Segment and Geographic Area Information

In the first quarter of 2018, the Company's reportable segments were revised to reflect the Clean Air, Ride Performance, and Aftermarket businesses. Until the fourth quarter of 2018, the three reportable segments were also the Company's operating segments, and aligned with how the Chief Operating Decision Maker (“CODM”) allocated resources and assessed performance against key growth strategies.

As discussed in Note 3, Acquisitions and Divestitures, the Company completed the Acquisition of Federal-Mogul on October 1, 2018 and its results are included in the Powertrain and Motorparts segments. As a result, it was determined the Company has five operating segments consisting of Clean Air, Ride Performance, Aftermarket, Powertrain, and Motorparts businesses. This structure is consistent with how the CODM allocates resources and assesses performance.

With respect to the five segments:


•	The Clean Air segment designs, manufactures and distributes a variety of products and systems designed to reduce pollution and optimize engine performance, acoustic tuning and weight on a vehicle for OEMs.


•	The Ride Performance segment designs, manufactures and distributes a variety of products and systems designed to reduce and control excessive roll, pitch and bounce of a vehicle through the suspension system for OEM customers.


•	The Aftermarket segment designs, manufactures and distributes replacement products for the automotive parts industry including ride performance and clean air products.


•	The Powertrain segment focuses on original equipment powertrain products for automotive, heavy duty, and industrial applications.


•	The Motorparts segment sells and distributes a broad portfolio of products in the global aftermarket, while also serving OEMs with products including, braking, wipers, and a limited range of chassis components.

As a result of the Acquisition, management changed its key performance measure of segment profitability. Management now uses EBITDA including noncontrolling interests as the key performance measure of segment profitability and uses the measure in its financial and operational decision making processes, for internal reporting, and for planning and forecasting purposes to effectively allocate resources. EBITDA including noncontrolling interests is defined as earnings before interest expense, income taxes, noncontrolling interests, and depreciation and amortization. Prior period operating segment results have been retrospectively recast to reflect the Company's current operating segments and change in key performance measure for segment profitability. Segment assets are not presented as it is not a measure reviewed by the CODM in allocating resources and assessing performance.

EBITDA including noncontrolling interests should not be considered a substitute for results prepared in accordance with US GAAP and should not be considered an alternative to net income, which is the most directly comparable financial measure to EBITDA including noncontrolling interests that is in accordance with US GAAP. EBITDA including noncontrolling interests, as determined and measured by the Company, should not be compared to similarly titled measures reported by other companies.

Segment results for 2018, 2017 and 2016 are as follows:



	Reportable Segments
	Clean Air		Ride Performance		Aftermarket		Powertrain		Motorparts			Total		Other			Reclass & Elims			Total
	(Millions)
At December 31, 2018, and for the Year Ended
Revenues from external customers	$	6,707	$	1,949	$	1,221	$	1,112	$	774		$	11,763	$	—		$	—		$	11,763
Intersegment revenues	—		22		—		40		10			72		—			(72		)	—
EBITDA including noncontrolling interests	597		66		169		92		(39		)	885		(234		)	—			651
At December 31, 2017, and for the Year Ended
Revenues from external customers	$	6,216	$	1,807	$	1,251	$	—	$	—		$	9,274	$	—		$	—		$	9,274
Intersegment revenues	—		22		—		—		—			22		—			(22		)	—
EBITDA including noncontrolling interests	562		124		193		—		—			879		(245		)	—			634
At December 31, 2016, and for the Year Ended
Revenues from external customers	$	5,764	$	1,593	$	1,240	$	—	$	—		$	8,597	$	—		$	—		$	8,597
Intersegment revenues	—		26		—		—		—			26		—			(26		)	—
EBITDA including noncontrolling interests	561		153		207		—		—			921		(229		)	—			692

Segment EBITDA including noncontrolling interests and the reconciliation to earnings before interest expense, income taxes, and noncontrolling interests are as follow:



	Year Ended December 31
	2018			2017			2016
	(Millions)
EBITDA including noncontrolling interests by Segments:
Clean Air	$	597		$	562		$	561
Ride Performance	66			124			153
Aftermarket	169			193			207
Powertrain	92			—			—
Motorparts	(39		)	—			—
Other	(234		)	(245		)	(229		)
Total EBITDA including noncontrolling interests	651			634			692
Less: Depreciation and amortization	(345		)	(226		)	(213		)
Earnings before interest expense, income taxes, and noncontrolling interests	$	306		$	408		$	479
Less: Interest expense	132			72			68
Less: Income tax expense (benefit)	63			71			(4		)
Net income	$	111		$	265		$	415

The following customers accounted for 10% or more of the Company's net sales in the last three years. The net sales to both customers were across all segments.



Customer	2018		2017		2016
General Motors Company	12	%	14	%	17	%
Ford Motor Company	12	%	13	%	13	%



	Revenues from external customers ^(b)						Long-lived assets ^(c)
	Year Ended December 31						December 31
	2018		2017		2016		2018			2017
	(Millions)
United States	$	4,488	$	3,632	$	3,512	$	1,341		$	655
China	1,553		1,283		1,186		687			280
Germany	1,212		798		764		543			144
Poland	731		488		385		319			219
United Kingdom	499		482		387		116			48
Mexico	543		416		352		239			75
India	316		216		159		167			46
Turkey	7		9		9		276			—
Other Foreign ^(a)	2,414		1,950		1,843		687			298
Reclass & Elims	—		—		—		(107		)	—
Consolidated	$	11,763	$	9,274	$	8,597	$	4,268		$	1,765


(a)	Revenues from external customers and long-lived assets for individual foreign countries other than China, Germany, Poland, United Kingdom, Mexico, India, and Turkey are not material.


(b)	Revenues are attributed to countries based on location of the shipper.


(c)	Long-lived assets include all long-term assets except goodwill, intangibles and deferred tax assets.

Disaggregation of revenue

Original Equipment

Value added: OE revenue is generated from providing original equipment manufacturers and servicers with products for automotive, heavy duty, and industrial applications. Supply relationships typically extend over the life of the related vehicle, subject to interim design and technical specification revisions, and do not require the customer to purchase a minimum quantity.

Substrate/Pass through sales: Generally, in connection with the sale of exhaust systems to certain OE manufacturers, the Company purchases catalytic converters and diesel particulate filters or components thereof including precious metals (“substrates”) on behalf of its customers which are used in the assembled system. These substrates are included in inventory and are “passed through” to the customer at cost, plus a small margin. Since the Company takes title to the substrate inventory and has responsibility for both the delivery and quality of the finished product including the substrates, the revenues and related expenses are recorded at gross amounts. Revenues recognized for substrate sales were $2,500 million, $2,187 million, and $2,028 million for the years ended December 31, 2018, 2017 and 2016.

Aftermarket

Aftermarket revenue is generated from providing products for the global vehicle aftermarket to a wide range of warehouse distributors, retail parts stores, and mass merchants that distribute these products to customers ranging from professional service providers to “do-it-yourself” consumers.

Revenue from contracts with customers is disaggregated by product lines, as it depicts the nature and amount of the Company’s revenue that is aligned with the Company's key growth strategies. In the following table, revenue is disaggregated accordingly:



	Reportable Segments
By Customer Type	Clean Air		Ride Performance		Aftermarket		Powertrain		Motorparts		Total
	(Millions)
Year Ended December 31, 2018
OE - Substrate	$	2,500	$	—	$	—	$	—	$	—	$	2,500
OE - Value add	4,207		1,949		—		1,112		—		7,268
Aftermarket	—		—		1,221		—		774		1,995
Total	$	6,707	$	1,949	$	1,221	$	1,112	$	774	$	11,763
Year Ended December 31, 2017
OE - Substrate	$	2,187	$	—	$	—	$	—	$	—	$	2,187
OE - Value add	4,029		1,807		—		—		—		5,836
Aftermarket	—		—		1,251		—		—		1,251
Total	$	6,216	$	1,807	$	1,251	$	—	$	—	$	9,274
Year Ended December 31, 2016
OE - Substrate	$	2,028	$	—	$	—	$	—	$	—	$	2,028
OE - Value add	3,736		1,593		—		—		—		5,329
Aftermarket	—		—		1,240		—		—		1,240
Total	$	5,764	$	1,593	$	1,240	$	—	$	—	$	8,597



	Reportable Segments
By Geography	Clean Air		Ride Performance		Aftermarket		Powertrain		Motorparts		Total
	(Millions)
Year Ended December 31, 2018
North America	$	2,981	$	721	$	758	$	386	$	408	$	5,254
EMEA	2,415		801		399		498		290		4,403
ROW	1,311		427		64		228		76		2,106
Total	$	6,707	$	1,949	$	1,221	$	1,112	$	774	$	11,763
Year Ended December 31, 2017
North America	$	2,866	$	674	$	786	$	—	$	—	$	4,326
EMEA	2,143		736		404		—		—		3,283
ROW	1,207		397		61		—		—		1,665
Total	$	6,216	$	1,807	$	1,251	$	—	$	—	$	9,274
Year Ended December 31, 2016
North America	$	2,767	$	652	$	818	$	—	$	—	$	4,237
EMEA	1,872		604		370		—		—		2,846
ROW	1,125		337		52		—		—		1,514
Total	$	5,764	$	1,593	$	1,240	$	—	$	—	$	8,597

The following table shows the asset expenditure information by reportable segments:



	Year Ended December 31, 2018
	Clean Air			Ride Performance			Aftermarket			Powertrain			Motorparts			Other unallocated assets			Total
	(Millions)
Prior year payable on assets	$	33		$	22		$	4		$	—		$	—		$	—		$	59
Asset additions	202			121			38			81			43			56			541
Less: Current year payable on assets	(38		)	(23		)	(7		)	(23		)	(2		)	—			(93		)
Cash payments for property, plant, and equipment	$	197		$	120		$	35		$	58		$	41		$	56		$	507

	Year Ended December 31, 2017
	Clean Air			Ride Performance			Aftermarket			Powertrain			Motorparts			Other unallocated assets			Total
	(Millions)
Prior year payable on assets	$	43		$	19		$	5		$	—		$	—		$	1		$	68
Asset additions	212			145			27			—			—			26			410
Less: Current year payable on assets	(33		)	(22		)	(4		)	—			—			—			(59		)
Cash payments for property, plant, and equipment	$	222		$	142		$	28		$	—		$	—		$	27		$	419

	Year Ended December 31, 2016
	Clean Air			Ride Performance			Aftermarket			Powertrain			Motorparts			Other unallocated assets			Total
	(Millions)
Prior year payable on assets	$	35		$	11		$	4		$	—		$	—		$	—		$	50
Asset additions	217			96			26			—			—			24			363
Less: Current year payable on assets	(43		)	(19		)	(5		)	—			—			(1		)	(68		)
Cash payments for property, plant, and equipment	$	209		$	88		$	25		$	—		$	—		$	23		$	345

The Other unallocated assets are comprised of software additions not included in segment information.