SEGMENT REPORTING

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

•

Powertrain Systems, which manufactures fuel injection systems as well as various other powertrain products including valvetrain, fuel delivery modules, ignition coils, canisters, sensors, valves and actuators. This segment also offers electronic control modules and corresponding software, algorithms and calibration that provide centralized and reliable management of various powertrain components. Additionally, we provide power electronics solutions that include supervisory controllers and software, along with DC/DC converters and inverters and on-board chargers that convert electricity to enable hybrid and electric vehicle propulsion systems.


•	Delphi Technologies Aftermarket, which sells aftermarket products to independent aftermarket and original equipment service customers. This segment also supplies a wide range of aftermarket products and services covering the fuel injection, electronics and engine management, maintenance, and test equipment and vehicle diagnostics categories.


•	Eliminations and Other, which includes the elimination of inter-segment transactions.

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 Technologies’ 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 Technologies 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, restructuring, costs related to the Separation, 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), and asset impairments (“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 Technologies’ 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 Technologies’ 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 Technologies, 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 Technologies, should also not be compared to similarly titled measures reported by other companies.

Included below are sales and operating data for Delphi Technologies’ segments for the three and six months ended June 30, 2018 and 2017.



	Powertrain Systems		Delphi Technologies Aftermarket		Eliminations and Other (1)			Total

	(in millions)
For the Three Months Ended June 30, 2018:
Net sales	$	1,086	$	215	$	(69	)	$	1,232
Depreciation & amortization	$	47	$	1	$	—		$	48
Adjusted operating income	$	134	$	22	$	—		$	156
Operating income	$	105	$	17	$	—		$	122
Equity income, net of tax	$	3	$	—	$	—		$	3
Net income attributable to noncontrolling interest	$	4	$	—	$	—		$	4



	Powertrain Systems			Delphi Technologies Aftermarket		Eliminations and Other (1)			Total

	(in millions)
For the Three Months Ended June 30, 2017:
Net sales	$	1,035		$	232	$	(80	)	$	1,187
Depreciation & amortization	$	48		$	1	$	—		$	49
Adjusted operating income	$	141		$	23	$	—		$	164
Operating income (2)	$	61		$	18	$	—		$	79
Equity loss, net of tax	$	(1	)	$	—	$	—		$	(1	)
Net income attributable to noncontrolling interest	$	8		$	—	$	—		$	8



	Powertrain Systems		Delphi Technologies Aftermarket		Eliminations and Other (1)			Total

	(in millions)
For the Six Months Ended June 30, 2018:
Net sales	$	2,239	$	432	$	(143	)	$	2,528
Depreciation & amortization	$	96	$	2	$	—		$	98
Adjusted operating income	$	276	$	39	$	—		$	315
Operating income	$	228	$	32	$	—		$	260
Equity income, net of tax	$	6	$	—	$	—		$	6
Net income attributable to noncontrolling interest	$	11	$	—	$	—		$	11



	Powertrain Systems		Delphi Technologies Aftermarket		Eliminations and Other (1)			Total

	(in millions)
For the Six Months Ended June 30, 2017:
Net sales	$	2,058	$	454	$	(157	)	$	2,355
Depreciation & amortization	$	94	$	3	$	—		$	97
Adjusted operating income	$	291	$	35	$	—		$	326
Operating income (2)	$	203	$	24	$	—		$	227
Equity income, net of tax	$	—	$	—	$	—		$	—
Net income attributable to noncontrolling interest	$	16	$	—	$	—		$	16


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


(2)	Includes $66 million and $76 million of charges recorded related to costs associated with employee termination benefits and other exit costs for the three and six months ended June 30, 2017, respectively.

The reconciliation of Adjusted Operating Income to Operating Income includes, as applicable, restructuring, separation costs, 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 Technologies for the three and six months ended June 30, 2018 and 2017 are as follows:



	Powertrain Systems			Delphi Technologies Aftermarket			Eliminations and Other		Total

	(in millions)
For the Three Months Ended June 30, 2018:
Adjusted operating income	$	134		$	22		$	—	$	156
Restructuring	(11		)	(1		)	—		(12		)
Separation costs (1)	(17		)	(4		)	—		(21		)
Asset impairments	(1		)	—			—		(1		)
Operating income	$	105		$	17		$	—	122
Interest expense									(19		)
Other income, net									4
Income before income taxes and equity income									107
Income tax expense									(20		)
Equity income, net of tax									3
Net income									90
Net income attributable to noncontrolling interest									4
Net income attributable to Delphi Technologies									$	86



	Powertrain Systems			Delphi Technologies Aftermarket			Eliminations and Other		Total

	(in millions)
For the Three Months Ended June 30, 2017:
Adjusted operating income	$	141		$	23		$	—	$	164
Restructuring	(64		)	(2		)	—		(66		)
Separation costs (1)	(12		)	(3		)	—		(15		)
Asset impairments	(4		)	—			—		(4		)
Operating income	$	61		$	18		$	—	79
Interest expense									—
Other income, net									—
Income before income taxes and equity income									79
Income tax expense									(22		)
Equity loss, net of tax									(1		)
Net income									56
Net income attributable to noncontrolling interest									8
Net income attributable to Delphi Technologies									$	48



	Powertrain Systems			Delphi Technologies Aftermarket			Eliminations and Other		Total

	(in millions)
For the Six Months Ended June 30, 2018:
Adjusted operating income	$	276		$	39		$	—	$	315
Restructuring	(22		)	(1		)	—		(23		)
Separation costs (1)	(25		)	(6		)	—		(31		)
Asset impairments	(1		)	—			—		(1		)
Operating income	$	228		$	32		$	—	260
Interest expense									(39		)
Other income, net									10
Income before income taxes and equity income									231
Income tax expense									(42		)
Equity income, net of tax									6
Net income									195
Net income attributable to noncontrolling interest									11
Net income attributable to Delphi Technologies									$	184



	Powertrain Systems			Delphi Technologies Aftermarket			Eliminations and Other		Total

	(in millions)
For the Six Months Ended June 30, 2017:
Adjusted operating income	$	291		$	35		$	—	$	326
Restructuring	(68		)	(8		)	—		(76		)
Separation costs (1)	(12		)	(3		)	—		(15		)
Asset impairments	(8		)	—			—		(8		)
Operating income	$	203		$	24		$	—	$	227
Interest expense									(1		)
Other expense, net									(6		)
Income before income taxes and equity income									220
Income tax expense									(53		)
Equity income, net of tax									—
Net income									167
Net income attributable to noncontrolling interest									16
Net income attributable to Delphi Technologies									$	151


(1)	Prior to December 4, 2017 separation costs include one-time expenses related to the separation from our Former Parent. For periods subsequent to December 4, 2017, these costs include one-time incremental expenses associated with becoming a stand-alone publicly-traded company.