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.



2018 Segment information
	Net sales								Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
(millions of dollars)	Customers		Inter-segment			Net			Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
Engine	$	6,389.9	$	57.5		$	6,447.4		$	4,730.7	$	225.7	$	278.1
Drivetrain	4,139.7		(0.3		)	4,139.4			3,919.9		175.6		254.4
Inter-segment eliminations	—		(57.2		)	(57.2		)	—		—		—
Total	10,529.6		—			10,529.6			8,650.6		401.3		532.5
Corporate (b)	—		—			—			1,444.7		30.0		14.1
Consolidated	$	10,529.6	$	—		$	10,529.6		$	10,095.3	$	431.3	$	546.6



2017 Segment information
	Net sales								Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
(millions of dollars)	Customers		Inter-segment			Net			Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
Engine	$	6,009.0	$	52.5		$	6,061.5		$	4,732.9	$	218.8	$	305.5
Drivetrain	3,790.3		—			3,790.3			3,903.8		160.9		241.6
Inter-segment eliminations	—		(52.5		)	(52.5		)	—		—		—
Total	9,799.3		—			9,799.3			8,636.7		379.7		547.1
Corporate (b)	—		—			—			1,150.9		28.1		12.9
Consolidated	$	9,799.3	$	—		$	9,799.3		$	9,787.6	$	407.8	$	560.0



2016 Segment information
	Net sales								Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
(millions of dollars)	Customers		Inter-segment			Net			Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
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 (b)	—		—			—			1,487.7		25.0		19.1
Consolidated	$	9,071.0	$	—		$	9,071.0		$	8,834.7	$	391.4	$	500.6

_______________

(a) Long-lived asset expenditures include capital expenditures and tooling outlays.

(b) Corporate assets include investments and other long-term receivables and deferred income taxes.

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



	Year Ended December 31,
(millions of dollars)	2018			2017			2016
Engine	$	1,039.9		$	992.1		$	943.9
Drivetrain	475.4			448.3			363.0
Adjusted EBIT	1,515.3			1,440.4			1,306.9
Restructuring expense	67.1			58.5			26.9
Asset impairment and loss on divestiture	25.6			71.0			127.1
Asbestos-related adjustments	22.8			—			(48.6		)
Gain on sale of building	(19.4		)	—			—
Other postretirement income	(9.4		)	(5.1		)	(4.9		)
Officer stock awards modification	8.3			—			—
Merger, acquisition and divestiture expense	5.8			10.0			23.7
Lease termination settlement	—			5.3			—
Intangible asset impairment	—			—			12.6
Contract expiration gain	—			—			(6.2		)
Other (income) expense, net	(3.3		)	2.1			—
Corporate, including equity in affiliates' earnings and stock-based compensation	169.6			170.3			155.3
Interest income	(6.4		)	(5.8		)	(6.3		)
Interest expense and finance charges	58.7			70.5			84.6
Earnings before income taxes and noncontrolling interest	1,195.9			1,063.6			942.7
Provision for income taxes	211.3			580.3			306.0
Net earnings	984.6			483.3			636.7
Net earnings attributable to the noncontrolling interest, net of tax	53.9			43.4			41.7
Net earnings attributable to BorgWarner Inc.	$	930.7		$	439.9		$	595.0

Geographic Information

During the year ended December 31, 2018, approximately 77% of the Company's consolidated net sales were outside the United States ("U.S."), attributing sales to the location of production rather than the location of the customer. Outside the U.S., only Germany, China, South Korea, Mexico and Hungary exceeded 5% of consolidated net sales during the year ended December 31, 2018. Also, the Company's 50% equity investment in NSK-Warner (refer to Note 6, "Balance Sheet Information," to the Consolidated Financial Statements for more information) of $184.1 million, $185.1 million and $172.9 million at December 31, 2018, 2017 and 2016, 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)	2018		2017		2016		2018		2017		2016
United States	$	2,393.5	$	2,280.0	$	2,236.0	$	728.9	$	719.3	$	799.3
Europe:
Germany	1,665.1		1,652.6		1,735.1		371.1		413.4		370.3
Hungary	687.3		655.7		541.1		153.0		147.5		122.2
Other Europe	1,669.5		1,427.2		1,193.9		452.5		426.1		337.7
Total Europe	4,021.9		3,735.5		3,470.1		976.6		987.0		830.2
China	1,801.1		1,560.1		1,218.0		589.3		554.8		384.6
South Korea	858.8		877.6		948.2		235.1		244.2		208.0
Mexico	978.4		920.2		805.6		223.1		201.2		136.2
Other foreign	475.9		425.9		393.1		150.8		157.3		143.5
Total	$	10,529.6	$	9,799.3	$	9,071.0	$	2,903.8	$	2,863.8	$	2,501.8

Sales to Major Customers

Consolidated net sales to Ford (including its subsidiaries) were approximately 14%, 15%, and 15% for the years ended December 31, 2018, 2017 and 2016, respectively; and to Volkswagen (including its subsidiaries) were approximately 12%, 13% and 13% for the years ended December 31, 2018, 2017 and 2016, respectively. Both of the Company's reporting segments had significant sales to Volkswagen and Ford in 2018, 2017 and 2016. 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 27%, 28% and 28% of total net sales for the years ended December 31, 2018, 2017 and 2016, 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.