SEGMENT REPORTING

Delphi operates its core business along the following operating segments, which are grouped on the basis of similar product, market and operating factors:


•	Electrical/Electronic Architecture, which includes complete electrical architecture and component products.


•	Powertrain Systems, which includes extensive systems integration expertise in gasoline, diesel and fuel handling and full end-to-end systems including fuel and air injection, combustion, electronics controls, exhaust handling, test and validation capabilities, electric and hybrid electric vehicle power electronics, aftermarket, and original equipment service.


•	Electronics and Safety, which includes component and systems integration expertise in infotainment and connectivity, body controls and security systems, displays and passive and active safety electronics, as well as advanced development of software.


•	Eliminations and Other, which includes i) the elimination of inter-segment transactions, and ii) certain other expenses and income of a non-operating or strategic nature.

The accounting policies of the segments are the same as those described in Note 2. Significant Accounting Policies, except that the disaggregated financial results for the segments have been prepared using a management approach, which is consistent with the basis and manner in which management internally disaggregates financial information for which Delphi’s chief operating decision maker regularly reviews financial results to assess performance of, and make internal operating decisions about allocating resources to, the segments.

Generally, Delphi evaluates segment performance based on stand-alone segment net income before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, income (loss) from discontinued operations, net of tax, restructuring, other acquisition and portfolio project costs (which includes costs incurred to integrate acquired businesses and to plan and execute product portfolio transformation actions, including business and product acquisitions and divestitures), asset impairments and gains (losses) on business divestitures (“Adjusted Operating Income”) and accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, at current market prices. Delphi’s management utilizes Adjusted Operating Income as the key performance measure of segment income or loss to evaluate segment performance, and for planning and forecasting purposes to allocate resources to the segments, as management believes this measure is most reflective of the operational profitability or loss of Delphi's operating segments. Segment Adjusted Operating Income should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income attributable to Delphi, which is the most directly comparable financial measure to Adjusted Operating Income that is prepared in accordance with U.S. GAAP. Segment Adjusted Operating Income, as determined and measured by Delphi, should also not be compared to similarly titled measures reported by other companies.

As described in Note 25. Discontinued Operations, the Company's previously reported Thermal Systems segment has been classified as discontinued operations for all periods presented. Discontinued operations also includes the Company's thermal original equipment service business, the results of which were previously reported within the Powertrain Systems segment. Certain operations, primarily related to contract manufacturing services, which were previously included within the Thermal Systems reporting segment but which were not included in the scope of the divestiture, are reported in continuing operations within the Electronics and Safety segment for all periods presented. No amounts for shared general and administrative operating expense or interest expense were allocated to discontinued operations.

Effective July 1, 2016, Delphi reorganized its management reporting structure by moving its Power Electronics product line, which was historically included in the Electronics and Safety segment, to the Powertrain Systems segment. This reorganization was made to better align the product offerings of the Power Electronics product line with the Company's approach to managing the markets and customers served by this product line. Consistent with this change in the Company's management reporting structure and basis of financial information used by the chief operating decision maker, the prior period results of the Power Electronics product line have been reclassified from the Electronics and Safety segment to the Powertrain Systems segment for all periods presented. The reclassification had no impact on the consolidated financial statements.

Included below are sales and operating data for Delphi’s segments for the years ended December 31, 2016, 2015 and 2014, as well as balance sheet data as of December 31, 2016 and 2015.



	Electrical/Electronic Architecture		Powertrain Systems		Electronics and Safety		Eliminations and Other (1)			Total
	(in millions)
For the Year Ended December 31, 2016:
Net sales	$	9,316	$	4,486	$	3,014	$	(155	)	$	16,661
Depreciation and amortization	$	399	$	217	$	88	$	—		$	704
Adjusted operating income	$	1,344	$	511	$	368	$	—		$	2,223
Operating income (2)	$	1,186	$	300	$	461	$	—		$	1,947
Equity income	$	35	$	—	$	—	$	—		$	35
Net income attributable to noncontrolling interest	$	34	$	32	$	—	$	—		$	66
Capital expenditures	$	458	$	171	$	131	$	68		$	828



	Electrical/Electronic Architecture		Powertrain Systems		Electronics and Safety		Eliminations and Other (1)			Total
	(in millions)
For the Year Ended December 31, 2015:
Net sales	$	8,180	$	4,407	$	2,744	$	(166	)	$	15,165
Depreciation and amortization	$	276	$	195	$	69	$	—		$	540
Adjusted operating income	$	1,095	$	524	$	352	$	—		$	1,971
Operating income (3)	$	1,014	$	388	$	321	$	—		$	1,723
Equity income	$	16	$	—	$	—	$	—		$	16
Net income attributable to noncontrolling interest	$	39	$	34	$	—	$	—		$	73
Capital expenditures	$	353	$	201	$	102	$	48		$	704



	Electrical/Electronic Architecture		Powertrain Systems			Electronics and Safety		Eliminations and Other (1)			Total
	(in millions)
For the Year Ended December 31, 2014:
Net sales	$	8,274	$	4,540		$	2,880	$	(195	)	$	15,499
Depreciation and amortization	$	266	$	200		$	74	$	—		$	540
Adjusted operating income	$	1,060	$	486		$	379	$	—		$	1,925
Operating income (4)	$	986	$	427		$	345	$	—		$	1,758
Equity income (loss)	$	21	$	(1	)	$	—	$	—		$	20
Net income attributable to noncontrolling interest	$	35	$	36		$	—	$	—		$	71
Capital expenditures	$	326	$	322		$	82	$	49		$	779


(1)	Eliminations and Other includes the elimination of inter-segment transactions. Capital expenditures amounts are attributable to corporate administrative and support functions, including corporate headquarters and certain technical centers.


(2)	Includes a pre-tax gain of $141 million from the divestiture of the Electronics and Safety Mechatronics business, as well as charges recorded in 2016 related to costs associated with employee termination benefits and other exit costs of $117 million for Electrical/Electronic Architecture, $172 million for Powertrain Systems and $39 million for Electronics and Safety.


(3)	Includes charges recorded in 2015 related to costs associated with employee termination benefits and other exit costs of $37 million for Electrical/Electronic Architecture, $115 million for Powertrain Systems and $25 million for Electronics and Safety.


(4)	Includes charges recorded in 2014 related to costs associated with employee termination benefits and other exit costs of $57 million for Electrical/Electronic Architecture, $55 million for Powertrain Systems and $28 million for Electronics and Safety.



	Electrical/Electronic Architecture		Powertrain Systems		Electronics and Safety		Eliminations and Other (1)			Total
	(in millions)
Balance as of December 31, 2016:
Investment in affiliates	$	67	$	34	$	—	$	—		$	101
Goodwill	$	1,424	$	6	$	78	$	—		$	1,508
Total segment assets	$	8,458	$	3,589	$	2,327	$	(2,082	)	$	12,292
Balance as of December 31, 2015:
Investment in affiliates	$	60	$	34	$	—	$	—		$	94
Goodwill	$	1,458	$	8	$	73	$	—		$	1,539
Total segment assets	$	7,924	$	3,684	$	2,474	$	(2,109	)	$	11,973


(1)	Eliminations and Other includes the elimination of inter-segment transactions.

The reconciliation of Adjusted Operating Income to Operating Income includes, as applicable, restructuring, other acquisition and portfolio project costs (which includes costs incurred to integrate acquired businesses and to plan and execute product portfolio transformation actions, including business and product acquisitions and divestitures), asset impairments and gains (losses) on business divestitures. The reconciliation of Adjusted Operating Income to net income attributable to Delphi for the years ended December 31, 2016, 2015 and 2014 are as follows:



	Electrical/Electronic Architecture			Powertrain Systems			Electronics and Safety			Eliminations and Other		Total
	(in millions)
For the Year Ended December 31, 2016:
Adjusted operating income	$	1,344		$	511		$	368		$	—	$	2,223
Restructuring	(117		)	(172		)	(39		)	—		(328		)
Other acquisition and portfolio project costs	(41		)	(10		)	(8		)	—		(59		)
Asset impairments	—			(29		)	(1		)	—		(30		)
Gain (loss) on business divestitures, net	—			—			141			—		141
Operating income	$	1,186		$	300		$	461		$	—	1,947
Interest expense												(156		)
Other expense, net												(366		)
Income from continuing operations before income taxes and equity income												1,425
Income tax expense												(242		)
Equity income, net of tax												35
Income from continuing operations												1,218
Income from discontinued operations, net of tax												108
Net income												1,326
Net income attributable to noncontrolling interest												69
Net income attributable to Delphi												$	1,257



	Electrical/Electronic Architecture			Powertrain Systems			Electronics and Safety			Eliminations and Other		Total
	(in millions)
For the Year Ended December 31, 2015:
Adjusted operating income	$	1,095		$	524		$	352		$	—	$	1,971
Restructuring	(37		)	(115		)	(25		)	—		(177		)
Other acquisition and portfolio project costs	(26		)	(12		)	(9		)	—		(47		)
Asset impairments	(4		)	(9		)	(3		)	—		(16		)
Gain (loss) on business divestitures, net	(14		)	—			6			—		(8		)
Operating income	$	1,014		$	388		$	321		$	—	1,723
Interest expense												(127		)
Other expense, net												(88		)
Income from continuing operations before income taxes and equity income												1,508
Income tax expense												(263		)
Equity income, net of tax												16
Income from continuing operations												1,261
Income from discontinued operations, net of tax												274
Net income												1,535
Net income attributable to noncontrolling interest												85
Net income attributable to Delphi												$	1,450



	Electrical/Electronic Architecture			Powertrain Systems			Electronics and Safety			Eliminations and Other		Total
	(in millions)
For the Year Ended December 31, 2014:
Adjusted operating income	$	1,060		$	486		$	379		$	—	$	1,925
Restructuring	(57		)	(55		)	(28		)	—		(140		)
Other acquisition and portfolio project costs	(15		)	(3		)	(2		)	—		(20		)
Asset impairments	(2		)	(1		)	(4		)	—		(7		)
Operating income	$	986		$	427		$	345		$	—	1,758
Interest expense												(135		)
Other income, net												(8		)
Income from continuing operations before income taxes and equity income												1,615
Income tax expense												(255		)
Equity income, net of tax												20
Income from continuing operations												1,380
Income from discontinued operations, net of tax												60
Net income												1,440
Net income attributable to noncontrolling interest												89
Net income attributable to Delphi												$	1,351

Information concerning principal geographic areas is set forth below. Net sales data reflects the manufacturing location and is for the years ended December 31. Net property data is as of December 31.



	Year Ended December 31, 2016				Year Ended December 31, 2015				Year Ended December 31, 2014
	Net Sales		Net Property (1)		Net Sales		Net Property (1)		Net Sales		Net Property (1)
	(in millions)
United States (2)	$	6,037	$	980	$	5,536	$	898	$	5,160	$	675
Other North America	143		171		146		147		208		135
Europe, Middle East & Africa (3)	5,871		1,435		5,275		1,469		5,940		1,395
Asia Pacific (4)	4,274		858		3,839		809		3,552		732
South America	336		71		369		54		639		84
Total	$	16,661	$	3,515	$	15,165	$	3,377	$	15,499	$	3,021


(1)	Net property data represents property, plant and equipment, net of accumulated depreciation.


(2)	Includes net sales and machinery, equipment and tooling that relate to the Company's maquiladora operations located in Mexico. These assets are utilized to produce products sold to customers located in the United States.

(3)

Includes Delphi’s country of domicile, Jersey, and the country of Delphi’s principal executive offices, the United Kingdom. The Company had no sales in Jersey in any period. The Company had net sales of $827 million, $834 million, and $892 million in the United Kingdom for the years ended December 31, 2016, 2015 and 2014, respectively. The Company had net property in the United Kingdom of $230 million, $276 million, and $231 million as of December 31, 2016, 2015 and 2014, respectively. The largest portion of net sales in the Europe, Middle East & Africa region was $959 million in Germany, $834 million in the United Kingdom and $892 million in the United Kingdom for the years ended December 31, 2016, 2015 and 2014, respectively.


(4)	Net sales and net property in Asia Pacific are primarily attributable to China.