DELPHI TECHNOLOGIES PLC, 10-Q filed on 8/2/2019
Quarterly Report
v3.19.2
Cover Document - shares
6 Months Ended
Jun. 30, 2019
Jul. 26, 2019
Document and Entity Information [Abstract]    
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Title of 12(b) Security Ordinary shares. $0.01 par value per share  
Entity Filer Category Large Accelerated Filer  
Entity Incorporation, State or Country Code Y9  
Document Transition Report false  
Document Quarterly Report true  
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Entity File Number 001-38110  
Entity Registrant Name DELPHI TECHNOLOGIES PLC  
Entity Central Index Key 0001707092  
Entity Tax Identification Number 98-1367514  
Entity Address, Address Line One One Angel Court  
Entity Address, Address Line Two 10th Floor  
Entity Address, City or Town London  
Entity Address, Postal Zip Code EC2R 7HJ  
Entity Address, Country GB  
City Area Code 011-  
Local Phone Number 44-020-305-74300  
Entity Information, Former Legal or Registered Name N/A  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Trading Symbol DLPH  
Security Exchange Name NYSE  
Entity Common Stock, Shares Outstanding   87,111,264
v3.19.2
Consolidated Statements Of Operations - USD ($)
shares in Thousands, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Net sales $ 1,121 $ 1,232 $ 2,272 $ 2,528
Operating expenses:        
Cost of sales 955 991 1,938 2,037
Selling, general and administrative 103 105 207 202
Amortization 2 2 8 6
Restructuring 5 12 8 23
Total operating expenses 1,065 1,110 2,161 2,268
Operating income 56 122 111 260
Interest expense (18) (19) (36) (39)
Other income (expense), net 8 4 (4) 10
Income before income taxes and equity income 46 107 71 231
Income tax expense (14) (20) (22) (42)
Income before equity income 32 87 49 189
Equity (loss) income, net of tax (1) 3 1 6
Net income 31 90 50 195
Net income attributable to noncontrolling interest 4 4 7 11
Net income attributable to Delphi Technologies $ 27 $ 86 $ 43 $ 184
Net income per share attributable to Delphi Technologies:        
Basic (in dollars per share) $ 0.31 $ 0.97 $ 0.49 $ 2.07
Diluted (in dollars per share) $ 0.31 $ 0.97 $ 0.49 $ 2.07
Weighted Average Number of Shares Outstanding [Abstract]        
Basic (in shares) 87,770 88,780 88,110 88,750
Diluted (in shares) 88,110 89,050 88,330 88,980
Cash dividends declared per share $ 0 $ 0.17 $ 0 $ 0.34
v3.19.2
Consolidated Statements Of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement of Comprehensive Income [Abstract]        
Net income $ 31 $ 90 $ 50 $ 195
Other comprehensive income (loss):        
Currency translation adjustments (15) (85) (6) (54)
Net change in unrecognized gain on derivative instruments, net of tax (9) 3 7 2
Employee benefit plans adjustment, net of tax 9 24 43 16
Other comprehensive income (loss) (15) (58) 44 (36)
Comprehensive income 16 32 94 159
Comprehensive income attributable to noncontrolling interests 2 0 6 9
Comprehensive income attributable to Delphi Technologies $ 14 $ 32 $ 88 $ 150
v3.19.2
Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 162 $ 359
Restricted cash 1 1
Accounts receivable, net 884 878
Inventories 553 521
Other current assets 178 172
Total current assets 1,778 1,931
Long-term assets:    
Property, net 1,509 1,445
Investments in affiliates 39 44
Goodwill 7 7
Intangible Assets, Net (Excluding Goodwill) 61 69
Deferred Tax Assets, Net, Noncurrent 273 280
Other long-term assets 236 117
Total long-term assets 2,125 1,962
Total assets 3,903 3,893
Current liabilities:    
Short-term debt 39 43
Accounts payable 832 906
Accrued liabilities 443 428
Total current liabilities 1,314 1,377
Long-term liabilities:    
Long-term debt 1,475 1,488
Pension and other postretirement benefit obligations 408 467
Other long-term liabilities 206 123
Total long-term liabilities 2,089 2,078
Total liabilities 3,403 3,455
Commitments and contingencies
Shareholders' equity:    
Preferred shares, $0.01 par value per share, 50,000,000 shares authorized, none issued and outstanding 0 0
Ordinary shares, $0.01 par value per share, 1,200,000,000 shares authorized, 87,111,264 and 88,491,963 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively 1 1
Additional paid-in capital 406 407
Retained earnings 317 296
Accumulated other comprehensive loss (367) (412)
Total Delphi Technologies shareholders' equity 357 292
Noncontrolling interest 143 146
Total shareholders' equity 500 438
Total liabilities and shareholders' equity $ 3,903 $ 3,893
v3.19.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Preferred shares, par value per share $ 0.01 $ 0.01
Preferred shares, authorized 50,000,000 50,000,000
Preferred shares, outstanding 0 0
Ordinary Shares, Par or Stated Value Per Share $ 0.01 $ 0.01
Ordinary shares, authorized 1,200,000,000 1,200,000,000
Ordinary shares, outstanding 87,111,264 88,491,963
v3.19.2
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash flows from operating activities:    
Net income $ 50 $ 195
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 102 92
Amortization 8 6
Amortization of deferred debt issuance costs 2 2
Restructuring expense, net of cash paid (11) (17)
Deferred income taxes (2) 3
Pension and other postretirement benefit expenses 18 22
Income from equity method investments, net of dividends received (1) (6)
Gain on Disposition of Other Assets (1) 0
Share-based compensation 9 10
Changes in operating assets and liabilities:    
Accounts receivable, net (6) 64
Inventories (32) (22)
Other assets 7 28
Accounts payable (13) (72)
Accrued and other long-term liabilities (10) (37)
Other, net (3) (6)
Pension contributions (26) (23)
Net cash provided by operating activities 91 239
Cash flows from investing activities:    
Capital expenditures (234) (123)
Proceeds from sale of property 5 1
Proceeds from Insurance Settlement, Investing Activities 0 1
Cost of technology investments 0 (7)
Settlement of undesignated derivatives (1) (10)
Net cash used in investing activities (230) (138)
Cash flows from financing activities:    
Net repayments under other short-term debt agreements 0 (2)
Repayments under long-term debt agreements (19) (9)
Dividend payments of consolidated affiliates to minority shareholders (8) (10)
Distribution of cash dividends 0 (30)
Taxes withheld and paid on employees' restricted share awards (2) (5)
Repurchase of ordinary shares (29) 0
Net cash used in financing activities (58) (56)
Effect of exchange rate fluctuations on cash and cash equivalents 0 (12)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect (197) 33
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, beginning 360 339
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, end $ 163 $ 372
v3.19.2
Consolidated Statement Of Shareholders' Equity - USD ($)
$ in Millions
Total
Ordinary Shares
Additional Paid in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Total Delphi Technologies Shareholders' Equity
Noncontrolling Interest
Balance at beginning of year at Dec. 31, 2017 $ 232 $ 1 $ 431 $ 7 $ (371) $ 68 $ 164
Shares outstanding, beginning of period at Dec. 31, 2017   89,000,000          
Net income 105     98   98 7
Other comprehensive income (loss) 22       20 20 2
Dividends on ordinary shares (15)     (15)   (15)  
Dividend payments of consolidated affiliates to minority shareholders (10)           (10)
Separation related adjustments (32)   (32)     (32)  
Share-based compensation 5   5     5  
Taxes witheld on employees' restricted share award vestings (5)   (5)     (5)  
Balance at end of year at Mar. 31, 2018 302 $ 1 399 90 (351) 139 163
Shares outstanding, end of period at Mar. 31, 2018   89,000,000          
Balance at beginning of year at Dec. 31, 2017 232 $ 1 431 7 (371) 68 164
Shares outstanding, beginning of period at Dec. 31, 2017   89,000,000          
Net income 195            
Other comprehensive income (loss) $ (36)            
Stock Repurchased and Retired During Period, Shares 0            
Repurchase of ordinary shares $ 0            
Balance at end of year at Jun. 30, 2018 320 $ 1 400 161 (405) 157 163
Shares outstanding, end of period at Jun. 30, 2018   89,000,000          
Balance at beginning of year at Mar. 31, 2018 302 $ 1 399 90 (351) 139 163
Shares outstanding, beginning of period at Mar. 31, 2018   89,000,000          
Net income 90     86   86 4
Other comprehensive income (loss) (58)       (54) (54) (4)
Dividends on ordinary shares (15)     (15)   (15)  
Separation related adjustments $ (4)   (4)     (4)  
Stock Repurchased and Retired During Period, Shares 0            
Share-based compensation $ 5   5     5  
Repurchase of ordinary shares 0            
Balance at end of year at Jun. 30, 2018 320 $ 1 400 161 (405) 157 163
Shares outstanding, end of period at Jun. 30, 2018   89,000,000          
Balance at beginning of year at Dec. 31, 2018 438 $ 1 407 296 (412) 292 146
Shares outstanding, beginning of period at Dec. 31, 2018   89,000,000          
Net income 19     16   16 3
Other comprehensive income (loss) 59       58 58 1
Dividend payments of consolidated affiliates to minority shareholders (8)           (8)
Stock Repurchased and Retired During Period, Shares   (1,000,000)          
Share-based compensation 4   4     4  
Repurchase of ordinary shares (15)   (4) (11)   (15)  
Taxes witheld on employees' restricted share award vestings (1)   (1)     (1)  
Balance at end of year at Mar. 31, 2019 496 $ 1 406 301 (354) 354 142
Shares outstanding, end of period at Mar. 31, 2019   88,000,000          
Balance at beginning of year at Dec. 31, 2018 438 $ 1 407 296 (412) 292 146
Shares outstanding, beginning of period at Dec. 31, 2018   89,000,000          
Net income 50            
Other comprehensive income (loss) $ 44            
Stock Repurchased and Retired During Period, Shares (1,583,876)            
Repurchase of ordinary shares $ (30)            
Balance at end of year at Jun. 30, 2019 500 $ 1 406 317 (367) 357 143
Shares outstanding, end of period at Jun. 30, 2019   87,000,000          
Balance at beginning of year at Mar. 31, 2019 496 $ 1 406 301 (354) 354 142
Shares outstanding, beginning of period at Mar. 31, 2019   88,000,000          
Net income 31     27   27 4
Other comprehensive income (loss) (15)       (13) (13) (2)
Dividend payments of consolidated affiliates to minority shareholders $ (1)           (1)
Stock Repurchased and Retired During Period, Shares (845,959) (1,000,000)          
Share-based compensation $ 5   5     5  
Repurchase of ordinary shares (15)   (4) (11)   (15)  
Taxes witheld on employees' restricted share award vestings (1)   (1)     (1)  
Balance at end of year at Jun. 30, 2019 $ 500 $ 1 $ 406 $ 317 $ (367) $ 357 $ 143
Shares outstanding, end of period at Jun. 30, 2019   87,000,000          
v3.19.2
General
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
General GENERAL
On December 4, 2017, Delphi Technologies PLC became an independent publicly-traded company, formed under the laws of Jersey, as a result of the separation of the Powertrain Systems segment, which included the aftermarket operations, from Aptiv PLC, formerly known as Delphi Automotive PLC (the “Former Parent”). The separation was completed in the form of a pro-rata distribution to the Former Parent’s shareholders of 100% of the outstanding ordinary shares of Delphi Technologies PLC (the “Separation”). References hereinafter to “Delphi Technologies,” “we,” “us,” “our” or the “Company” refer to Delphi Technologies PLC.
Nature of Operations
We are a leader in the development, design and manufacture of integrated powertrain technologies that optimize engine performance, increase vehicle efficiency, reduce emissions, improve driving performance, and support increasing electrification of vehicles. We are a global supplier to original equipment manufacturers (“OEMs”) seeking to manufacture vehicles that meet and exceed increasingly stringent global regulatory requirements and satisfy consumer demands for an enhanced user experience. We provide advanced fuel injection systems, actuators, valvetrain products, sensors, electronic control modules and power electronics technologies. Additionally, we offer a full spectrum of aftermarket products serving a global customer base.
We sell a comprehensive portfolio of advanced technologies and solutions for all propulsion systems to global OEMs of both light vehicles (passenger cars, trucks, vans and sport-utility vehicles) and commercial vehicles (light-duty, medium-duty and heavy-duty trucks, commercial vans, buses and off-highway vehicles). In addition, we manufacture and sell a wide range of fuel injection, electronics and engine management, maintenance, diagnostics, and other products, to leading aftermarket companies, including independent retailers and wholesale distributors. We also add aftermarket know-how in category management, logistics, training, marketing and other dedicated services to provide a full range of aftermarket solutions throughout vehicles’ lives.
Basis of Presentation
The unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual financial statements. These financial statements include all adjustments, which consist of normal recurring items, necessary for a fair presentation. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These financial statements should be read in conjunction with the Delphi Technologies 2018 Annual Report on Form 10-K.
v3.19.2
Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Significant Accounting Policies SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes on the Company’s significant accounting policies since the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, except those described below.
Recently adopted accounting pronouncements—In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The Company adopted Accounting Standards Codification (“ASC”) 842 as of January 1, 2019 using the optional modified retrospective transition method and did not recast the comparative periods. ASC 842 requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet for all leases, with the exception of short-term leases. For leases that meet the definition of a short-term lease, the Company has elected to apply the short-term lease exemption, and accordingly, they are not recorded on the balance sheet.
The Company has applied the practical expedients in ASC 842 related to not separating lease and nonlease components of contracts, both when the Company is a lessee and lessor. In addition, the Company elected the package of practical expedients, related to existing leases at the time of adoption, that allowed the Company to carry forward the accounting assessments for: i) whether contracts are or contain leases, ii) the lease classification and iii) the initial direct costs. Delphi Technologies also elected the practical expedient related to existing land easements, that allowed the Company to carry forward the accounting treatment for land easements in existing agreements.
The Company uses an estimated incremental borrowing rate, which is derived from information available at lease commencement, in determining the present value of lease payments. When calculating the incremental borrowing rates, the Company gives consideration to the applicable margin based on our corporate credit ratings, as defined by the Credit Agreement, as well as publicly available data by country for instruments with similar characteristics.
The adoption of this guidance resulted in the recognition of operating lease right-of-use assets and operating lease liabilities of approximately $117 million and $120 million, respectively, on the Company’s consolidated balance sheet as of June 30, 2019. The adoption did not have a material impact on its consolidated statements of operations or cash flows. Refer to Note 6. Leases for additional information.
Delphi Technologies adopted ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting in the first quarter of 2019. This guidance expands the scope of ASC Topic 718, which previously only included share-based payments to employees, to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees is now substantially aligned. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
v3.19.2
Inventories
6 Months Ended
Jun. 30, 2019
Inventory Disclosure [Abstract]  
Inventories INVENTORIES, NET
A summary of inventories is shown below:
 
June 30,
2019
 
December 31,
2018
 
 
 
 
 
(in millions)
Productive material
$
250

 
$
250

Work-in-process
48

 
36

Finished goods
255

 
235

Total
$
553

 
$
521


v3.19.2
Assets
6 Months Ended
Jun. 30, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Assets ASSETS
Other current assets consisted of the following:
 
June 30,
2019
 
December 31,
2018
 
 
 
 
 
(in millions)
Value added tax receivable
$
98

 
$
98

Reimbursable engineering costs
19

 
17

Prepaid insurance and other expenses
19

 
14

Income and other taxes receivable
18

 
16

Notes receivable
10

 
15

Derivative financial instruments (Note 16)
6

 
4

Return assets (Note 12)
5

 
7

Other
3

 
1

Total
$
178

 
$
172


Other long-term assets consisted of the following:
 
June 30,
2019
 
December 31,
2018
 
 
 
 
 
(in millions)
Operating lease assets (Note 6)
$
117

 
$

Income and other taxes receivable
41

 
53

Investment in Tula Technology, Inc.
21

 
21

Investment in PolyCharge America, Inc.
7

 
7

Derivative financial instruments (Note 16)
5

 

Debt issuance costs
3

 
3

Reimbursable engineering costs
3

 

Other
39

 
33

Total
$
236

 
$
117


v3.19.2
Liabilities
6 Months Ended
Jun. 30, 2019
Other Liabilities Disclosure [Abstract]  
Liabilities LIABILITIES
Accrued liabilities consisted of the following:
 
June 30,
2019
 
December 31,
2018
 
 
 
 
 
(in millions)
Income and other taxes payable
$
62

 
$
63

Warranty obligations (Note 7)
60

 
68

Payroll-related obligations
50

 
45

Restructuring (Note 8)
42

 
46

Deferred reimbursable engineering
37

 
31

Accrued rebates
27

 
29

Operating lease liabilities (Note 6)
21

 

Freight
17

 
20

Employee benefits
13

 
16

Outside services
12

 
13

Accrued interest
10

 
12

Deferred cost reimbursement
7

 
5

Customer deposits
6

 
5

Other
79

 
75

Total
$
443

 
$
428


Other long-term liabilities consisted of the following:
 
June 30,
2019
 
December 31,
2018
 
 
 
 
 
(in millions)
Operating lease liabilities (Note 6)
$
99

 
$

Accrued income taxes
46

 
46

Warranty obligations (Note 7)
25

 
28

Deferred income taxes
15

 
14

Restructuring (Note 8)
11

 
19

Derivative financial instruments (Note 16)
5

 
6

Environmental (Note 11)
2

 
2

Other
3

 
8

Total
$
206

 
$
123


v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases Disclosure [Text Block] LEASES
On January 1, 2019, Delphi Technologies adopted ASC Topic 842, Leases, which requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet for leases, with the exception of short-term leases. The Company leases real estate (including manufacturing sites and technical centers), office equipment, automobiles, forklifts and certain other equipment under finance and operating leases. As of June 30, 2019, the remaining lease terms range from 1 year to 10 years. Many of the Company’s leases include rent escalation clauses, renewal options and/or termination options that are factored into the Company’s determination of lease payments and lease term, as appropriate. During the six months ended June 30, 2019, the Company obtained $6 million of lease assets in exchange for new operating lease liabilities.
The Company is a lessor for certain owned real estate. Rental income for these leases is included within other income, net and was not material for the six months ended June 30, 2019.
The table below presents supplemental balance sheet information related to leases as of June 30, 2019:
 
 
June 30, 2019
 
 
 
 
 
(in millions)
Assets
Balance Sheet Location
 
Operating lease assets
Other long-term assets (Note 4)
$
117

Finance lease assets
Property, net
14

 
Total lease assets
$
131

 
 
 
Liabilities
 
 
Current
 
 
Operating leases
Accrued liabilities (Note 5)
$
21

Finance leases
Short-term debt (Note 9)
2

Long-term
 
 
Operating leases
Other long-term liabilities (Note 5)
99

Finance leases
Long-term debt (Note 9)
13

 
Total lease liabilities
$
135


The table below presents the components of lease costs for the three and six months ended June 30, 2019:
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
 
 
 
 
 
(in millions)
Finance lease cost - amortization of lease assets (1)
$

 
$
1

Operating lease cost (2)
10

 
18

Total lease cost
$
10

 
$
19

(1)
Includes interest on finance lease liabilities, which was not material.
(2)
Includes short-term leases and variable lease costs, which were not material.
The table below presents the weighted-average remaining lease term and discount rate as of June 30, 2019:
Weighted-average remaining lease term (in years):
 
Operating leases
6.68

Finance leases
8.60

Weighted-average discount rate:
 
Operating leases
6.10
%
Finance leases
4.11
%

The table below presents supplemental cash flow information related to leases during the three and six months ended June 30, 2019:
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
 
 
 
 
 
(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows for operating leases (1)
$
7

 
$
14

(1)
Operating and financing cash flows for finance leases were not material for the three and six months ended ended June 30, 2019.

The table below reconciles the undiscounted future minimum lease payments to the lease liabilities recorded on the balance sheet as of June 30, 2019:
 
Operating Leases
 
Finance Leases
 
Total
 
 
 
 
 
 
 
(in millions)
Remainder of 2019
$
13

 
$
1

 
$
14

2020
26

 
2

 
28

2021
24

 
2

 
26

2022
20

 
2

 
22

2023
14

 
2

 
16

Thereafter
49

 
9

 
58

Total future minimum lease payments
146

 
18

 
164

Less: amount of lease payments representing interest
(26
)
 
(3
)
 
(29
)
Total lease liabilities
$
120

 
$
15

 
$
135



As of June 30, 2019, the Company has an additional lease that has not yet commenced totaling $14 million of undiscounted future minimum lease payments. This lease will commence in 2020 with a lease term of 11 years.
v3.19.2
Warranty Obligations
6 Months Ended
Jun. 30, 2019
Product Warranties Disclosures [Abstract]  
Warranty Obligations WARRANTY OBLIGATIONS
Delphi Technologies has recognized its best estimate for its total aggregate warranty reserves, including product recall costs, across all of its operating segments as of June 30, 2019. The Company estimates the reasonably possible amount to ultimately resolve all matters in excess of the recorded reserves as of June 30, 2019 to be $0 million to $5 million.
The table below summarizes the activity in the product warranty liability for the six months ended June 30, 2019:
 
Warranty Obligations
 
 
 
(in millions)
Accrual balance at beginning of period
$
96

Provision for estimated warranties incurred during the period
19

Changes in estimate for pre-existing warranties

Settlements made during the period (in cash or in kind)
(30
)
Foreign currency translation and other

Accrual balance at end of period
$
85


v3.19.2
Restructuring
6 Months Ended
Jun. 30, 2019
Restructuring and Related Activities [Abstract]  
Restructuring RESTRUCTURING
The Company’s restructuring activities are undertaken as necessary to implement management’s strategy, streamline operations, take advantage of available capacity and resources, and ultimately achieve net cost reductions. These activities generally relate to the realignment of existing manufacturing capacity and closure of facilities and other exit or disposal activities, as it relates to executing Delphi Technologies’ strategy, either in the normal course of business or pursuant to significant restructuring programs.
As part of the Company’s continued efforts to optimize its cost structure, it has undertaken several restructuring programs which include workforce reductions as well as plant closures. These programs are primarily focused on the continued rotation of our manufacturing footprint to best-cost locations in Europe and on reducing global overhead costs. The Company recorded employee-related and other restructuring charges related to these programs totaling approximately $5 million and $8 million during the three and six months ended June 30, 2019, respectively. The Company recorded employee-related and other restructuring charges related to these programs totaling approximately $12 million and $23 million during the three and six months ended June 30, 2018, respectively, of which $5 million and $13 million was recognized for programs focused on the continued rotation of our manufacturing footprint to best cost locations in Europe.
Restructuring charges for employee separation and termination benefits are paid either over the severance period or in a lump sum in accordance with either statutory requirements or individual agreements. Delphi Technologies incurred cash expenditures related to its restructuring programs of approximately $19 million and $40 million in the six months ended June 30, 2019 and 2018, respectively.
The following table summarizes the restructuring charges recorded for the three and six months ended June 30, 2019 and 2018 by operating segment:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
(in millions)
Powertrain Systems
$
4

 
$
11

 
$
7

 
$
22

Aftermarket
1

 
1

 
1

 
1

Total
$
5

 
$
12

 
$
8

 
$
23


The table below summarizes the activity in the restructuring liability for the six months ended June 30, 2019:
 
Employee Termination Benefits Liability
 
Other Exit Costs Liability
 
Total
 
 
 
 
 
 
 
(in millions)
Accrual balance at December 31, 2018
$
64

 
$
1

 
$
65

Provision for estimated expenses during the period
8

 

 
8

Payments made during the period
(19
)
 

 
(19
)
Foreign currency and other
(1
)
 

 
(1
)
Accrual balance at June 30, 2019
$
52

 
$
1

 
$
53


v3.19.2
Debt
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Debt DEBT
The following is a summary of debt outstanding, net of unamortized issuance costs and discounts, as of June 30, 2019 and December 31, 2018, respectively:
 
June 30, 2019
 
December 31, 2018
 
(in millions)
$750 million Term Loan A Facility, due 2022 (net of $3 and $4 unamortized issuance costs)
$
709

 
$
727

$800 million Senior Notes at 5.00%, due 2025 (net of $11 and $12 unamortized issuance costs and $3 and $3 discount, respectively)
786

 
785

Finance lease liabilities and other
19

 
19

Total debt
1,514

 
1,531

Less: current portion
(39
)
 
(43
)
Long-term debt
$
1,475

 
$
1,488


Credit Agreement
On September 7, 2017, Delphi Technologies and its wholly-owned subsidiary Delphi Powertrain Corporation entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), with respect to $1.25 billion in senior secured credit facilities. The Credit Agreement consists of a senior secured five-year $750 million term loan facility (the “Term Loan A Facility”) and a $500 million five-year senior secured revolving credit facility (the “Revolving Credit Facility”) (collectively, the “Credit Facilities”) with the lenders party thereto and JPMorgan Chase Bank, N.A. We incurred $9 million of issuance costs in connection with the Credit Agreement. As of June 30, 2019, there were no amounts drawn on the Revolving Credit Facility.
The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to designate subsidiaries as unrestricted, to make certain investments, to prepay certain indebtedness and to pay dividends, or to make other distributions or redemptions/repurchases, with respect to our and our subsidiaries’ equity interests. In addition, the Credit Agreement requires that we maintain a consolidated net leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated Adjusted EBITDA, each as defined in the Credit Agreement) of not greater than 3.5 to 1.0. The Credit Agreement also contains events of default customary for financings of this type, including certain customary change of control events. The Company was in compliance with the Credit Agreement covenants as of June 30, 2019.
Senior Notes
On September 28, 2017, Delphi Technologies PLC issued $800 million in aggregate principal amount of 5.00% senior unsecured notes due 2025 in a transaction exempt from registration under the Securities Act (the “Senior Notes”).
The Senior Notes indenture contains certain restrictive covenants, including with respect to Delphi Technologies’ (and subsidiaries) ability to incur liens, enter into sale and leaseback transactions and merge with or into other entities. The Company was in compliance with the Senior Notes covenants as of June 30, 2019.
Other Financing
Receivable factoring—The Company entered into arrangements with various financial institutions to sell eligible trade receivables from certain Aftermarket customers in North America and Europe. These arrangements can be terminated at any time subject to prior written notice. The receivables under these arrangements are sold to a third party without recourse to the Company and are therefore accounted for as true sales. During the three and six months ended June 30, 2019, $43 million and $74 million of receivables were sold under these arrangements, and expenses of $1 million and $2 million were recognized within interest expense, respectively. During the three and six months ended June 30, 2018, $25 million and $45 million of receivables were sold under these arrangements, and expenses of $1 million and $2 million were recognized within interest expense, respectively.
In addition, during the six months ended June 30, 2019 and June 30, 2018, one of the Company’s European subsidiaries factored, without recourse, receivables related to certain foreign research credits to a financial institution. These transactions were accounted for as true sales of the receivables, and the Company therefore derecognized approximately $21 million and $22 million from other long-term assets in the consolidated balance sheet as of June 30, 2019 and June 30, 2018, respectively,
as a result of these transactions. During the three and six months ended June 30, 2019 and June 30, 2018, less than $1 million of expenses were recognized within interest expense related to this transaction.
Finance leases—There were approximately $15 million and $14 million of finance lease obligations outstanding as of June 30, 2019 and December 31, 2018, respectively.
Interest—Cash paid for interest related to debt outstanding, including the effect of interest rate and cross currency swaps, totaled $35 million and $37 million, for the six months ended June 30, 2019 and 2018, respectively.
v3.19.2
Pension Benefits
6 Months Ended
Jun. 30, 2019
Retirement Benefits [Abstract]  
Pension Benefits PENSION BENEFITS
The Company sponsors defined benefit pension plans for certain employees and retirees outside of the U.S. Using appropriate actuarial methods and assumptions, the Company’s defined benefit pension plans are accounted for in accordance with FASB ASC Topic 715, Compensation—Retirement Benefits. The Company’s primary non-U.S. plans are located in the United Kingdom (“U.K.”), France and Mexico. The U.K. and certain Mexican plans are funded. In addition, the Company has defined benefit plans in South Korea, Turkey and Italy for which amounts are payable to employees immediately upon separation. The obligations for these plans are recorded over the requisite service period. Delphi Technologies does not have any U.S. pension assets or liabilities.
Effective March 31, 2019, the Company has frozen future accruals for nearly all U.K. based employees under the related defined benefit plans, replacing them with contributions under defined contribution plans effective April 1, 2019, including additional contributions and other payments to impacted employees over a two-year transition period. As a result of this change, the Company realized a one-time reduction to its pension obligation of $33 million, along with a one-time charge of $15 million in the six months ended June 30, 2019, related to curtailing the defined benefit pension plans in the U.K. The Company also recognized a charge of $2 million and $9 million in the three and six months ended June 30, 2019, respectively, related to transitional payments to impacted employees. The Company excluded these charges, and expects to exclude related future charges, from our calculation of Adjusted Operating Income.
The amounts shown below reflect the non-U.S. plans’ defined benefit pension expense for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
2019
 
2018
 
 
 
 
 
(in millions)
Service cost
$
2

 
$
9

Interest cost
9

 
9

Expected return on plan assets
(15
)
 
(13
)
Amortization of actuarial losses
1

 
6

Net periodic benefit cost
$
(3
)
 
$
11

 
 
 
 
 
Six Months Ended June 30,
 
2019
 
2018
 
 
 
 
 
(in millions)
Service cost
$
9

 
$
19

Interest cost
18

 
18

Expected return on plan assets
(29
)
 
(27
)
Curtailment loss
15

 

Amortization of actuarial losses
5

 
12

Net periodic benefit cost
$
18

 
$
22


Other postretirement benefit obligations were $1 million and $1 million at June 30, 2019 and December 31, 2018, respectively.
v3.19.2
Commitments And Contingencies
6 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies COMMITMENTS AND CONTINGENCIES
Ordinary Business Claims
In the normal course of our business, we are named from time to time as a defendant in various legal actions, including arbitrations, class actions, and other litigation. We also from time to time receive subpoenas and other inquiries or requests for information from U.S. and foreign federal, state and local governments on a variety of matters. We accrue for matters when we believe that losses are probable and can be reasonably estimated. Considering, among other things, the legal defenses available and existing accruals, it is inherently difficult in many matters to determine whether loss is probable or reasonably possible or to estimate the size or range of the possible loss. Accordingly adverse outcomes from such proceedings could exceed the amounts accrued by an amount that could be material to our results of operations or cash flows in any particular reporting period.
We estimate our reasonably possible loss in excess of the amounts accrued for ordinary business claims to be up to $20 million, exclusive of the environmental matters discussed below.
Environmental Matters
Delphi Technologies is subject to the requirements of U.S. federal, state, local and non-U.S. environmental and safety and health laws and regulations. As of June 30, 2019 and December 31, 2018, the undiscounted reserve for environmental investigation and remediation was approximately $3 million (of which $1 million was recorded in accrued liabilities and $2 million was recorded in other long-term liabilities) and $3 million (of which $1 million was recorded in accrued liabilities and $2 million was recorded in other long-term liabilities), respectively. At June 30, 2019, the difference between the recorded liabilities and the reasonably possible range of potential loss was not material.
v3.19.2
Revenue
6 Months Ended
Jun. 30, 2019
Revenue [Abstract]  
Revenue from Contract with Customer [Text Block]
12. REVENUE
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring promised goods or services. The Company generally recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. From time to time, we enter into pricing agreements with our customers that provide for price reductions, some of which are conditional upon achieving certain criteria. In these instances, revenue is recognized based on the agreed-upon price at the time of shipment.    
Nature of Goods
The majority of our revenue is recorded at a point in time as defined by ASC 606 as the customers obtain control of the product upon title transfer and not as the product is manufactured or developed. For certain customers, based on specific terms and conditions pertaining to termination for convenience, Delphi Technologies concluded that it had an enforceable right to payment for performance completed to date and the products have no alternative use to the Company, which requires the recognition of revenue over time as defined by ASC 606. The impact on both revenue and operating income from recognizing revenue over time instead of point in time is not significant.
The major product groups within the Powertrain Systems operating segment include internal combustion engine products and electronics & electrification products. The major sales channels within the Aftermarket operating segment include aftermarket products sold to independent aftermarket customers and original equipment service customers. The amount of revenue recognized for these products is based on the purchase order price and adjusted for revenue allocated to variable consideration (i.e. estimated rebates and price discounts), as applicable. Our payment terms are based on customary business practices and vary by customer type and products offered. The term between invoicing and when payment is due is not significant.
Disaggregation of Revenue
In the following table, net sales to outside customers, based on the manufacturing location, is disaggregated by primary geographical market:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
North America
$
314

 
$
349

 
$
652

 
$
705

Europe
520

 
549

 
1,062

 
1,115

Asia Pacific
254

 
300

 
490

 
639

South America
33

 
34

 
68

 
69

Total
$
1,121

 
$
1,232

 
$
2,272

 
$
2,528


The Powertrain Systems segment primarily serves OEMs along with certain Tier 1 suppliers (one that supplies vehicle components directly to manufacturers) and the Aftermarket segment serves independent aftermarket customers and original equipment service customers.
In the following table, net sales is disaggregated by major product group, sales channels and type of customer:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Sales to OEMs and Tier 1 customers:
 
 
 
 
 
 
 
Internal combustion engine products
$
705

 
$
749

 
$
1,427

 
$
1,544

Electronics & electrification products
202

 
268

 
438

 
552

Total sales to OEMs and Tier 1 customers (Powertrain Systems segment)
907

 
1,017

 
1,865

 
2,096

 
 
 
 
 
 
 
 
Sales to independent aftermarket customers
159

 
159

 
300

 
314

Sales to original equipment service customers
55

 
56

 
107

 
118

Total sales to aftermarket customers (Aftermarket segment)
$
214

 
$
215

 
$
407

 
$
432

 
 
 
 
 
 
 
 
Total
$
1,121

 
$
1,232

 
$
2,272

 
$
2,528


Contract Balances
As discussed above, certain customers have contracts with specific terms and conditions which require recognition of revenue over time as defined by ASC 606. As of June 30, 2019, the recognition of revenue over time resulted in approximately $1 million of unbilled accounts receivable, which is included in accounts receivable, net. There were no other contract assets or liabilities as of June 30, 2019, as defined by ASC 606.
Return Assets
The Aftermarket segment provides certain customers with a right of return. The Company recognizes an estimated return asset (and adjusts for cost of sales) for the right to recover the products returned by the customer. ASC 606 requires that return assets be presented separately from inventory. As of June 30, 2019 and December 31, 2018, the Company had return assets of $5 million and $7 million, respectively, included in other current assets.
Practical Expedients and Exemptions
For our Powertrain Systems segment, we define the contract with the customer as the combination of a current purchase order and a current production schedule issued by the customer. For our Aftermarket segment, we define the contract with the customer as the combination of a current purchase order and a master agreement with the customer. Although there are instances where the master agreements may extend beyond one year, there are generally no purchase orders with an expected duration beyond a year.
There are generally no performance obligations outstanding beyond a year. The Company generally does not enter into fixed long-term supply agreements. The Company applies the exemption in ASC 606 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
In addition, the Company applies the practical expedient in ASC 340 and immediately expenses contract acquisition costs when incurred, including sales commissions, because the amortization period would be one year or less.
v3.19.2
Income Taxes
6 Months Ended
Jun. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
At the end of each interim period, the Company makes its best estimate of the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to unusual or infrequent items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or income tax contingencies is recognized in the interim period in which the change occurs.
The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in respective jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. Jurisdictions with a projected loss for the year or a year-to-date loss for which no tax benefit or expense can be recognized due to a valuation allowance are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the composition and timing of actual earnings compared to annual projections. The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or as our tax environment changes. To the extent that the expected annual effective income tax rate changes, the effect of the change on prior interim periods is included in the income tax provision in the period in which the change in estimate occurs.
The Company’s income tax expense and effective tax rate for the six months ended June 30, 2019 and 2018 were as follows:
 
Six Months Ended June 30,
 
2019
 
2018
 
 
 
 
 
 
Income tax expense
$
22

 
$
42

Effective tax rate
31
%
 
18
%

The Company’s tax rate is affected by the fact that Delphi Technologies PLC, its parent entity, is a U.K. resident taxpayer, the tax rates in the other jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance.
The Company’s effective tax rate for the six months ended June 30, 2019 was impacted by unfavorable changes in geographic income mix in 2019 as compared to 2018. The Company’s effective tax rate for the six months ended June 30, 2019 includes net discrete tax benefit of less than $1 million. The effective tax rate for the six months ended June 30, 2018 was impacted by favorable changes in geographic income mix in 2018 as compared to 2017. The Company’s effective tax rate for the six months ended June 30, 2018 includes net discrete tax expense of $2 million.
Delphi Technologies PLC is a U.K. resident taxpayer and as such is generally not subject to U.K. tax on remitted foreign earnings.
Cash paid or withheld for income taxes was $28 million and $51 million for the six months ended June 30, 2019 and 2018 respectively.
v3.19.2
Shareholders' Equity And Net Income Per Share
6 Months Ended
Jun. 30, 2019
Shareholders' Equity and Net Income Per Share Note [Abstract]  
Shareholders' Equity And Net Income Per Share SHAREHOLDERS’ EQUITY AND NET INCOME PER SHARE
Net Income Per Share
Basic net income per share is computed by dividing net income attributable to Delphi Technologies by the weighted average number of ordinary shares outstanding during the period. Diluted net income per share reflects the weighted average dilutive impact of all potentially dilutive securities from the date of issuance and is computed using the treasury stock method by dividing net income attributable to Delphi Technologies by the diluted weighted average number of ordinary shares outstanding. For all periods presented the calculation of net income per share contemplates the dilutive impacts, if any, of the Company’s share-based compensation plans. Refer to Note 19. Share-Based Compensation for additional information.
Weighted Average Shares
The following table illustrates net income per share attributable to Delphi Technologies and the weighted average shares outstanding used in calculating basic and diluted income per share:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
(in millions, except per share data)
Numerator:
 
 
 
 
 
 
 
Net income attributable to Delphi Technologies
$
27

 
$
86

 
$
43

 
$
184

Denominator:
 
 
 
 
 
 
 
Weighted average ordinary shares outstanding, basic
87.77

 
88.78

 
88.11

 
88.75

Dilutive shares related to restricted stock units (“RSUs”)
0.34

 
0.27

 
0.22

 
0.23

Weighted average ordinary shares outstanding, including dilutive shares
88.11

 
89.05

 
88.33

 
88.98

 
 
 
 
 
 
 
 
Net income per share attributable to Delphi Technologies:
 
 
 
 
 
 
 
Basic
$
0.31

 
$
0.97

 
$
0.49

 
$
2.07

Diluted
$
0.31

 
$
0.97

 
$
0.49

 
$
2.07

Anti-dilutive securities share impact

 

 

 


Share Repurchases
In July 2018, the Board of Directors approved a $100 million share repurchase authorization, which commenced in September 2018. This authorization was replaced by a new $200 million share repurchase program in January 2019 which was approved by the Board of Directors. Repurchases will be made at management’s discretion from time to time on the open market or through privately negotiated transactions. The repurchase program may be suspended for periods or discontinued at any time. Repurchases under this program will be funded from one or a combination of future free cash flow and existing cash balances. The program is expected to be completed by December 31, 2021.
A summary of the ordinary shares repurchased during the three and six months ended June 30, 2019 and 2018 is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Total number of shares repurchased
845,959

 

 
1,583,876

 

Average price paid per share
$
17.73

 
$

 
$
18.94

 
$

Total (in millions)
$
15

 
$

 
$
30

 
$


All repurchased shares were retired and returned to authorized but unissued shares. The repurchased shares are reflected as a reduction of ordinary share capital for the par value of the shares, with the excess applied as reductions to additional paid-in-capital and retained earnings.
v3.19.2
Changes in Accumulated Other Comprehensive Income
6 Months Ended
Jun. 30, 2019
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Changes in Accumulated Other Comprehensive Income CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The changes in accumulated other comprehensive income (loss) attributable to Delphi Technologies (net of tax) for the three and six months ended June 30, 2019 and 2018 are shown below.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
(in millions)
Foreign currency translation adjustments:
 
 
 
 
 
 
 
Balance at beginning of period
$
(157
)
 
$
(56
)
 
$
(165
)
 
$
(85
)
Aggregate adjustment for the period (1)
(13
)
 
(81
)
 
(5
)
 
(52
)
Balance at end of period
(170
)
 
(137
)
 
(170
)
 
(137
)
 
 
 
 
 
 
 
 
Gains (losses) on derivatives:
 
 
 
 
 
 
 
Balance at beginning of period
14

 
(1
)
 
(2
)
 

Other comprehensive income before reclassifications (net tax effect of $0, $0, $0 and $0)
(7
)
 
3

 
11

 
2

Reclassification to income (net tax effect of $0, $0, $0 and $0)
(2
)
 

 
(4
)
 

Balance at end of period
5

 
2

 
5

 
2

 
 
 
 
 
 
 
 
Pension and postretirement plans:
 
 
 
 
 
 
 
Balance at beginning of period
(211
)
 
(294
)
 
(245
)
 
(286
)
Other comprehensive income before reclassifications (net tax effect of $3, $6, $5 and $4)
8

 
19

 
27

 
6

Reclassification to income (net tax effect of $0, $1, $4 and $2)
1

 
5

 
16

 
10

Balance at end of period
(202
)
 
(270
)
 
(202
)
 
(270
)
 
 
 
 
 
 
 
 
Accumulated other comprehensive loss, end of period
$
(367
)
 
$
(405
)
 
$
(367
)
 
$
(405
)
(1)
Includes gains of $5 million and gains of $2 million, for the three and six months ended June 30, 2019, respectively, related to the foreign currency impact of intra-entity loans that are of a long-term investment nature. Also includes losses of $12 million and $5 million, for the three and six months ended June 30, 2018, respectively, related to the foreign currency impact of intra-entity loans that are of a long-term investment nature. During the three and six months ended June 30, 2019 there were losses of $5 million and losses of $1 million, respectively, related to non-derivative net investment hedges. During the three and six months ended June 30, 2018 there were losses of less than $1 million and $1 million, respectively, related to non-derivative net investment hedges. Refer to Note 16. Derivatives and Hedging Activities for further description of these hedges.
Reclassifications from accumulated other comprehensive income (loss) to income for the six months ended June 30, 2019 and 2018 were as follows:
Reclassification Out of Accumulated Other Comprehensive Income (Loss)
Details About Accumulated Other Comprehensive Income (Loss) Components
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Affected Line Item in the Statement of Operations
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
Pension and postretirement plans:
 
 
 
 
 
 
 
 
 
 
Actuarial losses
 
$
(1
)
 
$
(6
)
 
$
(5
)
 
$
(12
)
 
Other income (expense), net (1)
Curtailment
 

 

 
(15
)
 

 
Other income (expense), net (1)
 
 
(1
)
 
(6
)
 
(20
)
 
(12
)
 
Income before income taxes
 
 

 
1

 
4

 
2

 
Income tax expense
 
 
(1
)
 
(5
)
 
(16
)
 
(10
)
 
Net income
 
 

 

 

 

 
Net income attributable to noncontrolling interest
 
 
$
(1
)
 
$
(5
)
 
$
(16
)
 
$
(10
)
 
Net income attributable to Delphi Technologies
(1)
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note 10. Pension Benefits for additional details).

Refer to Note. 16 Derivatives and Hedging Activities for additional reclassifications from accumulated other comprehensive income (loss) to income.
v3.19.2
Derivatives And Hedging Activities
6 Months Ended
Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities DERIVATIVES AND HEDGING ACTIVITIES
Cash Flow Hedges
Delphi Technologies is exposed to market risk, such as fluctuations in foreign currency exchange rates, commodity prices and changes in interest rates, which may result in cash flow risks. To manage the volatility relating to these exposures, Delphi Technologies aggregates the exposures on a consolidated basis to take advantage of natural offsets. For exposures that are not offset within its operations, Delphi Technologies enters into various derivative transactions pursuant to its risk management policies, which prohibit holding or issuing derivative financial instruments for speculative purposes, and designation of derivative instruments is performed on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. Delphi Technologies assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policy.
In December 2018, the Company entered into interest rate swap agreements, designated as cash flow hedges, with a combined notional amount of $400 million where the variable rates under the Term Loan A Facility have been exchanged for a fixed rate. These interest rate swap agreements mature in September 2022 and convert the nature of $400 million of the loan from LIBOR floating-rate debt to fixed-rate debt.
As of June 30, 2019, the Company had the following outstanding notional amounts related to foreign currency forward contracts designated as cash flow hedges that were entered into to hedge forecasted exposures:
Foreign Currency
 
Quantity
Hedged
 
Unit of
Measure
 
Notional Amount
(USD Equivalent)
 
 
(in millions)
Chinese Yuan
 
814

 
RMB
 
$
120

Euro
 
88

 
EUR
 
100

Mexican Peso
 
966

 
MXN
 
50

Singapore Dollar
 
47

 
SGD
 
30

Polish Zloty
 
104

 
PLN
 
30

Turkish Lira
 
114

 
TRY
 
20


As of June 30, 2019, Delphi Technologies has entered into derivative instruments to hedge cash flows extending out to September 2022.
Gains and losses on derivatives qualifying as cash flow hedges are recorded in accumulated other comprehensive income (“OCI”), to the extent that hedges are effective, until the underlying transactions are recognized in earnings. Unrealized amounts in accumulated OCI will fluctuate based on changes in the fair value of hedge derivative contracts at each reporting period. Net losses on cash flow hedges included in accumulated OCI as of June 30, 2019 were approximately $6 million (approximately $6 million, net of tax). Of this total, approximately $1 million of gains are expected to be included in cost of sales and interest expense within the next 12 months and $7 million of losses are expected to be included in cost of sales and interest expense in subsequent periods. Cash flow hedges are discontinued when Delphi Technologies determines it is no longer probable that the originally forecasted transactions will occur. Cash flows from derivatives used to manage foreign exchange and interest rate risks are classified as operating activities within the consolidated statement of cash flows.
Net Investment Hedges
The Company is also exposed to the risk that adverse changes in foreign currency exchange rates could impact its net investment in non-U.S. subsidiaries. To manage this risk, the Company designated a qualifying non-derivative instrument, foreign currency-denominated debt, as a net investment hedge of certain non-U.S. subsidiaries. The gains or losses on instruments designated as net investment hedges are recognized within OCI to offset changes in the value of the net investment in these foreign currency-denominated operations. Gains and losses reported in accumulated other comprehensive income (loss) are reclassified to earnings only when the related currency translation adjustments are required to be reclassified, usually upon sale or liquidation of the investment.
In December 2018 and March 2019, as a means of managing foreign currency risk related to our significant operations in Europe, the Company executed fixed-for-fixed cross currency swaps, in which the Company will pay Euros and receive U.S. dollars with a combined notional amount of $600 million. These agreements are designated as net investment hedges and have a maturity date of September 2022.
Derivatives Not Designated as Hedges
On certain occasions the Company enters into certain foreign currency contracts that are not designated as hedges. When hedge accounting is not applied to derivative contracts, gains and losses are recorded to other income (expense), net and cost of sales in the consolidated statement of operations.
Fair Value of Derivative Instruments in the Balance Sheet
The following table includes the fair value of derivative instruments recorded in the consolidated balance sheets as of June 30, 2019 and December 31, 2018:
 
Asset Derivatives
 
Liability Derivatives
 
Balance Sheet Location*
 
June 30,
2019
 
December 31,
2018
 
Balance Sheet Location*
 
June 30,
2019
 
December 31,
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions)
Designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Foreign currency derivatives
Other current assets
 
$
5

 
$
5

 
Other current assets
 
$

 
$
1

Foreign currency derivatives
Other long-term assets
 
1

 

 
Other long-term assets
 

 

Interest rate swaps
Other long-term liabilities
 

 

 
Other long-term liabilities
 
12

 
3

 
 
 
 
 
 
 
 
 
 
 
 
Designated as net investment hedges:
 
 
 
 
 
 
 
 
 
 
Cross-currency swaps
Other long-term assets
 
4

 

 
Other long-term assets
 

 

Cross-currency swaps
Other long-term liabilities
 
7

 

 
Other long-term liabilities
 

 
3

Total designated as hedges
 
$
17

 
$
5

 
 
 
$
12

 
$
7

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
 
 
Foreign currency derivatives
Other current assets
 
$
1

 
$

 
Other current assets
 
$

 
$

Total not designated as hedges
 
$
1

 
$

 
 
 
$