Reporting Segments and Related Information

12 Months Ended

Dec. 31, 2019

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:



2019 Segment information
	Net sales								Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
(in millions)	Customers		Inter-segment			Net			Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
Engine	$	6,153	$	61		$	6,214		$	4,536	$	227	$	219
Drivetrain	4,015		—			4,015			4,075		183		254
Inter-segment eliminations	—		(61		)	(61		)	—		—		—
Total	10,168		—			10,168			8,611		410		473
Corporate (b)	—		—			—			1,091		29		8
Consolidated	$	10,168	$	—		$	10,168		$	9,702	$	439	$	481



2018 Segment information
	Net sales								Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
(in millions)	Customers		Inter-segment			Net			Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
Engine	$	6,390	$	57		$	6,447		$	4,731	$	226	$	278
Drivetrain	4,140		—			4,140			3,920		175		254
Inter-segment eliminations	—		(57		)	(57		)	—		—		—
Total	10,530		—			10,530			8,651		401		532
Corporate (b)	—		—			—			1,444		30		14
Consolidated	$	10,530	$	—		$	10,530		$	10,095	$	431	$	546



2017 Segment information
	Net sales								Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
(in millions)	Customers		Inter-segment			Net			Year-end assets		Depreciation/ amortization		Long-lived asset expenditures (a)
Engine	$	6,009	$	53		$	6,062		$	4,733	$	219	$	305
Drivetrain	3,790		—			3,790			3,904		161		242
Inter-segment eliminations	—		(53		)	(53		)	—		—		—
Total	9,799		—			9,799			8,637		380		547
Corporate (b)	—		—			—			1,151		28		13
Consolidated	$	9,799	$	—		$	9,799		$	9,788	$	408	$	560

_______________

(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,
(in millions)	2019			2018			2017
Engine	$	995		$	1,040		$	992
Drivetrain	443			475			448
Adjusted EBIT	1,438			1,515			1,440
Gain on derecognition of subsidiary	(177		)	—			—
Restructuring expense	72			67			58
Unfavorable arbitration loss	14			—			—
Merger, acquisition and divestiture expense	11			6			10
Asset impairment and loss on divestiture	7			25			71
Officer stock awards modification	2			8			—
Asbestos-related adjustments	—			23			—
Gain on sale of building	—			(19		)	—
Lease termination settlement	—			—			5
Other (income) expense	—			(4		)	2
Corporate, including stock-based compensation	206			219			222
Equity in affiliates' earnings, net of tax	(32		)	(49		)	(51		)
Interest income	(12		)	(6		)	(6		)
Interest expense	55			59			71
Other postretirement expense (income)	27			(10		)	(5		)
Earnings before income taxes and noncontrolling interest	1,265			1,196			1,063
Provision for income taxes	468			211			580
Net earnings	797			985			483
Net earnings attributable to the noncontrolling interest, net of tax	51			54			43
Net earnings attributable to BorgWarner Inc.	$	746		$	931		$	440

Geographic Information

During the year ended December 31, 2019, 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, Poland and Hungary exceeded 5% of consolidated net sales during the year ended December 31, 2019. Also, the Company's equity investments are excluded from the definition of long-lived assets, as are goodwill and certain other non-current assets.



	Net sales						Long-lived assets
(in millions)	2019		2018		2017		2019		2018		2017
United States	$	2,335	$	2,394	$	2,280	$	752	$	729	$	719
Europe:
Germany	1,507		1,665		1,653		328		371		413
Poland	627		519		522		180		171		152
Hungary	589		687		656		164		153		148
Other Europe	1,087		1,151		904		285		282		274
Total Europe	3,810		4,022		3,735		957		977		987
China	1,711		1,801		1,560		605		589		555
Mexico	1,040		978		920		247		223		201
South Korea	786		859		877		221		235		244
Other foreign	486		476		427		152		151		158
Total	$	10,168	$	10,530	$	9,799	$	2,934	$	2,904	$	2,864

Sales to Major Customers

Consolidated net sales to Ford (including its subsidiaries) were approximately 15%, 14%, and 15% for the years ended December 31, 2019, 2018 and 2017, respectively, and to Volkswagen (including its subsidiaries) were approximately 11%, 12% and 13% for the years ended December 31, 2019, 2018 and 2017, respectively. Both of the Company's reporting segments had significant sales to Ford and Volkswagen in 2019, 2018 and 2017. 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%, 27% and 28% of total net sales for the years ended December 31, 2019, 2018 and 2017, 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.