DISCONTINUED OPERATIONS

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

On June 30, 2015 the Company closed the sale of its wholly owned Thermal Systems business to MAHLE GmbH ("MAHLE"). The Company received cash proceeds of approximately $670 million and recognized a gain on the divestiture of $285 million (approximately $0.99 per diluted share), net of tax expense of $56 million and transaction costs of $10 million, within income from discontinued operations. As part of the transaction closing, MAHLE also pre-funded approximately $29 million of Thermal Systems accounts payable that were subsequently satisfied in July 2015. Consideration associated with the divestiture remains subject to further adjustments, primarily related to working capital. In conjunction with the sale, Delphi and MAHLE also entered into a transition services agreement under which Delphi will provide certain administrative and other services, as well as a supply agreement under which Delphi will supply certain products, primarily for a period of up to eighteen months following the closing of the transaction.

Delphi and MAHLE also entered into a separate letter of intent regarding the sale of Delphi's 50 percent interest in its Shanghai Delphi Automotive Air Conditioning ("SDAAC") joint venture, subject to customary regulatory and other approvals. The financial results of SDAAC, which are consolidated by Delphi, were historically reported as part of the Thermal Systems segment. Additionally, Delphi determined that the Company's 50 percent interest in its Korea Delphi Automotive Systems Corporation ("KDAC") joint venture, which is accounted for under the equity method and was principally reported as part of the Thermal Systems segment, met the criteria to be classified as held for sale based on management's commitment to divest the Company's interest in KDAC to a separate buyer as part of the Company's overall Thermal Systems divestiture strategy. The Company's interests in these joint ventures remain held for sale as of June 30, 2015.

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

The Company determined that the assets and liabilities of the Thermal Systems segment met the held for sale criteria in accordance with FASB ASC 205, Presentation of Financial Statements. Accordingly, the held for sale Thermal Systems assets and liabilities were reclassified in the consolidated balance sheet to assets held for sale or liabilities held for sale, respectively, as the sale of such assets and liabilities is expected within one year, and to current or long-term assets and liabilities held for sale, as appropriate, for prior periods. The Company ceased recording depreciation of the held for sale Thermal Systems assets in the first quarter of 2015. As described above, Delphi completed the sale of the wholly owned Thermal Systems business during the three months ended June 30, 2015. The following table summarizes the carrying value of the major classes of assets and liabilities of discontinued operations:



	June 30, 2015		December 31, 2014

	(in millions)
Cash and cash equivalents	$	64	$	45
Accounts receivable, net	76		228
Inventories, net	23		91
Property, net	73		322
Investments in affiliates	41		130
Intangible assets, net	1		18
Other assets	8		61
Total assets of the discontinued operations classified as held for sale	286		895
Other assets classified as held for sale	30		—
Total assets held for sale	$	316	$	895

Accounts payable	$	95	$	303
Accrued liabilities	11		53
Other liabilities	7		35
Total liabilities of the discontinued operations classified as held for sale	113		391
Other liabilities classified as held for sale	60		—
Total liabilities held for sale	$	173	$	391

As of June 30, 2015 and December 31, 2014, there was $125 million and $118 million, respectively, of Noncontrolling interest attributable to the Company's partner in the SDAAC joint venture. Other assets and liabilities classified as held for sale as of June 30, 2015 relate to the Company's Reception Systems business, as further described in Note 17. Acquisitions and Divestitures.

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

The estimated fair value less costs to sell of the held for sale businesses exceeded their carrying value as of June 30, 2015, and therefore no adjustment to these long-lived assets was necessary. The divestiture of the businesses held for sale could result in a gain or loss on sale to the extent the ultimate selling price differs from the current carrying value of the net assets recorded.

A reconciliation of the major classes of line items constituting pretax profit or loss of discontinued operations to income from discontinued operations, net of tax as presented in the consolidated statements of operations is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014

	(in millions)
Net sales	$	382		$	389		$	755		$	768
Cost of sales	345			349			688			693
Selling, general and administrative	11			11			22			24
Amortization	—			2			1			4
Restructuring	1			1			2			2
Other income and (expense) items that are not major, net	—			—			—			1
Income from discontinued operations before income taxes and equity income	25			26			42			46
Income tax expense on discontinued operations	(12		)	(6		)	(16		)	(12		)
Equity income from discontinued operations, net of tax	—			7			—			8
Gain on divestiture of discontinued operations, net of tax	285			—			285			—
Impairment loss	—			—			(88		)	—
Income from discontinued operations, net of tax	298			27			223			42
Income from discontinued operations attributable to noncontrolling interests	3			5			7			10
Net income from discontinued operations attributable to Delphi	$	295		$	22		$	216		$	32

Income from discontinued operations before income taxes attributable to Delphi was $307 million and $27 million for the three months ended June 30, 2015 and 2014, respectively, which includes $0 million and $1 million, respectively, of income tax expense attributable to noncontrolling interests. Income from discontinued operations before income taxes attributable to Delphi was $231 million and $42 million for the six months ended June 30, 2015 and 2014, respectively, which includes $1 million and $2 million, respectively, of income tax expense attributable to noncontrolling interests.