Segment Reporting

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment Reporting

SEGMENT REPORTING

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. The Company’s common rail fuel injection system is the core technology for both on and off-highway commercial and light vehicle applications.

• 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 of the consolidated Company, 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, net of tax, restructuring, separation and transformation costs, asset impairments, pension charges and Transaction related costs (“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 three months ended March 31, 2020 and 2019.

	Fuel Injection Systems			Powertrain Products		Electrification & Electronics			Aftermarket		Corporate Costs and Other (1)			Total
	(in millions)
For the Three Months Ended March 31, 2020:
Net sales	$	393		$	261	$	178		$	174	$	(61	)	$	945
Depreciation & amortization	$	30		$	11	$	13		$	1	$	1		$	56
Adjusted operating income	$	18		$	35	$	1		$	15	$	(29	)	$	40
Operating income	$	(16	)	$	27	$	(2	)	$	15	$	(44	)	$	(20	)
Equity income	$	—		$	—	$	—		$	—	$	—		$	—
Net income attributable to noncontrolling interest	$	1		$	2	$	—		$	—	$	—		$	3

	Fuel Injection Systems		Powertrain Products		Electrification & Electronics		Aftermarket		Corporate Costs and Other (1)			Total
	(in millions)
For the Three Months Ended March 31, 2019:
Net sales	$	454	$	327	$	243	$	193	$	(66	)	$	1,151
Depreciation & amortization	$	28	$	14	$	10	$	1	$	—		$	53
Adjusted operating income	$	23	$	61	$	17	$	15	$	(29	)	$	87
Operating income	$	13	$	57	$	13	$	14	$	(42	)	$	55
Equity income	$	2	$	—	$	—	$	—	$	—		$	2
Net income attributable to noncontrolling interest	$	—	$	3	$	—	$	—	$	—		$	3

(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

The reconciliation of Adjusted Operating Income to Operating Income includes, as applicable, restructuring, separation and transformation costs, asset impairments, pension charges and Transaction related costs. The reconciliation of Adjusted Operating Income to net income attributable to Delphi Technologies for the three and three months ended March 31, 2020 and 2019 are as follows:

	Fuel Injection Systems			Powertrain Products			Electrification & Electronics			Aftermarket		Corporate Costs (1)			Total
	(in millions)
For the Three Months Ended March 31, 2020:
Adjusted operating income	$	18		$	35		$	1		$	15	$	(29	)	$	40
Restructuring	(32		)	(8		)	(1		)	—		(2		)	(43		)
Separation and transformation costs (2)	—			—			(2		)	—		(1		)	(3		)
Transaction related costs (3)	—			—			—			—		(12		)	(12		)
Pension charges (4)	(2		)	—			—			—		—			(2		)
Operating (loss) income	$	(16	)	$	27		$	(2	)	$	15	$	(44	)	(20		)
Interest expense															(16		)
Other income, net															2
Loss before income taxes and equity income															(34		)
Income tax expense															(20		)
Equity income, net of tax															—
Net loss															(54		)
Net income attributable to noncontrolling interest															3
Net loss attributable to Delphi Technologies															$	(57	)

	Fuel Injection Systems			Powertrain Products			Electrification & Electronics			Aftermarket			Corporate Costs (1)			Total
	(in millions)
For the Three Months Ended March 31, 2019:
Adjusted operating income	$	23		$	61		$	17		$	15		$	(29	)	$	87
Restructuring	(3		)	—			—			—			—			(3		)
Separation and transformation costs (2)	—			(1		)	(4		)	—			(13		)	(18		)
Asset impairments	—			(3		)	—			—			—			(3		)
Pension charges (4)	(7		)	—			—			(1		)	—			(8		)
Operating income	$	13		$	57		$	13		$	14		$	(42	)	55
Interest expense																(18		)
Other expense, net																(12		)
Income before income taxes and equity income																25
Income tax expense																(8		)
Equity income, net of tax																2
Net income																19
Net income attributable to noncontrolling interest																3
Net income attributable to Delphi Technologies																$	16

(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) Separation and transformation 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) Transaction related costs include charges for due diligence, integration planning and other expenses related to the Transaction with BorgWarner.

(4)

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.