BUSINESS SEGMENT INFORMATION

The company defines its operating segments as components of its business where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The company’s Chief Operating Decision Maker ("CODM") is the Chief Executive Officer.

The company has two reportable segments at September 30, 2017, as follows:

•

The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines, brakes and suspension systems, primarily for medium- and heavy-duty trucks, military, construction, bus and coach, fire and emergency and other applications in North America, South America, Europe and Asia Pacific. This segment also includes the company's aftermarket businesses in Asia Pacific and South America; and


•	The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers, primarily in North America and Europe. This segment also supplies a wide variety of undercarriage products and systems for trailer applications in North America.

Segment adjusted EBITDA is defined as income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization, non-controlling interests in consolidated joint ventures, loss on sale of receivables, restructuring expense, asset impairment charges and other special items as determined by management. Segment adjusted EBITDA excludes unallocated legacy and corporate income (expense), net. The company uses Segment adjusted EBITDA as the primary basis for the CODM to evaluate the performance of each of its reportable segments.

The accounting policies of the segments are the same as those applied in the consolidated financial statements, except for the use of Segment adjusted EBITDA. The company may allocate certain common costs, primarily corporate functions, between the segments differently than the company would for stand alone financial information prepared in accordance with GAAP. These allocated costs include expenses for shared services such as information technology, finance, communications, legal and human resources. The company does not allocate interest expense and certain legacy and other corporate costs not directly associated with the segment.

Segment information is summarized as follows (in millions):



	Commercial Truck & Industrial		Aftermarket & Trailer		Elims			Total
Fiscal year 2017 Sales:
External Sales	$	2,533	$	814	$	—		$	3,347
Intersegment Sales	82		39		(121		)	—
Total Sales	$	2,615	$	853	$	(121	)	$	3,347
Fiscal year 2016 Sales:
External Sales	$	2,369	$	830	$	—		$	3,199
Intersegment Sales	76		30		(106		)	—
Total Sales	$	2,445	$	860	$	(106	)	$	3,199
Fiscal year 2015 Sales:
External Sales	$	2,649	$	856	$	—		$	3,505
Intersegment Sales	90		28		(118		)	—
Total Sales	$	2,739	$	884	$	(118	)	$	3,505



Segment adjusted EBITDA:	2017			2016			2015
Commercial Truck & Industrial	$	244		$	208		$	216
Aftermarket & Trailer	106			115			123
Segment adjusted EBITDA	350			323			339
Unallocated legacy and corporate income (expense), net ⁽¹⁾	(3		)	4			(5		)
Interest expense, net	(119		)	(84		)	(105		)
Gain on sale of equity investment	243			—			—
Benefit (provision) for income taxes	(52		)	424			(1		)
Depreciation and amortization	(75		)	(67		)	(65		)
Loss on sale of receivables	(5		)	(5		)	(5		)
Restructuring costs	(6		)	(16		)	(16		)
Pension settlement losses	—			—			(59		)
Asset impairment charges	(4		)	—			(2		)
Goodwill impairment charges	—			—			(15		)
Noncontrolling interests	(4		)	(2		)	(1		)
Income from continuing operations attributable to Meritor, Inc.	$	325		$	577		$	65


(1)	Unallocated legacy and corporate income (expense), net represents items that are not directly related to the company's business segments. These items primarily include asbestos-related charges and settlements, pension and retiree medical costs associated with sold businesses, and other legacy costs for environmental and product liability.



Depreciation and Amortization:	2017			2016			2015
Commercial Truck & Industrial	$	66		$	59		$	59
Aftermarket & Trailer	9			8			6
Total depreciation and amortization	$	75		$	67		$	65
Capital Expenditures:	2017			2016			2015
Commercial Truck & Industrial	$	85		$	83		$	71
Aftermarket & Trailer	10			10			8
Total capital expenditures	$	95		$	93		$	79
Segment Assets:	2017			2016
Commercial Truck & Industrial	$	1,707		$	1,433
Aftermarket & Trailer	467			436
Total segment assets	2,174			1,869
Corporate ⁽¹⁾	869			845
Less: Accounts receivable sold under off-balance sheet factoring programs ⁽²⁾	(261		)	(220		)
Total assets	$	2,782		$	2,494


(1)	Corporate assets consist primarily of cash, deferred income taxes and prepaid pension costs.


(2)	At September 30, 2017 and September 30, 2016, segments assets include $261 million and $220 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 8). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

Sales by geographic area are based on the location of the selling unit. Information on the company’s geographic areas is summarized as follows (in millions):



Sales by Geographic Area:
	2017		2016		2015
U.S.	$	1,761	$	1,617	$	1,733
Canada	69		67		70
Mexico	234		390		491
Total North America	2,064		2,074		2,294
Sweden	273		250		325
Italy	210		201		204
United Kingdom	149		136		76
Other Europe	83		86		90
Total Europe	715		673		695
Brazil	168		130		198
China	127		84		90
India	184		152		140
Other Asia-Pacific	89		86		88
Total sales	$	3,347	$	3,199	$	3,505



Assets by Geographic Area:
	2017		2016
U.S.	$	1,489	$	1,359
Canada	29		33
Mexico	204		202
Total North America	1,722		1,594
Sweden	123		104
Italy	70		65
United Kingdom	241		212
Other Europe	184		164
Total Europe	618		545
Brazil	164		146
China	127		97
India	84		58
Other Asia-Pacific	67		54
Total	$	2,782	$	2,494

Sales to AB Volvo represented approximately 22 percent, 23 percent and 24 percent of the company’s sales in each of fiscal years 2017, 2016 and 2015, respectively. Sales to Daimler AG represented approximately 17 percent, 18 percent and 20 percent of the company’s sales in fiscal years 2017, 2016 and 2015, respectively. Sales to PACCAR represented approximately 10 percent, 9 percent and 6 percent of the company's sales in each of fiscal years 2017, 2016 and 2015, respectively. Sales to Navistar represented approximately 9 percent, 9 percent, and 11 percent of the company's sales in each of fiscal years 2017, 2016 and 2015, respectively. No other customer comprised 10 percent or more of the company’s total sales in any of the three fiscal years ended September 30, 2017.