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Reporting Segments and Related Information
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
Reporting segments and related information
REPORTING SEGMENTS AND RELATED INFORMATION

The Company's business is comprised of two reporting segments: Engine and Drivetrain. These segments are strategic business groups, which are managed separately as each represents a specific grouping of related automotive components and systems.

The Company allocates resources to each segment based upon the projected after-tax return on invested capital ("ROIC") of its business initiatives. ROIC is comprised of Adjusted EBIT after deducting notional taxes compared to the projected average capital investment required. Adjusted EBIT is comprised of earnings before interest, income taxes and noncontrolling interest (“EBIT") adjusted for restructuring, goodwill impairment charges, affiliates' earnings and other items not reflective of on-going operating income or loss.

Adjusted EBIT is the measure of segment income or loss used by the Company. The Company believes Adjusted EBIT is most reflective of the operational profitability or loss of our reporting segments. The following tables show segment information and Adjusted EBIT for the Company's reporting segments.

2016 Segment information
 
 
 
 
 
 
 
 
Net sales
 
Year-end assets
 
Depreciation/ amortization
 
Long-lived asset expenditures (b)
(millions of dollars)
Customers
 
Inter-segment
 
Net
 
 
 
Engine
$
5,547.3

 
$
42.8

 
$
5,590.1

 
$
4,134.6

 
$
211.9

 
$
298.7

Drivetrain
3,523.7

 
—

 
3,523.7

 
3,212.4

 
154.5

 
182.8

Inter-segment eliminations
—

 
(42.8
)
 
(42.8
)
 
—

 
—

 
—

Total
9,071.0

 
—

 
9,071.0

 
7,347.0

 
366.4

 
481.5

Corporate (a)
—

 
—

 
—

 
1,487.7

 
25.0

 
19.1

Consolidated
$
9,071.0

 
$
—

 
$
9,071.0

 
$
8,834.7

 
$
391.4

 
$
500.6



2015 Segment information
 
 
 
 
 
 
 
 
Net sales
 
Year-end assets
 
Depreciation/ amortization
 
Long-lived asset expenditures (b)
(millions of dollars)
Customers
 
Inter-segment
 
Net
 
 
 
Engine
$
5,466.5

 
$
33.5

 
$
5,500.0

 
$
4,017.8

 
$
200.2

 
$
332.4

Drivetrain
2,556.7

 
—

 
2,556.7

 
3,685.1

 
97.0

 
221.8

Inter-segment eliminations
—

 
(33.5
)
 
(33.5
)
 
—

 
—

 
—

Total
8,023.2

 
—

 
8,023.2

 
7,702.9

 
297.2

 
554.2

Corporate (a)
—

 
—

 
—

 
1,122.8

 
23.0

 
23.1

Consolidated
$
8,023.2

 
$
—

 
$
8,023.2

 
$
8,825.7

 
$
320.2

 
$
577.3



2014 Segment information
 
 
 
 
 
 
 
 
Net sales
 
Year-end assets
 
Depreciation/ amortization
 
Long-lived asset
expenditures (b)
(millions of dollars)
Customers
 
Inter-segment
 
Net
 
 
 
Engine
$
5,673.7

 
$
32.2

 
$
5,705.9

 
$
3,936.2

 
$
215.3

 
$
349.8

Drivetrain
2,631.4

 
—

 
2,631.4

 
1,783.5

 
92.8

 
189.2

Inter-segment eliminations
—

 
(32.2
)
 
(32.2
)
 
—

 
—

 
—

Total
8,305.1

 
—

 
8,305.1

 
5,719.7

 
308.1

 
539.0

Corporate (a)
—

 
—

 
—

 
1,505.5

 
22.3

 
24.0

Consolidated
$
8,305.1

 
$
—

 
$
8,305.1

 
$
7,225.2

 
$
330.4

 
$
563.0


_______________
(a) Corporate assets include investments and other long-term receivables and deferred income taxes.
(b) Long-lived asset expenditures include capital expenditures and tooling outlays.

Adjusted earnings before interest, income taxes and noncontrolling interest ("Adjusted EBIT")

 
Year Ended December 31,
(millions of dollars)
2016
 
2015
 
2014
Engine
$
934.1


$
900.7

 
$
924.0

Drivetrain
354.5


294.6

 
303.3

Adjusted EBIT
1,288.6


1,195.3

 
1,227.3

Asbestos-related charge
703.6

 
—

 
—

Loss on divestiture
127.1

 
—

 
—

Restructuring expense
26.9


65.7

 
90.8

Merger and acquisition expense
23.7

 
21.8

 
—

Intangible asset impairment
12.6

 
—

 
10.3

Contract expiration gain
(6.2
)
 
—

 
—

Pension settlement loss
—

 
25.7

 
3.1

Gain on previously held equity interest
—


(10.8
)
 
—

Corporate, including equity in affiliates' earnings and stock-based compensation
132.1


113.2

 
112.1

Interest income
(6.3
)

(7.5
)
 
(5.5
)
Interest expense and finance charges
84.6


60.4

 
36.4

Earnings before income taxes and noncontrolling interest
190.5


926.8

 
980.1

Provision for income taxes
30.3


280.4

 
292.6

Net earnings
160.2


646.4

 
687.5

Net earnings attributable to the noncontrolling interest, net of tax
41.7


36.7

 
31.7

Net earnings attributable to BorgWarner Inc. 
$
118.5


$
609.7

 
$
655.8



Geographic Information

Outside the U.S., only Germany, China, South Korea, Mexico and Hungary exceeded 5% of consolidated net sales during the year ended December 31, 2016, attributing sales to the location of production rather than the location of the customer. Also, the Company's 50% equity investment in NSK-Warner (see the Balance Sheet Information footnote to the Consolidated Financial Statements) of $172.9 million, $158.7 million and $143.8 million at December 31, 2016, 2015 and 2014, respectively, is excluded from the definition of long-lived assets, as are goodwill and certain other non-current assets.
 
Net sales
 
Long-lived assets
(millions of dollars)
2016
 
2015
 
2014
 
2016
 
2015
 
2014
United States
$
2,236.0

 
$
1,985.1

 
$
2,008.1

 
$
799.3

 
$
800.5

 
$
586.2

Europe:


 


 


 
 

 
 

 
 

Germany
1,735.1

 
1,857.1

 
2,145.6

 
370.3

 
380.9

 
413.6

Hungary
541.1

 
500.5

 
518.1

 
122.2

 
112.4

 
73.2

France
305.2

 
339.2

 
405.2

 
39.5

 
41.4

 
42.5

Other Europe
888.7

 
921.8

 
1,097.3

 
298.2

 
276.6

 
258.8

Total Europe
3,470.1

 
3,618.6

 
4,166.2

 
830.2

 
811.3

 
788.1

China
1,218.0

 
1,009.0

 
885.1

 
384.6

 
355.8

 
299.9

South Korea
948.2

 
741.7

 
623.0

 
208.0

 
218.6

 
185.9

Mexico
805.6

 
312.7

 
201.4

 
136.2

 
132.8

 
96.6

Other foreign
393.1

 
356.1

 
421.3

 
143.5

 
129.1

 
137.2

Total
$
9,071.0

 
$
8,023.2

 
$
8,305.1

 
$
2,501.8

 
$
2,448.1

 
$
2,093.9



Sales to Major Customers

Consolidated net sales to Ford (including its subsidiaries) were approximately 15%, 15%, and 13% for the years ended December 31, 2016, 2015 and 2014, respectively; and to Volkswagen (including its subsidiaries) were approximately 13%, 15% and 17% for the years ended December 31, 2016, 2015 and 2014, respectively. Both of the Company's reporting segments had significant sales to Volkswagen and Ford in 2016, 2015 and 2014. Such sales consisted of a variety of products to a variety of customer locations and regions. No other single customer accounted for more than 10% of consolidated net sales in any of the years presented.

Sales by Product Line

Sales of turbochargers for light vehicles represented approximately 28%, 31% and 28% of total net sales for the years ended December 31, 2016, 2015 and 2014, respectively. The Company currently supplies light vehicle turbochargers to many OEMs including BMW, Daimler, Fiat Chrysler Automobiles, Ford, General Motors, Great Wall, Hyundai, Renault, Volkswagen and Volvo. No other single product line accounted for more than 10% of consolidated net sales in any of the years presented.

Interim Financial Information (Unaudited)

(millions of dollars, except per share amounts)
2016
 
2015
Quarter ended
Mar-31
 
Jun-30
 
Sep-30
 
Dec-31
 
Year
 
Mar-31
 
Jun-30
 
Sep-30
 
Dec-31
 
Year
Net sales
$
2,268.6

 
$
2,329.2

 
$
2,214.2

 
$
2,259.0

 
$
9,071.0

 
$
1,984.2

 
$
2,031.9

 
$
1,884.0

 
$
2,123.1

 
$
8,023.2

Cost of sales
1,804.3

 
1,832.5

 
1,743.1

 
1,758.0

 
7,137.9

 
1,555.2

 
1,602.9

 
1,485.8

 
1,676.2

 
6,320.1

Gross profit
464.3

 
496.7

 
471.1

 
501.0

 
1,933.1

 
429.0

 
429.0

 
398.2

 
446.9

 
1,703.1

Selling, general and administrative expenses
188.4

 
202.3

 
209.7

 
217.1

 
817.5

 
168.2

 
167.4

 
148.0

 
178.4

 
662.0

Other expense, net
11.7

 
25.0

 
111.1

 
741.9

 
889.7

 
1.2

 
19.1

 
13.1

 
68.0

 
101.4

Operating income (loss)
264.2

 
269.4

 
150.3

 
(458.0
)
 
225.9

 
259.6

 
242.5

 
237.1

 
200.5

 
939.7

Equity in affiliates’ earnings, net of tax
(9.1
)
 
(10.1
)
 
(12.4
)
 
(11.3
)
 
(42.9
)
 
(8.5
)
 
(11.1
)
 
(8.7
)
 
(11.7
)
 
(40.0
)
Interest income
(1.6
)
 
(1.5
)
 
(1.6
)
 
(1.6
)
 
(6.3
)
 
(1.7
)
 
(1.6
)
 
(2.0
)
 
(2.2
)
 
(7.5
)
Interest expense and finance charges
21.3

 
21.4

 
22.4

 
19.5

 
84.6

 
10.0

 
17.6

 
15.0

 
17.8

 
60.4

Earnings (loss) before income taxes and noncontrolling interest
253.6

 
259.6

 
141.9

 
(464.6
)
 
190.5

 
259.8

 
237.6

 
232.8

 
196.6

 
926.8

Provision (benefit) for income taxes
80.4

 
84.2

 
48.8

 
(183.1
)
 
30.3

 
72.1

 
80.2

 
66.9

 
61.2

 
280.4

Net earnings (loss)
173.2

 
175.4

 
93.1

 
(281.5
)
 
160.2

 
187.7

 
157.4

 
165.9

 
135.4

 
646.4

Net earnings attributable to the noncontrolling interest, net of tax
9.1

 
11.0

 
9.8

 
11.8

 
41.7

 
8.8

 
9.3

 
8.5

 
10.1

 
36.7

Net earnings (loss) attributable to BorgWarner Inc. (a)
$
164.1

 
$
164.4

 
$
83.3

 
$
(293.3
)
 
$
118.5

 
$
178.9

 
$
148.1

 
$
157.4

 
$
125.3

 
$
609.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share — basic
$
0.75

 
$
0.76

 
$
0.39

 
$
(1.39
)
 
$
0.55

 
$
0.79

 
$
0.66

 
$
0.70

 
$
0.57

 
$
2.72

Earnings per share — diluted
$
0.75

 
$
0.76

 
$
0.39

 
$
(1.39
)
 
$
0.55

 
$
0.79

 
$
0.65

 
$
0.70

 
$
0.56

 
$
2.70

_______________

(a) The Company's results were impacted by the following:
•
Quarter ended December 31, 2016: The Company recorded an asbestos-related charge of $703.6 million representing the difference in the total liability from what was previously accrued, consulting fees, less available insurance coverage, and an intangible asset impairment loss of $12.6 million related to the Engine segment Etatech’s ECCOS intellectual technology. Additionally, the Company recorded an incremental loss on divestiture of $20.6 million related to the sale of Remy light vehicle aftermarket business. The Company also recorded merger and acquisition expense of $4.8 million primarily related to the Remy transaction. The Company recorded tax benefits of $263.0 million related to asbestos-related charge, $4.4 million related to intangible asset loss, and $4.9 million related to other one-time tax adjustments. The Company also recorded a tax expense of $4.9 million related to the sale of the Remy light vehicle aftermarket business and the reversal of the associated deferred tax balances.
•
Quarter ended September 30, 2016: The Company recorded an asset impairment expense of $106.5 million to adjust the net book value of the Remy light vehicle aftermarket business to fair value, based on the anticipated sale price. Additionally, the Company recorded restructuring expense of $1.3 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $5.9 million primarily related to the Remy transaction. The Company recorded tax benefits of $27.6 million related to asset impairment expense, $2.4 million related to other one-time tax adjustments, $0.5 million related to restructuring expense, and $0.4 million related to a gain associated with the release of certain Remy light vehicle aftermarket liabilities due to the expiration of a customer contract.
•
Quarter ended June 30, 2016: The Company recorded restructuring expense of $19.2 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $7.2 million primarily related to the Remy transaction. The Company recorded tax benefits of $4.4 million related to restructuring expense and $0.3 million related to other one-time tax adjustments, as well as a tax expense of $2.6 million related to a gain associated with the release of certain Remy light vehicle aftermarket liabilities due to the expiration of a customer contract.
•
Quarter ended March 31, 2016: The Company recorded restructuring expense of $6.4 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $5.8 million primarily related to the Remy transaction. The Company recorded tax benefits of $1.0 million related to restructuring expense and $1.0 million related to other one-time tax adjustments.
•
Quarter ended December 31, 2015: The Company recorded restructuring expense of $24.4 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also incurred a non-cash settlement loss of $25.7 million related to a lump-sum pension de-risking disbursement made to an insurance company to unconditionally and irrevocably guarantee all future payments to certain participants that were receiving payments from the U.S. pension plan. Furthermore, the Company recorded merger and acquisition expense of $17.9 million primarily related to the Remy transaction. The Company recorded tax benefits of $9.0 million related to the pension settlement loss, $7.7 million primarily related to foreign tax incentives and tax settlements, $3.8 million related to merger and acquisition expense, partially offset by a tax expense of $0.4 million related to restructuring expense.
•
Quarter ended September 30, 2015: The Company recorded restructuring expense of $6.3 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. Additionally, the Company recorded $3.0 million of restructuring expense related to a global realignment plan intended to enhance treasury management flexibility by creating a legal entity structure that better aligns with the Company's business strategy. The Company also recorded merger and acquisition expense of $3.9 million primarily related to the Remy transaction. The Company recorded tax benefits of $4.5 million related to a global realignment plan, $0.7 million related to restructuring expense and $0.4 million primarily related to foreign tax incentives.
•
Quarter ended June 30, 2015: The Company recorded restructuring expense of $10.5 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. Additionally, the Company recorded $9.4 million of restructuring expense related to a global realignment plan intended to enhance treasury management flexibility by creating a legal entity structure that better aligns with the Company's business strategy. The Company recorded tax expense of $10.3 million related to a global realignment plan, partially offset by tax benefits of $3.9 million related to tax settlements, $2.2 million related to restructuring expense and $1.3 million primarily related to foreign tax incentives.
•
Quarter ended March 31, 2015: The Company recorded restructuring expense of $9.4 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. Additionally, the Company recorded $2.7 million of restructuring expense related to a global realignment plan intended to enhance treasury management flexibility by creating a legal entity structure that better aligns with the Company's business strategy. The Company also recorded a $10.8 million gain on the previously held equity interest in BERU Diesel as a result of purchasing the remaining 51% of this joint venture. The Company recorded tax benefits of $2.4 million primarily related to foreign tax incentives and $1.2 million related to restructuring expense.