, there was $7 million of unrecognized compensation expense related to the cumulative free cash flow units that will be recognized over a weighted average period of approximately 1.6 years. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2023. •eProduct Revenue: Introduced in the first quarter of 2022, this performance metric is based on the amount of the Company’s total revenue derived from eProducts in the third year of the performance period. Based on the Company’s eProduct revenue, it is possible for none of the awards to vest or for a range of up to 200% of the target shares to vest. The value of this performance share award is determined by the market value of the Company’s common stock at the date of grant. The Company recognizes compensation expense relating to this performance share plan over the performance period based on the number of shares expected to vest at the end of each reporting period. The actual performance of the Company is evaluated quarterly and the expense is adjusted according to the new projections. As of December 31, 2023, there was $6 million of unrecognized compensation expense related to the eProduct revenue units that will be recognized over a weighted average period of approximately 1.7 years. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2023. The amounts expensed and common stock issued from continuing operations for performance share units for the years ended December 31, 2023, 2022 and 2021 were as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| Expense (in millions) | Number of shares issued (in thousands) |  | Expense (in millions) | Number of shares issued (in thousands) |  | Expense (in millions) | Number of shares issued (in thousands)
Total Stockholder Return | $ | 8 |  | 107 |  |  | $ | 6 |  | — |  |  | $ | 6 |  | — |
Other Performance-Based | 13 |  | 313 |  |  | 30 |  | 284 |  |  | 17 |  | 138 |
Total | $ | 21 |  | 420 |  |  | $ | 36 |  | 284 |  |  | $ | 23 |  | 138 |
A summary of the status of the Company’s nonvested performance share units for the years ended December 31, 2023, 2022 and 2021 were as follows:
| Total Stockholder Return |  | Other Performance-Based
| Number of shares (in thousands) |  | Weighted average grant date fair value |  | Number of shares (in thousands) |  | Weighted average grant date fair value
Nonvested at January 1, 2021 | 271 |  |  | $ | 45.20 |  |  | 385 |  |  | $ | 38.66 |
Granted | 135 |  |  | $ | 70.39 |  |  | 404 |  |  | $ | 45.30 |
Vested | (143) |  |  | $ | 47.93 |  |  | (143) |  |  | $ | 41.92 |
Forfeited | (4) |  |  | $ | 37.28 |  |  | (6) |  |  | $ | 36.79 |
Nonvested at December 31, 2021 | 259 |  |  | $ | 56.90 |  |  | 640 |  |  | $ | 42.14 |
Granted | 138 |  |  | $ | 66.96 |  |  | 415 |  |  | $ | 44.33 |
Vested | (127) |  |  | $ | 28.55 |  |  | (234) |  |  | $ | 34.73 |
Forfeited | (20) |  |  | $ | 59.87 |  |  | (56) |  |  | $ | 43.35 |
Nonvested at December 31, 2022 | 250 |  |  | $ | 76.68 |  |  | 765 |  |  | $ | 45.51 |
Granted | 135 |  |  | $ | 79.39 |  |  | 405 |  |  | $ | 48.06 |
Vested | (114) |  |  | $ | 70.39 |  |  | (341) |  |  | $ | 45.14 |
Forfeited | (11) |  |  | $ | 68.66 |  |  | (34) |  |  | $ | 44.96 |
PHINIA spin-off awards transferred 1 | (22) |  |  | $ | 72.33 |  |  | (67) |  |  | $ | 46.03 |
PHINIA spin-off adjustment 2 | 35 |  |  | $ | — |  |  | 106 |  |  | $ | — |
Nonvested at December 31, 2023 | 273 |  |  | $ | 71.37 |  |  | 834 |  |  | $ | 41.08 |

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