SEGMENT REPORTING

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


•	Electrical/Electronic Architecture, which includes complete electrical architecture and component products.


•	Powertrain Systems, which includes extensive systems integration expertise in gasoline, diesel and fuel handling and full end-to-end systems including fuel and air injection, combustion, electronics controls, exhaust handling, test and validation capabilities, aftermarket, and original equipment service.


•	Electronics and Safety, which includes component and systems integration expertise in infotainment and connectivity, body controls and security systems, displays, mechatronics, passive and active safety electronics and electric and hybrid electric vehicle power electronics, as well as advanced development of software.


•	Eliminations and Other, which includes i) the elimination of inter-segment transactions, and ii) certain other expenses and income of a non-operating or strategic nature.

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’s 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 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, income (loss) from discontinued operations, net of tax, restructuring, 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 (“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’s 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's 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, which is the most directly comparable financial measure to Adjusted Operating Income that is in accordance with U.S. GAAP. Segment Adjusted Operating Income, as determined and measured by Delphi, should also not be compared to similarly titled measures reported by other companies.

As described in Note 21. Discontinued Operations, the Company's previously reported Thermal Systems segment has been classified as discontinued operations for all periods presented. Discontinued operations also includes the Company's thermal original equipment service 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 but which were not included in the scope of the divestiture, 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.

Included below are sales and operating data for Delphi’s segments for the three and six months ended June 30, 2016 and 2015.



	Electrical/ Electronic Architecture		Powertrain Systems			Electronics and Safety		Eliminations and Other (1)			Total

	(in millions)
For the Three Months Ended June 30, 2016:
Net sales	$	2,352	$	1,118		$	777	$	(41	)	$	4,206
Depreciation & amortization	$	100	$	67		$	23	$	—		$	190
Adjusted operating income	$	343	$	138		$	96	$	—		$	577
Operating income (loss)	$	321	$	(12	)	$	82	$	—		$	391
Equity income	$	7	$	—		$	—	$	—		$	7
Net income attributable to noncontrolling interest	$	6	$	7		$	—	$	—		$	13



	Electrical/ Electronic Architecture		Powertrain Systems			Electronics and Safety		Eliminations and Other (1)			Total

	(in millions)
For the Three Months Ended June 30, 2015:
Net sales	$	2,044	$	1,143		$	713	$	(42	)	$	3,858
Depreciation & amortization	$	69	$	45		$	21	$	—		$	135
Adjusted operating income	$	292	$	146		$	88	$	—		$	526
Operating income	$	267	$	135		$	79	$	—		$	481
Equity income (loss)	$	1	$	(1	)	$	—	$	—		$	—
Net income attributable to noncontrolling interest	$	9	$	10		$	—	$	—		$	19



	Electrical/ Electronic Architecture		Powertrain Systems		Electronics and Safety		Eliminations and Other (1)			Total

	(in millions)
For the Six Months Ended June 30, 2016:
Net sales	$	4,629	$	2,212	$	1,497	$	(81	)	$	8,257
Depreciation & amortization	$	195	$	111	$	46	$	—		$	352
Adjusted operating income	$	648	$	268	$	170	$	—		$	1,086
Operating income	$	581	$	105	$	146	$	—		$	832
Equity income	$	13	$	—	$	—	$	—		$	13
Net income attributable to noncontrolling interest	$	13	$	15	$	—	$	—		$	28



	Electrical/ Electronic Architecture		Powertrain Systems		Electronics and Safety		Eliminations and Other (1)			Total

	(in millions)
For the Six Months Ended June 30, 2015:
Net sales	$	4,122	$	2,224	$	1,395	$	(86	)	$	7,655
Depreciation & amortization	$	135	$	89	$	39	$	—		$	263
Adjusted operating income	$	556	$	275	$	167	$	—		$	998
Operating income	$	520	$	256	$	151	$	—		$	927
Equity income	$	5	$	—	$	—	$	—		$	5
Net income attributable to noncontrolling interest	$	17	$	18	$	—	$	—		$	35


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

The reconciliation of Adjusted Operating Income to Operating Income includes, as applicable, restructuring, 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 reconciliations of Adjusted Operating Income to net income attributable to Delphi for the three and six months ended June 30, 2016 and 2015 are as follows:



	Electrical/ Electronic Architecture			Powertrain Systems			Electronics and Safety			Eliminations and Other		Total

	(in millions)
For the Three Months Ended June 30, 2016:
Adjusted operating income	$	343		$	138		$	96		$	—	$	577
Restructuring	(17		)	(126		)	(11		)	—		(154		)
Other acquisition and portfolio project costs	(5		)	(2		)	(3		)	—		(10		)
Asset impairments	—			(22		)	—			—		(22		)
Operating income (loss)	$	321		$	(12	)	$	82		$	—	391
Interest expense												(41		)
Other income (expense), net												(2		)
Income from continuing operations before income taxes and equity income												348
Income tax expense												(84		)
Equity income, net of tax												7
Income from continuing operations												271
Income from discontinued operations, net of tax												—
Net income												271
Net income attributable to noncontrolling interest												13
Net income attributable to Delphi												$	258



	Electrical/ Electronic Architecture			Powertrain Systems			Electronics and Safety			Eliminations and Other		Total

	(in millions)
For the Three Months Ended June 30, 2015:
Adjusted operating income	$	292		$	146		$	88		$	—	$	526
Restructuring	(5		)	(8		)	(4		)	—		(17		)
Other acquisition and portfolio project costs	(5		)	(3		)	(2		)	—		(10		)
Asset impairments	(1		)	—			(3		)	—		(4		)
Gain (loss) on business divestitures, net	(14		)	—			—			—		(14		)
Operating income	$	267		$	135		$	79		$	—	481
Interest expense												(30		)
Other income (expense), net												(2		)
Income from continuing operations before income taxes and equity income												449
Income tax expense												(80		)
Equity income, net of tax												—
Income from continuing operations												369
Income from discontinued operations, net of tax												298
Net income												667
Net income attributable to noncontrolling interest												22
Net income attributable to Delphi												$	645



	Electrical/ Electronic Architecture			Powertrain Systems			Electronics and Safety			Eliminations and Other		Total

	(in millions)
For the Six Months Ended June 30, 2016:
Adjusted operating income	$	648		$	268		$	170		$	—	$	1,086
Restructuring	(35		)	(135		)	(19		)	—		(189		)
Other acquisition and portfolio project costs	(32		)	(6		)	(5		)	—		(43		)
Asset impairments	—			(22		)	—			—		(22		)
Operating income	$	581		$	105		$	146		$	—	832
Interest expense												(82		)
Other income (expense), net												2
Income from continuing operations before income taxes and equity income												752
Income tax expense												(159		)
Equity income, net of tax												13
Income from continuing operations												606
Income from discontinued operations, net of tax												108
Net income												714
Net income attributable to noncontrolling interest												31
Net income attributable to Delphi												$	683



	Electrical/ Electronic Architecture			Powertrain Systems			Electronics and Safety			Eliminations and Other		Total

	(in millions)
For the Six Months Ended June 30, 2015:
Adjusted operating income	$	556		$	275		$	167		$	—	$	998
Restructuring	(9		)	(14		)	(10		)	—		(33		)
Other acquisition and portfolio project costs	(10		)	(5		)	(3		)	—		(18		)
Asset impairments	(3		)	—			(3		)	—		(6		)
Gain (loss) on business divestitures, net	(14		)	—			—			—		(14		)
Operating income	$	520		$	256		$	151		$	—	927
Interest expense												(62		)
Other income (expense), net												(56		)
Income from continuing operations before income taxes and equity income												809
Income tax expense												(141		)
Equity income, net of tax												5
Income from continuing operations												673
Loss from discontinued operations, net of tax												223
Net income												896
Net income attributable to noncontrolling interest												42
Net income attributable to Delphi												$	854