DISCONTINUED OPERATIONS

Spin-Off of Delphi Technologies

On December 4, 2017, the Company completed the Separation of its former Powertrain Systems segment by distributing to Aptiv shareholders on a pro rata basis all of the issued and outstanding ordinary shares of Delphi Technologies PLC (“Delphi Technologies”), a public limited company formed to hold the spun-off business. To effect the Separation, the Company distributed to its shareholders one ordinary share of Delphi Technologies for every three Aptiv ordinary shares outstanding as of November 22, 2017, the record date for the distribution. Shareholders received cash in lieu of any fractional ordinary shares of Delphi Technologies. Following the Separation, Delphi Technologies is now an independent public company. Aptiv did not retain any equity or other interests in Delphi Technologies.

On December 4, 2017, pursuant to the Separation and Distribution Agreement, the Company transferred to Delphi Technologies the assets and liabilities that comprised Delphi Technologies’ business. The Company received a dividend of approximately $1,148 million from Delphi Technologies in connection with the Separation. Delphi Technologies financed this dividend through the issuance of approximately $1.55 billion of debt, consisting of a senior secured five-year $750 million term loan facility that was issued upon the spin-off and $800 million aggregate principal amount of 5.00% senior unsecured notes due 2025 that were issued in September 2017 (collectively, the "Delphi Technologies Debt"). In connection with the Separation, the Delphi Technologies Debt was transferred to Delphi Technologies and is no longer reflected in the Company’s consolidated financial statements. Also in connection with the Separation, the Company received $180 million in cash from Delphi Technologies pursuant to the Tax Matters Agreement.

The requirements for the presentation of Delphi Technologies as a discontinued operation were met when the Separation was completed. Accordingly, the accompanying consolidated financial statements reflect this business as a discontinued operation for all periods presented through the Distribution Date. Operations related to certain original equipment service businesses previously included within the Company's Powertrain Systems segment, but which were not included in the spin-off, are reported in continuing operations and have been reclassified within the Advanced Safety and User Experience and Signal and Power Solutions segments for all periods presented. No amounts for shared general and administrative expense or interest expense were allocated to discontinued operations. Aptiv has not had significant continuing involvement with the spun-off Powertrain Systems business following the closing of the transaction.

In connection with the Separation, Aptiv and Delphi Technologies entered into various agreements to effect the Separation and to provide a framework for their relationship following the Separation, which included a Separation and Distribution agreement, a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement and Contract Manufacturing Services Arrangements. The transition services primarily involve Aptiv providing certain services to Delphi Technologies related to information technology and human resource infrastructure for terms of up to 24 months following the Separation. Amounts billed to Delphi Technologies pursuant to the Transition Services Agreement were not significant during the year ended December 31, 2017. As part of the near-term transition related to these agreements, Aptiv has recorded certain short-term assets and liabilities within the consolidated balance sheet as of December 31, 2017. The Company has recorded $123 million in other current assets related to accounts receivable from customers that it will collect on behalf of Delphi Technologies, which will be remitted to Delphi Technologies, and $132 million in accrued liabilities related to accounts payable to outside suppliers that it will remit on behalf of Delphi Technologies, which will be reimbursed by Delphi Technologies.

As a result of the Separation, the Company incurred approximately $118 million in separation costs during the year ended December 31, 2017, which are included within earnings from discontinued operations, net of income taxes in the accompanying Consolidated Statement of Operations. These costs primarily related to professional fees associated with planning the Separation, as well as Separation activities within finance, tax, legal and information system functions and certain investment banking fees incurred upon the Separation.

As a result of the Separation, the Company has separated its defined benefit pension and other post-employment benefit plans, and adjusted its employee share-based compensation awards. See Note 12. Pension Benefits and Note 21. Share-Based Compensation, respectively, for additional information.

As a result of the completion of the Separation on December 4, 2017, there were no assets or liabilities of the discontinued operation as of December 31, 2017. The following table summarizes the carrying value of the major classes of assets and liabilities of discontinued operations as of December 31, 2016:



	December 31, 2016

	(in millions)
Cash and cash equivalents	$	101
Accounts receivable, net	808
Inventories, net	373
Other current assets	108
Total current assets of discontinued operations	$	1,390

Property, net	$	1,190
Investments in affiliates	34
Intangible assets, net	92
Goodwill	6
Other long-term assets	229
Total long-term assets of discontinued operations	$	1,551

Short-term debt	$	2
Accounts payable	743
Other current liabilities	331
Total current liabilities of discontinued operations	$	1,076

Long-term debt	$	6
Pension benefit obligations	516
Other long-term liabilities	96
Total long-term liabilities of discontinued operations	$	618

As of December 31, 2016, there was $156 million of Noncontrolling interest attributable to the Company's partners in its Powertrain Systems joint ventures.

Divestiture of Thermal Systems

During the first quarter of 2015, the Company determined that its previously reported Thermal Systems segment met the criteria to be classified as a discontinued operation as a result of entering into a definitive agreement for the sale of substantially all of the assets and liabilities of the Company's wholly owned Thermal Systems business and a commitment to a plan to dispose of the Company's interests in two joint ventures which were previously reported within the Thermal Systems segment.

On June 30, 2015 the Company closed the sale of its wholly owned Thermal Systems business to MAHLE GmbH ("MAHLE"). The Company received cash proceeds of approximately $670 million and recognized a gain on the divestiture within income from discontinued operations of $271 million (approximately $0.95 per diluted share), net of tax expense of $52 million, transaction costs of $10 million and $18 million of pre-tax post-closing adjustments recorded during the year ended December 31, 2015 primarily related to settlement of working capital items and contingent liabilities. Additional post-closing adjustments of $3 million, primarily related to the settlement of contingent liabilities, were recorded as a reduction to the gain on the divestiture during the year ended December 31, 2016. In conjunction with the sale, Aptiv and MAHLE also entered into a transition services agreement under which Aptiv provided certain administrative and other services, as well as a supply agreement under which Aptiv supplied certain products, primarily for a period of up to eighteen months following the closing of the transaction. Aptiv recorded $8 million and $8 million to other income (expense), net for the years ended December 31, 2016 and December 31, 2015, respectively, for certain fees earned pursuant to the transition services agreement.

On September 24, 2015 the Company closed the sale of its 50 percent interest in its Korea Delphi Automotive Systems Corporation ("KDAC") joint venture, which was accounted for under the equity method and was principally reported as part of the Thermal Systems segment, to the joint venture partner. The Company received cash proceeds of $70 million and recognized a gain on the divestiture of $47 million, net of tax expense, within income from discontinued operations during the three months ended September 30, 2015. During the year ended December 31, 2015, the Company recorded a net loss of $41 million (approximately $0.14 per diluted share) on the KDAC divestiture within income from discontinued operations, which includes an impairment loss of $88 million recorded on this investment in the first quarter of 2015 based on the evaluation of the estimated fair value of the Company's interest in KDAC as of March 31, 2015 in relation to its carrying value.

On March 31, 2016, the Company closed the sale of its 50 percent interest in its Shanghai Delphi Automotive Air Conditioning ("SDAAC") joint venture to one of the Company's joint venture partners, Shanghai Aerospace Automobile Electromechanical Co., Ltd ("SAAE"). The Company received cash proceeds of $62 million, net of tax, transaction costs and $29 million of cash divested, and recognized a gain on the divestiture of $104 million (approximately $0.38 per diluted share), net of tax expense of $10 million and transaction costs, within income from discontinued operations during the year ended December 31, 2016. The financial results of SDAAC, which were consolidated by Aptiv, were historically reported as part of the Thermal Systems segment.

As the divestiture of the Thermal Systems segment, including the Company's interests in SDAAC and KDAC and the thermal original equipment service business, represents a strategic shift that will have a major effect on the Company's operations and financial results, the assets and liabilities, operating results, and operating and investing cash flows for the former Thermal Systems segment are presented as discontinued operations separate from the Company’s continuing operations for all periods presented. Discontinued operations also includes the Company's thermal original equipment service business, which was included in the sale of the wholly owned Thermal Systems 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, were excluded from the scope of the divestiture, and are reported in continuing operations within the Advanced Safety and User Experience segment for all periods presented. No amounts for shared general and administrative operating expense or interest expense were allocated to discontinued operations. Aptiv has not had significant continuing involvement with the divested Thermal Systems business following the closing of the transactions.

Assets and liabilities classified as held for sale were required to be recorded at the lower of carrying value or fair value less costs to sell. Accordingly, an after-tax impairment loss of $88 million (approximately $0.30 per diluted share) was recorded in income from discontinued operations in the first quarter of 2015 based on the evaluation of the estimated fair value of the Company's interest in KDAC as of March 31, 2015 in relation to its carrying value. As of March 31, 2015, the fair value of this interest was estimated to be approximately $32 million, determined primarily based on recent negotiations with a third party and based on a non-binding offer from that potential buyer at the time. As described above, the Company subsequently completed the sale of its interest in KDAC for net cash proceeds of $70 million during the third quarter of 2015.

Income from Discontinued Operations

A reconciliation of the major classes of line items constituting pre-tax profit or loss of discontinued operations, including Powertrain Systems through December 4, 2017, as well as Thermal Systems in prior periods, to income from discontinued operations, net of tax as presented in the consolidated statements of operations is as follows:



	Year Ended December 31,
	2017			2016			2015
	(in millions)
Net sales	$	4,385		$	4,465		$	5,215
Cost of sales	3,496			3,631			4,269
Selling, general and administrative	298			222			236
Amortization	15			17			24
Restructuring	90			161			115
Other income and expense items that are not major, net	(54		)	(2		)	(5		)
Income from discontinued operations before income taxes and equity income	432			432			566
Income tax expense on discontinued operations	(71		)	(75		)	(112		)
Equity income (loss) from discontinued operations, net of tax	4			—			(1		)
Gain on divestiture of discontinued operations, net of tax	—			104			318
Adjustment to prior period gain on divestiture, net of tax	—			(3		)	—
Impairment loss	—			—			(88		)
Income from discontinued operations, net of tax	365			458			683
Income from discontinued operations attributable to noncontrolling interests	31			35			46
Net income from discontinued operations attributable to Aptiv	$	334		$	423		$	637

Income from discontinued operations before income taxes attributable to Aptiv was $399 million, $491 million and $739 million for the years ended December 31, 2017, 2016 and 2015, respectively, which includes $6 million, $7 million and $10 million respectively, of income tax expense attributable to noncontrolling interests.