Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Aptiv PLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Aptiv PLC (the Company) as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 4, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2006

Detroit, Michigan

February 4, 2019

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Aptiv PLC

Opinion on Internal Control over Financial Reporting

We have audited Aptiv PLC’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Aptiv PLC (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and related footnotes and schedule and our report dated February 4, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Detroit, Michigan

February 4, 2019

APTIV PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2018				2017				2016
	(in millions, except per share amounts)
Net sales	$	14,435			$	12,884			$	12,274
Operating expenses:
Cost of sales	11,706				10,270				9,527
Selling, general and administrative	993				952				924
Amortization	154				117				117
Restructuring (Note 10)	109				129				167
Total operating expenses	12,962				11,468				10,735
Operating income	1,473				1,416				1,539
Interest expense	(141		)		(140		)		(155		)
Other income (expense), net (Note 19)	2				(21		)		(384		)
Income from continuing operations before income taxes and equity income	1,334				1,255				1,000
Income tax expense	(250		)		(223		)		(167		)
Income from continuing operations before equity income	1,084				1,032				833
Equity income, net of tax	23				31				35
Income from continuing operations	1,107				1,063				868
Income from discontinued operations, net of tax (Note 25)	—				365				458
Net income	1,107				1,428				1,326
Net income attributable to noncontrolling interest	40				73				69
Net income attributable to Aptiv	$	1,067			$	1,355			$	1,257
Amounts attributable to Aptiv:
Income from continuing operations	$	1,067			$	1,021			$	834
Income from discontinued operations	—				334				423
Net income	$	1,067			$	1,355			$	1,257
Basic net income per share:
Continuing operations	$	4.04			$	3.82			$	3.05
Discontinued operations	—				1.25				1.55
Basic net income per share attributable to Aptiv	$	4.04			$	5.07			$	4.60
Weighted average number of basic shares outstanding	264.41				267.16				273.02
Diluted net income per share:
Continuing operations	$	4.02			$	3.81			$	3.05
Discontinued operations	—				1.25				1.54
Diluted net income per share attributable to Aptiv	$	4.02			$	5.06			$	4.59
Weighted average number of diluted shares outstanding	265.22				268.03				273.70

See notes to consolidated financial statements.

APTIV PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Net income	$	1,107			$	1,428			$	1,326
Other comprehensive (loss) income:
Currency translation adjustments	(194		)		315				(147		)
Net change in unrecognized (loss) gain on derivative instruments, net of tax (Note 17)	(39		)		15				95
Employee benefit plans adjustment, net of tax (Note 12)	2				11				(139		)
Other comprehensive (loss) income	(231		)		341				(191		)
Comprehensive income	876				1,769				1,135
Comprehensive income attributable to noncontrolling interests	32				83				60
Comprehensive income attributable to Aptiv	$	844			$	1,686			$	1,075

See notes to consolidated financial statements.

APTIV PLC

CONSOLIDATED BALANCE SHEETS

	December 31,
	2018				2017
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	567			$	1,596
Restricted cash	1				1
Accounts receivable, net	2,487				2,440
Inventories (Note 3)	1,277				1,083
Other current assets (Note 4)	445				521
Total current assets	4,777				5,641
Long-term assets:
Property, net (Note 6)	3,179				2,804
Investments in affiliates	99				91
Intangible assets, net (Note 7)	1,380				1,219
Goodwill (Note 7)	2,524				1,944
Other long-term assets (Note 4)	521				470
Total long-term assets	7,703				6,528
Total assets	$	12,480			$	12,169
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (Note 11)	$	306			$	17
Accounts payable	2,334				2,227
Accrued liabilities (Note 8)	1,054				1,296
Total current liabilities	3,694				3,540
Long-term liabilities:
Long-term debt (Note 11)	4,038				4,132
Pension benefit obligations (Note 12)	445				454
Other long-term liabilities (Note 8)	633				526
Total long-term liabilities	5,116				5,112
Total liabilities	8,810				8,652
Commitments and contingencies (Note 13)
Shareholders’ equity:
Preferred shares, $0.01 par value per share, 50,000,000 shares authorized, none issued and outstanding	—				—
Ordinary shares, $0.01 par value per share, 1,200,000,000 shares authorized, 259,991,022 and 265,839,794 issued and outstanding as of December 31, 2018 and December 31, 2017, respectively	3				3
Additional paid-in-capital	1,639				1,649
Retained earnings	2,511				2,118
Accumulated other comprehensive loss (Note 16)	(694		)		(471		)
Total Aptiv shareholders’ equity	3,459				3,299
Noncontrolling interest	211				218
Total shareholders’ equity	3,670				3,517
Total liabilities and shareholders’ equity	$	12,480			$	12,169

See notes to consolidated financial statements.

APTIV PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Cash flows from operating activities:
Net income	$	1,107			$	1,428			$	1,326
Income from discontinued operations, net of tax	—				365				458
Income from continuing operations	1,107				1,063				868
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	522				429				372
Amortization	154				117				117
Amortization of deferred debt issuance costs	7				7				9
Restructuring expense, net of cash paid	(26		)		2				77
Deferred income taxes	(14		)		(26		)		(121		)
Pension and other postretirement benefit expenses	35				51				32
Income from equity method investments, net of dividends received	(11		)		(18		)		(18		)
Loss on extinguishment of debt	—				—				73
Gain on sale of assets	(2		)		(3		)		(147		)
Share-based compensation	58				62				62
Changes in operating assets and liabilities:
Accounts receivable, net	55				(287		)		(207		)
Inventories	(120		)		(224		)		(45		)
Other assets	(165		)		(187		)		51
Accounts payable	62				268				35
Accrued and other long-term liabilities	73				(72		)		440
Other, net	(47		)		(36		)		(61		)
Pension contributions	(48		)		(40		)		(43		)
Net cash provided by operating activities from continuing operations	1,640				1,106				1,494
Net cash (used in) provided by operating activities from discontinued operations	(12		)		362				447
Net cash provided by operating activities	1,628				1,468				1,941
Cash flows from investing activities:
Capital expenditures	(846		)		(698		)		(657		)
Proceeds from sale of property / investments	13				7				19
Net proceeds from divestiture of discontinued operations	—				—				48
Proceeds from business divestitures, net	—				—				197
Cost of business acquisitions, net of cash acquired	(1,197		)		(324		)		(15		)
Cost of technology investments	(16		)		(50		)		(3		)
Settlement of derivatives	(2		)		(28		)		(1		)
Net cash used in investing activities from continuing operations	(2,048		)		(1,093		)		(412		)
Net cash used in investing activities from discontinued operations	—				(159		)		(166		)
Net cash used in investing activities	(2,048		)		(1,252		)		(578		)
Cash flows from financing activities:
Net proceeds (repayments) under other short-term debt agreements	255				(17		)		(34		)
Repayment of senior notes	—				—				(862		)
Proceeds from issuance of senior notes, net of issuance costs	—				796				852
Contingent consideration and deferred acquisition purchase price payments	(13		)		(24		)		(4		)
Dividend payments of consolidated affiliates to minority shareholders	(30		)		(38		)		(42		)
Repurchase of ordinary shares	(499		)		(383		)		(634		)
Distribution of cash dividends	(233		)		(310		)		(317		)
Dividend received from spin-off of Delphi Technologies	—				1,148				—
Cash transferred to Delphi Technologies related to spin-off	—				(863		)		—
Cash transferred from Delphi Technologies related to spin-off	—				180				—
Taxes withheld and paid on employees’ restricted share awards	(35		)		(33		)		(40		)
Net cash (used in) provided by financing activities	(555		)		456				(1,081		)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash	(54		)		86				(23		)
(Decrease) increase in cash, cash equivalents and restricted cash	(1,029		)		758				259
Cash, cash equivalents and restricted cash at beginning of the year	1,597				839				580
Cash, cash equivalents and restricted cash at end of the year	$	568			$	1,597			$	839
Cash, cash equivalents and restricted cash of discontinued operations	$	—			$	—			$	101
Cash, cash equivalents and restricted cash of continuing operations	$	568			$	1,597			$	738

See notes to consolidated financial statements.

APTIV PLC

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

	Ordinary Shares
	Number of Shares			Amount				Additional Paid in Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Total Aptiv Shareholders’ Equity				Noncontrolling Interest				Total Shareholders’ Equity
	(in millions)
Balance at December 31, 2015	278			$	3			$	1,653			$	1,627			$	(1,033	)		$	2,250			$	483			$	2,733
Net income	—			—				—				1,257				—				1,257				69				1,326
Other comprehensive loss	—			—				—				—				(182		)		(182		)		(9		)		(191		)
Dividends on ordinary shares	—			—				3				(320		)		—				(317		)		—				(317		)
Dividend payments of consolidated affiliates to minority shareholders	—			—				—				—				—				—				(80		)		(80		)
Taxes withheld on employees’ restricted share award vestings	—			—				(40		)		—				—				(40		)		—				(40		)
Repurchase of ordinary shares	(10	)		—				(51		)		(584		)		—				(635		)		—				(635		)
Divestiture of business	—			—				—				—				—				—				(101		)		(101		)
Share-based compensation	2			—				68				—				—				68				—				68
Balance at December 31, 2016	270			$	3			$	1,633			$	1,980			$	(1,215	)		$	2,401			$	362			$	2,763
Net income	—			—				—				1,355				—				1,355				73				1,428
Other comprehensive income	—			—				—				—				331				331				10				341
Dividends on ordinary shares	—			—				4				(373		)		—				(369		)		—				(369		)
Dividend payments of consolidated affiliates to minority shareholders	—			—				—				—				—				—				(67		)		(67		)
Taxes withheld on employees’ restricted share award vestings	—			—				(33		)		—				—				(33		)		—				(33		)
Repurchase of ordinary shares	(5	)		—				(25		)		(358		)		—				(383		)		—				(383		)
Distribution of Delphi Technologies	—			—				—				(1,814		)		413				(1,401		)		(160		)		(1,561		)
Dividend received from spin-off of Delphi Technologies	—			—				—				1,148				—				1,148				—				1,148
Cash transferred from Delphi Technologies related to spin-off	—			—				—				180				—				180				—				180
Share-based compensation	1			—				70				—				—				70				—				70
Balance at December 31, 2017	266			$	3			$	1,649			$	2,118			$	(471	)		$	3,299			$	218			$	3,517
Net income	—			—				—				1,067				—				1,067				40				1,107
Other comprehensive loss	—			—				—				—				(223		)		(223		)		(8		)		(231		)
Dividends on ordinary shares	—			—				2				(176		)		—				(174		)		—				(174		)
Dividend payments of consolidated affiliates to minority shareholders	—			—				—				—				—				—				(39		)		(39		)
Taxes withheld on employees’ restricted share award vestings	—			—				(35		)		—				—				(35		)		—				(35		)
Repurchase of ordinary shares	(7	)		—				(35		)		(464		)		—				(499		)		—				(499		)
Share-based compensation	1			—				58				—				—				58				—				58
Distribution of Delphi Technologies	—			—				—				(25		)		—				(25		)		—				(25		)
Adjustment for recently adopted accounting pronouncements (Note 2)	—			—				—				(9		)		—				(9		)		—				(9		)
Balance at December 31, 2018	260			$	3			$	1,639			$	2,511			$	(694	)		$	3,459			$	211			$	3,670

See notes to consolidated financial statements.

APTIV PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

General and basis of presentation—“Aptiv,” the “Company,” “we,” “us” and “our” refer to Aptiv PLC, a public limited company formed under the laws of Jersey on May 19, 2011 as Delphi Automotive PLC, which, through its subsidiaries, acquired certain assets of the former Delphi Corporation (now known as DPH Holdings Corp. (“DPHH”)) and completed an initial public offering on November 22, 2011. On December 4, 2017 (the “Distribution Date”), the Company completed the separation (the “Separation”) of its former Powertrain Systems segment by distributing to Aptiv shareholders on a pro rata basis all of the issued and outstanding ordinary shares of Delphi Technologies PLC (“Delphi Technologies”), a public limited company formed to hold the spun-off business. To effect the Separation, the Company distributed to its shareholders one ordinary share of Delphi Technologies for every three Aptiv ordinary shares outstanding as of November 22, 2017, the record date for the distribution. Following the Separation, the remaining company changed its name to Aptiv PLC and New York Stock Exchange (“NYSE”) symbol to “APTV.” Delphi Technologies’ historical financial results through the Distribution Date are reflected in the Company’s consolidated financial statements as a discontinued operation, as more fully described in Note 25. Discontinued Operations.

In April 2018, primarily as a result of the impact of the Separation on the Company’s U.K. presence and the centralization of the Company’s non-manufacturing European footprint, along with the long-term stability of the financial and regulatory environment in Ireland and continued uncertainties with regards to the impending exit of the U.K. from the European Union, Aptiv PLC changed its tax residence from the U.K. to Ireland. Aptiv PLC remains a public limited company incorporated under the laws of Jersey, and continues to be subject to U.S. Securities and Exchange Commission reporting requirements and prepare its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Nature of operations—Aptiv is a leading global technology and mobility company primarily serving the automotive sector. We design and manufacture vehicle components and provide electrical, electronic and active safety technology solutions to the global automotive and commercial vehicle markets. Aptiv is one of the largest vehicle component manufacturers, and its customers include all 25 of the largest automotive original equipment manufacturers (“OEMs”) in the world. Aptiv operates 126 major manufacturing facilities and 15 major technical centers utilizing a regional service model that enables the Company to efficiently and effectively serve its global customers from best cost countries. Aptiv has a presence in 44 countries and has approximately 18,600 scientists, engineers and technicians focused on developing market relevant product solutions for its customers. In line with the long-term growth in emerging markets, Aptiv has been increasing its focus on these markets, particularly in China, where the Company has a major manufacturing base and strong customer relationships.

2. SIGNIFICANT ACCOUNTING POLICIES

Consolidation—The consolidated financial statements include the accounts of Aptiv and U.S. and non-U.S. subsidiaries in which Aptiv holds a controlling financial or management interest and variable interest entities of which Aptiv has determined that it is the primary beneficiary. Aptiv’s share of the earnings or losses of non-controlled affiliates, over which Aptiv exercises significant influence (generally a 20% to 50% ownership interest), is included in the consolidated operating results using the equity method of accounting. When Aptiv does not have the ability to exercise significant influence (generally when ownership interest is less than 20%), investments in non-consolidated affiliates are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, and are measured at cost, less impairments, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. All significant intercompany transactions and balances between consolidated Aptiv businesses have been eliminated. The Company monitors its investments in affiliates for indicators of other-than-temporary declines in value on an ongoing basis. If the Company determines that such a decline has occurred, an impairment loss is recorded, which is measured as the difference between carrying value and estimated fair value. Estimated fair value is generally determined using an income approach based on discounted cash flows or negotiated transaction values.

During the years ended December 31, 2018, 2017 and 2016, Aptiv received dividends of $12 million, $15 million and $17 million, respectively, from its equity method investments. The dividends were recognized as a reduction to the investment and represented a return on investment included in cash flows from operating activities from continuing operations.

Investments in non-consolidated affiliates totaled $72 million and $56 million as of December 31, 2018 and 2017, respectively, and are classified within other long-term assets in the consolidated balance sheet. Refer to Note 5. Investments in Affiliates for further information.

Use of estimates—Preparation of consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect amounts reported therein. Generally, matters subject to estimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of intangible and fixed assets, deferred tax asset valuation allowances, income taxes, pension benefit plan assumptions, accruals related to litigation, warranty costs, environmental remediation costs, contingent consideration arrangements, worker’s compensation accruals and healthcare accruals. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from those estimates.

Revenue recognition—Revenue is measured based on consideration specified in a contract with a customer. Customer contracts generally are represented by a combination of a current purchase order and a current production schedule issued by the customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. From time to time, Aptiv enters into pricing agreements with its customers that provide for price reductions, some of which are conditional upon achieving certain joint cost saving targets. In these instances, revenue is recognized based on the agreed-upon price at the time of shipment.

Sales incentives and allowances are recognized as a reduction to revenue at the time of the related sale. In addition, from time to time, Aptiv makes payments to customers in conjunction with ongoing business. These payments to customers are generally recognized as a reduction to revenue at the time of the commitment to make these payments. However, certain other payments to customers, or upfront fees, meet the criteria to be considered a cost to obtain a contract as they are directly attributable to a contract, are incremental and management expects the fees to be recoverable.

Shipping and handling fees billed to customers are included in net sales, while costs of shipping and handling are included in cost of sales.

Aptiv collects and remits taxes assessed by different governmental authorities that are both imposed on and concurrent with a revenue-producing transaction between the Company and the Company’s customers. These taxes may include, but are not limited to, sales, use, value-added, and some excise taxes. Aptiv reports the collection of these taxes on a net basis (excluded from revenues). Refer to Note 26. Revenue for further information.

Net income per share—Basic net income per share is computed by dividing net income attributable to Aptiv 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 Aptiv by the diluted weighted-average number of ordinary shares outstanding during the period. Unless otherwise noted, share and per share amounts included in these notes are on a diluted basis. Refer to Note 15. Shareholders’ Equity and Net Income Per Share for additional information including the calculation of basic and diluted net income per share.

Research and development—Costs are incurred in connection with research and development programs that are expected to contribute to future earnings. Such costs are charged against income as incurred. Total research and development expenses, including engineering, net of customer reimbursements, were approximately $1,155 million, $882 million and $788 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Cash and cash equivalents—Cash and cash equivalents are defined as short-term, highly liquid investments with original maturities of three months or less.

Restricted cash—Restricted cash includes balances on deposit at financial institutions that have issued letters of credit in favor of Aptiv.

Accounts receivable—Aptiv enters into agreements to sell certain of its accounts receivable, primarily in Europe. Sales of receivables are accounted for in accordance with FASB ASC Topic 860, Transfers and Servicing (“ASC 860”). Agreements which result in true sales of the transferred receivables, as defined in ASC 860, which occur when receivables are transferred without recourse to the Company, are excluded from amounts reported in the consolidated balance sheets. Cash proceeds received from such sales are included in operating cash flows. Agreements that allow Aptiv to maintain effective control over the transferred receivables and which do not qualify as a sale, as defined in ASC 860, are accounted for as secured borrowings and recorded in the consolidated balance sheets within accounts receivable, net and short-term debt. The expenses associated with receivables factoring are recorded in the consolidated statements of operations within interest expense.

The Company exchanges certain amounts of accounts receivable, primarily in the Asia Pacific region, for bank notes with original maturities greater than three months. The collection of such bank notes are included in operating cash flows based on the substance of the underlying transactions, which are operating in nature. Bank notes held by the Company with original maturities of three months or less are classified as cash and cash equivalents within the consolidated balance sheet, and those with original maturities of greater than three months are classified as notes receivable within other current assets. The Company may hold such bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third-party financial institutions in exchange for cash.

The allowance for doubtful accounts is established based upon analysis of trade receivables for known collectability issues, the aging of the trade receivables at the end of each period and, generally, all accounts receivable balances greater than 90 days past due are fully reserved. As of December 31, 2018 and 2017, the allowance for doubtful accounts was $38 million and $34 million, respectively, and the provision for doubtful accounts was $9 million, $23 million, and $22 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Inventories—As of December 31, 2018 and 2017, inventories are stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value, including direct material costs and direct and indirect manufacturing costs. Refer to Note 3. Inventories for additional information. Obsolete inventory is identified based on analysis of inventory for known obsolescence issues, and, generally, the market value of inventory on hand in excess of one year’s supply is fully-reserved.

From time to time, payments may be received from suppliers. These payments from suppliers are recognized as a reduction of the cost of the material acquired during the period to which the payments relate. In some instances, supplier rebates are received in conjunction with or concurrent with the negotiation of future purchase agreements and these amounts are amortized over the prospective agreement period.

Property—Major improvements that materially extend the useful life of property are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is determined based on a straight-line method over the estimated useful lives of groups of property. Leasehold improvements under capital leases are depreciated over the period of the lease or the life of the property, whichever is shorter. Refer to Note 6. Property, Net for additional information.

Pre-production costs related to long-term supply agreements—The Company incurs pre-production engineering, development and tooling costs related to products produced for its customers under long-term supply agreements. Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred, unless the costs are reimbursable, as specified in a customer contract. As of December 31, 2018 and 2017, $184 million and $99 million of such contractually reimbursable costs were capitalized, respectively. These amounts are recorded within other current and other long-term assets in the consolidated balance sheets, as further detailed in Note 4. Assets.

Special tools represent Aptiv-owned tools, dies, jigs and other items used in the manufacture of customer components that will be sold under long-term supply arrangements, the costs of which are capitalized within property, plant and equipment if the Company has title to the assets. Special tools also include capitalized unreimbursed pre-production tooling costs related to customer-owned tools for which the customer has provided Aptiv a non-cancellable right to use the tool. Aptiv-owned special tools balances are depreciated over the expected life of the special tool or the life of the related vehicle program, whichever is shorter. The unreimbursed costs incurred related to customer-owned special tools that are not subject to reimbursement are capitalized and depreciated over the expected life of the special tool or the life of the related vehicle program, whichever is shorter. At December 31, 2018 and 2017, the special tools balance, net of accumulated depreciation, was $461 million and $445 million, respectively, included within property, net in the consolidated balance sheets. As of December 31, 2018 and 2017, the Aptiv-owned special tools balances were $352 million and $338 million, respectively, and the customer-owned special tools balances were $109 million and $107 million, respectively.

Valuation of long-lived assets—The carrying value of long-lived assets held for use, including definite-lived intangible assets, is periodically evaluated when events or circumstances warrant such a review. The carrying value of a long-lived asset held for use is considered impaired when the anticipated separately identifiable undiscounted cash flows from the asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset. Impairment losses on long-lived assets held for sale are recognized if the carrying value of the asset is in excess of the asset’s estimated fair value, reduced for the cost to dispose of the asset. Fair value of long-lived assets is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved (an income approach), and in certain situations Aptiv’s review of appraisals (a market approach). Refer to Note 6. Property, Net for additional information.

Intangible assets—The Company amortizes definite-lived intangible assets over their estimated useful lives. The Company has definite-lived intangible assets related to patents and developed technology, customer relationships and trade names. Indefinite-lived in-process research and development intangible assets are not amortized, but are tested for impairment annually, or more frequently when indicators of potential impairment exist, until the completion or abandonment of the associated research and development efforts. Upon completion of the projects, the assets will be amortized over the expected economic life of the asset, which will be determined on that date. Should the project be determined to be abandoned, and if the asset developed has no alternative use, the full value of the asset will be charged to expense. The Company also has intangible assets related to acquired trade names that are classified as indefinite-lived when there are no foreseeable limits on the periods of time over which they are expected to contribute cash flows. These indefinite-lived trade name assets are tested for impairment annually, or more frequently when indicators of potential impairment exist. Costs to renew or extend the term of acquired intangible assets are recognized as expense as incurred. The Company recorded intangible asset impairment charges of

$30 million during the year ended December 31, 2018. No intangible asset impairment charges were recorded in 2017 or 2016. Refer to Note 7. Intangible Assets and Goodwill for additional information.

Goodwill—Goodwill is the excess of the purchase price over the estimated fair value of identifiable net assets acquired in business combinations. The Company tests goodwill for impairment annually in the fourth quarter, or more frequently when indications of potential impairment exist. The Company monitors the existence of potential impairment indicators throughout the fiscal year. The Company tests for goodwill impairment at the reporting unit level. Our reporting units are the components of operating segments which constitute businesses for which discrete financial information is available and is regularly reviewed by segment management.

The impairment test involves first qualitatively assessing goodwill for impairment. If the qualitative assessment is not met the Company then performs a quantitative assessment by first comparing the estimated fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the estimated fair value exceeds carrying value, then we conclude that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its estimated fair value, a second step is required to measure possible goodwill impairment loss. The second step includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, the Company recognizes an impairment loss in an amount equal to the excess, not to exceed the carrying value. Refer to Note 20. Acquisitions and Divestitures, for further information on the goodwill attributable to the Company’s acquisitions.

Goodwill impairment—In the fourth quarter of 2018, 2017 and 2016, the Company completed a qualitative goodwill impairment assessment, and after evaluating the results, events and circumstances of the Company, the Company concluded that sufficient evidence existed to assert qualitatively that it was more likely than not that the estimated fair value of each reporting unit remained in excess of its carrying values. Therefore, a two-step impairment assessment was not necessary. No goodwill impairments were recorded in 2018, 2017 or 2016. Refer to Note 7. Intangible Assets and Goodwill for additional information.

Discontinued operations—The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Discontinued operations reporting occurs only when the disposal of a component or a group of components of the Company represents a strategic shift that will have a major effect on the Company’s operations and financial results. During the year ended December 31, 2017, the Company completed the Separation of its former Powertrain Systems segment by means of a spin-off into Delphi Technologies PLC, a new, independent, public company. During the year ended December 31, 2015, Aptiv completed the divestitures of the Company’s wholly owned Thermal Systems business and the Company’s interest in its Korea Delphi Automotive Systems Corporation (“KDAC”) joint venture. During the year ended December 31, 2016, Aptiv completed the divestiture of its interest in its Shanghai Delphi Automotive Air Conditioning (“SDAAC”) joint venture. Aptiv’s interests in the KDAC and SDAAC joint ventures were previously reported within the Thermal Systems segment. Accordingly, the assets and liabilities, operating results and operating and investing cash flows for the previously reported Powertrain Systems and Thermal Systems segments are presented as discontinued operations separate from the Company’s continuing operations and segment results for all periods presented in these consolidated financial statements and the notes to the consolidated financial statements, unless otherwise noted. Refer to Note 25. Discontinued Operations for further information regarding the Company’s discontinued operations.

Warranty and product recalls—Expected warranty costs for products sold are recognized at the time of sale of the product based on an estimate of the amount that eventually will be required to settle such obligations. These accruals are based on factors such as past experience, production changes, industry developments and various other considerations. Costs of product recalls, which may include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are accrued as part of our warranty accrual at the time an obligation becomes probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims. Refer to Note 9. Warranty Obligations for additional information.

Income taxes—Deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines it is more likely than not that the deferred tax assets will not be realized in the future, the valuation allowance adjustment to the deferred tax assets will be charged to earnings in the period in which the Company makes such a determination. In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments which affect

its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities. Refer to Note. 14. Income Taxes for additional information.

Foreign currency translation—Assets and liabilities of non-U.S. subsidiaries that use a currency other than U.S. dollars as their functional currency are translated to U.S. dollars at end-of-period currency exchange rates. The consolidated statements of operations of non-U.S. subsidiaries are translated to U.S. dollars at average-period currency exchange rates. The effect of translation for non-U.S. subsidiaries is generally reported in other comprehensive income (“OCI”). The effect of remeasurement of assets and liabilities of non-U.S. subsidiaries that use the U.S. dollar as their functional currency is primarily included in cost of sales. Also included in cost of sales are gains and losses arising from transactions denominated in a currency other than the functional currency of a particular entity. Net foreign currency transaction gains of $8 million, losses of $13 million and gains of $11 million were included in the consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016, respectively. The accumulated foreign currency translation adjustment related to an investment in a foreign subsidiary is reclassified to net income upon sale or upon complete or substantially complete liquidation of the respective entity.

Restructuring—Aptiv continually evaluates alternatives to align the business with the changing needs of its customers and to lower operating costs. This includes the realignment of its existing manufacturing capacity, facility closures, or similar actions, either in the normal course of business or pursuant to significant restructuring programs. These actions may result in employees receiving voluntary or involuntary employee termination benefits, which are mainly pursuant to union or other contractual agreements. Voluntary termination benefits are accrued when an employee accepts the related offer. Involuntary termination benefits are accrued upon the commitment to a termination plan and when the benefit arrangement is communicated to affected employees, or when liabilities are determined to be probable and estimable, depending on the existence of a substantive plan for severance or termination. Contract termination costs are recorded when contracts are terminated or when Aptiv ceases to use the leased facility and no longer derives economic benefit from the contract. All other exit costs are expensed as incurred. Refer to Note 10. Restructuring for additional information.

Environmental liabilities—Environmental remediation liabilities are recognized when a loss is probable and can be reasonably estimated. Such liabilities generally are not subject to insurance coverage. The cost of each environmental remediation is estimated by engineering, financial, and legal specialists based on current law and considers the estimated cost of investigation and remediation required and the likelihood that, where applicable, other responsible parties will be able to fulfill their commitments. The process of estimating environmental remediation liabilities is complex and dependent primarily on the nature and extent of historical information and physical data relating to a contaminated site, the complexity of the site, the uncertainty as to what remediation and technology will be required, and the outcome of discussions with regulatory agencies and, if applicable, other responsible parties at multi-party sites. In future periods, new laws or regulations, advances in remediation technologies and additional information about the ultimate remediation methodology to be used could significantly change estimates by Aptiv. Refer to Note 13. Commitments and Contingencies for additional information.

Asset retirement obligations—Asset retirement obligations are recognized in accordance with FASB ASC 410, Asset Retirement and Environmental Obligations. Conditional retirement obligations have been identified primarily related to asbestos abatement at certain sites. To a lesser extent, conditional retirement obligations also exist at certain sites related to the removal of storage tanks and disposal costs. Asset retirement obligations were $1 million and $1 million at December 31, 2018 and 2017, respectively.

Customer concentrations—As reflected in the table below, net sales to GM and VW, Aptiv’s two largest customers, totaled approximately 20%, 22% and 25% of our total net sales for the years ended December 31, 2018, 2017 and 2016, respectively.

	Percentage of Total Net Sales										Accounts and Other Receivables
	Year Ended December 31,										December 31, 2018				December 31, 2017
	2018			2017			2016
											(in millions)
GM (1)	11	%		13	%		16	%			$	169			$	204
VW	9	%		9	%		9	%			149				145

(1)	Net sales to GM includes net sales to GM’s former European Opel business prior to its sale to PSA on August 1, 2017, after which date these sales are excluded from net sales to GM.

Derivative financial instruments—All derivative instruments are required to be reported on the balance sheet at fair value unless the transactions qualify and are designated as normal purchases or sales. Changes in fair value are reported currently through earnings unless they meet hedge accounting criteria.

Exposure to fluctuations in currency exchange rates, interest rates and certain commodity prices are managed by entering into a variety of forward and option contracts and swaps with various counterparties. Such financial exposures are managed in accordance with the policies and procedures of Aptiv. Aptiv does not enter into derivative transactions for speculative or trading purposes. As part of the hedging program approval process, Aptiv identifies the specific financial risk which the derivative transaction will minimize, the appropriate hedging instrument to be used to reduce the risk and the correlation between the financial risk and the hedging instrument. Purchase orders, sales contracts, letters of intent, capital planning forecasts and historical data are used as the basis for determining the anticipated values of the transactions to be hedged. Aptiv does not enter into derivative transactions that do not have a high correlation with the underlying financial risk. Hedge positions, as well as the correlation between the transaction risks and the hedging instruments, are reviewed on an ongoing basis.

Foreign exchange forward contracts are accounted for as hedges of firm or forecasted foreign currency commitments or foreign currency exposure of the net investment in certain foreign operations to the extent they are designated and assessed as highly effective. All foreign exchange contracts are marked to market on a current basis. Commodity swaps are accounted for as hedges of firm or anticipated commodity purchase contracts to the extent they are designated and assessed as effective. All other commodity derivative contracts that are not designated as hedges are either marked to market on a current basis or are exempted from mark to market accounting as normal purchases. At December 31, 2018 and 2017, the Company’s exposure to movements in interest rates was not hedged with derivative instruments. Refer to Note 17. Derivatives and Hedging Activities and Note 18. Fair Value of Financial Instruments for additional information.

Extended disability benefits—Costs associated with extended disability benefits provided to inactive employees are accrued throughout the duration of their active employment. Workforce demographic data and historical experience are utilized to develop projections of time frames and related expense for post-employment benefits.

Workers’ compensation benefits—Workers’ compensation benefit accruals are actuarially determined and are subject to the existing workers’ compensation laws that vary by location. Accruals for workers’ compensation benefits represent the discounted future cash expenditures expected during the period between the incidents necessitating the employees to be idled and the time when such employees return to work, are eligible for retirement or otherwise terminate their employment.

Share-based compensation—The Company’s share-based compensation arrangements consist of the Aptiv PLC Long Term Incentive Plan, as amended and restated effective April 23, 2015 (the “PLC LTIP”), under which grants of restricted stock units (“RSUs”) have been made in each period from 2012 to 2018. The RSU awards include a time-based vesting portion and a performance-based vesting portion. The performance-based vesting portion includes performance and market conditions in addition to service conditions. The grant date fair value of the RSUs is determined based on the closing price of the Company’s ordinary shares on the date of the grant of the award, including an estimate for forfeitures, or a contemporaneous valuation performed by an independent valuation specialist with respect to awards with market conditions. Compensation expense is recognized based upon the grant date fair value of the awards applied to the Company’s best estimate of ultimate performance against the respective targets on a straight-line basis over the requisite vesting period of the awards. The performance conditions require management to make assumptions regarding the likelihood of achieving certain performance goals. Changes in these performance assumptions, as well as differences in actual results from management’s estimates, could result in estimated or actual values different from previously estimated fair values. Refer to Note 21. Share-Based Compensation for additional information.

Business combinations—The Company accounts for its business combinations in accordance with the accounting guidance in FASB ASC 805, Business Combinations. The purchase price of an acquired business is allocated to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. Determining the fair values of assets acquired and liabilities assumed requires management’s judgment, the utilization of independent appraisal firms and often involves the use of significant estimates and assumptions with respect to the timing and amount of future cash flows, market rate assumptions, actuarial assumptions, and appropriate discount rates, among other items. Refer to Note 20. Acquisitions and Divestitures for additional information.

Recently adopted accounting pronouncements—Aptiv adopted ASU 2014-09, Revenue from Contracts with Customers, in the first quarter of 2018 using the modified retrospective method. This ASU supersedes most of the existing guidance on revenue recognition in ASC Topic 605, Revenue Recognition and establishes a broad principle that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Refer to Note 26. Revenue for additional information.

Aptiv adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018. This guidance makes targeted improvements to existing U.S. GAAP for financial instruments, including requiring equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. In accordance with this guidance, Aptiv measures equity investments at cost, less impairments,

adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. The adoption of this guidance did not have a significant impact on Aptiv’s financial statements.

Aptiv adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, in the first quarter of 2018. This guidance clarifies the presentation requirements of eight specific issues within the statement of cash flows. The adoption of this guidance did not have a significant impact on Aptiv’s financial statements, as Aptiv’s treatment of the relevant affected items within its consolidated statement of cash flows is consistent with the requirements of this guidance.

Aptiv adopted ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, in the first quarter of 2018. This guidance requires that the tax effects of all intra-entity sales of assets other than inventory be recognized in the period in which the transaction occurs. The guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The adoption of this guidance resulted in an adjustment of $9 million recorded to retained earnings as of the beginning of the period of adoption.

Aptiv adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, in the first quarter of 2018. This guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and restricted cash. As a result, restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The adoption of this guidance did not have a significant impact on Aptiv’s financial statements, other than the classification of restricted cash within the beginning-of-period and end-of-period totals on the consolidated statement of cash flows, as opposed to being excluded from these totals.

Recently issued accounting pronouncements not yet adopted—In February 2016, the FASB issued ASU 2016-02, Leases (ASC Topic 842). Under this guidance, lessees are required to recognize on the balance sheet a lease liability and a right-of-use asset for all leases, with the exception of short-term leases with terms of twelve months or less. The lease liability represents the lessee’s obligation to make lease payments arising from a lease, and will be measured as the present value of the lease payments. The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs.

The new guidance is effective for fiscal years beginning after December 15, 2018. The Company plans to adopt this guidance in the first quarter of 2019 using the optional transition method. Consequently, the Company's reporting for the comparative periods presented in the financial statements will continue to be in accordance with ASC Topic 840, Leases. The adoption of this guidance will result in the addition of right-of-use assets and corresponding lease obligations to the consolidated balance sheet and will not have a material impact on the Company’s results of operations or cash flows. Upon adoption, the Company expects to record operating lease right-of-use assets in the range of approximately $420 million to $460 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months. The Company also expects to recorded corresponding short-term operating lease liabilities in the range of approximately $85 million to $105 million and long-term operating lease liabilities in the range of approximately $335 million to $355 million.

ASU 2016-02 provides for certain practical expedients when adopting the guidance. Aptiv plans to elect the package of practical expedients allowing the Company to not reassess whether any expired or existing contracts are, or contain, leases, the lease classification for any expired or existing leases or initial direct costs for any expired or existing leases. Aptiv does not plan to apply the hindsight practical expedient allowing the Company to use hindsight when determining the lease term (i.e., evaluating the Company’s option to renew or terminate the lease or to purchase the underlying asset) and assessing impairment of expired or existing leases. Aptiv plans to apply the land easements practical expedient allowing the Company to not assess whether any expired or existing land easements are, or contain, leases if they were not previously accounted for as leases under the existing leasing guidance. Instead, Aptiv will continue to apply its existing accounting policies to historical land easements. Aptiv elects to apply the short-term lease exception, therefore Aptiv will not record a right-of-use asset or corresponding lease liability for leases with a term of twelve months or less and instead recognize a single lease cost allocated over the lease term, generally on a straight-line basis. Aptiv plans to elect the practical expedient to not separate lease components from non-lease components and instead account for both as a single lease component for all asset classes. The Company is in the process of finalizing its catalog of existing lease contracts and implementing changes to its systems.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies how an entity is required to test goodwill for impairment by eliminating step two from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on its financial statements, but does not anticipate a material impact. As this standard is prospective in nature, the impact to Aptiv’s financial statements of not performing a step two in order to measure the amount of any potential goodwill impairment will depend on various factors associated with the Company’s assessment of goodwill for impairment in those future periods.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities, which expands and refines the application of hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Based on the Company’s hedging policies and procedures, the adoption of this guidance is not expected to have a significant impact on Aptiv’s financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for the elimination of the stranded income tax effects resulting from the enactment of the Tax Cuts and Jobs Act through a reclassification from accumulated other comprehensive income to retained earnings. The standard is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on Aptiv’s financial statements.

3. INVENTORIES

Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value, including direct material costs and direct and indirect manufacturing costs. A summary of inventories is shown below:

	December 31, 2018				December 31, 2017
	(in millions)
Productive material	$	724			$	584
Work-in-process	101				100
Finished goods	452				399
Total	$	1,277			$	1,083

4. ASSETS

Other current assets consisted of the following:

	December 31, 2018				December 31, 2017
	(in millions)
Value added tax receivable	$	185			$	160
Prepaid insurance and other expenses	80				104
Reimbursable engineering costs	47				33
Notes receivable	43				16
Income and other taxes receivable	73				46
Deposits to vendors	4				8
Derivative financial instruments (Note 17)	6				30
Accounts receivable to be remitted to Delphi Technologies (Note 25)	7				123
Other	—				1
Total	$	445			$	521

Other long-term assets consisted of the following:

	December 31, 2018				December 31, 2017
	(in millions)
Deferred income taxes, net (Note 14)	$	143			$	185
Unamortized Revolving Credit Facility debt issuance costs (Note 11)	6				8
Income and other taxes receivable	6				22
Reimbursable engineering costs	137				66
Value added tax receivable	38				37
Equity investments (Note 5)	72				56
Derivative financial instruments (Note 17)	2				8
Other	117				88
Total	$	521			$	470

5. INVESTMENTS IN AFFILIATES

As part of Aptiv’s continuing operations, it has investments in five non-consolidated affiliates accounted for under the equity method of accounting. These affiliates are not publicly traded companies and are located primarily in Asia Pacific and North America. Aptiv’s ownership percentages vary generally from approximately 20% to 50%, with the most significant investment in Promotora de Partes Electricas Automotrices, S.A. de C.V. (of which Aptiv owns approximately 40%). The Company’s aggregate investments in affiliates was $99 million and $91 million at December 31, 2018 and 2017, respectively. Dividends of $12 million, $15 million and $17 million for the years ended December 31, 2018, 2017 and 2016, respectively, have been received from these non-consolidated affiliates. No impairment charges were recorded for the years ended December 31, 2018, 2017 and 2016.

The following is a summary of the combined financial information of significant affiliates accounted for under the equity method for continuing operations as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016 (unaudited):

	December 31,
	2018				2017
	(in millions)
Current assets	$	222			$	222
Non-current assets	124				108
Total assets	$	346			$	330
Current liabilities	$	99			$	114
Non-current liabilities	7				4
Shareholders’ equity	240				212
Total liabilities and shareholders’ equity	$	346			$	330

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Net sales	$	533			$	570			$	521
Gross profit	84				111				105
Net income	53				66				77

A summary of transactions with affiliates is shown below:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Sales to affiliates	$	7			$	8			$	14
Purchases from affiliates	38				19				23

Technology Investments

The Company has made technology investments in certain non-consolidated affiliates for ownership interests of less than 20%, which are accounted for in accordance with ASU 2016-01, as described in Note 2. Significant Accounting Policies. These investments do not have readily determinable fair values and are measured at cost, less impairments, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer.

During the fourth quarter of 2018, the Company’s Advanced Safety and User Experience segment made a $15 million investment in Affectiva, Inc., a leader in human perception artificial intelligence technology.

During the third quarter of 2017, the Company’s Advanced Safety and User Experience segment made investments in two leading developers of Light Detection and Ranging (“LIDAR”) technology, a $15 million investment in Innoviz Technologies and a $10 million investment in LeddarTech, Inc.

During the second quarter of 2017, the Company’s Signal and Power Solutions segment made a $10 million investment in Valens Semiconductor Ltd., a leading provider of signal processing technology for high frequency data transmission of connected car content. During the first quarter of 2017, the Company’s Advanced Safety and User Experience segment made a $15 million investment in Otonomo Technologies Ltd., the developer of a connected car data marketplace.

As of December 31, 2018, the Company had the following technology investments, which are classified within other long-term assets in the consolidated balance sheet:

Investment Name	Segment	Investment Date		Investment (in millions)
Affectiva, Inc.	Advanced Safety and User Experience	Q4 2018		$	15
Innoviz Technologies	Advanced Safety and User Experience	Q3 2017		15
LeddarTech, Inc.	Advanced Safety and User Experience	Q3 2017		10
Valens Semiconductor Ltd.	Signal and Power Solutions	Q2 2017		10
Otonomo Technologies Ltd.	Advanced Safety and User Experience	Q1 2017		15
Quanergy Systems, Inc	Advanced Safety and User Experience	Q2 2015; Q1 2016		6
Other investments	Advanced Safety and User Experience	Q4 2018		1
				$	72

During the year ended December 31, 2018 there were no material transactions, events or changes in circumstances requiring an impairment or an observable price change adjustment to any of these investments. The Company continues to monitor these investments to identify potential transactions which may indicate an impairment or an observable price change requiring an adjustment to its carrying value.

6. PROPERTY, NET

Property, net consisted of:

	Estimated Useful Lives		December 31,
	2018				2017
	(Years)		(in millions)
Land	—		$	78			$	63
Land and leasehold improvements	3-20		170				134
Buildings	40		582				505
Machinery, equipment and tooling	3-20		3,594				3,077
Furniture and office equipment	3-10		562				493
Construction in progress	—		357				330
Total			5,343				4,602
Less: accumulated depreciation			(2,164		)		(1,798		)
Total property, net			$	3,179			$	2,804

For the years ended December 31, 2018, 2017 and 2016, Aptiv recorded non-cash asset impairment charges of $4 million, $9 million and $1 million, respectively, in cost of sales related to declines in the fair values of certain fixed assets.

7. INTANGIBLE ASSETS AND GOODWILL

The changes in the carrying amount of intangible assets and goodwill were as follows as of December 31, 2018 and 2017. See Note 20. Acquisitions and Divestitures for a further description of the goodwill and intangible assets resulting from Aptiv’s acquisitions in 2018 and 2017.

			As of December 31, 2018												As of December 31, 2017
	Estimated Useful Lives		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
	(Years)		(in millions)												(in millions)
Amortized intangible assets:
Patents and developed technology	3-15		$	647			$	371			$	276			$	639			$	324			$	315
Customer relationships	5-14		1,046				261				785				798				219				579
Trade names	5-20		66				35				31				68				25				43
Total			1,759				667				1,092				1,505				568				937
Unamortized intangible assets:
In-process research and development	—		126				—				126				147				—				147
Trade names	—		162				—				162				135				—				135
Goodwill	—		2,524				—				2,524				1,944				—				1,944
Total			$	4,571			$	667			$	3,904			$	3,731			$	568			$	3,163

Estimated amortization expense for the years ending December 31, 2019 through 2023 is presented below:

	Year Ending December 31,
	2019				2020				2021				2022				2023
	(in millions)
Estimated amortization expense	$	146			$	142			$	140			$	133			$	109

A roll-forward of the gross carrying amounts of intangible assets for the years ended December 31, 2018 and 2017 is presented below.

	2018				2017
	(in millions)
Balance at January 1	$	3,731			$	3,050
Acquisitions (1)	1,000				398
Impairment (2)	(20		)		—
Foreign currency translation and other	(140		)		283
Balance at December 31	$	4,571			$	3,731

(1)	Primarily attributable to the 2018 acquisitions of KUM and Winchester Interconnect, and the 2017 acquisitions of Movimento Group and nuTonomy, Inc., as further described in Note 20. Acquisitions and Divestitures.

(2)

Primarily attributable to the impairment of certain indefinite-lived in-process research and development assets within the Advanced Safety and User Experience segment, which is included within amortization in the consolidated statement of operations. The fair value of the impaired assets was determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved and a review of other market indicators and management estimates.

A roll-forward of the accumulated amortization for the years ended December 31, 2018 and 2017 is presented below:

	2018				2017
	(in millions)
Balance at January 1	$	568			$	400
Amortization	124				117
Impairment (1)	10				—
Foreign currency translation and other	(35		)		51
Balance at December 31	$	667			$	568

(1)

Primarily attributable to the impairment of certain definite-lived trade name assets within the Advanced Safety and User Experience segment, which is included within amortization in the consolidated statement of operations. The fair value of the impaired assets was determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved and a review of other market indicators and management estimates.

A roll-forward of the carrying amount of goodwill, by operating segment, for the years ended December 31, 2018 and 2017 is presented below:

	Signal and Power Solutions				Advanced Safety and User Experience				Total
	(in millions)
Balance at January 1, 2017	$	1,424			$	78			$	1,502
Acquisitions (1)	—				274				274
Foreign currency translation and other	170				(2		)		168
Balance at December 31, 2017	$	1,594			$	350			$	1,944
Acquisitions (2)	$	657			$	—			$	657
Foreign currency translation and other	(71		)		(6		)		(77		)
Balance at December 31, 2018	$	2,180			$	344			$	2,524

(1)	Primarily attributable to the acquisitions of Movimento Group and nuTonomy, Inc., as further described in Note 20. Acquisitions and Divestitures.

(2)	Primarily attributable to the acquisitions of KUM and Winchester Interconnect, as further described in Note 20. Acquisitions and Divestitures.

8. LIABILITIES

Accrued liabilities consisted of the following:

	December 31, 2018				December 31, 2017
	(in millions)
Payroll-related obligations	$	235			$	217
Employee benefits, including current pension obligations	96				116
Income and other taxes payable	187				233
Warranty obligations (Note 9)	33				41
Restructuring (Note 10)	55				90
Customer deposits	36				28
Derivative financial instruments (Note 17)	19				15
Accrued interest	42				41
Dividends payable	—				59
Accounts payable to be remitted on behalf of Delphi Technologies (Note 25)	4				132
Deferred compensation related to nuTonomy acquisition (Note 20)	31				1
Other	316				323
Total	$	1,054			$	1,296

Other long-term liabilities consisted of the following:

	December 31, 2018				December 31, 2017
	(in millions)
Environmental (Note 13)	$	3			$	4
Extended disability benefits	5				9
Warranty obligations (Note 9)	17				17
Restructuring (Note 10)	49				42
Payroll-related obligations	10				10
Accrued income taxes	201				154
Deferred income taxes, net (Note 14)	233				222
Derivative financial instruments (Note 17)	9				11
Deferred compensation related to nuTonomy acquisition (Note 20)	18				4
Other	88				53
Total	$	633			$	526

9. WARRANTY OBLIGATIONS

Expected warranty costs for products sold are recognized principally at the time of sale of the product based on an estimate of the amount that will eventually be required to settle such obligations. These accruals are based on factors such as past experience, production changes, industry developments and various other considerations. The estimated costs related to product recalls based on a formal campaign soliciting return of that product are accrued at the time an obligation becomes probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims. Aptiv has recognized its best estimate for its total aggregate warranty reserves, including product recall costs, across all of its operating segments as of December 31, 2018. The Company estimates the reasonably possible amount to ultimately resolve all matters in excess of the recorded reserves as of December 31, 2018 to be zero to $15 million.

The table below summarizes the activity in the product warranty liability for the years ended December 31, 2018 and 2017:

	Year Ended December 31,
	2018				2017
	(in millions)
Accrual balance at beginning of year	$	58			$	65
Provision for estimated warranties incurred during the year	39				47
Changes in estimate for pre-existing warranties	5				45
Settlements made during the year (in cash or in kind)	(51		)		(103		)
Foreign currency translation and other	(1		)		4
Accrual balance at end of year	$	50			$	58

In September 2016, one of the Company’s OEM customers initiated a recall to enhance airbag deployment systems in certain vehicles. Aptiv’s Advanced Safety and User Experience segment had supplied sensors and related control modules for the airbags in the affected vehicles. During the first quarter of 2017, Aptiv reached an agreement with its customer related to this matter. In addition to the Company’s previously recorded reserve estimate, Aptiv recognized an incremental $43 million of warranty expense within cost of sales during the year ended December 31, 2017 related to this matter.

10. RESTRUCTURING

Aptiv’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 Aptiv’s strategy, either in the normal course of business or pursuant to significant restructuring programs.

As part of Aptiv’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, including programs implemented to realign the Company’s organizational structure due to changes in roles and workforce as a result of the spin-off of the former Powertrain Systems segment. The Company recorded employee-related and other restructuring charges related to these programs totaling approximately $109 million during the year ended December 31, 2018, of which $64 million was recognized for programs focused on the continued rotation of our manufacturing footprint to best cost locations in Europe and reducing overhead costs in the region.

During the year ended December 31, 2017, Aptiv recorded employee-related and other restructuring charges totaling approximately $129 million, of which $89 million was recognized for programs focused on the continued rotation of our manufacturing footprint to best cost locations in Europe and reducing overhead costs in the region. The charges recorded during the the year ended December 31, 2017 included the recognition of approximately $36 million of employee-related and other costs related to the initiation of a program to close a Western European Advanced Safety and User Experience manufacturing site, pursuant to the Company’s ongoing European footprint rotation strategy. During the year ended December 31, 2016, the Company recorded employee-related and other restructuring charges totaling approximately $167 million, primarily focused on the continued rotation of our manufacturing footprint to best cost locations in Europe and on reducing global overhead costs. These charges included $91 million for programs implemented to reduce global overhead costs, as well as $39 million for programs focused on the continued rotation of our manufacturing footprint to best cost locations in Europe.

Additionally, the Company recorded $90 million and $161 million of restructuring costs within discontinued operations, primarily related to the Powertrain Systems business, during the years ended December 31, 2017 and 2016, respectively. These amounts were primarily incurred related to the Company’s ongoing European footprint rotation strategy, and included charges for the closures of European manufacturing sites in each year, which totaled $54 million and $93 million during the years ended December 31, 2017 and 2016, respectively.

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. Aptiv incurred cash expenditures related to its restructuring programs of approximately $135 million and $127 million in the years ended December 31, 2018 and December 31, 2017, respectively.

The following table summarizes the restructuring charges recorded for the years ended December 31, 2018, 2017 and 2016 by operating segment:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Signal and Power Solutions	$	90			$	67			$	125
Advanced Safety and User Experience	19				62				42
Total	$	109			$	129			$	167

The table below summarizes the activity in the restructuring liability for the years ended December 31, 2018 and 2017:

	Employee Termination Benefits Liability				Other Exit Costs Liability				Total
	(in millions)
Accrual balance at January 1, 2017	$	114			$	1			$	115
Provision for estimated expenses incurred during the year	129				—				129
Payments made during the year	(127		)		—				(127		)
Foreign currency and other	15				—				15
Accrual balance at December 31, 2017	$	131			$	1			$	132
Provision for estimated expenses incurred during the year	$	109			$	—			$	109
Payments made during the year	(134		)		(1		)		(135		)
Foreign currency and other	(2		)		—				(2		)
Accrual balance at December 31, 2018	$	104			$	—			$	104

11. DEBT

The following is a summary of debt outstanding, net of unamortized issuance costs and discounts, as of December 31, 2018 and December 31, 2017, respectively:

	December 31,
	2018				2017
	(in millions)
Accounts receivable factoring	$	279			$	—
3.15%, senior notes, due 2020 (net of $1 and $2 unamortized issuance costs and $1 and $1 discount, respectively)	648				647
4.15%, senior notes, due 2024 (net of $3 and $4 unamortized issuance costs and $1 and $1 discount, respectively)	696				695
1.50%, Euro-denominated senior notes, due 2025 (net of $3 and $4 unamortized issuance costs and $3 and $3 discount, respectively)	795				833
4.25%, senior notes, due 2026 (net of $3 and $4 unamortized issuance costs, respectively)	647				646
1.60%, Euro-denominated senior notes, due 2028 (net of $3 and $4 unamortized issuance costs and $1 and $1 discount, respectively)	568				595
4.40%, senior notes, due 2046 (net of $3 and $3 unamortized issuance costs and $2 and $2 discount, respectively)	295				295
Tranche A Term Loan, due 2021 (net of $1 and $2 unamortized issuance costs, respectively)	384				396
Capital leases and other	32				42
Total debt	4,344				4,149
Less: current portion	(306		)		(17		)
Long-term debt	$	4,038			$	4,132

The principal maturities of debt, at nominal value, follows:

	Debt and Capital Lease Obligations
	(in millions)
2019	$	306
2020	684
2021	340
2022	3
2023	3
Thereafter	3,033
Total	$	4,369

Credit Agreement

Aptiv PLC and its wholly-owned subsidiary Aptiv Corporation entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), under which it maintains senior secured credit facilities currently consisting of a term loan (the “Tranche A Term Loan”) and a revolving credit facility of $2.0 billion (the “Revolving Credit Facility”). The Credit Agreement was entered into in March 2011 and has been subsequently amended and restated on several occasions, most recently on August 17, 2016. The 2016 amendment extended the maturity of the Revolving Credit Facility and the Tranche A Term Loan from 2018 to 2021, increased the capacity of the Revolving Credit Facility from $1.5 billion to $2.0 billion and permitted Aptiv PLC to act as a borrower on the Revolving Credit Facility. A loss on debt extinguishment of $3 million was recorded within other income (expense), net in the consolidated statement of operations during the year ended December 31, 2016 in conjunction with the 2016 amendment.

The Tranche A Term Loan and the Revolving Credit Facility mature on August 17, 2021. Beginning in the fourth quarter of 2017, Aptiv was obligated to begin making quarterly principal payments throughout the term of the Tranche A Term Loan according to the amortization schedule in the Credit Agreement. The Credit Agreement also contains an accordion feature that permits Aptiv to increase, from time to time, the aggregate borrowing capacity under the Credit Agreement by up to an

additional $1 billion (or a greater amount based upon a formula set forth in the Credit Agreement) upon Aptiv’s request, the agreement of the lenders participating in the increase, and the approval of the Administrative Agent and existing lenders.

As of December 31, 2018, Aptiv had no amounts outstanding under the Revolving Credit Facility and less than $1 million in letters of credit issued under the Credit Agreement. Letters of credit issued under the Credit Agreement reduce availability under the Revolving Credit Facility.

Loans under the Credit Agreement bear interest, at Aptiv’s option, at either (a) the Administrative Agent’s Alternate Base Rate (“ABR” as defined in the Credit Agreement) or (b) the London Interbank Offered Rate (the “Adjusted LIBO Rate” as defined in the Credit Agreement) (“LIBOR”) plus in either case a percentage per annum as set forth in the table below (the “Applicable Rate”). The Applicable Rates under the Credit Agreement on the specified dates are set forth below:

	December 31, 2018						December 31, 2017
	LIBOR plus			ABR plus			LIBOR plus			ABR plus
Revolving Credit Facility	1.10	%		0.10	%		1.10	%		0.10	%
Tranche A Term Loan	1.25	%		0.25	%		1.25	%		0.25	%

The Applicable Rate under the Credit Agreement may increase or decrease from time to time based on changes in the Company’s credit ratings. Accordingly, the interest rate will fluctuate during the term of the Credit Agreement based on changes in the ABR, LIBOR or future changes in the Company’s corporate credit ratings. The Credit Agreement also requires that Aptiv pay certain facility fees on the Revolving Credit Facility and certain letter of credit issuance and fronting fees.

The interest rate period with respect to LIBOR interest rate options can be set at one-, two-, three-, or six-months as selected by Aptiv in accordance with the terms of the Credit Agreement (or other period as may be agreed by the applicable lenders). Aptiv may elect to change the selected interest rate option in accordance with the provisions of the Credit Agreement. As of December 31, 2018, Aptiv selected the one-month LIBOR interest rate option on the Tranche A Term Loan, and the rate effective as of December 31, 2018, as detailed in the table below, was based on the Company’s current credit rating and the Applicable Rate for the Credit Agreement:

			Borrowings as of
			December 31, 2018				Rates effective as of
	Applicable Rate		(in millions)				December 31, 2018
Tranche A Term Loan	LIBOR plus 1.25%		$	385			3.75	%

Borrowings under the Credit Agreement are prepayable at Aptiv’s option without premium or penalty.

The Credit Agreement contains certain covenants that limit, among other things, the Company’s (and the Company’s subsidiaries’) ability to incur certain additional indebtedness or liens or to dispose of substantially all of its assets. In addition, the Credit Agreement requires that the Company maintain a consolidated leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the Credit Agreement) of less than 3.50 to 1.0. The Credit Agreement also contains events of default customary for financings of this type. The Company was in compliance with the Credit Agreement covenants as of December 31, 2018.

As of December 31, 2018, all obligations under the Credit Agreement were borrowed by Aptiv Corporation and jointly and severally guaranteed by its direct and indirect parent companies, subject to certain exceptions set forth in the Credit Agreement. Refer to Note 22. Supplemental Guarantor and Non-Guarantor Condensed Consolidating Financial Statements for additional information.

Senior Unsecured Notes

On February 14, 2013, Aptiv Corporation issued $800 million of 5.00% senior unsecured notes due 2023 (the “2013 Senior Notes”) in a transaction registered under Rule 144A and Regulation S of the Securities Act of 1933 (the “Securities Act”). The proceeds were primarily utilized to prepay our term loan indebtedness under the Credit Agreement. Aptiv paid approximately $12 million of issuance costs in connection with the 2013 Senior Notes. Interest was payable semi-annually on February 15 and August 15 of each year to holders of record at the close of business on February 1 or August 1 immediately preceding the interest payment date. In September 2016, Aptiv redeemed for cash the entire $800 million aggregate principal amount outstanding of the 2013 Senior Notes, primarily financed by the proceeds from the issuance of the 2016 Euro-denominated Senior Notes and the 2016 Senior Notes, each as defined below. As a result of the redemption of the 2013 Senior Notes, Aptiv recognized a loss on debt extinguishment of approximately $70 million during the year ended December 31, 2016 within other income (expense), net in the consolidated statement of operations.

On March 3, 2014, Aptiv Corporation issued $700 million in aggregate principal amount of 4.15% senior unsecured notes due 2024 (the “2014 Senior Notes”) in a transaction registered under the Securities Act. The 2014 Senior Notes were priced at 99.649% of par, resulting in a yield to maturity of 4.193%. The proceeds were primarily utilized to redeem $500 million of 5.875% senior unsecured notes due 2019 and to repay a portion of the Tranche A Term Loan. Aptiv paid approximately $6 million of issuance costs in connection with the 2014 Senior Notes. Interest is payable semi-annually on March 15 and September 15 of each year to holders of record at the close of business on March 1 or September 1 immediately preceding the interest payment date.

On March 10, 2015, Aptiv PLC issued €700 million in aggregate principal amount of 1.50% Euro-denominated senior unsecured notes due 2025 (the “2015 Euro-denominated Senior Notes”) in a transaction registered under the Securities Act. The 2015 Euro-denominated Senior Notes were priced at 99.54% of par, resulting in a yield to maturity of 1.55%. The proceeds were primarily utilized to redeem $500 million of 6.125% senior unsecured notes due 2021, and to fund growth initiatives, such as acquisitions, and share repurchases. Aptiv incurred approximately $5 million of issuance costs in connection with the 2015 Euro-denominated Senior Notes. Interest is payable annually on March 10. The Company has designated the 2015 Euro-denominated Senior Notes as a net investment hedge of the foreign currency exposure of its investments in certain Euro-denominated wholly owned subsidiaries. Refer to Note 17. Derivatives and Hedging Activities for further information.

On November 19, 2015, Aptiv PLC issued $1.3 billion in aggregate principal amount of senior unsecured notes in a transaction registered under the Securities Act, comprised of $650 million of 3.15% senior unsecured notes due 2020 (the “3.15% Senior Notes”) and $650 million of 4.25% senior unsecured notes due 2026 (the “4.25% Senior Notes”) (collectively, the “2015 Senior Notes”). The 3.15% Senior Notes were priced at 99.784% of par, resulting in a yield to maturity of 3.197%, and the 4.25% Senior Notes were priced at 99.942% of par, resulting in a yield to maturity of 4.256%. The proceeds were primarily utilized to fund a portion of the cash consideration for the acquisition of HellermannTyton PLC, and for general corporate purposes, including the payment of fees and expenses associated with the HellermannTyton PLC acquisition and the related financing transaction. Aptiv incurred approximately $8 million of issuance costs in connection with the 2015 Senior Notes. Interest on the 3.15% Senior Notes is payable semi-annually on May 19 and November 19 of each year to holders of record at the close of business on May 4 or November 4 immediately preceding the interest payment date. Interest on the 4.25% Senior Notes is payable semi-annually on January 15 and July 15 of each year to holders of record at the close of business on January 1 or July 1 immediately preceding the interest payment date.

On September 15, 2016, Aptiv PLC issued €500 million in aggregate principal amount of 1.60% Euro-denominated senior unsecured notes due 2028 (the “2016 Euro-denominated Senior Notes”) in a transaction registered under the Securities Act. The 2016 Euro-denominated Senior Notes were priced at 99.881% of par, resulting in a yield to maturity of 1.611%. The proceeds, together with proceeds from the 2016 Senior Notes described below, were utilized to redeem the 2013 Senior Notes. Aptiv incurred approximately $4 million of issuance costs in connection with the 2016 Euro-denominated Senior Notes. Interest is payable annually on September 15. The Company has designated the 2016 Euro-denominated Senior Notes as a net investment hedge of the foreign currency exposure of its investments in certain Euro-denominated wholly-owned subsidiaries. Refer to Note. 17. Derivatives and Hedging Activities for further information.

On September 20, 2016, Aptiv PLC issued $300 million in aggregate principal amount of 4.40% senior unsecured notes due 2046 (the “2016 Senior Notes”) in a transaction registered under the Securities Act. The 2016 Senior Notes were priced at 99.454% of par, resulting in a yield to maturity of 4.433%. The proceeds, together with proceeds from the 2016 Euro-denominated Senior Notes, were utilized to redeem the 2013 Senior Notes. Aptiv incurred approximately $3 million of issuance costs in connection with the 2016 Senior Notes. Interest is payable semi-annually on April 1 and October 1 of each year to holders of record at the close of business on March 15 or September 15 immediately preceding the interest payment date.

Although the specific terms of each indenture governing each series of senior notes vary, the indentures contain certain restrictive covenants, including with respect to Aptiv’s (and Aptiv’s subsidiaries) ability to incur liens, enter into sale and leaseback transactions and merge with or into other entities. As of December 31, 2018, the Company was in compliance with the provisions of all series of the outstanding senior notes.

The 2013 Senior Notes and the 2014 Senior Notes were issued by Aptiv Corporation. The 2014 Senior Notes are, and prior to their redemption, the 2013 Senior Notes were, fully and unconditionally guaranteed, jointly and severally, by Aptiv PLC and by certain of Aptiv PLC’s direct and indirect subsidiaries which are directly or indirectly 100% owned by Aptiv PLC, subject to customary release provisions (other than in the case of Aptiv PLC). The 2015 Euro-denominated Senior Notes, 2015 Senior Notes, 2016 Euro-denominated Senior Notes and 2016 Senior Notes issued by Aptiv PLC are fully and unconditionally guaranteed, jointly and severally, by certain of Aptiv PLC’s direct and indirect subsidiaries (including Aptiv Corporation), which are directly or indirectly 100% owned by Aptiv PLC, subject to customary release provisions. Refer to Note 22. Supplemental Guarantor and Non-Guarantor Condensed Consolidating Financial Statements for additional information.

Other Financing

Receivable factoring—Aptiv maintains a €300 million European accounts receivable factoring facility that is available on a committed basis. This facility is accounted for as short-term debt and borrowings are subject to the availability of eligible accounts receivable. Collateral is not required related to these trade accounts receivable. This program renews on a non-committed, indefinite basis unless terminated by either party. Borrowings bear interest at Euro Interbank Offered Rate (“EURIBOR”) plus 0.42% for borrowings denominated in Euros. As of December 31, 2018, Aptiv had $279 million outstanding on the European accounts receivable factoring facility. No amounts were outstanding on the European accounts receivable factoring facility as of December 31, 2017.

Capital leases and other—As of December 31, 2018 and December 31, 2017, approximately $32 million and $42 million, respectively, of other debt primarily issued by certain non-U.S. subsidiaries and capital lease obligations were outstanding.

Interest—Cash paid for interest related to debt outstanding totaled $134 million, $124 million and $144 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Letter of credit facilities—In addition to the letters of credit issued under the Credit Agreement, Aptiv had approximately $2 million outstanding through other letter of credit facilities as of December 31, 2018, primarily to support arrangements and other obligations at certain of its subsidiaries. There were no amounts outstanding under these letter of credit facilities as of December 31, 2017.

Indebtedness Related to the Delphi Technologies Separation

As further described in Note 25. Discontinued Operations, the Company received a dividend of approximately $1,148 million from Delphi Technologies in connection with the Separation. Delphi Technologies financed this dividend through the issuance of approximately $1.55 billion of debt, consisting of a senior secured five-year $750 million term loan facility that was issued upon the Separation and $800 million aggregate principal amount of 5.00% senior unsecured notes due 2025 that were issued in September 2017 (collectively, the “Delphi Technologies Debt”). As of December 4, 2017, in connection with the Separation, the Delphi Technologies Debt was transferred to Delphi Technologies and is no longer reflected in the Company’s consolidated financial statements.

12. PENSION BENEFITS

Certain of Aptiv’s non-U.S. subsidiaries sponsor defined benefit pension plans, which generally provide benefits based on negotiated amounts for each year of service. Aptiv’s primary non-U.S. plans are located in France, Germany, Mexico, Portugal and the United Kingdom (“U.K.”). The U.K. and certain Mexican plans are funded. In addition, Aptiv 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.

Aptiv sponsors a Supplemental Executive Retirement Program (“SERP”) for those employees who were U.S. executives of DPHH prior to September 30, 2008 and were still U.S. executives of the Company on October 7, 2009, the effective date of the program. This program is unfunded. Executives receive benefits over 5 years after an involuntary or voluntary separation from Aptiv. The SERP is closed to new members.

Amounts disclosed within this note include amounts attributable to the Company’s discontinued operations, unless otherwise noted. Refer to Note 25. Discontinued Operations for further detail.

Funded Status

The amounts shown below reflect the change in the U.S. defined benefit pension obligations during 2018 and 2017.

	Year Ended December 31,
	2018				2017
	(in millions)
Benefit obligation at beginning of year	$	29			$	40
Interest cost	1				1
Actuarial gain	(2		)		—
Benefits paid	(10		)		(12		)
Benefit obligation at end of year	18				29
Change in plan assets:
Fair value of plan assets at beginning of year	—				—
Aptiv contributions	10				12
Benefits paid	(10		)		(12		)
Fair value of plan assets at end of year	—				—
Underfunded status	(18		)		(29		)
Amounts recognized in the consolidated balance sheets consist of:
Current liabilities	(7		)		(10		)
Non-current liabilities	(11		)		(19		)
Total	(18		)		(29		)
Amounts recognized in accumulated other comprehensive loss consist of (pre-tax):
Actuarial loss	8				9
Total	$	8			$	9

The amounts shown below reflect the change in the non-U.S. defined benefit pension obligations during 2018 and 2017.

	Year Ended December 31,
	2018				2017
	(in millions)
Benefit obligation at beginning of year	$	835			$	2,137
Obligation assumed in KUM acquisition	25				—
Service cost	17				48
Interest cost	23				54
Actuarial gain	(4		)		(1		)
Benefits paid	(30		)		(71		)
Impact of curtailments	(1		)		3
Plan amendments	6				—
Spin-off of Delphi Technologies	—				(1,518		)
Exchange rate movements and other	(62		)		183
Benefit obligation at end of year	809				835
Change in plan assets:
Fair value of plan assets at beginning of year	377				1,212
Assets acquired in KUM acquisition	19				—
Actual return on plan assets	(6		)		75
Aptiv contributions	38				67
Benefits paid	(30		)		(71		)
Spin-off of Delphi Technologies	—				(997		)
Exchange rate movements and other	(36		)		91
Fair value of plan assets at end of year	362				377
Underfunded status	(447		)		(458		)
Amounts recognized in the consolidated balance sheets consist of:
Non-current assets	2				4
Current liabilities	(17		)		(31		)
Non-current liabilities	(432		)		(431		)
Total	(447		)		(458		)
Amounts recognized in accumulated other comprehensive loss consist of (pre-tax):
Actuarial loss	143				144
Prior service cost	6				1
Total	$	149			$	145

The projected benefit obligation (“PBO”), accumulated benefit obligation (“ABO”), and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets and with plan assets in excess of accumulated benefit obligations are as follows:

	U.S. Plans								Non-U.S. Plans
	2018				2017				2018				2017
	(in millions) Plans with ABO in Excess of Plan Assets
PBO	$	18			$	29			$	699			$	743
ABO	18				29				655				701
Fair value of plan assets at end of year	—				—				258				282
	Plans with Plan Assets in Excess of ABO
PBO	$	—			$	—			$	110			$	92
ABO	—				—				85				64
Fair value of plan assets at end of year	—				—				104				95
	Total
PBO	$	18			$	29			$	809			$	835
ABO	18				29				740				765
Fair value of plan assets at end of year	—				—				362				377

Benefit costs presented below were determined based on actuarial methods and included the following, which include the results of discontinued operations:

	U.S. Plans
	Year Ended December 31,
	2018				2017				2016
	(in millions)
Interest cost	$	1			$	1			$	1
Amortization of actuarial losses	1				1				1
Net periodic benefit cost	$	2			$	2			$	2

	Non-U.S. Plans
	Year Ended December 31,
	2018				2017				2016
	(in millions)
Service cost	$	17			$	48			$	46
Interest cost	23				54				63
Expected return on plan assets	(22		)		(63		)		(65		)
Settlement loss	3				1				—
Curtailment (gain) loss	(1		)		16				3
Amortization of actuarial losses	13				35				14
Other	—				—				2
Net periodic benefit cost	$	33			$	91			$	63

Other postretirement benefit obligations were approximately $3 million and $4 million at December 31, 2018 and 2017, respectively.

Experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions are recognized in other comprehensive income. Cumulative gains and losses in excess of 10% of the PBO for a particular plan are amortized over the average future service period of the employees in that plan. The estimated actuarial loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2019 is $11 million.

The principal assumptions used to determine the pension expense and the actuarial value of the projected benefit obligation for the U.S. and non-U.S. pension plans were:

Assumptions used to determine benefit obligations at December 31:

	Pension Benefits
	U.S. Plans						Non-U.S. Plans
	2018			2017			2018			2017
Weighted-average discount rate	3.80	%		2.70	%		3.53	%		3.39	%
Weighted-average rate of increase in compensation levels	N/A			N/A			3.74	%		3.65	%

Assumptions used to determine net expense for years ended December 31:

	Pension Benefits
	U.S. Plans									Non-U.S. Plans
	2018			2017			2016			2018			2017			2016
Weighted-average discount rate	2.70	%		2.70	%		2.70	%		3.39	%		2.83	%		3.81	%
Weighted-average rate of increase in compensation levels	N/A			N/A			N/A			3.65	%		3.86	%		3.67	%
Weighted-average expected long-term rate of return on plan assets	N/A			N/A			N/A			5.63	%		5.84	%		5.84	%

Aptiv selects discount rates by analyzing the results of matching each plan’s projected benefit obligations with a portfolio of high-quality fixed income investments rated AA-or higher by Standard and Poor’s.

Aptiv does not have any U.S. pension assets; therefore no U.S. asset rate of return calculation was necessary. The primary funded non-U.S. plans are in the U.K. and Mexico. For the determination of 2018 expense, Aptiv assumed a long-term expected asset rate of return of approximately 5.50% and 7.50% for the U.K. and Mexico, respectively. Aptiv evaluated input from local actuaries and asset managers, including consideration of recent fund performance and historical returns, in developing the long-term rate of return assumptions. The assumptions for the U.K. and Mexico are primarily long-term, prospective rates. To determine the expected return on plan assets, the market-related value of our plan assets is actual fair value.

Aptiv’s pension expense for 2019 is determined at the 2018 year end measurement date. For purposes of analysis, the following table highlights the sensitivity of the Company’ pension obligations and expense attributable to continuing operations to changes in key assumptions:

Change in Assumption		Impact on Pension Expense		Impact on PBO
25 basis point (“bp”) decrease in discount rate		+ $2 million		+ $28 million
25 bp increase in discount rate		- $2 million		- $26 million
25 bp decrease in long-term expected return on assets		+ $1 million		—
25 bp increase in long-term expected return on assets		- $1 million		—

The above sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not necessarily linear. The above sensitivities also assume no changes to the design of the pension plans and no major restructuring programs.

Pension Funding

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Projected Pension Benefit Payments
	U.S. Plans				Non-U.S. Plans
	(in millions)
2019	$	8			$	40
2020	4				36
2021	3				39
2022	1				41
2023	1				45
2024 – 2028	2				272

Aptiv anticipates making pension contributions and benefit payments of approximately $48 million in 2019.

Aptiv sponsors defined contribution plans for certain hourly and salaried employees. Expense related to the contributions for these plans attributable to continued operations was $37 million, $36 million, and $36 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Plan Assets

Certain pension plans sponsored by Aptiv invest in a diversified portfolio consisting of an array of asset classes that attempts to maximize returns while minimizing volatility. These asset classes include developed market equities, emerging market equities, private equity, global high quality and high yield fixed income, real estate and absolute return strategies.

The fair values of Aptiv’s pension plan assets weighted-average asset allocations at December 31, 2018 and 2017, by asset category, are as follows:

		Fair Value Measurements at December 31, 2018
Asset Category		Total				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(in millions)
Cash		$	22			$	22			$	—			$	—
Time deposits		23				—				23				—
Equity mutual funds		25				—				25				—
Bond mutual funds		148				—				148				—
Real estate trust funds		24				—				—				24
Hedge funds		21				—				—				21
Insurance contracts		6				—				—				6
Debt securities		53				53				—				—
Equity securities		40				40				—				—
Total		$	362			$	115			$	196			$	51

		Fair Value Measurements at December 31, 2017
Asset Category		Total				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(in millions)
Cash		$	17			$	17			$	—			$	—
Time deposits		4				—				4				—
Equity mutual funds		114				—				114				—
Bond mutual funds		94				—				94				—
Real estate trust funds		13				—				—				13
Hedge funds		27				—				—				27
Insurance contracts		6				—				—				6
Debt securities		51				51				—				—
Equity securities		51				51				—				—
Total		$	377			$	119			$	212			$	46

Following is a description of the valuation methodologies used for pension assets measured at fair value.

Time deposits—The fair value of fixed-maturity certificates of deposit was estimated using the rates offered for deposits of similar remaining maturities.

Equity mutual funds—The fair value of the equity mutual funds is determined by the indirect quoted market prices on regulated financial exchanges of the underlying investments included in the fund.

Bond mutual funds—The fair value of the bond mutual funds is determined by the indirect quoted market prices on regulated financial exchanges of the underlying investments included in the fund.

Real estate—The fair value of real estate properties is estimated using an annual appraisal provided by the administrator of the property investment. Management believes this is an appropriate methodology to obtain the fair value of these assets.

Hedge funds—The fair value of the hedge funds is accounted for by a custodian. The custodian obtains valuations from the underlying hedge fund managers based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient trading activity to derive prices. Management and the custodian review the methods used by the underlying managers to value the assets. Management believes this is an appropriate methodology to obtain the fair value of these assets.

Insurance contracts—The insurance contracts are invested in a fund with guaranteed minimum returns. The fair values of these contracts are based on the net asset value underlying the contracts.

Debt securities—The fair value of debt securities is determined by direct quoted market prices on regulated financial exchanges.

Equity securities—The fair value of equity securities is determined by direct quoted market prices on regulated financial exchanges.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Real Estate Trust Fund				Hedge Funds				Insurance Contracts
	(in millions)
Beginning balance at January 1, 2017	$	29			$	107			$	5
Actual return on plan assets:
Relating to assets still held at the reporting date	1				2				1
Purchases, sales and settlements	6				—				—
Spin-off of Delphi Technologies	(23		)		(84		)		—
Foreign currency translation and other	—				2				—
Ending balance at December 31, 2017	$	13			$	27			$	6
Actual return on plan assets:
Relating to assets still held at the reporting date	$	2			$	—			$	—
Purchases, sales and settlements	9				(4		)		—
Foreign currency translation and other	—				(2		)		—
Ending balance at December 31, 2018	$	24			$	21			$	6

13. COMMITMENTS AND CONTINGENCIES

Ordinary Business Litigation

Aptiv is from time to time subject to various legal actions and claims incidental to its business, including those arising out of alleged defects, alleged breaches of contracts, product warranties, intellectual property matters, and employment-related matters. It is the opinion of Aptiv that the outcome of such matters will not have a material adverse impact on the consolidated financial position, results of operations, or cash flows of Aptiv. With respect to warranty matters, although Aptiv cannot ensure that the future costs of warranty claims by customers will not be material, Aptiv believes its established reserves are adequate to cover potential warranty settlements.

Unsecured Creditors Litigation

Aptiv was subject to litigation related to general unsecured claims against DPHH, resulting from that entity’s 2005 bankruptcy filing. In January 2017, the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) which had jurisdiction over the general unsecured claims, granted summary judgment in favor of the holders of the general unsecured claims against DPHH, and a $300 million distribution for general unsecured claims was triggered.

In connection with the January 2017 ruling, the Company recorded a reserve of $300 million in the fourth quarter of 2016. The reserve was recorded to other expense in the consolidated statement of operations, and resulted in a corresponding reduction in earnings per diluted share of approximately $1.10 for the year ended December 31, 2016. In March 2017, the Bankruptcy Court issued a ruling on the application of pre-judgment interest owed on the amount of the distribution to be made to the holders of the general unsecured claims. Pursuant to this ruling, Aptiv recorded an additional reserve of $27 million during the three months ended March 31, 2017.

During the second quarter of 2017, Aptiv and the holders of the general unsecured claims against DPHH reached an agreement to settle this matter for $310 million, which was subsequently approved by the Bankruptcy Court. In July 2017, the Company paid the $310 million settlement pursuant to the terms of the settlement agreement. In accordance with the terms of the settlement agreement, the Company recorded a net incremental charge of $10 million to other expense during the year ended December 31, 2017.

Brazil Matters

Aptiv conducts business operations in Brazil that are subject to the Brazilian federal labor, social security, environmental, tax and customs laws, as well as a variety of state and local laws. While Aptiv believes it complies with such laws, they are complex, subject to varying interpretations, and the Company is often engaged in litigation with government agencies regarding the application of these laws to particular circumstances. As of December 31, 2018, the majority of claims asserted against Aptiv in Brazil relate to such litigation. The remaining claims in Brazil relate to commercial and labor litigation with private parties. As of December 31, 2018, claims totaling approximately $145 million (using December 31, 2018 foreign

currency rates) have been asserted against Aptiv in Brazil. As of December 31, 2018, the Company maintains accruals for these asserted claims of $30 million (using December 31, 2018 foreign currency rates). The amounts accrued represent claims that are deemed probable of loss and are reasonably estimable based on the Company’s analyses and assessment of the asserted claims and prior experience with similar matters. While the Company believes its accruals are adequate, the final amounts required to resolve these matters could differ materially from the Company’s recorded estimates and Aptiv’s results of operations could be materially affected. The Company estimates the reasonably possible loss in excess of the amounts accrued related to these claims to be zero to $115 million.

Environmental Matters

Aptiv 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 December 31, 2018 and December 31, 2017, the undiscounted reserve for environmental investigation and remediation was approximately $4 million (of which $1 million was recorded in accrued liabilities and $3 million was recorded in other long-term liabilities) and $4 million (which was recorded in other long-term liabilities), respectively. Aptiv cannot ensure that environmental requirements will not change or become more stringent over time or that its eventual environmental remediation costs and liabilities will not exceed the amount of its current reserves. In the event that such liabilities were to significantly exceed the amounts recorded, Aptiv’s results of operations could be materially affected. At December 31, 2018 the difference between the recorded liabilities and the reasonably possible range of potential loss was not material.

Operating Leases

Rental expense totaled $112 million, $100 million and $85 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, Aptiv had minimum lease commitments under non-cancellable operating leases totaling $514 million, which become due as follows:

	Minimum Future Operating Lease Commitments
	(in millions)
2019	$	103
2020	92
2021	81
2022	68
2023	50
Thereafter	120
Total	$	514

14. INCOME TAXES

Income from continuing operations before income taxes and equity income for U.S. and non-U.S. operations are as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
U.S. income (loss)	$	369			$	(32	)		$	150
Non-U.S. income	965				1,287				850
Income from continuing operations before income taxes and equity income	$	1,334			$	1,255			$	1,000

The provision (benefit) for income taxes from continuing operations is comprised of:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Current income tax expense (benefit):
U.S. federal	$	40			$	37			$	47
Non-U.S.	214				214				238
U.S. state and local	10				(2		)		3
Total current	264				249				288
Deferred income tax expense (benefit), net:
U.S. federal	13				(15		)		(88		)
Non-U.S.	(16		)		(12		)		(33		)
U.S. state and local	(11		)		1				—
Total deferred	(14		)		(26		)		(121		)
Total income tax provision	$	250			$	223			$	167

Cash paid or withheld for income taxes was $283 million, $275 million and $253 million for the years ended December 31, 2018, 2017 and 2016, respectively.

For purposes of comparability and consistency, the Company uses the notional U.S. federal income tax rate when presenting the Company’s reconciliation of the income tax provision. The Company was a U.K. resident taxpayer and became an Irish resident taxpayer in April 2018. A reconciliation of the provision for income taxes compared with the amounts at the notional U.S. federal statutory rate was:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Notional U.S. federal income taxes at statutory rate	$	280			$	439			$	350
Income taxed at other rates	(106		)		(260		)		(86		)
Change in valuation allowance	(4		)		(6		)		(17		)
Other change in tax reserves	36				25				76
Withholding taxes	28				64				44
Tax credits	(18		)		(32		)		(196		)
Change in tax law	26				(6		)		(1		)
Other adjustments	8				(1		)		(3		)
Total income tax expense	$	250			$	223			$	167
Effective tax rate	19		%		18		%		17		%

The Company’s tax rate is affected by the fact that its parent entity was a U.K. resident taxpayer and became an Irish resident taxpayer in April 2018, the tax rates in Ireland, the U.K. and 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. Included in the non-U.S. income taxed at other rates are tax incentives obtained in various non-U.S. countries, primarily the High and New Technology Enterprise (“HNTE”) status in China, a Free Trade Zone exemption in Honduras and the Special Economic Zone exemption in Turkey, which totaled $41 million in 2018, $45 million in 2017 and $45 million in 2016, as well as tax benefit for income earned, and no tax benefit for losses incurred, in jurisdictions where a valuation allowance has been recorded. The Company currently benefits from tax holidays in various non-U.S. jurisdictions with expiration dates from 2019 through 2041. The income tax benefits attributable to these tax holidays are approximately $7 million ($0.03 per share) in 2018, $7 million ($0.03 per share) in 2017 and $10 million ($0.04 per share) in 2016.

The effective tax rate in the year ended December 31, 2018 was impacted by additional income tax expense for an adjustment to the provisional effects of the enactment of The Tax Cuts and Jobs Act (the “Tax Legislation”) and the income tax expense recorded as a result of the intra-entity transfer of intellectual property, as described below, partially offset by favorable

geographic income mix in 2018 as compared to 2017, primarily due to changes in the underlying operations of the business. The Company also accrued $36 million of reserve adjustments for uncertain tax positions, which included reserves for ongoing audits in foreign jurisdictions, as well as for changes in estimates based on relevant new or additional evidence obtained related to certain of the Company’s tax positions, including tax authority administrative pronouncements and court decisions.

The Tax Legislation was enacted in the U.S. on December 22, 2017, significantly revising the U.S. corporate income tax by, among other things, lowering corporate income tax rates and imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries. Pursuant to ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), the Company recognized the provisional effects of the enactment of the Tax Legislation of approximately $50 million during the year ended December 31, 2017 for which measurement could be reasonably estimated. The impact was primarily the result of increased tax expense due to the one-time deemed repatriation tax and a reduction of our foreign tax credit, partially offset by the favorable impact of the reduced tax rate on the Company’s net deferred tax liabilities. Pursuant to ASU 2018-05, adjustments to the provisional amounts recorded by the Company as of December 31, 2017 identified within a subsequent measurement period of up to one year from the enactment date were to be included, as discussed above, as an adjustment to tax expense from continuing operations in the period the amounts are determined. During 2018, the U.S. Treasury Department and the Internal Revenue Service (“IRS”) issued additional guidance, particularly with respect to computing the transition tax on the untaxed foreign earnings of foreign subsidiaries. As a result, during the year ended December 31, 2018, the Company recorded approximately $30 million to income tax expense as an adjustment to the provisional amounts recorded as of December 31, 2017, primarily related to a reduction of our foreign tax credit as a result of recently issued regulatory guidance. The accounting for the Tax Legislation was finalized in the fourth quarter of 2018, and resulted in no further adjustments beyond the amounts described above.

The Tax Legislation also created a provision known as Global Intangible Low-Taxed Income (“GILTI”) that imposes a tax on certain earnings of foreign subsidiaries. U.S. GAAP allows companies to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to account for GILTI in the year the tax is incurred.

During the year ended December 31, 2017, the Company also incurred certain intra-entity gains and related tax impacts in connection with transactions comprising the Separation. During the fourth quarter of 2017, the Company finalized its plan and entered into several transactions to separate these businesses into stand-alone legal and operational structures. As these transactions occurred between related subsidiaries that were consolidated at the time the transactions occurred, the gains were deferred within the consolidated financial statements in accordance with ASC 810. The tax impacts of the gains, which totaled approximately $64 million, were recognized upon the distribution of the related assets to Delphi Technologies and recorded as a reduction to Shareholders’ Equity during the year ended December 31, 2017.

The effective tax rate in the year ended December 31, 2016 was impacted by favorable geographic income mix in 2016 as compared to 2015, primarily due to changes in the underlying operations of the business, as well as $17 million for releases of valuation allowances as a result of the Company’s determination that it was more likely than not that certain deferred tax assets would be realized. These benefits were offset by $76 million of reserve adjustments recorded for uncertain tax positions, which included reserves for ongoing audits in foreign jurisdictions, as well as for changes in estimates based on relevant new or additional evidence obtained related to certain of the Company’s tax positions, including tax authority administrative pronouncements and court decisions. These reserve adjustments resulted in foreign tax credit benefits of approximately $18 million. Additionally, following a change in U.S. tax regulation during 2016, the Company recorded a tax credit benefit of approximately $16 million during the year ended December 31, 2016.

As described above, certain of the Company’s Chinese subsidiaries benefit from a reduced corporate income tax rate as a result of their HNTE status. Aptiv regularly submits applications to reapply for HNTE status as they expire. The Company believes each of the applicable entities will continue to renew HNTE status going forward and has reflected this in calculating total income tax expense.

Intellectual Property Transfer

During the year ended December 31, 2018, the Company finalized changes to its corporate entity operating structure, including transferring certain intellectual property among certain of its subsidiaries, primarily to align corporate entities with the Company’s evolving operations and business model following the Separation of its former Powertrain Systems segment. The transfer of assets occurred between wholly-owned legal entities in different U.S. and non-U.S. tax jurisdictions. As the impact of the transfer was the result of an intra-entity transaction, the resulting gain on the transfer was eliminated for purposes of the consolidated financial statements. However, the transferring entity recognized a gain on the transfer of assets that was subject to income tax in its local jurisdiction. In accordance with ASU 2016-16, which the Company adopted in the first quarter of 2018, as further described in Note 2. Significant Accounting Policies, the income tax expense recorded as a result of the intra-entity transfer of the intellectual property was approximately $30 million, net during the year ended December 31, 2018.

Deferred Income Taxes

The Company accounts for income taxes and the related accounts under the liability method. Deferred income tax assets and liabilities reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Significant components of the deferred tax assets and liabilities are as follows:

	December 31,
	2018				2017
	(in millions)
Deferred tax assets:
Pension	$	88			$	94
Employee benefits	43				12
Net operating loss carryforwards	1,089				976
Warranty and other liabilities	63				88
Other	136				210
Total gross deferred tax assets	1,419				1,380
Less: valuation allowances	(1,178		)		(1,008		)
Total deferred tax assets (1)	$	241			$	372
Deferred tax liabilities:
Fixed assets	$	38			$	33
Tax on unremitted profits of certain foreign subsidiaries	59				69
Intangibles	234				307
Total gross deferred tax liabilities	331				409
Net deferred tax liabilities	$	(90	)		$	(37	)

(1)	Reflects gross amount before jurisdictional netting of deferred tax assets and liabilities.

Deferred tax liabilities and assets are classified as long-term in the consolidated balance sheet. Net deferred tax assets and liabilities are included in the consolidated balance sheets as follows:

	December 31,
	2018				2017
	(in millions)
Long-term assets	$	143			$	185
Long-term liabilities	(233		)		(222		)
Total deferred tax liability	$	(90	)		$	(37	)

The net deferred tax liability of $90 million as of December 31, 2018 are primarily comprised of deferred tax liabilities in South Korea, the U.S. and Singapore offset by deferred tax asset amounts primarily in Mexico, China, Turkey and the U.K.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2018, the Company has gross deferred tax assets of approximately $1,073 million for non-U.S. net operating loss (“NOL”) carryforwards with recorded valuation allowances of $1,042 million. These NOL’s are available to offset future taxable income and realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. The NOL’s primarily relate to Luxembourg and Germany. The NOL carryforwards have expiration dates ranging from one year to an indefinite period.

Deferred tax assets include $64 million and $108 million of tax credit carryforwards with recorded valuation allowances of $62 million and $49 million at December 31, 2018 and 2017, respectively. These tax credit carryforwards expire at various times from 2019 through 2038.

Cumulative Undistributed Foreign Earnings

No income taxes have been provided on indefinitely reinvested earnings of certain foreign subsidiaries at December 31, 2018.

Withholding taxes of $59 million have been accrued on undistributed earnings that are not indefinitely reinvested and are primarily related to China, Turkey, Honduras and Morocco. There are no other material liabilities for income taxes on the undistributed earnings of foreign subsidiaries, as the Company has concluded that such earnings are either indefinitely reinvested or should not give rise to additional income tax liabilities as a result of the distribution of such earnings.

Uncertain Tax Positions

The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.

A reconciliation of the gross change in the unrecognized tax benefits balance, excluding interest and penalties is as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Balance at beginning of year	$	224			$	180			$	43
Additions related to current year	33				51				94
Additions related to prior years	65				40				67
Reductions related to prior years	(19		)		(31		)		(15		)
Reductions due to expirations of statute of limitations	(78		)		(15		)		(8		)
Settlements	(16		)		(1		)		(1		)
Balance at end of year	$	209			$	224			$	180

A portion of the Company’s unrecognized tax benefits would, if recognized, reduce its effective tax rate. The remaining unrecognized tax benefits relate to tax positions for which only the timing of the benefit is uncertain. Recognition of these tax benefits would reduce the Company’s effective tax rate only through a reduction of accrued interest and penalties. As of December 31, 2018 and 2017, the amounts of unrecognized tax benefit that would reduce the Company’s effective tax rate were $203 million and $159 million, respectively. Pursuant to the Company’s redomiciliation from the U.K. to Ireland in 2018, Aptiv PLC forfeited its net operating loss carryforwards. These net operating losses were offset against approximately $60 million of reserves for uncertain tax positions which lapsed in 2018 due to the expiration of the statute of limitations. For 2018 and 2017, respectively, $18 million and $85 million of reserves for uncertain tax positions would be offset by the write-off of a related deferred tax asset, if recognized.

The Company recognizes interest and penalties relating to unrecognized tax benefits as part of income tax expense. Total accrued liabilities for interest and penalties were $12 million and $21 million at December 31, 2018 and 2017, respectively. Total interest and penalties recognized as part of income tax expense was a $7 million benefit, a $5 million expense and a $5 million expense for the years ended December 31, 2018, 2017 and 2016, respectively.

The Company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. Taxing jurisdictions significant to Aptiv include Barbados, China, Germany, Ireland, Luxembourg, Mexico, South Korea, the U.K. and the U.S. Open tax years related to these taxing jurisdictions remain subject to examination and could result in additional tax liabilities. In general, the Company’s affiliates are no longer subject to income tax examinations by foreign tax authorities for years before 2002. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations in several jurisdictions could impact the Company’s unrecognized tax benefits. A reversal of less than $10 million is reasonably possible in the next 12 months, due to the running of statutes of limitations in various taxing jurisdictions.

15. SHAREHOLDERS’ EQUITY AND NET INCOME PER SHARE

Net Income Per Share

Basic net income per share is computed by dividing net income attributable to Aptiv 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 Aptiv by the diluted weighted average number of ordinary shares outstanding during the period. 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 21. Share-Based Compensation for additional information.

Weighted Average Shares

The following table illustrates net income per share attributable to Aptiv and the weighted average shares outstanding used in calculating basic and diluted income per share:

	Year Ended December 31,
	2018				2017				2016
	(in millions, except per share data)
Numerator:
Income from continuing operations	$	1,067			$	1,021			$	834
Income from discontinued operations	—				334				423
Net income attributable to Aptiv	$	1,067			$	1,355			$	1,257
Denominator:
Weighted average ordinary shares outstanding, basic	264.41				267.16				273.02
Dilutive shares related to RSUs	0.81				0.87				0.68
Weighted average ordinary shares outstanding, including dilutive shares	265.22				268.03				273.70
Basic net income per share:
Continuing operations	$	4.04			$	3.82			$	3.05
Discontinued operations	—				1.25				1.55
Basic net income per share attributable to Aptiv	$	4.04			$	5.07			$	4.60
Diluted net income per share:
Continuing operations	$	4.02			$	3.81			$	3.05
Discontinued operations	—				1.25				1.54
Diluted net income per share attributable to Aptiv	$	4.02			$	5.06			$	4.59
Anti-dilutive securities share impact	—				—				—

Share Repurchase Program

In April 2016, the Board of Directors authorized a share repurchase program of up to $1.5 billion of ordinary shares, which commenced in September 2016 following the completion of the Company’s $1.5 billion January 2015 share repurchase program. This share repurchase program provides for share purchases in the open market or in privately negotiated transactions, depending on share price, market conditions and other factors, as determined by the Company.

A summary of the ordinary shares repurchased during the years ended December 31, 2018, 2017 and 2016 is as follows:

	Year Ended December 31,
	2018				2017				2016
Total number of shares repurchased	6,530,369				4,667,193				9,481,946
Average price paid per share	$	76.44			$	82.00			$	66.93
Total (in millions)	$	499			$	383			$	635

As of December 31, 2018, approximately $490 million of share repurchases remained available under the April 2016 share repurchase program. All repurchased shares were retired, and 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.

New Share Repurchase Program

In January 2019, the Board of Directors authorized a new share repurchase program of up to $2.0 billion of ordinary shares. This share repurchase program provides for share purchases in the open market or in privately negotiated transactions, depending on share price, market conditions and other factors, as determined by the Company. This program will commence following the completion of the Company’s April 2016 share repurchase program described above.

Dividends

The Company has declared and paid cash dividends per ordinary share during the periods presented as follows:

	Dividend				Amount
	Per Share				(in millions)
2018:
Fourth quarter	$	0.22			$	58
Third quarter	0.22				58
Second quarter	0.22				58
First quarter	0.22				59
Total	$	0.88			$	233
2017:
Fourth quarter	$	0.29			$	77
Third quarter	0.29				77
Second quarter	0.29				78
First quarter	0.29				78
Total	$	1.16			$	310

In addition, in January 2019, the Board of Directors declared a regular quarterly cash dividend of $0.22 per ordinary share, payable on February 20, 2019 to shareholders of record at the close of business on February 6, 2019.

16. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) attributable to Aptiv (net of tax) are shown below. Other comprehensive income includes activity relating to discontinued operations.

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Foreign currency translation adjustments:
Balance at beginning of year	$	(369	)		$	(799	)		$	(661	)
Aggregate adjustment for the year (1)	(186		)		305				(138		)
Spin-off of Delphi Technologies	—				125				—
Balance at end of year	(555		)		(369		)		(799		)
Gains (losses) on derivatives:
Balance at beginning of year	$	4			$	(11	)		$	(106	)
Other comprehensive income (loss) before reclassifications (net tax effect of $3 million, $1 million and $23 million)	(36		)		14				(1		)
Reclassification to income (net tax effect of $3 million, $6 million and $30 million)	(3		)		1				96
Balance at end of year	(35		)		4				(11		)
Pension and postretirement plans:
Balance at beginning of year	$	(106	)		$	(405	)		$	(266	)
Other comprehensive income (loss) before reclassifications (net tax effect of $3 million, $3 million and $32 million)	(11		)		(19		)		(150		)
Reclassification to income (net tax effect of $2 million, $6 million and $1 million)	13				30				11
Spin-off of Delphi Technologies	—				288				—
Balance at end of year	(104		)		(106		)		(405		)
Accumulated other comprehensive loss, end of year	$	(694	)		$	(471	)		$	(1,215	)

(1)

Includes $67 million of gains, $177 million of losses and $67 million of gains for the years ended December 31, 2018, 2017 and 2016, respectively, related to non-derivative net investment hedges. Refer to Note 17. Derivatives and Hedging Activities for further description of the Company’s net investment hedges. The year ended December 31, 2016 also includes $29 million of accumulated currency translation adjustment losses reclassified to net income as a result of the sale of the Company’s Mechatronics business, as further described in Note 20. Acquisitions and Divestitures.

Reclassifications from accumulated other comprehensive income (loss) to income were as follows:

Reclassification Out of Accumulated Other Comprehensive Income (Loss)
Details About Accumulated Other Comprehensive Income Components		Year Ended December 31,												Affected Line Item in the Statement of Operations
	2018				2017				2016
		(in millions)
Foreign currency translation adjustments:
Sale of Mechatronics business (1)		$	—			$	—			$	(29	)		Cost of sales
		—				—				(29		)		Income before income taxes
		—				—				—				Income tax expense
		—				—				(29		)		Net income
		—				—				—				Net income attributable to noncontrolling interest
		$	—			$	—			$	(29	)		Net income attributable to Aptiv
Gains (losses) on derivatives:
Commodity derivatives		$	14			$	18			$	(42	)		Cost of sales
Foreign currency derivatives		(14		)		(25		)		(84		)		Cost of sales
		—				(7		)		(126		)		Income before income taxes
		3				6				30				Income tax expense
		3				(1		)		(96		)		Net income
		—				—				—				Net income attributable to noncontrolling interest
		$	3			$	(1	)		$	(96	)		Net income attributable to Aptiv
Pension and postretirement plans:
Actuarial loss		$	(14	)		$	(35	)		$	(12	)		(2)
Settlement loss		(2		)		(1		)		—				(2)
Curtailment gain		1				—				—				(2)
		(15		)		(36		)		(12		)		Income before income taxes
		2				6				1				Income tax expense
		(13		)		(30		)		(11		)		Net income
		—				—				—				Net income attributable to noncontrolling interest
		$	(13	)		$	(30	)		$	(11	)		Net income attributable to Aptiv
Total reclassifications for the year		$	(10	)		$	(31	)		$	(136	)

(1)	Represents accumulated currency translation adjustment losses reclassified to net income as a result of the sale of the Company’s Mechatronics business during the year ended December 31, 2016, as further described in Note 20. Acquisitions and Divestitures.

(2)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note 12. Pension Benefits for additional details).

17. DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow Hedges

Aptiv 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, Aptiv aggregates the exposures on a consolidated basis to take advantage of natural offsets. For exposures that are not offset within its operations, Aptiv 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. Aptiv assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policy.

As of December 31, 2018, the Company had the following outstanding notional amounts related to commodity and foreign currency forward and option contracts designated as cash flow hedges that were entered into to hedge forecasted exposures:

Commodity		Quantity Hedged			Unit of Measure		Notional Amount (Approximate USD Equivalent)
		(in thousands)					(in millions)
Copper		93,337			pounds		$	260

Foreign Currency		Quantity Hedged			Unit of Measure		Notional Amount (Approximate USD Equivalent)
		(in millions)
Mexican Peso		15,584			MXN		$	795
Chinese Yuan Renminbi		2,426			RMB		355
Polish Zloty		476			PLN		125
Euro		23			EUR		25
New Turkish Lira		60			TRY		10

As of December 31, 2018, Aptiv has entered into derivative instruments to hedge cash flows extending out to December 2020.

Gains and losses on derivatives qualifying as cash flow hedges are recorded in 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 December 31, 2018 were $23 million ($15 million, net of tax). Of this total, approximately $17 million of losses are expected to be included in cost of sales within the next 12 months and $6 million of losses are expected to be included in cost of sales in subsequent periods. Cash flow hedges are discontinued when Aptiv determines it is no longer probable that the originally forecasted transactions will occur. The amount included in cost of sales related to hedge ineffectiveness was insignificant for the years ended December 31, 2018, 2017 and 2016, respectively. Cash flows from derivatives used to manage commodity and foreign exchange 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 designates certain qualifying derivative and non-derivative instruments, including foreign currency forward contracts and foreign currency-denominated debt, as net investment hedges of certain non-U.S. subsidiaries. The effective portion of 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. Any ineffective portion of gains or losses on net investment hedges are reclassified to other income (expense), net within the consolidated statement of 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. Cash flows from derivatives designated as net investment hedges are classified as investing activities within the consolidated statement of cash flows.

Since the first quarter of 2016, the Company has entered into a series of forward contracts, each of which have been designated as net investment hedges of the foreign currency exposure of the Company’s investments in certain Chinese Yuan Renminbi (“RMB”)-denominated subsidiaries. During the first quarter of 2016, the Company entered into a forward contract with a notional amount of 2.4 billion RMB (approximately $370 million, using March 31, 2016 foreign currency rates), which matured in May 2016, and the Company paid $1 million at settlement. In December 2016, the Company entered into a forward contract with a notional amount of 1.8 billion RMB (approximately $265 million, using December 31, 2016 foreign currency rates), which matured in June 2017, and the Company paid $12 million at settlement. In June 2017, the Company entered into a forward contract with a notional amount of 2.4 billion RMB (approximately $345 million, using June 30, 2017 foreign currency rates), which matured in December 2017, and the Company paid $16 million at settlement. In December 2017, the Company entered into a forward contract with a notional amount of 1.9 billion RMB (approximately $290 million, using December 31, 2017 foreign currency rates), which matured in June 2018, and the Company paid $10 million at settlement. In June 2018, the Company entered into a forward contract with a notional amount of 486 million RMB (approximately $75 million, using June 30, 2018 foreign currency rates), which matured in December 2018, and the Company received $4 million at settlement. In

December 2018, the Company entered into a forward contract with a notional amount of 570 million RMB (approximately $85 million, using December 31, 2018 foreign currency rates), which matures in March 2019. Refer to the tables below for details of the fair value recorded in the consolidated balance sheet and the effects recorded in the consolidated statement of operations and consolidated statement of comprehensive income related to these derivative instruments.

The Company has designated the €700 million 2015 Euro-denominated Senior Notes and the €500 million 2016 Euro-denominated Senior Notes, as more fully described in Note 11. Debt, as net investment hedges of the foreign currency exposure of its investments in certain Euro-denominated subsidiaries. Due to changes in the value of the Euro-denominated debt instruments designated as net investment hedges, during the years ended December 31, 2018 and 2017, $67 million of gains and $177 million of losses, respectively, were recognized within the cumulative translation adjustment component of OCI. Cumulative losses included in accumulated OCI on these net investment hedges were $50 million as of December 31, 2018 and $117 million as of December 31, 2017. There were no amounts reclassified or recognized for ineffectiveness in the years ended December 31, 2018 or 2017.

Derivatives Not Designated as Hedges

In certain occasions the Company enters into certain foreign currency and commodity 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.

In conjunction with the acquisition of KUM, as more fully disclosed in Note 20. Acquisitions and Divestitures, in March 2018, the Company entered into forward contracts, requiring no initial net investment, with notional amounts totaling 559 billion South Korean Won (“KRW”) (approximately $520 million using March 1, 2018 foreign currency rates) to hedge portions of the currency risk associated with the cash payment for the acquisition. Pursuant to the requirements of ASC 815, Derivatives and Hedging, the forwards did not qualify as hedges for accounting purposes, and therefore, changes in the fair value of the forwards were recognized in other income (expense), net. During the year ended December 31, 2018, the change in fair value resulted in a pre-tax gain of $4 million, included within other income in the consolidated statement of operations. In conjunction with the closing of the acquisition, Aptiv settled the forward contracts in the second quarter of 2018 and received $4 million, which is reflected within investing activities from continuing operations in the consolidated statement of cash flows.

On July 30, 2015, Aptiv made a recommended offer to acquire HellermannTyton Group PLC. In conjunction with the acquisition, in August 2015, the Company entered into option contracts with notional amounts totaling £917 million to hedge portions of the currency risk associated with the cash payment for the acquisition at a cost of $15 million. Subsequently, in conjunction with the closing of the acquisition, Aptiv entered into offsetting option contracts. Pursuant to the requirements of ASC 815, Derivatives and Hedging, the options did not qualify as hedges for accounting purposes. The Company paid $15 million to settle these options during the year ended December 31, 2016, which is reflected within investing activities in the consolidated statement of cash flows.

Fair Value of Derivative Instruments in the Balance Sheet

The fair value of derivative financial instruments recorded in the consolidated balance sheets as of December 31, 2018 and December 31, 2017 are as follows:

	Asset Derivatives						Liability Derivatives						Net Amounts of Assets and (Liabilities) Presented in the Balance Sheet
	Balance Sheet Location		December 31, 2018				Balance Sheet Location		December 31, 2018				December 31, 2018
	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	Other current assets		$	—			Accrued liabilities		$	15
Foreign currency derivatives*	Other current assets		9				Other current assets		3				$	6
Foreign currency derivatives*	Accrued liabilities		—				Accrued liabilities		4				(4		)
Commodity derivatives	Other long-term assets		—				Other long-term liabilities		7
Foreign currency derivatives*	Other long-term assets		2				Other long-term assets		—				2
Foreign currency derivatives*	Other long-term liabilities		—				Other long-term liabilities		2				(2		)
Total derivatives designated as hedges			$	11					$	31

	Asset Derivatives						Liability Derivatives						Net Amounts of Assets and (Liabilities) Presented in the Balance Sheet
	Balance Sheet Location		December 31, 2017				Balance Sheet Location		December 31, 2017				December 31, 2017
	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	Other current assets		$	27			Accrued liabilities		$	—
Foreign currency derivatives*	Other current assets		3				Other current assets		—				$	3
Foreign currency derivatives*	Accrued liabilities		7				Accrued liabilities		17				(10		)
Commodity derivatives	Other long-term assets		8				Other long-term liabilities		—
Foreign currency derivatives*	Other long-term liabilities		—				Other long-term liabilities		11				(11		)
Derivatives designated as net investment hedges:
Foreign currency derivatives	Other current assets		—				Accrued liabilities		5
Total derivatives designated as hedges			$	45					$	33

• Derivative instruments within this category are subject to master netting arrangements and are presented on a net basis in the consolidated balance sheets in accordance with accounting guidance related to the offsetting of amounts related to certain contracts.

The fair value of Aptiv’s derivative financial instruments was in a net liability position as of December 31, 2018 and a net asset position as of December 31, 2017.

Effect of Derivatives on the Statement of Operations and Statement of Comprehensive Income

The pre-tax effect of derivative financial instruments in the consolidated statement of operations and consolidated statement of comprehensive income for the year ended December 31, 2018 is as follows:

Year Ended December 31, 2018	(Loss) Gain Recognized in OCI (Effective Portion)				Gain (Loss) Reclassified from OCI into Income (Effective Portion)				Gain Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	$	(45	)		$	14			$	—
Foreign currency derivatives	14				(14		)		—
Derivatives designated as net investment hedges:
Foreign currency derivatives	(2		)		—				—
Total	$	(33	)		$	—			$	—

	Gain Recognized in Income
	(in millions)
Derivatives not designated:
Foreign currency derivatives	$	2
Total	$	2

The pre-tax effect of derivative financial instruments in the consolidated statement of operations and consolidated statement of comprehensive income for the year ended December 31, 2017 is as follows:

Year Ended December 31, 2017	Gain (Loss) Recognized in OCI (Effective Portion)				Gain (Loss) Reclassified from OCI into Income (Effective Portion)				Gain Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	$	45			$	18			$	—
Foreign currency derivatives	4				(27		)		—
Derivatives designated as net investment hedges:
Foreign currency derivatives	(34		)		2				—
Total	$	15			$	(7	)		$	—

	Loss Recognized in Income
	(in millions)
Derivatives not designated:
Foreign currency derivatives	$	(5	)
Total	$	(5	)

The pre-tax effect of derivative financial instruments in the consolidated statement of operations and consolidated statement of comprehensive income for the year ended December 31, 2016 is as follows:

Year Ended December 31, 2016	Gain (Loss) Recognized in OCI (Effective Portion)				Loss Reclassified from OCI into Income (Effective Portion)				Gain Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	$	22			$	(42	)		$	—
Foreign currency derivatives	(62		)		(84		)		—
Derivatives designated as net investment hedges:
Foreign currency derivatives	16				—				—
Total	$	(24	)		$	(126	)		$	—

	Gain Recognized in Income
	(in millions)
Derivatives not designated:
Foreign currency derivatives	$	1
Total	$	1

The gain or loss reclassified from OCI into income for the effective portion of designated derivative instruments and the gain or loss recognized in income for the ineffective portion of designated derivative instruments excluded from effectiveness testing were recorded to other income (expense), net and cost of sales in the consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016. The gain or loss recognized in income for non-designated derivative instruments was recorded to other income (expense), net and cost of sales in the consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016.

18. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market

participants on the measurement date. Fair value measurements are based on one or more of the following three valuation techniques:

Market—This approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Income—This approach uses valuation techniques to convert future amounts to a single present value amount based on current market expectations.

Cost—This approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost).

Aptiv uses the following fair value hierarchy prescribed by GAAP, which prioritizes the inputs used to measure fair value as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Typically, assets and liabilities are considered to be fair valued on a recurring basis if fair value is measured regularly. However, if the fair value measurement of an instrument does not necessarily result in a change in the amount recorded on the consolidated balance sheet, assets and liabilities are considered to be fair valued on a nonrecurring basis. This generally occurs when accounting guidance requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment.

Fair Value Measurements on a Recurring Basis

Derivative instruments—All derivative instruments are required to be reported on the balance sheet at fair value unless the transactions qualify and are designated as normal purchases or sales. Changes in fair value are reported currently through earnings unless they meet hedge accounting criteria. Aptiv’s derivative exposures are with counterparties with long-term investment grade credit ratings. Aptiv estimates the fair value of its derivative contracts using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. Estimates of the fair value of foreign currency and commodity derivative instruments are determined using exchange traded prices and rates. Aptiv also considers the risk of non-performance in the estimation of fair value, and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. The non-performance risk adjustment reflects the credit default spread (“CDS”) applied to the net commodity by counterparty and foreign currency exposures by counterparty. When Aptiv is in a net derivative asset position, the counterparty CDS rates are applied to the net derivative asset position. When Aptiv is in a net derivative liability position, estimates of peer companies’ CDS rates are applied to the net derivative liability position.

In certain instances where market data is not available, Aptiv uses management judgment to develop assumptions that are used to determine fair value. This could include situations of market illiquidity for a particular currency or commodity or where observable market data may be limited. In those situations, Aptiv generally surveys investment banks and/or brokers and utilizes the surveyed prices and rates in estimating fair value.

As of December 31, 2018 and 2017, Aptiv was in a net derivative liability position of $20 million and a net derivative asset position of $12 million, respectively, and no significant adjustments were recorded for nonperformance risk based on the application of peer companies’ CDS rates, evaluation of our own nonperformance risk and because Aptiv’s exposures were to counterparties with investment grade credit ratings. Refer to Note 17. Derivatives and Hedging Activities for further information regarding derivatives.

Contingent consideration—As described in Note 20. Acquisitions and Divestitures, as of December 31, 2018, additional contingent consideration may be earned as a result of Aptiv’s acquisition agreement for nuTonomy, Inc. (“nuTonomy”). The liability for contingent consideration is estimated as of the date of the acquisition and is recorded as part of the purchase price, and is subsequently re-measured to fair value at each reporting date based on a probability-weighted analysis using a rate that reflects the uncertainty surrounding the expected outcomes, which the Company believes is appropriate and representative of market participant assumptions. The measurement of the liability for contingent consideration is based on significant inputs that are not observable in the market, and is therefore classified as a Level 3 measurement in accordance with ASU Topic 820-10-35. Examples of utilized unobservable inputs are estimated future earnings or milestone achievements of the acquired businesses and applicable discount rates. The estimate of the liability may fluctuate if there are changes in the forecast of the acquired businesses’ future earnings or milestone achievements, as a result of actual earnings or milestones achieved or in the

discount rates used to determine the present value of contingent future cash flows. As of December 31, 2018, the range of periods in which the earn-out provisions may be achieved is from 2019 to 2020. The Company regularly reviews these assumptions, and makes adjustments to the fair value measurements as required by facts and circumstances.

As of December 31, 2018 and 2017, the liability for contingent consideration was $49 million (of which $16 million was classified within other current liabilities and $33 million was classified within other long-term liabilities) and $33 million (of which $7 million was classified within other current liabilities and $26 million was classified within other long-term liabilities). Adjustments to this liability for interest accretion are recognized in interest expense, and any other changes in the fair value of this liability are recognized within other income (expense), net in the consolidated statement of operations.

The changes in the contingent consideration liability classified as a Level 3 measurement were as follows:

	Year Ended December 31,
	2018				2017
	(in millions)
Fair value at beginning of year	$	33			$	35
Additions	—				32
Payments	(7		)		(22		)
Interest accretion	—				2
Measurement adjustments	23				(14		)
Fair value at end of year	$	49			$	33

During the year ended December 31, 2018, Aptiv paid $7 million of contingent consideration and recorded net increases to its contingent consideration liabilities of $23 million based on the actual level of earnings or achievement of certain milestones and the forecasted future earnings or milestone achievements of the acquired businesses during the contractual earn-out period.

During the year ended December 31, 2017, Aptiv recorded liabilities of $32 million for the estimated fair values of contingent consideration related to its acquisitions, as further described in Note 20. Acquisitions and Divestitures. Also during the year ended December 31, 2017, the Company paid $22 million of contingent consideration and recorded reductions to its contingent consideration liabilities of $14 million based on the actual level of earnings or achievement of certain milestones and the forecasted future earnings or milestone achievements of the acquired businesses during the contractual earn-out period.

As of December 31, 2018 and 2017, Aptiv had the following assets measured at fair value on a recurring basis:

	Total				Quoted Prices in Active Markets Level 1				Significant Other Observable Inputs Level 2				Significant Unobservable Inputs Level 3
	(in millions)
As of December 31, 2018
Foreign currency derivatives	$	8			$	—			$	8			$	—
Total	$	8			$	—			$	8			$	—
As of December 31, 2017
Commodity derivatives	$	35			$	—			$	35			$	—
Foreign currency derivatives	3				—				3				—
Total	$	38			$	—			$	38			$	—

As of December 31, 2018 and 2017, Aptiv had the following liabilities measured at fair value on a recurring basis:

	Total				Quoted Prices in Active Markets Level 1				Significant Other Observable Inputs Level 2				Significant Unobservable Inputs Level 3
	(in millions)
As of December 31, 2018
Commodity derivatives	$	22			$	—			$	22			$	—
Foreign currency derivatives	6				—				6				—
Contingent consideration	49				—				—				49
Total	$	77			$	—			$	28			$	49
As of December 31, 2017
Foreign currency derivatives	$	26			$	—			$	26			$	—
Contingent consideration	33				—				—				33
Total	$	59			$	—			$	26			$	33

Non-derivative financial instruments—Aptiv’s non-derivative financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable, as well as debt, which consists of its accounts receivable factoring arrangement, capital leases and other debt issued by Aptiv’s non-U.S. subsidiaries, the Revolving Credit Facility, the Tranche A Term Loan and all series of outstanding senior notes. The fair value of debt is based on quoted market prices for instruments with public market data or significant other observable inputs for instruments without a quoted public market price (Level 2). As of December 31, 2018 and December 31, 2017, total debt was recorded at $4,344 million and $4,149 million, respectively, and had estimated fair values of $4,222 million and $4,289 million, respectively. For all other financial instruments recorded at December 31, 2018 and December 31, 2017, fair value approximates book value.

Fair Value Measurements on a Nonrecurring Basis

In addition to items that are measured at fair value on a recurring basis, Aptiv also has items in its balance sheet that are measured at fair value on a nonrecurring basis. As these items are not measured at fair value on a recurring basis, they are not included in the tables above. Nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis include certain long-lived assets, equity investments, intangible assets, asset retirement obligations, share-based compensation and liabilities for exit or disposal activities measured at fair value upon initial recognition. During the years ended December 31, 2018, 2017 and 2016, Aptiv recorded non-cash asset impairment charges totaling $4 million, $9 million and $1 million, respectively, within cost of sales related to declines in the fair values of certain fixed assets. During the year ended December 31, 2018, Aptiv recorded non-cash asset impairment charges totaling $30 million within amortization related to declines in the fair values of certain intangible assets. Fair value of long-lived and intangible assets is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved and a review of appraisals or other market indicators and management estimates. As such, Aptiv has determined that the fair value measurements of long-lived and intangible assets fall in Level 3 of the fair value hierarchy.

19. OTHER INCOME, NET

Other income (expense), net included:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Interest income	$	21			$	7			$	1
Loss on extinguishment of debt	—				—				(73		)
Components of net periodic benefit cost other than service cost	(18		)		(32		)		(18		)
Reserve for Unsecured Creditors litigation	—				(10		)		(300		)
Costs associated with acquisitions	(14		)		(8		)		—
Contingent consideration liability fair value adjustment	(23		)		14				(3		)
Other, net	36				8				9
Other income (expense), net	$	2			$	(21	)		$	(384	)

During the year ended December 31, 2018, Aptiv incurred approximately $18 million in transaction costs related to the acquisitions of KUM and Winchester and, as further discussed in Note 17. Derivatives and Hedging Activities, recorded a gain of $4 million on forward contracts entered into in order to hedge portions of the currency risk associated with the cash payment for the acquisition of KUM, which are reflected within costs associated with acquisitions in the above table. Additionally, as further discussed in Note 25. Discontinued Operations, during the year ended December 31, 2018, Aptiv recorded $11 million for certain fees earned pursuant to the transition services agreement in connection with the Separation of the Company’s former Powertrain Systems segment.

As further discussed in Note 13. Commitments and Contingencies, during the three months ended June 30, 2017, Aptiv and the plaintiffs reached an agreement to settle the Unsecured Creditors litigation for $310 million, which was subsequently approved by the Bankruptcy Court. In July 2017, the Company paid the $310 million settlement pursuant to the terms of the settlement agreement. In accordance with the terms of the settlement agreement, the Company recorded a net incremental charge of $10 million to its previously recorded reserve of $300 million to other expense during the year ended December 31, 2017. Also during the year ended December 31, 2017, Aptiv incurred approximately $8 million in transaction costs related to the acquisition of nuTonomy.

During the year ended December 31, 2016, Aptiv recorded a reserve of $300 million for the Unsecured Creditors litigation. As further discussed in Note 11. Debt, during the year ended December 31, 2016, Aptiv redeemed for cash the entire $800 million aggregate principal amount outstanding of the 2013 Senior Notes, resulting in a loss on debt extinguishment of approximately $70 million. Aptiv also recorded a loss on debt extinguishment of $3 million during the year ended December 31, 2016 in conjunction with the 2016 amendment to the Credit Agreement, as further discussed in Note 11. Debt. Additionally, as further discussed in Note 25. Discontinued Operations, during the year ended December 31, 2016, Aptiv recorded $8 million for certain fees earned pursuant to the transition services agreement in connection with the sale of the Company’s wholly owned Thermal Systems business.

20. ACQUISITIONS AND DIVESTITURES

Acquisition of Winchester Interconnect

On October 24, 2018, Aptiv acquired 100% of the equity interests of Winchester Interconnect (“Winchester”), a leading provider of custom engineered interconnect solutions for harsh environment applications, for total consideration of $682 million. The results of operations of Winchester are reported within the Signal and Power Solutions segment from the date of acquisition. The Company acquired Winchester utilizing cash on hand and short-term borrowings.

The acquisition was accounted for as a business combination, with the total purchase price allocated on a preliminary basis using information available, in the fourth quarter of 2018. The preliminary purchase price and related allocation to the acquired net assets of Winchester based on their estimated fair values is shown below (in millions):

Assets acquired and liabilities assumed

Purchase price, cash consideration, net of cash acquired	$	682
Property, plant and equipment	$	31
Intangible assets	233
Other assets, net	25
Identifiable net assets acquired	289
Goodwill resulting from purchase	393
Total purchase price allocation	$	682

Intangible assets include $187 million recognized for the fair value of customer-based assets with estimated useful lives of approximately 9 years, $9 million of technology-related assets with estimated useful lives of approximately 5 years and $37 million recognized for the fair value of the acquired trade name, which has an indefinite useful life. The estimated fair value of these assets was based on third-party valuations and management’s estimates, generally utilizing income and market approaches. Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce of Winchester, and is not deductible for tax purposes.

The purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding liabilities assumed, including, but not limited to, contingent liabilities, revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals and valuations related to property, plant and equipment and intangible assets, and certain tax attributes.

The pro forma effects of this acquisition would not materially impact the Company’s reported results for any period presented, and as a result no pro forma financial statements were presented.

Acquisition of KUM

On June 14, 2018, Aptiv acquired 100% of the equity interests of KUM, a specialized manufacturer of connectors for the automotive industry, for total consideration of $526 million. The results of operations of KUM are reported within the Signal and Power Solutions segment from the date of acquisition. The Company acquired KUM utilizing cash on hand.

The acquisition was accounted for as a business combination, with the total purchase price allocated on a preliminary basis using information available, in the second quarter of 2018. Minor adjustments were recorded to the purchase price, goodwill and other assets purchased and liabilities assumed, from the amounts disclosed as of June 30, 2018. These adjustments were not significant for any period presented after the acquisition date. The preliminary purchase price and related allocation to the acquired net assets of KUM based on their estimated fair values is shown below (in millions):

Assets acquired and liabilities assumed

Purchase price, cash consideration, net of cash acquired	$	515
Debt and pension liabilities assumed	11
Total consideration, net of cash acquired	$	526
Property, plant and equipment	$	121
Intangible assets	110
Other assets, net	31
Identifiable net assets acquired	262
Goodwill resulting from purchase	264
Total purchase price allocation	$	526

Intangible assets primarily include amounts recognized for the fair value of customer-based assets, which will be amortized over their estimated useful lives of approximately 9 years. The estimated fair value of these assets was based on third-party valuations and management’s estimates, generally utilizing income and market approaches. Goodwill recognized in

this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce of KUM, and is not deductible for tax purposes.

The purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding liabilities assumed, including, but not limited to, contingent liabilities, revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals and valuations related to property, plant and equipment and intangible assets, and certain tax attributes.

The pro forma effects of this acquisition would not materially impact the Company’s reported results for any period presented, and as a result no pro forma financial statements were presented.

Acquisition of nuTonomy

On November 21, 2017, Aptiv acquired 100% of the equity interests of nuTonomy, Inc. (“nuTonomy”), a leading provider of autonomous driving software and technology, for total consideration of up to $454 million. Of the total consideration, $284 million of the purchase price was paid at closing, subject to certain post-closing adjustments. An additional $109 million of the purchase price will vest to certain selling shareholders in annual installments over a three-year period from the acquisition date, subject to such shareholders’ compliance with certain employment conditions. Of the $109 million, approximately $7 million was payable after one year and approximately $51 million is payable after each of the second and third years following the acquisition date. These remaining installments will be recorded as a component of cost of sales ratably over the respective installment period.

Additionally, the total consideration includes a cash payment of up to $54 million contingent upon the achievement of certain performance metrics over a future three-year period. The range of the undiscounted amounts the Company could be required to pay under this arrangement is between $0 and $54 million. As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $24 million. Refer to Note 18. Fair Value of Financial Instruments for additional information regarding the measurement of the contingent consideration liability. The results of operations of nuTonomy are reported within the Advanced Safety and User Experience segment from the date of acquisition. The Company acquired nuTonomy utilizing cash on hand.

The acquisition was accounted for as a business combination, with the total purchase price allocated on a preliminary basis using information available, in the fourth quarter of 2017. The purchase price and related allocation were finalized in the fourth quarter of 2018, and resulted in minor adjustments from the amounts previously disclosed. The purchase price and related allocation to the acquired net assets of nuTonomy based on their estimated fair values is shown below (in millions):

Assets acquired and liabilities assumed

Purchase price, cash consideration, net of cash acquired	$	284
Purchase price, fair value of contingent consideration	24
Total purchase price, net of cash acquired	$	308
Intangible assets	$	102
Other liabilities, net	(35		)
Identifiable net assets acquired	67
Goodwill resulting from purchase	241
Total purchase price allocation	$	308

Intangible assets include $102 million of in-process research and development, which will not be amortized, but tested for impairment until the completion or abandonment of the associated research and development efforts. The estimated fair value of these assets was based on third-party valuations and management’s estimates, generally utilizing income and market approaches. Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition from future growth and potential commercialization opportunities, and is not deductible for tax purposes.

The pro forma effects of this acquisition would not materially impact the Company’s reported results for any period presented, and as a result no pro forma financial statements were presented.

Acquisition of Movimento Group

On January 3, 2017, Aptiv acquired 100% of the equity interests of Movimento Group (“Movimento”), a leading provider of Over-the-Air software and data management for the automotive sector, for a purchase price of $40 million at closing and an additional cash payment of up to $10 million contingent upon the achievement of certain performance metrics over a future 2-

year period. The range of the undiscounted amounts the Company could be required to pay under this arrangement is between $0 and $10 million. As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $8 million. Refer to Note 18. Fair Value of Financial Instruments for additional information regarding the measurement of the contingent consideration liability. The results of operations of Movimento are reported within the Advanced Safety and User Experience segment from the date of acquisition. The Company acquired Movimento utilizing cash on hand.

The acquisition was accounted for as a business combination, with the total purchase price allocated on a preliminary basis using information available, in the first quarter of 2017. The purchase price and related allocation were finalized in the first quarter of 2018, and resulted in no adjustments from the amounts previously disclosed. The purchase price and related allocation to the acquired net assets of Movimento based on their estimated fair values is shown below (in millions):

Assets acquired and liabilities assumed

Purchase price, cash consideration, net of cash acquired	$	40
Purchase price, fair value of contingent consideration	8
Total purchase price, net of cash acquired	$	48
Intangible assets	$	22
Other liabilities, net	(2		)
Identifiable net assets acquired	20
Goodwill resulting from purchase	28
Total purchase price allocation	$	48

Intangible assets include $8 million recognized for the fair value of the acquired trade name, which has an estimated useful life of approximately 25 years, $4 million of customer-based and technology-related assets with estimated useful lives of approximately 7 years and $10 million of in-process research and development, which will not be amortized, but tested for impairment until the completion or abandonment of the associated research and development efforts. The estimated fair value of these assets was based on third-party valuations and management’s estimates, generally utilizing income and market approaches.

The pro forma effects of this acquisition would not materially impact the Company’s reported results for any period presented, and as a result no pro forma financial statements were presented.

Acquisition of PureDepth, Inc.

On March 23, 2016, Aptiv acquired 100% of the equity interests of PureDepth, Inc. (“PureDepth”), a leading provider of 3D display technology, for approximately $15 million. The results of operations of PureDepth are reported within the Advanced Safety and User Experience segment from the date of acquisition. The acquisition was accounted for as a business combination, with the total purchase price allocated on a preliminary basis using information available, in the first quarter of 2016. The purchase price and related allocation were finalized in the first quarter of 2017, and resulted in no adjustments from the amounts previously disclosed. The purchase price and related allocation to the acquired net assets of PureDepth based on their estimated fair values is shown below (in millions):

Assets acquired and liabilities assumed

Purchase price, cash consideration	$	15
Intangible assets	$	10
Goodwill resulting from purchase	5
Total purchase price allocation	$	15

Intangible assets include amounts recognized for the fair value of in-process research and development, which will not be amortized, but tested for impairment until the completion or abandonment of the associated research and development efforts. The fair value of these assets was based on third-party valuations and management’s estimates, generally utilizing income and market approaches.

The pro forma effects of this acquisition would not materially impact the Company’s reported results for any period presented, and as a result no pro forma financial statements were presented.

Sale of Mechatronics Business

On December 30, 2016, Aptiv completed the sale of its Mechatronics business, which was previously reported within the Advanced Safety and User Experience segment, for net cash proceeds of approximately $197 million. The net sales of this business in 2016 prior to the divestiture were approximately $290 million. Aptiv recognized a pre-tax gain on the divestiture of $141 million, net of $29 million of accumulated currency translation losses transferred from accumulated other comprehensive income, which is included in cost of sales in the consolidated statement of operations. The gain on the divestiture, net of tax, was $124 million, resulting in an increase in earnings per diluted share of approximately $0.45 for the year ended December 31, 2016. The results of operations of this business were not significant to the consolidated financial statements for any period presented, and the divestiture did not meet the discontinued operations criteria.

Sale of Thermal Systems Business

On June 30, 2015, Aptiv completed the sale of the Company’s wholly owned Thermal Systems business. On September 24, 2015, Aptiv completed the sale of its interest in its KDAC joint venture, and on March 31, 2016, Aptiv completed the sale of its interest in its SDAAC joint venture. Aptiv’s interests in the SDAAC and KDAC joint ventures were previously reported within the Thermal Systems segment. Accordingly, the results of the Thermal Systems business are classified as discontinued operations for all periods presented. Refer to Note 25. Discontinued Operations for further disclosure related to the Company’s discontinued operations, including details of the divestiture transactions.

Technology Investments

The Company has made technology investments in certain non-consolidated affiliates for ownership interests of less than 20%, which are accounted for in accordance with ASU 2016-01, as described in Note 2. Significant Accounting Policies. These investments do not have readily determinable fair values and are measured at cost, less impairments, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer.

During the fourth quarter of 2018, the Company’s Advanced Safety and User Experience segment made a $15 million investment in Affectiva, Inc., a leader in human perception artificial intelligence technology.

During the third quarter of 2017, the Company’s Advanced Safety and User Experience segment made investments in two leading developers of Light Detection and Ranging (“LIDAR”) technology, a $15 million investment in Innoviz Technologies and a $10 million investment in LeddarTech, Inc.

During the second quarter of 2017, the Company’s Signal and Power Solutions segment made a $10 million investment in Valens Semiconductor Ltd., a leading provider of signal processing technology for high frequency data transmission of connected car content. During the first quarter of 2017, the Company’s Advanced Safety and User Experience segment made a $15 million investment in Otonomo Technologies Ltd., the developer of a connected car data marketplace.

Refer to Note 5. Investments in Affiliates for further information regarding the Company’s technology investments.

21. SHARE-BASED COMPENSATION

Long Term Incentive Plan

The PLC LTIP allows for the grant of awards of up to 25,665,448 ordinary shares for long-term compensation. The PLC LTIP is designed to align the interests of management and shareholders. The awards can be in the form of shares, options, stock appreciation rights, restricted stock, RSUs, performance awards, and other share-based awards to the employees, directors, consultants and advisors of the Company. The Company has awarded annual long-term grants of RSUs under the PLC LTIP in each year from 2012 to 2018 in order to align management compensation with Aptiv’s overall business strategy. The Company has competitive and market-appropriate ownership requirements. All of the RSUs granted under the PLC LTIP are eligible to receive dividend equivalents for any dividend paid from the grant date through the vesting date. Dividend equivalents are generally paid out in ordinary shares upon vesting of the underlying RSUs. Historical amounts disclosed within this note include amounts attributable to the Company’s discontinued operations, unless otherwise noted, and for activity prior to December 4, 2017 represent awards based on shares of Delphi Automotive PLC.

In connection with the Separation, in 2017 the Company made adjustments to the number of unvested RSUs with the intention of preserving the intrinsic value of the recipient’s awards prior to the Separation. Accordingly, the number of RSUs underlying each unvested award outstanding as of the date of the Separation was multiplied by a factor of 1.17, and the related grant date fair value was divided by a factor of 1.17, which resulted in no increase in the intrinsic value of awards outstanding. The RSUs continue to vest in accordance with their original vesting period. These adjustments to the Company’s share-based compensation awards did not result in additional compensation expense.

RSUs that were held by employees who transferred to Delphi Technologies in connection with the Separation were canceled and replaced by awards issued by Delphi Technologies. Employees remaining with the Company did not receive share-based compensation awards of Delphi Technologies as a result of the spin-off. Except for the conversion of awards, the material terms of the awards remained unchanged.

Board of Director Awards

On April 23, 2015, Aptiv granted 20,347 RSUs to the Board of Directors at a grant date fair value of approximately $2 million. The grant date fair value was determined based on the closing price of the Company’s ordinary shares on April 23, 2015. The RSUs vested on April 27, 2016, and 24,542 ordinary shares, which included shares issued in connection with dividend equivalents, were issued to members of the Board of Directors at a fair value of approximately $2 million. 1,843 ordinary shares were withheld to cover the minimum U.K. withholding taxes.

On April 28, 2016, Aptiv granted 27,238 RSUs to the Board of Directors at a grant date fair value of approximately $2 million. The grant date fair value was determined based on the closing price of the Company’s ordinary shares on April 28, 2016. The RSUs vested on April 26, 2017, and 26,580 ordinary shares, which included shares issued in connection with dividend equivalents, were issued to members of the Board of Directors at a fair value of approximately $2 million. 3,472 ordinary shares were withheld to cover the minimum U.K. withholding taxes.

On April 27, 2017, Aptiv granted 26,782 RSUs to the Board of Directors at a grant date fair value of approximately $2 million. The grant date fair value was determined based on the closing price of the Company’s ordinary shares on April 27, 2017. The RSUs vested on April 25, 2018, and 24,642 ordinary shares, which included shares issued in connection with dividend equivalents, were issued to members of the Board of Directors at a fair value of approximately $2 million. 2,649 ordinary shares were withheld to cover the minimum withholding taxes.

On April 26, 2018, Aptiv granted 22,676 RSUs to the Board of Directors at a grant date fair value of approximately $2 million. The grant date fair value was determined based on the closing price of the Company’s ordinary shares on April 26, 2018. The RSUs will vest on April 24, 2019, the day before the 2019 annual meeting of shareholders.

Executive Awards

Aptiv has made annual grants of RSUs to its executives in February of each year beginning in 2012. These awards include a time-based vesting portion and a performance-based vesting portion, as well as continuity awards in certain years. The time-based RSUs, which make up 25% of the awards for Aptiv’s officers and 50% for Aptiv’s other executives, vest ratably over three years beginning on the first anniversary of the grant date. The performance-based RSUs, which make up 75% of the awards for Aptiv’s officers and 50% for Aptiv’s other executives, vest at the completion of a three-year performance period if certain targets are met. Each executive will receive between 0% and 200% of his or her target performance-based award based on the Company’s performance against established company-wide performance metrics, which are:

Metric	2016 - 2018 Grants			2014 - 2015 Grants
Average return on net assets (1)	50%			50%
Cumulative net income	25%			N/A
Cumulative earnings per share (2)	N/A			30%
Relative total shareholder return (3)	25%			20%

(1)	Average return on net assets is measured by tax-affected operating income divided by average net working capital plus average net property, plant and equipment for each calendar year during the respective performance period.

(2)	Cumulative earnings per share is measured by net income attributable to Aptiv divided by the weighted average number of diluted shares outstanding for the respective three-year performance period.

(3)

Relative total shareholder return is measured by comparing the average closing price per share of the Company’s ordinary shares for the specified trading days in the fourth quarter of the end of the performance period to the average closing price per share of the Company’s ordinary shares for the specified trading days in the fourth quarter of the year preceding the grant, including dividends, and assessed against a comparable measure of competitor and peer group companies.

The details of the executive grants were as follows:

Grant Date		RSUs Granted			Grant Date Fair Value				Time-Based Award Vesting Dates		Performance-Based Award Vesting Date
		(in millions)
February 2014		0.78			$	53			Annually on anniversary of grant date, 2015 - 2017		December 31, 2016
February 2015		0.90			76				Annually on anniversary of grant date, 2016 - 2018		December 31, 2017
February 2016		0.71			48				Annually on anniversary of grant date, 2017 - 2019		December 31, 2018
February 2017		0.80			63				Annually on anniversary of grant date, 2018 - 2020		December 31, 2019
February 2018		0.63			61				Annually on anniversary of grant date, 2019 - 2021		December 31, 2020

Any new executives hired after the annual executive RSU grant date may be eligible to participate in the PLC LTIP. Any off cycle grants made for new hires are valued at their grant date fair value based on the closing price of the Company’s ordinary shares on the date of such grant.

The grant date fair value of the RSUs is determined based on the target number of awards issued, the closing price of the Company’s ordinary shares on the date of the grant of the award, including an estimate for forfeitures, and a contemporaneous valuation performed by an independent valuation specialist with respect to the relative total shareholder return awards.

In February 2016, under the time-based vesting terms of the 2013, 2014 and 2015 grants, 395,744 ordinary shares were issued to Aptiv executives at a fair value of approximately $24 million, of which 146,726 ordinary shares were withheld to cover minimum withholding taxes. The performance-based RSUs associated with the 2013 grant vested at the completion of a three-year performance period on December 31, 2015, and in the first quarter of 2016, 1,265,339 ordinary shares were issued to executives at a fair value of approximately $77 million, of which 512,371 ordinary shares were withheld to cover minimum withholding taxes.

In February 2017, under the time-based vesting terms of the 2014, 2015 and 2016 grants, 248,008 ordinary shares were issued to Aptiv executives at a fair value of approximately $19 million, of which 88,807 ordinary shares were withheld to cover minimum withholding taxes. The performance-based RSUs associated with the 2014 grant vested at the completion of a three-year performance period on December 31, 2016, and in the first quarter of 2017, 797,210 ordinary shares were issued to executives at a fair value of approximately $60 million, of which 324,555 ordinary shares were withheld to cover minimum withholding taxes.

In February 2018, under the time-based vesting terms of the 2015, 2016 and 2017 grants, 285,344 ordinary shares were issued to Aptiv executives at a fair value of approximately $26 million, of which 102,045 ordinary shares were withheld to cover minimum withholding taxes. The performance-based RSUs associated with the 2015 grant vested at the completion of a three-year performance period on December 31, 2017, and in the first quarter of 2018, 640,239 ordinary shares were issued to executives at a fair value of approximately $59 million, of which 240,483 ordinary shares were withheld to cover minimum withholding taxes.

A summary of RSU activity, including award grants, vesting and forfeitures is provided below. For periods prior to the Separation, RSU activity and the corresponding weighted average grant date fair value is presented based on the awards of Delphi Automotive PLC RSUs.

	RSUs			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested, January 1, 2016	1,980			$	74.66
Granted	1,219			68.35
Vested	(1,241	)		65.91
Forfeited	(218	)		74.10
Nonvested, December 31, 2016	1,740			76.54
Granted	1,245			82.02
Vested	(980	)		73.01
Forfeited	(195	)		76.18
Adjustment due to Delphi Technologies Separation (1)	(3	)
Nonvested, December 31, 2017 (2)	1,807			68.66
Granted	1,242			87.08
Vested	(968	)		65.83
Forfeited	(202	)		77.64
Nonvested, December 31, 2018	1,879			81.24

(1)	Reflects the cancellation of awards outstanding as of the Distribution Date held by Delphi Technologies employees, which were converted to Delphi Technologies RSUs as part of the Separation, and the conversion of unvested RSUs for Aptiv employees in accordance with the conversion factor described above.

(2)	Nonvested RSUs and the corresponding weighted average grant date fair value as of December 31, 2017 presented on an Aptiv basis using the conversion factor described above in connection with the Separation.

As of December 31, 2018, there were approximately 374,000 Aptiv performance-based RSUs, with a weighted average grant date fair value of $57.56, that were vested but not yet distributed.

Aptiv recognized compensation expense from continuing operations of $58 million ($57 million, net of tax), $62 million ($56 million, net of tax) and $62 million ($54 million net of tax) based on the Company’s best estimate of ultimate performance against the respective targets during the years ended December 31, 2018, 2017 and 2016, respectively. Aptiv will continue to recognize compensation expense, based on the grant date fair value of the awards applied to the Company’s best estimate of ultimate performance against the respective targets, over the requisite vesting periods of the awards. Based on the grant date fair value of the awards and the Company’s best estimate of ultimate performance against the respective targets as of December 31, 2018, unrecognized compensation expense on a pre-tax basis of approximately $89 million is anticipated to be recognized over a weighted average period of approximately 2 years. For the years ended December 31, 2018, 2017 and 2016, respectively, approximately $35 million, $33 million and $40 million of cash was paid and reflected as a financing activity in the statements of cash flows related to the tax withholding for vested RSUs.

22. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Basis of Presentation

Notes Issued by the Subsidiary Issuer

As described in Note 11. Debt, Aptiv Corporation (the “Subsidiary Issuer/Guarantor”), a 100% owned subsidiary of Aptiv PLC (the “Parent”), issued the 2013 Senior Notes and the 2014 Senior Notes, both of which were registered under the Securities Act, and is the borrower of obligations under the Credit Agreement. The 2013 Senior Notes were subsequently redeemed and extinguished in September 2016. The 2014 Senior Notes and obligations under the Credit Agreement are, and prior to their redemption, the 2013 Senior Notes were, fully and unconditionally guaranteed by Aptiv PLC and certain of Aptiv PLC’s direct and indirect subsidiary companies, which are directly or indirectly 100% owned by Aptiv PLC (the “Subsidiary Guarantors”), on a joint and several basis, subject to customary release provisions (other than in the case of Aptiv PLC). All other consolidated direct and indirect subsidiaries of Aptiv PLC (“Non-Guarantor Subsidiaries”) are not subject to the guarantees.

Notes Issued by the Parent

As described in Note 11. Debt, Aptiv PLC issued the 2015 Senior Notes, the 2015 Euro-denominated Senior Notes, the 2016 Euro-denominated Senior Notes and the 2016 Senior Notes, each of which were registered under the Securities Act. Each series of these senior notes are fully and unconditionally guaranteed on a joint and several basis, subject to customary release provisions, by certain of Aptiv PLC’s direct and indirect subsidiary companies (the “Subsidiary Guarantors”), and Aptiv Corporation, each of which are directly or indirectly 100% owned by Aptiv PLC. All other Non-Guarantor Subsidiaries are not subject to the guarantees.

In lieu of providing separate audited financial statements for the Guarantors, the Company has included the accompanying condensed consolidating financial statements. These condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the parent’s share of the subsidiary’s cumulative results of operations, capital contributions and distributions and other equity changes. The Non-Guarantor Subsidiaries are combined in the condensed consolidating financial statements. The principal elimination entries are to eliminate the investments in subsidiaries and intercompany balances and transactions.

The historical presentation of the supplemental guarantor and non-guarantor condensed consolidating financial statements have been revised to be consistent with the presentation of the entities that comprise the structure of the Subsidiary Guarantors as of December 31, 2018.

Statement of Operations Year Ended December 31, 2018

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net sales	$	—			$	—			$	—			$	14,435			$	—			$	14,435
Operating expenses:
Cost of sales	—				—				—				11,706				—				11,706
Selling, general and administrative	27				—				—				966				—				993
Amortization	—				—				—				154				—				154
Restructuring	—				—				—				109				—				109
Total operating expenses	27				—				—				12,935				—				12,962
Operating (loss) income	(27		)		—				—				1,500				—				1,473
Interest (expense) income	(141		)		(147		)		(200		)		(25		)		372				(141		)
Other income (expense), net	—				1				80				293				(372		)		2
(Loss) income from continuing operations before income taxes and equity income	(168		)		(146		)		(120		)		1,768				—				1,334
Income tax benefit (expense)	—				—				27				(277		)		—				(250		)
(Loss) income from continuing operations before equity income	(168		)		(146		)		(93		)		1,491				—				1,084
Equity in net income of affiliates	—				—				—				23				—				23
Equity in net income (loss) of subsidiaries	1,235				1,221				33				—				(2,489		)		—
Income (loss) from continuing operations	1,067				1,075				(60		)		1,514				(2,489		)		1,107
Income from discontinued operations, net of tax	—				—				—				—				—				—
Net income (loss)	1,067				1,075				(60		)		1,514				(2,489		)		1,107
Net income attributable to noncontrolling interest	—				—				—				40				—				40
Net income (loss) attributable to Aptiv	$	1,067			$	1,075			$	(60	)		$	1,474			$	(2,489	)		$	1,067

Statement of Operations Year Ended December 31, 2017

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net sales	$	—			$	—			$	—			$	12,884			$	—			$	12,884
Operating expenses:
Cost of sales	—				—				—				10,270				—				10,270
Selling, general and administrative	137				—				—				815				—				952
Amortization	—				—				—				117				—				117
Restructuring	—				—				—				129				—				129
Total operating expenses	137				—				—				11,331				—				11,468
Operating (loss) income	(137		)		—				—				1,553				—				1,416
Interest (expense) income	(255		)		(24		)		(174		)		(11		)		324				(140		)
Other income (expense), net	—				144				13				146				(324		)		(21		)
(Loss) income from continuing operations before income taxes and equity income	(392		)		120				(161		)		1,688				—				1,255
Income tax benefit (expense)	—				—				59				(282		)		—				(223		)
(Loss) income from continuing operations before equity income	(392		)		120				(102		)		1,406				—				1,032
Equity in net income of affiliates	—				—				—				31				—				31
Equity in net income (loss) of subsidiaries	1,747				1,623				62				—				(3,432		)		—
Income (loss) from continuing operations	1,355				1,743				(40		)		1,437				(3,432		)		1,063
Income from discontinued operations, net of tax	—				—				—				365				—				365
Net income (loss)	1,355				1,743				(40		)		1,802				(3,432		)		1,428
Net income attributable to noncontrolling interest	—				—				—				73				—				73
Net income (loss) attributable to Aptiv	$	1,355			$	1,743			$	(40	)		$	1,729			$	(3,432	)		$	1,355

Statement of Operations Year Ended December 31, 2016

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net sales	$	—			$	—			$	—			$	12,274			$	—			$	12,274
Operating expenses:
Cost of sales	—				—				—				9,527				—				9,527
Selling, general and administrative	87				—				—				837				—				924
Amortization	—				—				—				117				—				117
Restructuring	—				—				—				167				—				167
Total operating expenses	87				—				—				10,648				—				10,735
Operating (loss) income	(87		)		—				—				1,626				—				1,539
Interest (expense) income	(208		)		(23		)		(202		)		(67		)		345				(155		)
Other (expense) income, net	(5		)		(163		)		(11		)		140				(345		)		(384		)
(Loss) income from continuing operations before income taxes and equity income	(300		)		(186		)		(213		)		1,699				—				1,000
Income tax benefit (expense)	60				—				78				(305		)		—				(167		)
(Loss) income from continuing operations before equity income	(240		)		(186		)		(135		)		1,394				—				833
Equity in net income of affiliates	—				—				—				35				—				35
Equity in net income (loss) of subsidiaries	1,497				1,531				359				—				(3,387		)		—
Income (loss) from continuing operations	1,257				1,345				224				1,429				(3,387		)		868
Income from discontinued operations, net of tax	—				—				—				458				—				458
Net income (loss)	1,257				1,345				224				1,887				(3,387		)		1,326
Net income attributable to noncontrolling interest	—				—				—				69				—				69
Net income (loss) attributable to Aptiv	$	1,257			$	1,345			$	224			$	1,818			$	(3,387	)		$	1,257

Statement of Comprehensive Income Year Ended December 31, 2018

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net income (loss)	$	1,067			$	1,075			$	(60	)		$	1,514			$	(2,489	)		$	1,107
Other comprehensive income (loss):
Currency translation adjustments	67				—				—				(261		)		—				(194		)
Net change in unrecognized loss on derivative instruments, net of tax	—				—				—				(39		)		—				(39		)
Employee benefit plans adjustment, net of tax	—				—				—				2				—				2
Other comprehensive income (loss)	67				—				—				(298		)		—				(231		)
Equity in other comprehensive (loss) income of subsidiaries	(290		)		(177		)		25				—				442				—
Comprehensive income (loss)	844				898				(35		)		1,216				(2,047		)		876
Comprehensive income attributable to noncontrolling interests	—				—				—				32				—				32
Comprehensive income (loss) attributable to Aptiv	$	844			$	898			$	(35	)		$	1,184			$	(2,047	)		$	844

Statement of Comprehensive Income Year Ended December 31, 2017

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net income (loss)	$	1,355			$	1,743			$	(40	)		$	1,802			$	(3,432	)		$	1,428
Other comprehensive (loss) income:
Currency translation adjustments	(177		)		—				—				492				—				315
Net change in unrecognized gain on derivative instruments, net of tax	—				—				—				15				—				15
Employee benefit plans adjustment, net of tax	—				—				—				11				—				11
Other comprehensive (loss) income	(177		)		—				—				518				—				341
Equity in other comprehensive income (loss) of subsidiaries	508				533				31				—				(1,072		)		—
Comprehensive income (loss)	1,686				2,276				(9		)		2,320				(4,504		)		1,769
Comprehensive income attributable to noncontrolling interests	—				—				—				83				—				83
Comprehensive income (loss) attributable to Aptiv	$	1,686			$	2,276			$	(9	)		$	2,237			$	(4,504	)		$	1,686

Statement of Comprehensive Income Year Ended December 31, 2016

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net income (loss)	$	1,257			$	1,345			$	224			$	1,887			$	(3,387	)		$	1,326
Other comprehensive income (loss):
Currency translation adjustments	65				—				—				(212		)		—				(147		)
Net change in unrecognized gain on derivative instruments, net of tax	—				—				—				95				—				95
Employee benefit plans adjustment, net of tax	—				—				—				(139		)		—				(139		)
Other comprehensive income (loss)	65				—				—				(256		)		—				(191		)
Equity in other comprehensive (loss) income of subsidiaries	(247		)		(243		)		2				—				488				—
Comprehensive income (loss)	1,075				1,102				226				1,631				(2,899		)		1,135
Comprehensive income attributable to noncontrolling interests	—				—				—				60				—				60
Comprehensive income (loss) attributable to Aptiv	$	1,075			$	1,102			$	226			$	1,571			$	(2,899	)		$	1,075

Balance Sheet as of December 31, 2018

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	1			$	—			$	—			$	566			$	—			$	567
Restricted cash	—				—				—				1				—				1
Accounts receivable, net	—				—				—				2,487				—				2,487
Intercompany receivables, current	54				16				3,114				4,201				(7,385		)		—
Inventories	—				—				—				1,277				—				1,277
Other current assets	—				—				—				445				—				445
Total current assets	55				16				3,114				8,977				(7,385		)		4,777
Long-term assets:
Intercompany receivables, long-term	—				—				768				1,424				(2,192		)		—
Property, net	—				—				—				3,179				—				3,179
Investments in affiliates	—				—				—				99				—				99
Investments in subsidiaries	7,392				7,860				1,156				—				(16,408		)		—
Intangible assets, net	—				—				—				3,904				—				3,904
Other long-term assets	—				—				6				515				—				521
Total long-term assets	7,392				7,860				1,930				9,121				(18,600		)		7,703
Total assets	$	7,447			$	7,876			$	5,044			$	18,098			$	(25,985	)		$	12,480
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	—			$	—			$	25			$	281			$	—			$	306
Accounts payable	2				—				—				2,332				—				2,334
Intercompany payables, current	791				4,479				2,115				—				(7,385		)		—
Accrued liabilities	31				—				11				1,012				—				1,054
Total current liabilities	824				4,479				2,151				3,625				(7,385		)		3,694
Long-term liabilities:
Long-term debt	2,953				—				1,055				30				—				4,038
Intercompany payables, long-term	—				—				1,296				896				(2,192		)		—
Pension benefit obligations	—				—				—				445				—				445
Other long-term liabilities	—				—				—				633				—				633
Total long-term liabilities	2,953				—				2,351				2,004				(2,192		)		5,116
Total liabilities	3,777				4,479				4,502				5,629				(9,577		)		8,810
Total Aptiv shareholders’ equity	3,670				3,397				542				12,258				(16,408		)		3,459
Noncontrolling interest	—				—				—				211				—				211
Total shareholders’ equity	3,670				3,397				542				12,469				(16,408		)		3,670
Total liabilities and shareholders’ equity	$	7,447			$	7,876			$	5,044			$	18,098			$	(25,985	)		$	12,480

Balance Sheet as of December 31, 2017

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	1			$	—			$	—			$	1,595			$	—			$	1,596
Restricted cash	—				—				—				1				—				1
Accounts receivable, net	—				—				—				2,440				—				2,440
Intercompany receivables, current	50				16				82				9,867				(10,015		)		—
Inventories	—				—				—				1,083				—				1,083
Other current assets	—				—				—				521				—				521
Total current assets	51				16				82				15,507				(10,015		)		5,641
Long-term assets:
Intercompany receivables, long-term	—				—				768				1,366				(2,134		)		—
Property, net	—				—				—				2,804				—				2,804
Investments in affiliates	—				—				—				91				—				91
Investments in subsidiaries	11,987				11,269				1,925				—				(25,181		)		—
Intangible assets, net	—				—				—				3,163				—				3,163
Other long-term assets	60				—				8				402				—				470
Total long-term assets	12,047				11,269				2,701				7,826				(27,315		)		6,528
Total assets	$	12,098			$	11,285			$	2,783			$	23,333			$	(37,330	)		$	12,169
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	—			$	—			$	13			$	4			$	—			$	17
Accounts payable	2				—				—				2,225				—				2,227
Intercompany payables, current	5,689				1,736				1,032				1,558				(10,015		)		—
Accrued liabilities	91				—				10				1,195				—				1,296
Total current liabilities	5,782				1,736				1,055				4,982				(10,015		)		3,540
Long-term liabilities:
Long-term debt	3,017				—				1,078				37				—				4,132
Intercompany payables, long-term	—				—				1,297				837				(2,134		)		—
Pension benefit obligations	—				—				—				454				—				454
Other long-term liabilities	—				—				—				526				—				526
Total long-term liabilities	3,017				—				2,375				1,854				(2,134		)		5,112
Total liabilities	8,799				1,736				3,430				6,836				(12,149		)		8,652
Total Aptiv shareholders’ equity	3,299				9,549				(647		)		16,279				(25,181		)		3,299
Noncontrolling interest	—				—				—				218				—				218
Total shareholders’ equity	3,299				9,549				(647		)		16,497				(25,181		)		3,517
Total liabilities and shareholders’ equity	$	12,098			$	11,285			$	2,783			$	23,333			$	(37,330	)		$	12,169

Statement of Cash Flows for the Year Ended December 31, 2018

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net cash (used in) provided by operating activities from continuing operations	$	(170	)		$	—			$	—			$	1,810			$	—			$	1,640
Net cash used in operating activities from discontinued operations	—				—				—				(12		)		—				(12		)
Net cash (used in) provided by operating activities	(170		)		—				—				1,798				—				1,628
Cash flows from investing activities:
Capital expenditures	—				—				—				(846		)		—				(846		)
Proceeds from sale of property / investments	—				—				—				13				—				13
Cost of business acquisitions, net of cash acquired	—				—				—				(1,197		)		—				(1,197		)
Cost of technology investments	—				—				—				(16		)		—				(16		)
Return of investment from subsidiaries	5,879				4,971				—				—				(10,850		)		—
Settlement of derivatives	—				—				—				(2		)		—				(2		)
Loans to affiliates	—				—				—				(3,629		)		3,629				—
Repayments of loans from affiliates	—				—				—				7,598				(7,598		)		—
Investments in subsidiaries	(100		)		—				—				—				100				—
Net cash provided by (used in) investing activities from continuing operations	5,779				4,971				—				1,921				(14,719		)		(2,048		)
Net cash used in investing activities from discontinued operations	—				—				—				—				—				—
Net cash provided by (used in) investing activities	5,779				4,971				—				1,921				(14,719		)		(2,048		)
Cash flows from financing activities:
Net proceeds under other short-term debt agreements	—				—				—				255				—				255
Contingent consideration and deferred acquisition purchase price payments	—				—				—				(13		)		—				(13		)
Dividend payments of consolidated affiliates to minority shareholders	—				—				—				(30		)		—				(30		)
Proceeds from borrowings from affiliates	1,002				2,627				—				—				(3,629		)		—
Payments on borrowings from affiliates	(5,879		)		(1,719		)		—				—				7,598				—
Investment from parent	—				—				—				100				(100		)		—
Dividends paid to affiliates	—				(5,879		)		—				(4,971		)		10,850				—
Repurchase of ordinary shares	(499		)		—				—				—				—				(499		)
Distribution of cash dividends	(233		)		—				—				—				—				(233		)
Taxes withheld and paid on employees’ restricted share awards	—				—				—				(35		)		—				(35		)
Net cash (used in) provided by financing activities	(5,609		)		(4,971		)		—				(4,694		)		14,719				(555		)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash	—				—				—				(54		)		—				(54		)
Decrease in cash, cash equivalents and restricted cash	—				—				—				(1,029		)		—				(1,029		)
Cash, cash equivalents and restricted cash at beginning of year	1				—				—				1,596				—				1,597
Cash, cash equivalents and restricted cash at end of year	$	1			$	—			$	—			$	567			$	—			$	568
Cash, cash equivalents and restricted cash of discontinued operations	$	—			$	—			$	—			$	—			$	—			$	—
Cash, cash equivalents and restricted cash of continuing operations	$	1			$	—			$	—			$	567			$	—			$	568

Statement of Cash Flows for the Year Ended December 31, 2017

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net cash (used in) provided by operating activities from continuing operations	$	(93	)		$	(184	)		$	—			$	1,383			$	—			$	1,106
Net cash provided by operating activities from discontinued operations	—				—				—				362				—				362
Net cash (used in) provided by operating activities	(93		)		(184		)		—				1,745				—				1,468
Cash flows from investing activities:
Capital expenditures	—				—				—				(698		)		—				(698		)
Proceeds from sale of property / investments	—				—				—				7				—				7
Cost of business acquisitions, net of cash acquired	—				—				—				(324		)		—				(324		)
Cost of technology investments	—				—				—				(50		)		—				(50		)
Settlement of derivatives	—				—				—				(28		)		—				(28		)
Loans to affiliates	—				(126		)		—				(986		)		1,112				—
Repayments of loans from affiliates	—				—				—				1,345				(1,345		)		—
Net cash used in investing activities from continuing operations	—				(126		)		—				(734		)		(233		)		(1,093		)
Net cash used in investing activities from discontinued operations	—				—				—				(159		)		—				(159		)
Net cash used in investing activities	—				(126		)		—				(893		)		(233		)		(1,252		)
Cash flows from financing activities:
Net repayments under other short-term debt agreements	—				—				—				(17		)		—				(17		)
Contingent consideration and deferred acquisition purchase price payments	—				—				—				(24		)		—				(24		)
Dividend payments of consolidated affiliates to minority shareholders	—				—				—				(38		)		—				(38		)
Proceeds from issuance of senior notes, net of issuance costs	—				—				—				796				—				796
Proceeds from borrowings from affiliates	802				310				—				—				(1,112		)		—
Payments on borrowings from affiliates	(1,345		)		—				—				—				1,345				—
Repurchase of ordinary shares	(383		)		—				—				—				—				(383		)
Distribution of cash dividends	(310		)		—				—				—				—				(310		)
Dividend received from spin-off of Delphi Technologies	1,148				—				—				—				—				1,148
Cash transferred from Delphi Technologies related to spin-off	180				—				—				—				—				180
Cash transferred to Delphi Technologies related to spin-off	—				—				—				(863		)		—				(863		)
Taxes withheld and paid on employees’ restricted share awards	—				—				—				(33		)		—				(33		)
Net cash provided by (used in) financing activities	92				310				—				(179		)		233				456
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash	—				—				—				86				—				86
(Decrease) increase in cash, cash equivalents and restricted cash	(1		)		—				—				759				—				758
Cash, cash equivalents and restricted cash at beginning of year	2				—				—				837				—				839
Cash, cash equivalents and restricted cash at end of year	$	1			$	—			$	—			$	1,596			$	—			$	1,597
Cash, cash equivalents and restricted cash of discontinued operations	$	—			$	—			$	—			$	—			$	—			$	—
Cash, cash equivalents and restricted cash of continuing operations	$	1			$	—			$	—			$	1,596			$	—			$	1,597

Statement of Cash Flows for the Year Ended December 31, 2016

	Parent				Subsidiary Guarantors				Subsidiary Issuer/Guarantor				Non-Guarantor Subsidiaries				Eliminations				Consolidated
	(in millions)
Net cash (used in) provided by operating activities from continuing operations	$	(141	)		$	125			$	—			$	1,510			$	—			$	1,494
Net cash provided by operating activities from discontinued operations	—				—				—				447				—				447
Net cash (used in) provided by operating activities	(141		)		125				—				1,957				—				1,941
Cash flows from investing activities:
Capital expenditures	—				—				—				(657		)		—				(657		)
Proceeds from sale of property / investments	—				—				—				19				—				19
Net proceeds from divestiture of discontinued operations	—				—				—				48				—				48
Proceeds from business divestitures	—				—				—				197				—				197
Cost of business acquisitions, net of cash acquired	—				—				(15		)		—				—				(15		)
Cost of technology investments	—				—				(3		)		—				—				(3		)
Settlement of derivatives	—				—				—				(1		)		—				(1		)
Loans to affiliates	—				(979		)		—				(1,346		)		2,325				—
Repayments of loans from affiliates	—				—				—				353				(353		)		—
Investments in subsidiaries	(854		)		—				(350		)		—				1,204				—
Net cash (used in) provided by investing activities from continuing operations	(854		)		(979		)		(368		)		(1,387		)		3,176				(412		)
Net cash used in investing activities from discontinued operations	—				—				—				(166		)		—				(166		)
Net cash (used in) provided by investing activities	(854		)		(979		)		(368		)		(1,553		)		3,176				(578		)
Cash flows from financing activities:
Net repayments under other short-term debt agreements	—				—				—				(34		)		—				(34		)
Repayment of senior notes	—				—				(862		)		—				—				(862		)
Proceeds from issuance of senior notes, net of issuance costs	852				—				—				—				—				852
Contingent consideration and deferred acquisition purchase price payments	—				—				—				(4		)		—				(4		)
Dividend payments of consolidated affiliates to minority shareholders	—				—				—				(42		)		—				(42		)
Proceeds from borrowings from affiliates	1,095				—				1,230				—				(2,325		)		—
Payments on borrowings from affiliates	(353		)		—				—				—				353				—
Investment from parent	350				854				—				—				(1,204		)		—
Repurchase of ordinary shares	(634		)		—				—				—				—				(634		)
Distribution of cash dividends	(317		)		—				—				—				—				(317		)
Taxes withheld and paid on employees’ restricted share awards	—				—				—				(40		)		—				(40		)
Net cash provided by (used in) financing activities	993				854				368				(120		)		(3,176		)		(1,081		)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash	—				—				—				(23		)		—				(23		)
(Decrease) increase in cash, cash equivalents and restricted cash	(2		)		—				—				261				—				259
Cash, cash equivalents and restricted cash at beginning of year	4				—				—				576				—				580
Cash, cash equivalents and restricted cash at end of year	$	2			$	—			$	—			$	837			$	—			$	839
Cash, cash equivalents and restricted cash of discontinued operations	$	—			$	—			$	—			$	101			$	—			$	101
Cash, cash equivalents and restricted cash of continuing operations	$	2			$	—			$	—			$	736			$	—			$	738

23. SEGMENT REPORTING

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

•	Signal and Power Solutions, which includes complete electrical architecture and component products.

•	Advanced Safety and User Experience, which includes component and systems integration expertise in infotainment and connectivity, body controls and security systems, active and passive safety electronics, autonomous driving software and technologies, 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 Aptiv’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, Aptiv 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, gains (losses) on business divestitures and deferred compensation related to acquisitions (“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. Aptiv’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 Aptiv’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 Aptiv, which is the most directly comparable financial measure to Adjusted Operating Income that is prepared in accordance with U.S. GAAP. Segment Adjusted Operating Income, as determined and measured by Aptiv, should also not be compared to similarly titled measures reported by other companies.

As described in Note 25. Discontinued Operations, the Company’s previously reported Powertrain Systems and Thermal Systems segments have 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, and certain original equipment service businesses that were previously included within the Powertrain Systems segment but which was not included in the spin-off, are reported in continuing operations and have been reclassified within the Advanced Safety and User Experience and Signal and Power Solutions segments for all periods presented. Amounts for shared general and administrative operating expenses that were allocated to the Powertrain Systems and Thermal Systems segments in prior periods have been re-allocated to the Company’s reportable operating segments. 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 Aptiv’s segments for the years ended December 31, 2018, 2017 and 2016, as well as balance sheet data as of December 31, 2018 and 2017.

	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other (1)				Total
	(in millions)
For the Year Ended December 31, 2018:
Net sales	$	10,402			$	4,078			$	(45	)		$	14,435
Depreciation and amortization	$	490			$	186			$	—			$	676
Adjusted operating income	$	1,424			$	327			$	—			$	1,751
Operating income (2)	$	1,279			$	194			$	—			$	1,473
Equity income, net of tax	$	23			$	—			$	—			$	23
Net income attributable to noncontrolling interest	$	40			$	—			$	—			$	40
Capital expenditures	$	534			$	245			$	67			$	846

	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other (1)				Total
	(in millions)
For the Year Ended December 31, 2017:
Net sales	$	9,507			$	3,446			$	(69	)		$	12,884
Depreciation and amortization	$	438			$	108			$	—			$	546
Adjusted operating income	$	1,302			$	292			$	—			$	1,594
Operating income (3)	$	1,206			$	210			$	—			$	1,416
Equity income, net of tax	$	31			$	—			$	—			$	31
Net income attributable to noncontrolling interest	$	42			$	—			$	—			$	42
Capital expenditures	$	477			$	196			$	25			$	698

	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other (1)				Total
	(in millions)
For the Year Ended December 31, 2016:
Net sales	$	9,319			$	3,024			$	(69	)		$	12,274
Depreciation and amortization	$	401			$	88			$	—			$	489
Adjusted operating income	$	1,272			$	351			$	—			$	1,623
Operating income (4)	$	1,099			$	440			$	—			$	1,539
Equity income, net of tax	$	35			$	—			$	—			$	35
Net income attributable to noncontrolling interest	$	34			$	—			$	—			$	34
Capital expenditures	$	458			$	131			$	68			$	657

(1)	Eliminations and Other includes the elimination of inter-segment transactions. Capital expenditures amounts are attributable to corporate administrative and support functions, including corporate headquarters and certain technical centers.

(2)	Includes charges recorded in 2018 related to costs associated with employee termination benefits and other exit costs of $90 million for Signal and Power Solutions and $19 million for Advanced Safety and User Experience.

(3)	Includes charges recorded in 2017 related to costs associated with employee termination benefits and other exit costs of $67 million for Signal and Power Solutions and $62 million for Advanced Safety and User Experience.

(4)	Includes a pre-tax gain of $141 million from the divestiture of the Advanced Safety and User Experience Mechatronics business, as well as charges recorded in 2016 related to costs associated with employee termination benefits and other exit costs of $125 million for Signal and Power Solutions and $42 million for Advanced Safety and User Experience.

	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other (1)				Total
	(in millions)
Balance as of December 31, 2018:
Investment in affiliates	$	99			$	—			$	—			$	99
Goodwill	$	2,180			$	344			$	—			$	2,524
Total segment assets	$	11,620			$	5,024			$	(4,164	)		$	12,480
Balance as of December 31, 2017:
Investment in affiliates	$	91			$	—			$	—			$	91
Goodwill	$	1,594			$	350			$	—			$	1,944
Total segment assets	$	9,833			$	4,225			$	(1,889	)		$	12,169

(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, gains (losses) on business divestitures and deferred compensation related to acquisitions. The reconciliations of Adjusted Operating Income to net income attributable to Aptiv for the years ended December 31, 2018, 2017 and 2016 are as follows:

	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other				Total
	(in millions)
For the Year Ended December 31, 2018:
Adjusted operating income	$	1,424			$	327			$	—			$	1,751
Restructuring	(90		)		(19		)		—				(109		)
Other acquisition and portfolio project costs	(54		)		(24		)		—				(78		)
Asset impairments	(1		)		(33		)		—				(34		)
Deferred compensation related to nuTonomy acquisition	—				(57		)		—				(57		)
Operating income	$	1,279			$	194			$	—			1,473
Interest expense													(141		)
Other income, net													2
Income from continuing operations before income taxes and equity income													1,334
Income tax expense													(250		)
Equity income, net of tax													23
Income from continuing operations													1,107
Income from discontinued operations, net of tax													—
Net income													1,107
Net income attributable to noncontrolling interest													40
Net income attributable to Aptiv													$	1,067

	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other				Total
	(in millions)
For the Year Ended December 31, 2017:
Adjusted operating income	$	1,302			$	292			$	—			$	1,594
Restructuring	(67		)		(62		)		—				(129		)
Other acquisition and portfolio project costs	(21		)		(7		)		—				(28		)
Asset impairments	(8		)		(1		)		—				(9		)
Deferred compensation related to nuTonomy acquisition	—				(12		)		—				(12		)
Operating income	$	1,206			$	210			$	—			1,416
Interest expense													(140		)
Other expense, net													(21		)
Income from continuing operations before income taxes and equity income													1,255
Income tax expense													(223		)
Equity income, net of tax													31
Income from continuing operations													1,063
Income from discontinued operations, net of tax													365
Net income													1,428
Net income attributable to noncontrolling interest													73
Net income attributable to Aptiv													$	1,355

	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other				Total
	(in millions)
For the Year Ended December 31, 2016:
Adjusted operating income	$	1,272			$	351			$	—			$	1,623
Restructuring	(125		)		(42		)		—				(167		)
Other acquisition and portfolio project costs	(48		)		(9		)		—				(57		)
Asset impairments	—				(1		)		—				(1		)
Gain on business divestitures, net	—				141				—				141
Operating income	$	1,099			$	440			$	—			1,539
Interest expense													(155		)
Other expense, net													(384		)
Income from continuing operations before income taxes and equity income													1,000
Income tax expense													(167		)
Equity income, net of tax													35
Income from continuing operations													868
Income from discontinued operations, net of tax													458
Net income													1,326
Net income attributable to noncontrolling interest													69
Net income attributable to Aptiv													$	1,257

Information concerning principal geographic areas is set forth below. Net sales data reflects the manufacturing location and is for the years ended December 31, 2018, 2017 and 2016. Net property data is as of December 31, 2018, 2017 and 2016.

	Year Ended December 31, 2018								Year Ended December 31, 2017								Year Ended December 31, 2016
	Net Sales				Net Property (1)				Net Sales				Net Property (1)				Net Sales				Net Property (1)
	(in millions)
United States (2)	$	5,390			$	942			$	4,652			$	839			$	4,800			$	733
Other North America	170				206				171				185				137				150
Europe, Middle East & Africa (3)	4,689				1,112				4,235				1,029				3,905				821
Asia Pacific (4)	3,916				869				3,544				698				3,212				573
South America	270				50				282				53				220				48
Total	$	14,435			$	3,179			$	12,884			$	2,804			$	12,274			$	2,325

(1)	Net property data represents property, plant and equipment, net of accumulated depreciation.

(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 U.S.

(3)

Includes Aptiv’s country of domicile, Jersey, and the country of Aptiv’s principal executive offices, Ireland. The Company had no sales in Jersey or Ireland in any period. The Company had net property in Ireland of $22 million and less than $1 million as of December 31, 2018 and 2017, respectively, and no net property in Ireland as of December 31, 2016. The largest portion of net sales in the Europe, Middle East & Africa region was $1,398 million, $1,191 million and $944 million in Germany for the years ended December 31, 2018, 2017 and 2016, respectively.

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

24. QUARTERLY DATA (UNAUDITED)

The following is a condensed summary of the Company’s unaudited quarterly results of operations for fiscal 2018 and 2017.

	Three Months Ended
	March 31,				June 30,				September 30,				December 31,				Total
	(in millions, except per share amounts)
2018
Net sales	$	3,630			$	3,684			$	3,485			$	3,636			$	14,435
Cost of sales	2,947				2,958				2,834				2,967				11,706
Gross profit	$	683			$	726			$	651			$	669			$	2,729
Operating income (1)	$	374			$	421			$	323			$	355			$	1,473
Income from continuing operations	316				303				231				257				1,107
Income from discontinued operations, net of tax	—				—				—				—				—
Net income (2)	$	316			$	303			$	231			$	257			$	1,107
Net income attributable to Aptiv	$	307			$	291			$	222			$	247			$	1,067
Basic net income per share:
Continuing operations (3)	$	1.16			$	1.10			$	0.84			$	0.94			$	4.04
Discontinued operations (3)	—				—				—				—				—
Basic net income per share attributable to Aptiv (3)	$	1.16			$	1.10			$	0.84			$	0.94			$	4.04
Weighted average number of basic shares outstanding	265.69				264.81				264.56				262.61				264.41
Diluted net income per share:
Continuing operations (3)	$	1.15			$	1.10			$	0.84			$	0.94			$	4.02
Discontinued operations (3)	—				—				—				—				—
Diluted net income per share attributable to Aptiv (3)	$	1.15			$	1.10			$	0.84			$	0.94			$	4.02
Weighted average number of diluted shares outstanding	266.44				265.48				265.33				263.65				265.22
2017
Net sales	$	3,143			$	3,153			$	3,148			$	3,440			$	12,884
Cost of sales	2,544				2,498				2,498				2,730				10,270
Gross profit	$	599			$	655			$	650			$	710			$	2,614
Operating income (4)	$	293			$	364			$	373			$	386			$	1,416
Income from continuing operations	229				306				306				222				1,063
Income from discontinued operations, net of tax	123				80				107				55				365
Net income (5)	$	352			$	386			$	413			$	277			$	1,428
Net income attributable to Aptiv	$	335			$	369			$	395			$	256			$	1,355
Basic net income per share:
Continuing operations (3)	$	0.82			$	1.11			$	1.11			$	0.78			$	3.82
Discontinued operations (3)	0.42				0.27				0.37				0.18				1.25
Basic net income per share attributable to Aptiv (3)	$	1.24			$	1.38			$	1.48			$	0.96			$	5.07
Weighted average number of basic shares outstanding	269.20				267.41				266.24				265.84				267.16
Diluted net income per share:
Continuing operations (3)	$	0.82			$	1.11			$	1.11			$	0.77			$	3.81
Discontinued operations (3)	0.42				0.27				0.37				0.18				1.25
Diluted net income per share attributable to Aptiv (3)	$	1.24			$	1.38			$	1.48			$	0.95			$	5.06
Weighted average number of diluted shares outstanding	269.54				268.03				267.16				267.44				268.03

(1)	In the third quarter of 2018, Aptiv recorded restructuring charges totaling $65 million, which includes employee-related and other costs. In the fourth quarter of 2018, Aptiv recorded intangible asset impairment charges totaling $30 million, as further described in Note 7. Intangible Assets and Goodwill.

(2)

In the second quarter of 2018, Aptiv recorded increased tax expense of approximately $25 million as an adjustment to the provisional amounts recorded due to the enactment of the Tax Cuts and Jobs Act in the U.S. on December 22, 2017. In the third quarter of 2018, Aptiv recorded increased tax expense of approximately $24 million as a result of the intra-entity transfer of intellectual property, as further described in Note 14. Income Taxes.

(3)	Due to the use of the weighted average shares outstanding for each quarter for computing earnings per share, the sum of the quarterly per share amounts may not equal the per share amount for the year.

(4)	In the first quarter of 2017, Aptiv recorded restructuring charges totaling $52 million, which includes employee-related and other costs, $36 million of which related to the initiation of the closure of a European manufacturing site within the Advanced Safety and User Experience segment.

(5)	In the fourth quarter of 2017, Aptiv recorded increased tax expense of approximately $50 million due to the enactment of the Tax Cuts and Jobs Act in the U.S. on December 22, 2017.

25. DISCONTINUED OPERATIONS

Spin-Off of Delphi Technologies

On December 4, 2017, the Company completed the Separation of its former Powertrain Systems segment by distributing to Aptiv shareholders on a pro rata basis all of the issued and outstanding ordinary shares of Delphi Technologies PLC (“Delphi Technologies”), a public limited company formed to hold the spun-off business. To effect the Separation, the Company distributed to its shareholders one ordinary share of Delphi Technologies for every three Aptiv ordinary shares outstanding as of November 22, 2017, the record date for the distribution. Shareholders received cash in lieu of any fractional ordinary shares of Delphi Technologies. Following the Separation, Delphi Technologies is now an independent public company. Aptiv did not retain any equity or other interests in Delphi Technologies.

On December 4, 2017, pursuant to the Separation and Distribution Agreement, the Company transferred to Delphi Technologies the assets and liabilities that comprised Delphi Technologies’ business. The Company received a dividend of approximately $1,148 million from Delphi Technologies in connection with the Separation. Delphi Technologies financed this dividend through the issuance of approximately $1.55 billion of debt, consisting of a senior secured five-year $750 million term loan facility that was issued upon the spin-off and $800 million aggregate principal amount of 5.00% senior unsecured notes due 2025 that were issued in September 2017 (collectively, the “Delphi Technologies Debt”). In connection with the Separation, the Delphi Technologies Debt was transferred to Delphi Technologies and is no longer reflected in the Company’s continuing operations in the consolidated financial statements. Also in connection with the Separation, the Company received $180 million in cash from Delphi Technologies pursuant to the Tax Matters Agreement.

The requirements for the presentation of Delphi Technologies as a discontinued operation were met when the Separation was completed. Accordingly, the accompanying consolidated financial statements reflect this business as a discontinued operation for all periods presented through the Distribution Date. Operations related to certain original equipment service businesses previously included within the Company’s Powertrain Systems segment, but which were not included in the spin-off, are reported in continuing operations and have been reclassified within the Advanced Safety and User Experience and Signal and Power Solutions segments for all periods presented. No amounts for shared general and administrative expense or interest expense were allocated to discontinued operations. Aptiv has not had significant continuing involvement with the spun-off Powertrain Systems business following the closing of the transaction.

In connection with the Separation, Aptiv and Delphi Technologies entered into various agreements to effect the Separation and to provide a framework for their relationship following the Separation, which included a Separation and Distribution Agreement, a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement and Contract Manufacturing Services Arrangements. The transition services primarily involve Aptiv providing certain services to Delphi Technologies related to information technology and human resource infrastructure for terms of up to 24 months following the Separation. Aptiv recorded $11 million to other income during the year ended December 31, 2018 for certain fees earned pursuant to the Transition Services Agreement. As part of the near-term transition related to these agreements, Aptiv has recorded certain short-term assets and liabilities within the consolidated balance sheet as of December 31, 2018 and 2017. The Company has recorded $7 million and $123 million, respectively, in other current assets related to accounts receivable from customers that it will collect on behalf of Delphi Technologies, which will be remitted to Delphi Technologies, and $4 million and $132 million, respectively, in accrued liabilities related to accounts payable to outside suppliers that it will remit on behalf of Delphi Technologies, which will be reimbursed by Delphi Technologies. The changes in these short-term assets and liabilities are reflected within operating activities from discontinued operations in the consolidated statement of cash flows.

As a result of the Separation, the Company incurred approximately $118 million in separation costs during the year ended December 31, 2017, which are included within earnings from discontinued operations, net of income taxes in the accompanying Consolidated Statement of Operations. These costs primarily related to professional fees associated with planning the Separation, as well as Separation activities within finance, tax, legal and information system functions and certain investment banking fees incurred upon the Separation.

As a result of the Separation, the Company separated its defined benefit pension and other post-employment benefit plans, and adjusted its employee share-based compensation awards. See Note 12. Pension Benefits and Note 21. Share-Based Compensation, respectively, for additional information.

As a result of the completion of the Separation on December 4, 2017, there were no assets or liabilities of the discontinued operation as of December 31, 2018 or 2017.

Divestiture of Thermal Systems

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 within income from discontinued operations of $271 million (approximately $0.95 per diluted share), net of tax expense of $52 million, transaction costs of $10 million and $18 million of pre-tax post-closing adjustments recorded during the year ended December 31, 2015 primarily related to settlement of working capital items and contingent liabilities. Additional post-closing adjustments of $3 million, primarily related to the settlement of contingent liabilities, were recorded as a reduction to the gain on the divestiture during the year ended December 31, 2016. In conjunction with the sale, Aptiv and MAHLE also entered into a transition services agreement under which Aptiv provided certain administrative and other services, as well as a supply agreement under which Aptiv supplied certain products, primarily for a period of up to eighteen months following the closing of the transaction. Aptiv recorded $8 million and $8 million to other income for the years ended December 31, 2016 and December 31, 2015, respectively, for certain fees earned pursuant to the transition services agreement.

On September 24, 2015 the Company closed the sale of its 50 percent interest in its Korea Delphi Automotive Systems Corporation (“KDAC”) joint venture, which was accounted for under the equity method and was principally reported as part of the Thermal Systems segment, to the joint venture partner. The Company received cash proceeds of $70 million and recognized a gain on the divestiture of $47 million, net of tax expense, within income from discontinued operations during the three months ended September 30, 2015. During the year ended December 31, 2015, the Company recorded a net loss of $41 million (approximately $0.14 per diluted share) on the KDAC divestiture within income from discontinued operations, which includes an impairment loss of $88 million recorded on this investment in the first quarter of 2015 based on the evaluation of the estimated fair value of the Company’s interest in KDAC as of March 31, 2015 in relation to its carrying value.

On March 31, 2016, the Company closed the sale of its 50 percent interest in its Shanghai Delphi Automotive Air Conditioning (“SDAAC”) joint venture to one of the Company’s joint venture partners, Shanghai Aerospace Automobile Electromechanical Co., Ltd (“SAAE”). The Company received cash proceeds of $62 million, net of tax, transaction costs and $29 million of cash divested, and recognized a gain on the divestiture of $104 million (approximately $0.38 per diluted share), net of tax expense of $10 million and transaction costs, within income from discontinued operations during the year ended December 31, 2016. The financial results of SDAAC, which were consolidated by Aptiv, were historically reported as part of the Thermal Systems segment.

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 Advanced Safety and User Experience segment for all periods presented. No amounts for shared general and administrative operating expense or interest expense were allocated to discontinued operations. Aptiv has not had significant continuing involvement with the divested Thermal Systems business following the closing of the transactions.

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 estimated fair value of the Company’s interest in KDAC as of March 31, 2015 in relation to its carrying value. As of March 31, 2015, 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 at the time. As described above, the Company subsequently completed the sale of its interest in KDAC for net cash proceeds of $70 million during the third quarter of 2015.

Income from Discontinued Operations

A reconciliation of the major classes of line items constituting pre-tax profit or loss of discontinued operations, primarily including Powertrain Systems through December 4, 2017, as well as Thermal Systems in prior periods, to income from discontinued operations, net of tax as presented in the consolidated statements of operations is as follows:

	Year Ended December 31,
	2017				2016
	(in millions)
Net sales	$	4,385			$	4,465
Cost of sales	3,496				3,631
Selling, general and administrative	298				222
Amortization	15				17
Restructuring	90				161
Other expense items that are not major, net	(54		)		(2		)
Income from discontinued operations before income taxes and equity income	432				432
Income tax expense on discontinued operations	(71		)		(75		)
Equity income from discontinued operations, net of tax	4				—
Gain on divestiture of discontinued operations, net of tax	—				104
Adjustment to prior period gain on divestiture, net of tax	—				(3		)
Income from discontinued operations, net of tax	365				458
Income from discontinued operations attributable to noncontrolling interests	31				35
Net income from discontinued operations attributable to Aptiv	$	334			$	423

Income from discontinued operations before income taxes attributable to Aptiv was $399 million and $491 million for the years ended December 31, 2017 and 2016, respectively, which includes $6 million and $7 million, respectively, of income tax expense attributable to noncontrolling interests.

26. REVENUE

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Aptiv adopted this guidance in the first quarter of 2018 using the modified retrospective method. In accordance with the standard, revenue is measured based on consideration specified in a contract with a customer. Customer contracts generally are represented by a combination of a current purchase order and a current production schedule issued by the customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. From time to time, Aptiv enters into pricing agreements with its customers that provide for price reductions, some of which are conditional upon achieving certain joint cost savings targets. In these instances, revenue is recognized based on the agreed-upon price at the time of shipment.

Sales incentives and allowances are recognized as a reduction to revenue at the time of the related sale. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by Aptiv from a customer are excluded from revenue. Shipping and handling fees billed to customers are included in net sales, while costs of shipping and handling are included in cost of sales.

Nature of Goods and Services

The principal activity from which the Company generates its revenue is the manufacturing of production parts for OEM customers. Aptiv recognizes revenue at a point in time, rather than over time, as the performance obligation is satisfied when customers obtain control of the product upon title transfer and not as the product is manufactured or developed.

Aptiv recognizes revenue for production parts at a point in time as title transfers to the customer. Although production parts are highly customized with no alternative use, Aptiv does not have an enforceable right to payment as customers have the right to cancel a product program without a notification period. The amount of revenue recognized is based on the purchase order price and adjusted for revenue allocated to variable consideration (i.e. estimated rebates and price discounts), as

applicable. Customers typically pay for production parts based on customary business practices with payment terms averaging 60 days.

Disaggregation of Revenue

Revenue generated from Aptiv’s operating segments is disaggregated by primary geographic market in the following tables for the years ended December 31, 2018, 2017 and 2016. Information concerning geographic market reflects the manufacturing location.

For the Year Ended December 31, 2018:	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other				Total
	(in millions)
Geographic Market
North America	$	4,232			$	1,333			$	(5	)		$	5,560
Europe, Middle East & Africa	3,049				1,652				(12		)		4,689
Asia Pacific	2,858				1,085				(27		)		3,916
South America	263				8				(1		)		270
Total net sales	$	10,402			$	4,078			$	(45	)		$	14,435

For the Year Ended December 31, 2017:	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other				Total
	(in millions)
Geographic Market
North America	$	3,676			$	1,158			$	(11	)		$	4,823
Europe, Middle East & Africa	2,894				1,362				(21		)		4,235
Asia Pacific	2,659				921				(36		)		3,544
South America	278				5				(1		)		282
Total net sales	$	9,507			$	3,446			$	(69	)		$	12,884

For the Year Ended December 31, 2016:	Signal and Power Solutions				Advanced Safety and User Experience				Eliminations and Other				Total
	(in millions)
Geographic Market
North America	$	3,821			$	1,134			$	(18	)		$	4,937
Europe, Middle East & Africa	2,747				1,178				(20		)		3,905
Asia Pacific	2,536				707				(31		)		3,212
South America	215				5				—				220
Total net sales	$	9,319			$	3,024			$	(69	)		$	12,274

Contract Balances

Consistent with the recognition of production parts revenue at a point in time as title transfers to the customer, Aptiv has no contract assets or contract liabilities balances as of December 31, 2018 and 2017.

Outstanding Performance Obligations

As customer contracts generally are represented by a combination of a current purchase order and a current production schedule issued by the customer for a production part, there are no contracts outstanding beyond one year. Aptiv does not enter into fixed long-term supply agreements.

As permitted, Aptiv does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Costs to Obtain a Contract

From time to time, Aptiv makes payments to customers in conjunction with ongoing business. These payments to customers are generally recognized as a reduction to revenue at the time of the commitment to make these payments. However, certain other payments to customers, or upfront fees, meet the criteria to be considered a cost to obtain a contract as they are directly attributable to a contract, are incremental and management expects the fees to be recoverable. As of December 31, 2018 and 2017, Aptiv has recorded $72 million (of which $8 million was classified within other current assets and $64 million was classified within other long-term assets) and $36 million (of which $5 million was classified within other current assets and $31 million was classified within other long-term assets), respectively, related to these capitalized upfront fees.

Capitalized upfront fees are amortized to revenue based on the transfer of goods and services to the customer for which the upfront fees relate, which typically range from three to five years. There have been no impairment losses in relation to the costs capitalized. The amount of amortization to net sales was $6 million, $3 million and $1 million for the years ended December 31, 2018, 2017 and 2016, respectively.