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SEGMENT REPORTING

12 Months Ended

Dec. 31, 2019

In July 2019, the Company’s chief operating decision maker announced changes to the Company’s organization structure. The changes included reorganizing the management reporting structure to better align the Company’s product portfolios and process technology expertise. As a result, as of December 31, 2019, the Company’s former Powertrain Systems segment has been

organized into three distinct segments on the basis of similar products and operating factors. Additionally, the Company made the decision to report the results of the operating segments excluding the allocation of certain corporate-related expenses. Therefore, the prior period information disclosed below has been recast to reflect these changes. The changes had no impact on the consolidated financial statements. The Aftermarket segment is unchanged, with the exception of excluding previously allocated corporate-related expenses.

The Company operates its business in the following segments:

•

Fuel Injection Systems. This segment includes gasoline and diesel fuel injection components and systems. Our gasoline fuel injection portfolio includes a full suite of fuel injection technologies – including pumps, injectors, fuel rail assemblies and complete systems – that deliver greater efficiency for traditional and hybrid vehicles with gasoline combustion engines. The Company’s Gasoline Direct Injection (“GDi”) technology provides high-precision fuel delivery for optimized combustion, which lowers emissions and improves fuel economy. Our diesel fuel injection systems portfolio provides enhanced engine performance.


•	Powertrain Products. This segment includes an array of highly engineered products for traditional combustion and hybrid electric vehicles, including variable valvetrain, smart remote actuators, powertrain sensors, ignition products, canisters, and fuel handling products. These products complement and enhance the efficiency improvements delivered by our fuel injection systems technologies.

•

Electrification & Electronics. Our electronics portfolio consists of engine and transmission control modules and power electronics. The control modules, containing as much as one million lines of software code, are key components that enable the integration and operation of powertrain products throughout the vehicle. As electrification increases, our proprietary solutions – including supervisory controllers, software, DC/DC converters and inverters – provide better efficiency, reduced weight and lower cost for our OEM customers, while also making these and other components easier to integrate. Manufacturers are also choosing to combine power electronic functionality into one unit, enabling more effective packaging at a lower total cost while increasing Delphi Technologies’ content per vehicle.


•	Aftermarket. Through this segment we sell products and services to independent aftermarket customers and original equipment service customers. Our aftermarket product portfolio includes a wide range of solutions covering the fuel injection, electronics and engine management, maintenance, and test equipment and vehicle diagnostics categories.

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 benefit (expense), equity income, net of tax, restructuring, separation costs, asset impairments and pension charges (“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. Consolidated 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. 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 the Company’s segments for the years ended December 31, 2019, 2018 and 2017, as well as balance sheet data as of December 31, 2019 and 2018.



	Fuel Injection Systems		Powertrain Products		Electrification & Electronics		Aftermarket		Corporate Costs and Other (1)			Total
	(in millions)
For the Year Ended December 31, 2019:
Net sales	$	1,748	$	1,231	$	834	$	841	$	(293	)	$	4,361
Depreciation and amortization (2)	$	130	$	61	$	41	$	6	$	—		$	238
Adjusted operating income	$	99	$	204	$	44	$	86	$	(119	)	$	314
Operating income	$	47	$	171	$	1	$	81	$	(159	)	$	141
Equity income	$	4	$	—	$	—	$	—	$	—		$	4
Net income attributable to noncontrolling interest	$	—	$	16	$	—	$	—	$	—		$	16
Capital expenditures	$	192	$	54	$	112	$	4	$	9		$	371



	Fuel Injection Systems		Powertrain Products		Electrification & Electronics		Aftermarket		Corporate Costs and Other (1)			Total
	(in millions)
For the Year Ended December 31, 2018:
Net sales	$	1,856	$	1,361	$	1,087	$	874	$	(320	)	$	4,858
Depreciation and amortization	$	115	$	44	$	33	$	5	$	—		$	197
Adjusted operating income	$	186	$	256	$	126	$	97	$	(117	)	$	548
Operating income	$	154	$	248	$	120	$	94	$	(182	)	$	434
Equity income	$	7	$	—	$	—	$	—	$	—		$	7
Net income attributable to noncontrolling interest	$	—	$	21	$	—	$	1	$	—		$	22
Capital expenditures	$	126	$	30	$	85	$	5	$	19		$	265



	Fuel Injection Systems		Powertrain Products		Electrification & Electronics		Aftermarket		Corporate Costs and Other (1)			Total
	(in millions)
For the Year Ended December 31, 2017:
Net sales	$	1,773	$	1,398	$	1,077	$	947	$	(346	)	$	4,849
Depreciation and amortization (3)	$	108	$	50	$	36	$	7	$	—		$	201
Adjusted operating income	$	212	$	261	$	175	$	94	$	(105	)	$	637
Operating income	$	127	$	246	$	169	$	88	$	(184	)	$	446
Equity income	$	5	$	—	$	—	$	—	$	—		$	5
Net income attributable to noncontrolling interest	$	—	$	34	$	—	$	—	$	—		$	34
Capital expenditures	$	115	$	27	$	47	$	3	$	5		$	197


(1)	Corporate Costs and Other includes corporate related expenses not allocated to operating segments, which primarily includes executive administration, corporate finance, legal, human resources, supply chain management and information technology. This column also includes the elimination of inter-segment transactions.


(2)	Includes asset impairment charges of $13 million for Fuel Injection Systems, $15 million for Powertrain Products, $2 million for Electrification & Electronics, $1 million for Aftermarket and $4 million for corporate support functions.


(3)	Includes asset impairment charges of $6 million for Fuel Injection Systems, $6 million for Powertrain Products, $0 million for Electrification & Electronics, $0 million for Aftermarket and $0 million for corporate support functions.



	Fuel Injection Systems		Powertrain Products		Electrification & Electronics		Aftermarket		Eliminations and Other (1)			Total
	(in millions)
Balance as of December 31, 2019:
Investment in affiliates	$	42	$	—	$	—	$	—	$	—		$	42
Goodwill	$	—	$	—	$	—	$	7	$	—		$	7
Total segment assets	$	3,596	$	1,092	$	743	$	1,161	$	(2,845	)	$	3,747
Balance as of December 31, 2018:
Investment in affiliates	$	44	$	—	$	—	$	—	$	—		$	44
Goodwill	$	—	$	—	$	—	$	7	$	—		$	7
Total segment assets	$	3,745	$	1,032	$	934	$	1,025	$	(2,843	)	$	3,893


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

The reconciliation of Adjusted Operating Income to Operating Income includes, as applicable, restructuring, separation costs, asset impairments and pension charges. The reconciliation of Adjusted Operating Income to net income attributable to Delphi Technologies for the years ended December 31, 2019, 2018 and 2017 are as follows:



	Fuel Injection Systems			Powertrain Products			Electrification & Electronics			Aftermarket			Corporate Costs (1)			Total
	(in millions)
For the Year Ended December 31, 2019:
Adjusted operating income	$	99		$	204		$	44		$	86		$	(119	)	$	314
Restructuring	(32		)	(17		)	(25		)	(2		)	(4		)	(80		)
Separation and transformation costs (2)	6			(1		)	(16		)	(1		)	(32		)	(44		)
Asset impairments	(13		)	(15		)	(2		)	(1		)	(4		)	(35		)
Pension charges (3)	(13		)	—			—			(1		)	—			(14		)
Operating income	$	47		$	171		$	1		$	81		$	(159	)	141
Interest expense																(68		)
Other income, net																13
Income before income taxes and equity income																86
Income tax expense																(57		)
Equity income, net of tax																4
Net income																33
Net income attributable to noncontrolling interest																16
Net income attributable to Delphi Technologies																$	17



	Fuel Injection Systems			Powertrain Products			Electrification & Electronics			Aftermarket			Corporate Costs (1)			Total
	(in millions)
For the Year Ended December 31, 2018:
Adjusted operating income	$	186		$	256		$	126		$	97		$	(117	)	$	548
Restructuring	(29		)	(6		)	—			2			(2		)	(35		)
Separation and transformation costs (2)	(3		)	(1		)	(6		)	(5		)	(63		)	(78		)
Asset impairments	—			(1		)	—			—			—			(1		)
Operating income	$	154		$	248		$	120		$	94		$	(182	)	434
Interest expense																(79		)
Other income, net																9
Income before income taxes and equity income																364
Income tax benefit																9
Equity income, net of tax																7
Net income																380
Net income attributable to noncontrolling interest																22
Net income attributable to Delphi Technologies																$	358



	Fuel Injection Systems			Powertrain Products			Electrification & Electronics			Aftermarket			Corporate Costs (1)			Total
	(in millions)
For the Year Ended December 31, 2017:
Adjusted operating income	$	212		$	261		$	175		$	94		$	(105	)	$	637
Restructuring	(79		)	(8		)	(5		)	(6		)	—			(98		)
Separation and transformation costs (2)	—			(1		)	(1		)	—			(79		)	(81		)
Asset impairments	(6		)	(6		)	—			—			—			(12		)
Operating income	$	127		$	246		$	169		$	88		$	(184	)	446
Interest expense																(15		)
Other expense, net																(11		)
Income before income taxes and equity income																420
Income tax expense																(106		)
Equity income, net of tax																5
Net income																319
Net income attributable to noncontrolling interest																34
Net income attributable to Delphi Technologies																$	285


(1)	Corporate Costs includes corporate related expenses not allocated to operating segments, which primarily includes executive administration, corporate finance, legal, human resources, supply chain management and information technology.


(2)	Prior to December 4, 2017 separation and transformation 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 and costs and income associated with the transformation of our global technical center footprint.


(3)	Pension charges include additional contributions to defined contribution plans, other payments to impacted employees and other related expenses resulting from the freeze of future accruals for nearly all U.K. defined benefit pension plans.

Information concerning principal geographic areas is set forth below. Net sales data reflects the manufacturing location for the years ended December 31, 2019, 2018 and 2017. Net property data is as of December 31, 2019, 2018 and 2017.



	Year Ended December 31, 2019				Year Ended December 31, 2018				Year Ended December 31, 2017
	Net Sales		Net Property (1)		Net Sales		Net Property (1)		Net Sales		Net Property (1)
	(in millions)
North America (2)	$	1,232	$	352	$	1,367	$	314	$	1,345	$	288
Europe (3)	1,953		760		2,142		681		2,030		677
Asia Pacific (4)	1,049		483		1,208		429		1,335		328
South America	127		21		141		21		139		23
Total	$	4,361	$	1,616	$	4,858	$	1,445	$	4,849	$	1,316


(1)	Net property data represents property, plant and equipment, net of accumulated depreciation. As of December 31, 2019 the net property data also includes operating lease assets.


(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 the Company’s country of domicile, Jersey, and the country of the Company’s principal executive offices, the United Kingdom. The Company had no sales in Jersey in any period. The Company had net sales of $774 million, $799 million, and $733 million in the United Kingdom for the years ended December 31, 2019, 2018 and 2017, respectively. The largest portion of net sales in Europe was in the United Kingdom for all years presented. The Company had net property in the United Kingdom of $178 million, $152 million, and $157 million as of December 31, 2019, 2018 and 2017, respectively.

(4)

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