Annual Statements Open main menu

Aptiv PLC - Quarter Report: 2020 June (Form 10-Q)

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
FORM 10-Q
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission file number: 001-35346
_____________________________________________________________________________________________________________________________________________________________________________________________________________
 APTIV PLC
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________________________________________________________________________________________________________________________
Jersey 98-1029562
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5 Hanover Quay
Grand Canal Dock
Dublin, D02 VY79, Ireland
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code) 353-1-259-7013
(Former name, former address and former fiscal year, if changed since last report) N/A
_____________________________________________________________________________________________________________________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Ordinary Shares. $0.01 par value per shareAPTVNew York Stock Exchange
5.50% Mandatory Convertible Preferred Shares, Series A, $0.01 par value per shareAPTV PRANew York Stock Exchange
1.500% Senior Notes due 2025APTVNew York Stock Exchange
4.250% Senior Notes due 2026APTVNew York Stock Exchange
1.600% Senior Notes due 2028APTVNew York Stock Exchange
4.350% Senior Notes due 2029APTVNew York Stock Exchange
4.400% Senior Notes due 2046APTVNew York Stock Exchange
5.400% Senior Notes due 2049APTVNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of the registrant’s ordinary shares outstanding, $0.01 par value per share as of July 24, 2020, was 270,025,374.


Table of Contents

APTIV PLC
INDEX 

  Page
Part I - Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II - Other Information
Item 1.
Item 1A.
Item 2.
Item 6.
Exhibits

2

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APTIV PLC
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
 (in millions, except per share amounts)
Net sales$1,960  $3,627  $5,186  $7,202  
Operating expenses:
Cost of sales1,947  2,958  4,672  5,920  
Selling, general and administrative217  260  469  516  
Amortization35  43  71  77  
Restructuring (Note 7)
72  31  100  57  
Gain on autonomous driving joint venture (Note 17)
—  —  (1,434) —  
Total operating expenses2,271  3,292  3,878  6,570  
Operating (loss) income(311) 335  1,308  632  
Interest expense(44) (43) (87) (81) 
Other (expense) income, net (Note 16)
(6)  (7) 22  
(Loss) income before income taxes and equity income
(361) 298  1,214  573  
Income tax benefit (expense)14  (31)  (64) 
(Loss) income before equity income(347) 267  1,218  509  
Equity (loss) income, net of tax(18)  (16)  
Net (loss) income(365) 271  1,202  516  
Net income (loss) attributable to noncontrolling interest (3) (4)  
Net (loss) income attributable to Aptiv(366) 274  1,206  514  
Mandatory Convertible Preferred Share dividends (Note 12)
(3) —  (3) —  
Net (loss) income attributable to ordinary shareholders$(369) $274  $1,203  $514  
Basic net (loss) income per share:
Basic net (loss) income per share attributable to ordinary shareholders$(1.43) $1.07  $4.69  $1.99  
Weighted average number of basic shares outstanding258.03  257.02  256.77  258.04  
Diluted net (loss) income per share (Note 12):
Diluted net (loss) income per share attributable to ordinary shareholders$(1.43) $1.07  $4.66  $1.99  
Weighted average number of diluted shares outstanding258.21  257.26  258.59  258.40  
See notes to consolidated financial statements.
3

Table of Contents

APTIV PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
 (in millions)
Net (loss) income$(365) $271  $1,202  $516  
Other comprehensive income (loss):
Currency translation adjustments19  (20) (112) (19) 
Net change in unrecognized gain (loss) on derivative instruments, net of tax (Note 14)
76  (1) (77) 18  
Employee benefit plans adjustment, net of tax  10   
Other comprehensive income (loss)98  (18) (179)  
Comprehensive (loss) income(267) 253  1,023  520  
Comprehensive income (loss) attributable to noncontrolling interests
 (4) (8)  
Comprehensive (loss) income attributable to Aptiv$(269) $257  $1,031  $518  
See notes to consolidated financial statements.
4

Table of Contents

APTIV PLC
CONSOLIDATED BALANCE SHEETS
June 30, 2020December 31,
2019
(Unaudited)
 (in millions)
ASSETS
Current assets:
Cash and cash equivalents$1,885  $412  
Restricted cash32  16  
Accounts receivable, net of allowances of $52 million and $37 million, respectively (Note 2)
1,834  2,569  
Inventories (Note 3)
1,212  1,286  
Other current assets (Note 4)
449  504  
Assets held for sale (Note 17)
—  532  
Total current assets5,412  5,319  
Long-term assets:
Property, net3,196  3,309  
Operating lease right-of-use assets (Note 21)
377  413  
Investments in affiliates2,073  106  
Intangible assets, net (Note 2)
1,104  1,186  
Goodwill (Note 2)2,401  2,407  
Other long-term assets (Note 4)
717  719  
Total long-term assets9,868  8,140  
Total assets$15,280  $13,459  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (Note 8)
$200  $393  
Accounts payable1,432  2,463  
Accrued liabilities (Note 5)
1,227  1,155  
Liabilities held for sale (Note 17)
—  43  
Total current liabilities2,859  4,054  
Long-term liabilities:
Long-term debt (Note 8)
3,946  3,971  
Pension benefit obligations468  483  
Long-term operating lease liabilities (Note 21)
293  329  
Other long-term liabilities (Note 5)
588  611  
Total long-term liabilities5,295  5,394  
Total liabilities8,154  9,448  
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred shares, $0.01 par value per share, 50,000,000 shares authorized; 11,500,000 shares of 5.50% Mandatory Convertible Preferred Shares, Series A, issued and outstanding as of June 30, 2020; none issued and outstanding as of December 31, 2019
—  —  
Ordinary shares, $0.01 par value per share, 1,200,000,000 shares authorized, 270,025,374 and 255,288,240 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
  
Additional paid-in-capital3,849  1,645  
Retained earnings3,984  2,890  
Accumulated other comprehensive loss (Note 13)
(894) (719) 
Total Aptiv shareholders’ equity6,942  3,819  
Noncontrolling interest184  192  
Total shareholders’ equity7,126  4,011  
Total liabilities and shareholders’ equity$15,280  $13,459  
See notes to consolidated financial statements.
5

Table of Contents

APTIV PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30,
 20202019
 (in millions)
Cash flows from operating activities:
Net income$1,202  $516  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation293  284  
Amortization71  77  
Amortization of deferred debt issuance costs  
Restructuring expense, net of cash paid13  (2) 
Deferred income taxes(22)  
Pension and other postretirement benefit expenses20  19  
Income from equity method investments, net of dividends received16  (4) 
Loss on modification of debt —  
Loss on extinguishment of debt—   
Loss (gain) on sale of assets (2) 
Share-based compensation12  36  
Gain on autonomous driving joint venture, net(1,434) —  
Changes in operating assets and liabilities:
Accounts receivable, net734  (190) 
Inventories74  (22) 
Other assets (137) 
Accounts payable(902) 26  
Accrued and other long-term liabilities12  31  
Other, net(38) (25) 
Pension contributions(16) (21) 
Net cash provided by operating activities55  596  
Cash flows from investing activities:
Capital expenditures(372) (451) 
Proceeds from sale of property / investments  
Cost of business acquisitions and other transactions, net of cash acquired(27) (23) 
Cost of technology investments—  (3) 
Settlement of derivatives (1) 
Net cash used in investing activities (394) (469) 
Cash flows from financing activities:
Net (repayments) proceeds under other short-term debt agreements(200) 202  
Net repayments under other long-term debt agreements(20) (10) 
Repayment of senior notes—  (654) 
Proceeds from issuance of senior notes, net of issuance costs—  641  
Fees related to modification of debt agreements(18) —  
Proceeds from the public offering of ordinary shares, net of issuance costs1,115  —  
Proceeds from the public offering of preferred shares, net of issuance costs1,115  —  
Dividend payments of consolidated affiliates to minority shareholders(6) —  
Repurchase of ordinary shares(57) (346) 
Distribution of cash dividends(56) (114) 
Taxes withheld and paid on employees’ restricted share awards(33) (34) 
Net cash provided by (used in) financing activities1,840  (315) 
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash(13)  
Increase (decrease) in cash, cash equivalents and restricted cash1,488  (187) 
Cash, cash equivalents and restricted cash at beginning of the period429  568  
Cash, cash equivalents and restricted cash at end of the period$1,917  $381  
See notes to consolidated financial statements.
6

Table of Contents

APTIV PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
Three Months Ended June 30,
Ordinary SharesPreferred Shares
Number of sharesAmount of sharesNumber of sharesAmount of sharesAdditional Paid in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Aptiv Shareholders’ EquityNoncontrolling InterestTotal Shareholders’ Equity
2020(in millions)
Balance at March 31, 2020255  $ —  $—  $1,606  $4,353  $(991) $4,971  $182  $5,153  
Net (loss) income—  —  —  —  —  (366) —  (366)  (365) 
Other comprehensive income
—  —  —  —  —  —  97  97   98  
Mandatory Convertible Preferred Share cumulative dividends
—  —  —  —  —  (3) —  (3) —  (3) 
Issuance of ordinary shares
15  —  —  —  1,115  —  —  1,115  —  1,115  
Issuance of Mandatory Convertible Preferred Shares
—  —  12  —  1,115  —  —  1,115  —  1,115  
Share-based compensation
—  —  —  —  13  —  —  13  —  13  
Balance at June 30, 2020270  $ 12  $—  $3,849  $3,984  $(894) $6,942  $184  $7,126  
2019
Balance at March 31, 2019258  $ —  $—  $1,606  $2,491  $(682) $3,418  $217  $3,635  
Net income (loss)—  —  —  —  —  274  —  274  (3) 271  
Other comprehensive loss
—  —  —  —  —  —  (17) (17) (1) (18) 
Dividends on ordinary shares—  —  —  —  —  (57) —  (57) —  (57) 
Repurchase of ordinary shares
(2) —  —  —  (9) (111) —  (120) —  (120) 
Share-based compensation
—  —  —  —  21  —  —  21  —  21  
Balance at June 30, 2019256  $ —  $—  $1,618  $2,597  $(699) $3,519  $213  $3,732  
See notes to consolidated financial statements.
7

Table of Contents

APTIV PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued) (Unaudited)
Six Months Ended June 30,
Ordinary SharesPreferred Shares
 Number of sharesAmount of sharesNumber of sharesAmount of sharesAdditional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Loss Total Aptiv Shareholders’ EquityNoncontrolling InterestTotal Shareholders’ Equity
2020(in millions)
Balance at January 1, 2020255  $ —  $—  $1,645  $2,890  $(719) $3,819  $192  $4,011  
Net income (loss)—  —  —  —  —  1,206  —  1,206  (4) 1,202  
Other comprehensive loss
—  —  —  —  —  —  (175) (175) (4) (179) 
Dividends on ordinary shares—  —  —  —   (57) —  (56) —  (56) 
Mandatory Convertible Preferred Shares cumulative dividends
—  —  —  —  —  (3) —  (3) —  (3) 
Taxes withheld on employees’ restricted share award vestings
—  —  —  —  (33) —  —  (33) —  (33) 
Repurchase of ordinary shares
(1) —  —  —  (6) (51) —  (57) —  (57) 
Issuance of ordinary shares
15  —  —  —  1,115  —  —  1,115  —  1,115  
Issuance of Mandatory Convertible Preferred Shares
—  —  12  —  1,115  —  —  1,115  —  1,115  
Share-based compensation
 —  —  —  12  —  —  12  —  12  
Adjustment for recently adopted accounting pronouncements (Note 2)
—  —  —  —  —  (1) —  (1) —  (1) 
Balance at June 30, 2020270  $ 12  $—  $3,849  $3,984  $(894) $6,942  $184  $7,126  
2019
Balance at January 1, 2019260  $ —  $—  $1,639  $2,511  $(694) $3,459  $211  $3,670  
Net income—  —  —  —  —  514  —  514   516  
Other comprehensive income
—  —  —  —  —  —    —   
Dividends on ordinary shares—  —  —  —   (115) —  (114) —  (114) 
Taxes withheld on employees’ restricted share award vestings
—  —  —  —  (34) —  —  (34) —  (34) 
Repurchase of ordinary shares
(5) —  —  —  (24) (322) —  (346) —  (346) 
Share-based compensation
 —  —  —  36  —  —  36  —  36  
Adjustment for recently adopted accounting pronouncements
—  —  —  —  —   (9) —  —  —  
Balance at June 30, 2019256  $ —  $—  $1,618  $2,597  $(699) $3,519  $213  $3,732  
See notes to consolidated financial statements.
8

Table of Contents

APTIV PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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, 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 PLC 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.”
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and all adjustments, consisting of only normal recurring items, which are necessary for a fair presentation, have been included. The consolidated financial statements and notes thereto included in this report should be read in conjunction with Aptiv’s 2019 Annual Report on Form 10-K.
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 operates manufacturing facilities and technical centers utilizing a regional service model that enables the Company to efficiently and effectively serve its global customers from best cost countries. 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 United States (“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 without readily determinable fair values 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 three months ended June 30, 2019, Aptiv received a dividend of $3 million from one of its equity method investments. The dividends were recognized as a reduction to the investment and represented a return on investment in cash flows from operating activities.
Aptiv’s equity investments totaled $101 million and $101 million as of June 30, 2020 and December 31, 2019, respectively, and are classified within other long-term assets in the consolidated balance sheets.
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, including the duration and severity of the impacts of the novel coronavirus (COVID-19) pandemic, actual results reported in future periods may be based upon amounts that differ from those estimates.
Revenue recognition—Aptiv recognizes 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. Accordingly, revenue is measured based on consideration specified in a contract with a customer. Refer to Note 20. Revenue for additional information regarding the Company’s revenue recognition policies.
9

Table of Contents

Net income (loss) per share—Basic net income (loss) per share is computed by dividing net income (loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted net income (loss) per share reflects the weighted average dilutive impact of all potentially dilutive securities from the date of issuance and is computed using both the treasury stock and if-converted methods. The if-converted method is used to determine if the impact of conversion of the 5.50% Mandatory Convertible Preferred Shares, Series A, $0.01 par value per share (the “MCPS”) into ordinary shares is more dilutive than the MCPS dividends to net income (loss) per share. If so, the MCPS are assumed to have been converted at the later of the beginning of the period or the time of issuance, and the resulting ordinary shares are included in the denominator and the MCPS dividends are added back to the numerator. Unless otherwise noted, share and per share amounts included in these notes are on a diluted basis. Refer to Note 12. Shareholders’ Equity and Net Income Per Share for additional information including the calculation of basic and diluted net income (loss) per share.
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 and cash deposited into an escrow account. Refer to Note 15. Fair Value of Financial Instruments for further information regarding amounts deposited into an escrow account.
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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.
Credit losses—Aptiv is exposed to credit losses primarily through the sale of services and vehicle components. Aptiv assesses the creditworthiness of a counterparty by conducting ongoing credit reviews, which considers the Company’s expected billing exposure and timing for payment, as well as the counterparty’s established credit rating. When a credit rating is not available, the Company’s assessment is based on an analysis of the counterparty’s financial statements. Aptiv also considers contract terms and conditions, country and political risk, and business strategy in its evaluation. Based on the outcome of this review, the Company establishes a credit limit for each counterparty. The Company continues to monitor its ongoing credit exposure through active review of counterparty balances against contract terms and due dates, which includes timely account reconciliation, payment confirmation and dispute resolution. The Company may also employ collection agencies and legal counsel to pursue recovery of defaulted receivables, if necessary.
Aptiv primarily utilizes historical loss and recovery data, combined with information on current economic conditions and reasonable and supportable forecasts to develop the estimate of the allowance for doubtful accounts in accordance with ASC Topic 326, Financial Instruments – Credit Losses (“ASC 326”). As of June 30, 2020 and December 31, 2019, the Company reported $1,834 million and $2,569 million, respectively, of accounts receivable, net of the allowance for doubtful accounts of $52 million and $37 million, respectively. Changes in the allowance were not material for the six months ended June 30, 2020.
Assets and liabilities held for sale—The Company considers assets to be held for sale when management approves and commits to a formal plan to actively market the assets for sale at a price reasonable in relation to their estimated fair value, the assets are available for immediate sale in their present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the assets is probable and expected to be completed within one year (or, if it is expected that others will impose conditions on the sale of the assets that will extend the period required to complete the sale, that a firm purchase commitment is probable within one year) and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, the Company records the assets at the lower of their carrying value or their estimated fair value, less cost to sell, and ceases to record depreciation expense on the assets.
Assets and liabilities of a discontinued operation are reclassified as held for sale for all comparative periods presented in the consolidated balance sheets. For assets that meet the held for sale criteria but do not meet the definition of a discontinued operation, the Company reclassifies the assets and liabilities in the period in which the held for sale criteria are met, but does not reclassify prior period amounts. Refer to Note 17. Acquisitions and Divestitures for further information regarding the Company's assets and liabilities held for sale.
Intangible assets—Intangible assets were $1,104 million and $1,186 million as of June 30, 2020 and December 31, 2019, respectively. Aptiv amortizes definite-lived intangible assets over their estimated useful lives. Aptiv 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
10

Table of Contents

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. Amortization expense was $35 million and $71 million for the three and six months ended June 30, 2020, respectively, and $43 million and $77 million and for the three and six months ended June 30, 2019, respectively, which includes the impact of any intangible asset impairment charges recorded during the period.
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 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, the Company recognizes an impairment loss in an amount equal to the excess, not to exceed the amount of goodwill allocated to the reporting unit. The Company qualitatively concluded there were no goodwill impairments during the six months ended June 30, 2020 and 2019. Goodwill was $2,401 million and $2,407 million as of June 30, 2020 and December 31, 2019, respectively.
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 6. 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 whether an uncertain tax position exists, the Company determines, based solely on its technical merits, whether the tax position is more likely than not to be sustained upon examination, and if so, a tax benefit is measured on a cumulative probability basis that is more likely than not to be realized upon the ultimate settlement. 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 11. Income Taxes for additional information.
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 or statutory requirements. 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 7. Restructuring for additional information.
Customer concentrations—As reflected in the table below, net sales to General Motors Company (“GM”), Volkswagen Group (“VW”) and Fiat Chrysler Automobiles N.V. (“FCA”), Aptiv’s three largest customers, totaled approximately 22% and
11

Table of Contents

25% of our total net sales for the three and six months ended June 30, 2020, respectively, and 28% and 28% of our total net sales for the three and six months ended June 30, 2019, respectively.
Percentage of Total Net SalesAccounts Receivable
Three Months Ended June 30,Six Months Ended June 30,June 30,
2020
December 31,
2019
2020201920202019
 (in millions)
GM%10 %%10 %$118  $205  
VW12 %%10 %%173  135  
FCA%%%%111  207  
Recently adopted accounting pronouncements—Aptiv adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments in the first quarter of 2020 using the modified retrospective transition method. 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. These amendments replace the incurred loss model with an expected loss model, which results in more timely measurement of expected credit losses. Upon adoption, Aptiv recorded a cumulative-effect adjustment of $1 million to retained earnings as of the beginning of the period of adoption. Refer to the “Credit losses” section above for further information regarding significant estimates and judgments used in estimating credit losses.
Aptiv adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment in the first quarter of 2020 on a prospective basis. This guidance simplifies the test for goodwill impairment by eliminating step two from the goodwill impairment test, which required an entity to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Under the new guidance, an entity will record an impairment charge based on the amount by which a reporting unit’s carrying amount exceeds its estimated fair value, limited to the amount of goodwill allocated to that reporting unit. The adoption of this guidance did not have a significant impact on Aptiv’s financial statements. Refer to the “Goodwill” section above for further information regarding the Company’s testing for goodwill impairment.
Aptiv adopted ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement in the first quarter of 2020 on a retrospective basis to all periods presented. This guidance modifies disclosure requirements related to fair value measurements by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements. The adoption of this guidance did not have a significant impact on Aptiv’s financial statements. Refer to Note 15. Fair Value of Financial Instruments for further information regarding the Company’s fair value measurements.
Recently issued accounting pronouncements not yet adopted—In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This guidance clarifies the interactions between accounting for equity securities under the measurement alternative in Topic 321 and the equity method of accounting in Topic 323, as well as the accounting for certain forward contracts and purchased options to purchase securities that, upon settlement or exercise, would be accounted for under the equity method of accounting. The new guidance will be applied prospectively and is effective for fiscal years beginning after December 15, 2020. 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:
June 30,
2020
December 31,
2019
 (in millions)
Productive material$714  $706  
Work-in-process98  102  
Finished goods400  478  
Total$1,212  $1,286  

12

Table of Contents

4. ASSETS
Other current assets consisted of the following:
June 30,
2020
December 31,
2019
 (in millions)
Value added tax receivable$146  $205  
Prepaid insurance and other expenses72  88  
Reimbursable engineering costs89  101  
Notes receivable 10  
Income and other taxes receivable104  45  
Deposits to vendors  
Derivative financial instruments (Note 14) 30  
Capitalized upfront fees (Note 20)26  20  
Other—   
Total$449  $504  
Other long-term assets consisted of the following:
June 30,
2020
December 31,
2019
 (in millions)
Deferred income taxes, net$143  $164  
Unamortized Revolving Credit Facility debt issuance costs14   
Income and other taxes receivable24  45  
Reimbursable engineering costs266  217  
Value added tax receivable40  59  
Equity investments (Note 17)101  101  
Derivative financial instruments (Note 14)  
Capitalized upfront fees (Note 20)85  79  
Other41  43  
Total$717  $719  

13

Table of Contents

5. LIABILITIES
Accrued liabilities consisted of the following:
June 30,
2020
December 31,
2019
 (in millions)
Payroll-related obligations$249  $226  
Employee benefits, including current pension obligations56  97  
Income and other taxes payable175  180  
Warranty obligations (Note 6)49  29  
Restructuring (Note 7)105  86  
Customer deposits37  43  
Derivative financial instruments (Note 14)33   
Accrued interest45  47  
MCPS dividends payable —  
Deferred compensation related to nuTonomy acquisition43  35  
Operating lease liabilities (Note 21)95  94  
Other337  314  
Total$1,227  $1,155  
Other long-term liabilities consisted of the following:
June 30,
2020
December 31,
2019
 (in millions)
Environmental (Note 10)$ $ 
Extended disability benefits  
Warranty obligations (Note 6)  
Restructuring (Note 7)41  48  
Payroll-related obligations10  10  
Accrued income taxes198  199  
Deferred income taxes, net205  229  
Derivative financial instruments (Note 14)12  —  
Other104  108  
Total$588  $611  

6. 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 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. 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 June 30, 2020. The Company estimates the reasonably possible amount to ultimately resolve all matters in excess of the recorded reserves as of June 30, 2020 to be zero to $10 million.
14

Table of Contents

The table below summarizes the activity in the product warranty liability for the six months ended June 30, 2020:
 Warranty Obligations
 (in millions)
Accrual balance at beginning of period$37  
Provision for estimated warranties incurred during the period15  
Changes in estimate for pre-existing warranties20  
Settlements made during the period (in cash or in kind)(14) 
Foreign currency translation and other(1) 
Accrual balance at end of period$57  

7. 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 aligning our production capabilities with the reduced levels of global vehicle production resulting the COVID-19 pandemic and on reducing global overhead costs. The Company recorded employee-related and other restructuring charges related to these programs totaling approximately $72 million and $100 million during the three and six months ended June 30, 2020, respectively, of which $42 million and $51 million, respectively, was recognized for programs implemented in the North America region and $24 million and $35 million, respectively, was recognized for programs implemented in the European region. The charges recorded during the three months ended June 30, 2020 included the recognition of approximately $60 million of employee-related and other costs related to actions taken to as a result of the global impacts of the COVID-19 pandemic. The Company expects to incur additional restructuring costs of approximately $45 million (of which approximately $30 million relates to the Signal and Power Solutions segment and approximately $15 million relates to the Advanced Safety and User Experience segment) for programs approved as of June 30, 2020, which are primarily expected to be incurred within the next twelve months.
During the three and six months ended June 30, 2019, Aptiv recorded employee-related and other restructuring charges totaling approximately $31 million and $57 million, respectively, of which $17 million and $34 million, respectively, was recognized for programs implemented in the North American region, pursuant to the Company’s ongoing overhead cost reduction strategy.
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 $87 million and $59 million in the six months ended June 30, 2020 and 2019, respectively.
The following table summarizes the restructuring charges recorded for the three and six months ended June 30, 2020 and 2019 by operating segment:
 Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
 (in millions)
Signal and Power Solutions$60  $23  $79  $42  
Advanced Safety and User Experience12   21  15  
Total$72  $31  $100  $57  
15

Table of Contents

The table below summarizes the activity in the restructuring liability for the six months ended June 30, 2020:
Employee Termination Benefits LiabilityOther Exit Costs LiabilityTotal
 (in millions)
Accrual balance at January 1, 2020$134  $—  $134  
Provision for estimated expenses incurred during the period100  —  100  
Payments made during the period(87) —  (87) 
Foreign currency and other(1) —  (1) 
Accrual balance at June 30, 2020$146  $—  $146  

8. DEBT
The following is a summary of debt outstanding, net of unamortized issuance costs and discounts, as of June 30, 2020 and December 31, 2019:
June 30,
2020
December 31,
2019
 (in millions)
Accounts receivable factoring
$160  $266  
Revolving Credit Facility
—  90  
4.15%, senior notes, due 2024 (net of $2 and $2 unamortized issuance costs and $1 and $1 discount, respectively)697  697  
1.50%, Euro-denominated senior notes, due 2025 (net of $2 and $3 unamortized issuance costs and $2 and $2 discount, respectively)781  779  
4.25%, senior notes, due 2026 (net of $3 and $3 unamortized issuance costs, respectively)647  647  
1.60%, Euro-denominated senior notes, due 2028 (net of $3 and $3 unamortized issuance costs, respectively)558  556  
4.35%, senior notes, due 2029 (net of $3 and $3 unamortized issuance costs, respectively)297  297  
4.40%, senior notes, due 2046 (net of $3 and $3 unamortized issuance costs and $1 and $2 discount, respectively)296  295  
5.40%, senior notes, due 2049 (net of $4 and $4 unamortized issuance costs and $1 and $1 discount, respectively)345  345  
Tranche A Term Loan, due 2022 and 2021 (net of $2 and $1 unamortized issuance costs, respectively)338  359  
Finance leases and other27  33  
Total debt4,146  4,364  
Less: current portion(200) (393) 
Long-term debt$3,946  $3,971  
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 unsecured credit facilities currently consisting of a term loan (the “Tranche A Term Loan”) and a revolving credit facility of $2 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 May 1, 2020 (the “May 2020 Amendment”) and June 8, 2020 (the “June 2020 Amendment”). The May 2020 Amendment extended the maturity of $1,779 million in principal amount of the Revolving Credit Facility and $298 million in principal amount of the Tranche A Term Loan from August 17, 2021 to August 17, 2022 and increased the leverage ratio maintenance covenant until July 1, 2021 (the “Covenant Relief Period”), unless Aptiv elects to terminate the Covenant Relief Period at an earlier date. Under the terms of the May 2020 Amendment, Aptiv’s consolidated leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the May 2020 Amendment) is increased from not more than 3.5 to 1.0 to not more than 4.5 to 1.0 during the Covenant Relief Period, and Aptiv is subject to certain additional covenant restrictions during the Covenant Relief Period, including restrictions on Aptiv’s ability to execute repurchases of or pay dividends on its outstanding ordinary shares. The maturity date of the remaining portions of the Revolving Credit Facility and Tranche A Term Loan were not extended and will mature on August 17, 2021.
16

Table of Contents

The May 2020 Amendment also required that Aptiv pay amendment fees of $18 million. The June 2020 Amendment amended the dividends and distributions covenant set forth in the Credit Agreement to permit the payment of dividends on convertible preferred shares in connection with the preferred equity offering as further discussed in Note 12. Shareholders’ Equity and Net Income Per Share.
Aptiv is obligated to make 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 June 30, 2020, Aptiv had no amounts outstanding under the Revolving Credit Facility and less than $1 million in letters of credit were 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:
June 30, 2020December 31, 2019
LIBOR plusABR plusLIBOR plusABR plus
Revolving Credit Facility (1)1.10 %0.10 %1.10 %0.10 %
Revolving Credit Facility (2)1.40 %0.40 %N/AN/A
Tranche A Term Loan (1)1.25 %0.25 %1.25 %0.25 %
Tranche A Term Loan (2)1.75 %0.75 %N/AN/A
(1)Applicable to principal balances under the Credit Agreement which were not extended as part of the May 2020 Amendment as described above.
(2)Applicable to principal balances under the Credit Agreement which were extended as part of the May 2020 Amendment as described above.
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 June 30, 2020, Aptiv selected the one-month LIBOR interest rate option on the Tranche A Term Loan, and the rate effective as of June 30, 2020, 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
June 30, 2020Rates effective as of
Applicable Rate(in millions)June 30, 2020
Tranche A Term Loan (1)LIBOR plus 1.25%$51  1.50 %
Tranche A Term Loan (2)LIBOR plus 1.75%$289  2.00 %
(1)Applicable to principal balances under the Credit Agreement which were not extended as part of the May 2020 Amendment as described above.
(2)Applicable to principal balances under the Credit Agreement which were extended as part of the May 2020 Amendment as described above.
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 not more than 3.5 to 1.0, which was increased to 4.5 to 1.0 until July 1, 2021 under the May 2020 Amendment. 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 June 30, 2020.
17

Table of Contents

As of June 30, 2020, 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.
Senior Unsecured Notes
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 of 1933, as amended (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 14. 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 was 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. In March 2019, Aptiv redeemed for cash the entire $650 million aggregate principal amount outstanding of the 3.15% Senior Notes, financed by the proceeds received from the issuance of the 2019 Senior Notes, as defined below. As a result of the redemption of the 3.15% Senior Notes, Aptiv recognized a loss on debt extinguishment of approximately $6 million during the six months ended March 31, 2019 within other expense, net in the consolidated statements of operations.
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 $800 million of 5.00% senior unsecured notes due 2023. 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 14. 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 $800 million of 5.00% senior unsecured notes due 2023. 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.
On March 14, 2019, Aptiv PLC issued $650 million in aggregate principal amount of senior unsecured notes in a transaction registered under the Securities Act, comprised of $300 million of 4.35% senior unsecured notes due 2029 (the “4.35% Senior Notes”) and $350 million of 5.40% senior unsecured notes due 2049 (the “5.40% Senior Notes”) (collectively, the “2019 Senior Notes”). The 4.35% Senior Notes were priced at 99.879% of par, resulting in a yield to maturity of 4.365%, and the 5.40% Senior Notes were priced at 99.558% of par, resulting in a yield to maturity of 5.430%. The proceeds were utilized to redeem the 3.15% Senior Notes. Aptiv incurred approximately $7 million of issuance costs in connection with the
18

Table of Contents

2019 Senior Notes. Interest on the 2019 Senior Notes 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.
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 June 30, 2020, the Company was in compliance with the provisions of all series of the outstanding senior notes.
The 2014 Senior Notes issued by Aptiv Corporation are 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, 4.25% Senior Notes, 2016 Euro-denominated Senior Notes, 2016 Senior Notes and 2019 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.
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. The rate effective on amounts outstanding as of June 30, 2020 was 0.42%. As of June 30, 2020 and December 31, 2019, Aptiv had $160 million and $266 million, respectively, outstanding on the European accounts receivable factoring facility.
Finance leases and other—As of June 30, 2020 and December 31, 2019, approximately $27 million and $33 million, respectively, of other debt primarily issued by certain non-U.S. subsidiaries and finance lease obligations were outstanding.
Interest—Cash paid for interest related to debt outstanding totaled $84 million and $71 million for the six months ended June 30, 2020 and 2019, respectively.
Letter of credit facilities—In addition to the letters of credit issued under the Credit Agreement, Aptiv had approximately $2 million and $2 million outstanding through other letter of credit facilities as of June 30, 2020 and December 31, 2019, respectively, primarily to support arrangements and other obligations at certain of its subsidiaries.

9. 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 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.
19

Table of Contents

The amounts shown below reflect the defined benefit pension expense for the three and six months ended June 30, 2020 and 2019:
 Non-U.S. PlansU.S. Plans
 Three Months Ended June 30,
 2020201920202019
 (in millions)
Service cost$ $ $—  $—  
Interest cost  —  —  
Expected return on plan assets(4) (4) —  —  
Amortization of actuarial losses    
Net periodic benefit cost$ $ $ $ 
 Non-U.S. PlansU.S. Plans
 Six Months Ended June 30,
 2020201920202019
 (in millions)
Service cost$10  $ $—  $—  
Interest cost11  14  —  —  
Expected return on plan assets(9) (9) —  —  
Amortization of actuarial losses    
Net periodic benefit cost$19  $18  $ $ 
Other postretirement benefit obligations were approximately $1 million and $2 million at June 30, 2020 and December 31, 2019, respectively.

10. 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.
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 June 30, 2020, 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 June 30, 2020, claims totaling approximately $100 million (using June 30, 2020 foreign currency rates) have been asserted against Aptiv in Brazil. As of June 30, 2020, the Company maintains accruals for these asserted claims of $20 million (using June 30, 2020 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 $80 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 June 30, 2020 and December 31, 2019, the undiscounted reserve for environmental investigation and
20

Table of Contents

remediation was approximately $4 million (which was recorded in other long-term liabilities) and $4 million (of which $1 million was recorded in accrued liabilities and $3 million 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 June 30, 2020, the difference between the recorded liabilities and the reasonably possible range of potential loss was not material.

11. INCOME TAXES
At the end of each interim period, the Company makes its best estimate of the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to unusual or infrequent items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or income tax contingencies is recognized in the interim period in which the change occurs.
The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in respective jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. The volatile global economic conditions resulting from the COVID-19 pandemic, the impacts of which are difficult to predict, may cause fluctuations in our expected pre-tax income (or loss) for the year, which could create volatility in our annual expected effective income tax rate. Jurisdictions with a projected loss for the year or a year-to-date loss for which no tax benefit or expense can be recognized due to a valuation allowance are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the composition and timing of actual earnings compared to annual projections. The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or as our tax environment changes. To the extent that the expected annual effective income tax rate changes, the effect of the change on prior interim periods is included in the income tax provision in the period in which the change in estimate occurs.
The Company’s income tax (benefit) expense and effective tax rate for the three and six months ended June 30, 2020 and 2019 were as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
 (dollars in millions)
Income tax (benefit) expense$(14) $31  $(4) $64  
Effective tax rate%10 %%11 %
The Company’s tax rate is affected by the fact that its parent entity is an Irish resident taxpayer, the tax rates in Ireland 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. Due to the COVID-19 pandemic, losses for which no tax benefit was recognized were higher in the three and six months ended June 30, 2020 as compared to the previous year. The Company’s effective tax rate is also impacted by the receipt of certain tax incentives and holidays that reduce the effective tax rate for certain subsidiaries below the statutory rate.
The Company’s effective tax rate for the three and six months ended June 30, 2020 also includes net discrete tax benefits of $3 million and $6 million respectively, primarily related to changes in reserves, changes in accruals for unremitted earnings and provision to return adjustments. Also included as a discrete item in the effective tax rate for the six months ended June 30, 2020 is the beneficial impact from the gain on the autonomous driving joint venture. The tax expense associated with the gain was insignificant as Aptiv’s aggregate autonomous driving assets were exempt from capital gains tax in the jurisdiction from which they were sold. The aggregate autonomous driving assets had been acquired, purchased or developed in taxable transactions in prior periods and reflect changes made to the corporate entity operating structure for intellectual property following the Separation of its former Powertrain Systems segment. The effective tax rate for the three and six months ended June 30, 2019 includes net discrete tax benefits of $21 million and $31 million, respectively, primarily related to changes in reserves, changes in accruals for unremitted earnings and provision to return adjustments.
Aptiv PLC is an Irish resident taxpayer and not a domestic corporation for U.S. federal income tax purposes. As such, it is not subject to U.S. tax on remitted foreign earnings and, as a result of its capital structure, is also generally not subject to Irish tax on the repatriation of foreign earnings.
21

Table of Contents

Cash paid or withheld for income taxes was $54 million and $83 million for the six months ended June 30, 2020 and 2019, respectively.

12. SHAREHOLDERS’ EQUITY AND NET INCOME PER SHARE
Public Equity Offering
In June 2020, the Company completed the underwritten public offering of approximately 15.1 million ordinary shares at a price of $75.91 per share (the “Ordinary Share Offering”), resulting in net proceeds of approximately $1,115 million, after deducting expenses and the underwriters’ discount of $35 million. Simultaneously, the Company completed the underwritten public offering of 11.5 million 5.50% Mandatory Convertible Preferred Shares, Series A, $0.01 par value per share (the “MCPS”) with a liquidation preference of $100 per share (the “MCPS Offering”), resulting in net proceeds of approximately $1,115 million, after deducting expenses and the underwriters’ discount of $35 million. The Company intends to use the net proceeds from the Ordinary Share Offering and MCPS Offering for general corporate purposes, which may include funding potential future investments (including acquisitions), capital expenditures, working capital, repayment of outstanding indebtedness, including the repayment of the Revolving Credit Facility, which was fully drawn as of March 31, 2020, and the satisfaction of other obligations.
Each share of MCPS will mandatorily convert on the mandatory conversion date of June 15, 2023, into between 1.0754 and 1.3173 shares of the Company’s ordinary shares, subject to customary anti-dilution adjustments, and further adjustment if there are any accumulated and unpaid MCPS dividends at the conversion date. The number of the Company’s ordinary shares issuable upon conversion will be determined based on the average volume-weighted average price per share of the Company’s ordinary shares over the 20 consecutive trading day period beginning on, and including the 21st scheduled trading day immediately before June 15, 2023. Subject to certain exceptions, at any time prior to June 15, 2023, holders of the MCPS may elect to convert each share into 1.0754 ordinary shares, subject to further anti-dilution adjustments. In the event of a fundamental change, the MCPS will convert at the fundamental change rates specified in the statement of rights, and the holders of the MCPS would be entitled to a fundamental change make-whole dividend.
Holders of the MCPS will be entitled to receive, when and if declared by the Company’s Board of Directors, cumulative dividends at the annual rate of 5.50% of the liquidation preference of $100 per share (equivalent to $5.50 annually per share), payable in cash or, subject to certain limitations, by delivery of the Company’s ordinary shares or any combination of cash and the Company’s ordinary shares, at the Company’s election. If declared, dividends on the MCPS will be payable quarterly on March 15, June 15, September 15 and December 15 of each year (commencing on September 15, 2020 to, and including June 15, 2023), to the holders of record of the MCPS as they appear on the Company’s share register at the close of business on the immediately preceding March 1, June 1, September 1 or December 1, respectively.
Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted net income (loss) per share reflects the weighted average dilutive impact of all potentially dilutive securities from the date of issuance and is computed using both the treasury stock and if-converted methods. The if-converted method is used to determine if the impact of conversion of the MCPS into ordinary shares is more dilutive than the MCPS dividends to net income (loss) per share. If so, the MCPS are assumed to have been converted at the later of the beginning of the period or the time of issuance, and the resulting ordinary shares are included in the denominator and the MCPS dividends are added back to the numerator. Unless otherwise noted, share and per share amounts included in these notes are on a diluted basis. For the three months ended June 30, 2020, the impact of the MCPS calculated under the if-converted method was anti-dilutive, and as such 3.14 million ordinary shares underlying the MCPS were excluded from the diluted net loss per share calculation. For the six months ended June 30, 2020, the calculation of net income per share includes the dilutive impacts of the MCPS under the if-converted method. For all periods presented, the calculation of net income (loss) per share also contemplates the dilutive impacts, if any, of the Company’s share-based compensation plans. Refer to Note 18. Share-Based Compensation for additional information.
22

Table of Contents

Weighted Average Shares
The following table illustrates net (loss) income per share attributable to ordinary shareholders and the weighted average shares outstanding used in calculating basic and diluted income per share:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
 (in millions, except per share data)
Numerator, basic:
Net (loss) income attributable to ordinary shareholders$(369) $274  $1,203  $514  
Numerator, diluted:
Net (loss) income attributable to Aptiv$(366) $274  $1,206  $514  
MCPS dividends (1)(3) —  —  —  
Numerator, diluted$(369) $274  $1,206  $514  
Denominator:
Weighted average ordinary shares outstanding, basic258.03  257.02  256.77  258.04  
Dilutive shares related to restricted stock units (“RSUs”)
0.18  0.24  0.25  0.36  
Weighted average MCPS Converted Shares (1)—  —  1.57  —  
Weighted average ordinary shares outstanding, including dilutive shares
258.21  257.26  258.59  258.40  
Net (loss) income per share attributable to ordinary shareholders Aptiv:
Basic$(1.43) $1.07  $4.69  $1.99  
Diluted$(1.43) $1.07  $4.66  $1.99  
(1)For purposes of calculating net loss per share under the if-converted method, the Company has included the impact of the MCPS dividends for the three months ended June 30, 2020, as the impact was more dilutive to net loss per share than the impact of assuming the conversion of the MCPS into ordinary shares on a weighted average basis. The Company has excluded the impact of the MCPS dividends for the six months ended June 30, 2020, as the assumed conversion of the MCPS into ordinary shares on a weighted average basis was more dilutive than the impact of the MCPS dividends.
Share Repurchase Programs
In April 2016, the Board of Directors authorized a share repurchase program of up to $1.5 billion of ordinary shares, which commenced in September 2016. This share repurchase program provides for share purchases in the open market or in privately negotiated transactions, depending on share price, market conditions and other factors, as determined by the Company.
A summary of the ordinary shares repurchased during the three and six months ended June 30, 2020 and 2019 is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Total number of shares repurchased—  1,642,598  1,059,075  4,482,677  
Average price paid per share$—  $73.07  $53.73  $77.19  
Total (in millions)$—  $120  $57  $346  
As of June 30, 2020, approximately $13 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 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. Although both the April 2016 and this new share repurchase program remain authorized, the Company is restricted from executing further share
23

Table of Contents

repurchases under the terms of the May 2020 Amendment to the Credit Agreement for as long as the Covenant Relief Period remains in effect, as further described in Note 8. Debt. Furthermore, in order to preserve liquidity during the COVID-19 pandemic crisis, the Company does not anticipate executing further share repurchases until such time as the global economic uncertainties and business impacts resulting from the pandemic have abated.
Ordinary Share Dividends
The Company has declared and paid cash dividends per ordinary share during the periods presented as follows:
DividendAmount
 Per Share(in millions)
2020:
Second quarter$—  $—  
First quarter0.22  56  
Total$0.22  $56  
2019:
Fourth quarter$0.22  $56  
Third quarter0.22  56  
Second quarter0.22  57  
First quarter0.22  57  
Total$0.88  $226  
Under the terms of the May 2020 Amendment to the Credit Agreement, the Company is restricted from the payment of further ordinary share cash dividends for as a long as the Covenant Relief Period remains in effect, as further described in Note 8. Debt. Additionally, the Company does not anticipate making further ordinary share cash dividend payments, until such time as the global economic uncertainties and business impacts resulting from the COVID-19 pandemic have abated.

24

Table of Contents

13. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The changes in accumulated other comprehensive income (loss) attributable to Aptiv (net of tax) for the three and six months ended June 30, 2020 and 2019 are shown below.
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(in millions)
Foreign currency translation adjustments:
Balance at beginning of period
$(723) $(555) $(597) $(555) 
Aggregate adjustment for the period (1)
18  (19) (108) (19) 
Balance at end of period
(705) (574) (705) (574) 
Gains (losses) on derivatives:
Balance at beginning of period
(140) (24) 13  (35) 
Other comprehensive income (loss) before reclassifications (net tax effect of $0, $4, $0 and $4)
54  —  (95) 16  
Reclassification to income (net tax effect of $0, $0, $0 and $0)
22  (1) 18   
Adoption of ASU 2018-02
—  —  —  (8) 
Balance at end of period
(64) (25) (64) (25) 
Pension and postretirement plans:
Balance at beginning of period
(128) (103) (135) (104) 
Other comprehensive income (loss) before reclassifications (net tax effect of $0, $0, $1 and $0)
—     
Reclassification to income (net tax effect of $1, $0, $2 and $1)
    
Adoption of ASU 2018-02
—  —  —  (1) 
Balance at end of period
(125) (100) (125) (100) 
Accumulated other comprehensive loss, end of period$(894) $(699) $(894) $(699) 
(1)Includes losses of $8 million and $2 million for the three and six months ended June 30, 2020, respectively, and losses of $15 million and gains of $8 million for the three and six months ended June 30, 2019, respectively, related to non-derivative net investment hedges. Refer to Note 14. Derivatives and Hedging Activities for further description of these hedges.
25

Table of Contents

Reclassifications from accumulated other comprehensive income (loss) to income for the three and six months ended June 30, 2020 and 2019 were as follows:
Reclassification Out of Accumulated Other Comprehensive Income (Loss)
Details About Accumulated Other Comprehensive Income ComponentsThree Months Ended June 30,Six Months Ended June 30,Affected Line Item in the Statements of Operations
2020201920202019
(in millions)
Gains (losses) on derivatives:
Commodity derivatives$(8) $(2) $(11) $(4) Cost of sales
Foreign currency derivatives(14)  (7)  Cost of sales
(22)  (18) (2) (Loss) income before income taxes
—  —  —  —  Income tax benefit (expense)
(22)  (18) (2) Net (loss) income
—  —  —  —  Net income (loss) attributable to noncontrolling interest
$(22) $ $(18) $(2) Net (loss) income attributable to Aptiv
Pension and postretirement plans:
Actuarial losses$(4) $(2) $(8) $(5) Other (expense) income, net (1)
(4) (2) (8) (5) (Loss) income before income taxes
 —    Income tax benefit (expense)
(3) (2) (6) (4) Net (loss) income
—  —  —  —  Net income (loss) attributable to noncontrolling interest
$(3) $(2) $(6) $(4) Net (loss) income attributable to Aptiv
Total reclassifications for the period$(25) $(1) $(24) $(6) 
(1)These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note 9. Pension Benefits for additional details).

14. 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.
26

Table of Contents

As of June 30, 2020, 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:
CommodityQuantity HedgedUnit of MeasureNotional Amount
(Approximate USD Equivalent)
 (in thousands)(in millions)
Copper57,135  pounds$150  

Foreign CurrencyQuantity HedgedUnit of MeasureNotional Amount
(Approximate USD Equivalent)
 (in millions)
Mexican Peso12,109  MXN$525  
Chinese Yuan Renminbi2,561  RMB360  
Euro240  EUR270  
Polish Zloty504  PLN125  
The Company had additional foreign currency forward contracts designated as cash flow hedges with notional amounts that individually amounted to less than $10 million. As of June 30, 2020, Aptiv has entered into derivative instruments to hedge cash flows extending out to June 2022.
Gains and losses on derivatives qualifying as cash flow hedges are recorded in accumulated OCI, to the extent that hedges are effective, until the underlying transactions are recognized in earnings. Unrealized amounts in accumulated OCI will fluctuate based on changes in the fair value of hedge derivative contracts at each reporting period. Net losses on cash flow hedges included in accumulated OCI as of June 30, 2020 were $44 million (approximately $44 million, net of tax). Of this total, approximately $33 million of losses are expected to be included in cost of sales within the next 12 months and approximately $11 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. Cash flows from derivatives used to manage commodity and foreign exchange risks designated as cash flow hedges are classified as operating activities within the consolidated statements 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 gains or losses on instruments designated as net investment hedges are recognized within OCI to offset changes in the value of the net investment in these foreign currency-denominated operations. Gains and losses reported in accumulated OCI 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 statements of cash flows.
The Company previously entered into a series of forward contracts, each of which were 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 six months ended June 30, 2020, the Company received $1 million at settlement related to this series of forward contracts which matured during the period. During the three and six months ended June 30, 2019, the Company received $1 million and paid $1 million, respectively, at settlement related to these series of forward contracts which matured throughout each respective period. Refer to the tables below for details of the fair value recorded in the consolidated balance sheets and the effects recorded in the consolidated statements of operations and consolidated statements 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 8. 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 three and six months ended June 30, 2020, $8 million and $2 million of losses, respectively, were recognized within the cumulative translation adjustment component of OCI. During the three and six months ended June 30, 2019, $15 million of losses and $8 million of gains, respectively, were recognized within
27

Table of Contents

the cumulative translation adjustment component of OCI. Included in accumulated OCI related to these net investment hedges were cumulative losses of $23 million and $21 million as of June 30, 2020 and December 31, 2019, respectively.
Derivatives Not Designated as Hedges
In certain occasions the Company enters into certain foreign currency and commodity contracts that are not designated as hedges. When hedge accounting is not applied to derivative contracts, gains and losses are recorded to other income (expense), net and cost of sales in the consolidated statements of operations.
Fair Value of Derivative Instruments in the Balance Sheet
The fair value of derivative financial instruments recorded in the consolidated balance sheets as of June 30, 2020 and December 31, 2019 are as follows:
 Asset DerivativesLiability DerivativesNet Amounts of Assets and (Liabilities) Presented in the Balance Sheet
 Balance Sheet LocationJune 30,
2020
Balance Sheet LocationJune 30,
2020
June 30,
2020
 (in millions)
Derivatives designated as cash flow hedges:
Commodity derivativesOther current assets$ Accrued liabilities$ 
Foreign currency derivatives*Other current assets—  Other current assets $(1) 
Foreign currency derivatives*Accrued liabilities Accrued liabilities33  (29) 
Commodity derivativesOther long-term assets Other long-term liabilities—  
Foreign currency derivatives*Other long-term assets Other long-term assets—   
Foreign currency derivatives*Other long-term liabilities Other long-term liabilities13  (12) 
Total derivatives designated as hedges$10  $50  
Derivatives not designated:
Foreign currency derivatives*Accrued liabilities$—  Accrued liabilities$ (1) 
Total derivatives not designated as hedges$—  $ 

 Asset DerivativesLiability DerivativesNet Amounts of Assets and (Liabilities) Presented in the Balance Sheet
 Balance Sheet LocationDecember 31,
2019
Balance Sheet LocationDecember 31,
2019
December 31,
2019
 (in millions)
Derivatives designated as cash flow hedges:
Commodity derivativesOther current assets$ Accrued liabilities$ 
Foreign currency derivatives*Other current assets35  Other current assets $29  
Commodity derivativesOther long-term assets Other long-term liabilities—  
Foreign currency derivatives*Other long-term assets Other long-term assets  
Total derivatives designated as hedges$46  $11  
Derivatives not designated:
Foreign currency derivatives*Accrued liabilities$—  Accrued liabilities$ (1) 
Total derivatives not designated as hedges$—  $ 
28

Table of Contents

* 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 June 30, 2020 and a net asset position as of December 31, 2019.
Effect of Derivatives on the Statements of Operations and Statements of Comprehensive Income
The pre-tax effect of derivative financial instruments in the consolidated statements of operations and consolidated statements of comprehensive income for the three and six months ended June 30, 2020 and 2019 is as follows:

Three Months Ended June 30, 2020Gain Recognized in OCILoss Reclassified from OCI into Income
(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives$28  $(8) 
Foreign currency derivatives26  (14) 
Derivatives designated as net investment hedges:
Foreign currency derivatives—  —  
Total$54  $(22) 

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

Three Months Ended June 30, 2019(Loss) Gain Recognized in OCI(Loss) Gain Reclassified from OCI into Income
 (in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives$(18) $(2) 
Foreign currency derivatives21   
Derivatives designated as net investment hedges:
Foreign currency derivatives —  
Total$ $ 

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

29

Table of Contents

Six Months Ended June 30, 2020(Loss) Gain Recognized in OCILoss Reclassified from OCI into Income
 (in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives$(11) $(11) 
Foreign currency derivatives(85) (7) 
Derivatives designated as net investment hedges:
Foreign currency derivatives —  
Total$(95) $(18) 

 Loss Recognized in Income
(in millions)
Derivatives not designated:
Foreign currency derivatives$(4) 
Total$(4) 

Six Months Ended June 30, 2019Gain (Loss) Recognized in OCI(Loss) Gain Reclassified from OCI into Income
 (in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives$ $(4) 
Foreign currency derivatives19   
Derivatives designated as net investment hedges:
Foreign currency derivatives(1) —  
Total$20  $(2) 

 Gain Recognized in Income
(in millions)
Derivatives not designated:
Foreign currency derivatives$ 
Total$ 
The gain or loss recognized in income for designated and non-designated derivative instruments was recorded to cost of sales and other income (expense), net in the consolidated statements of operations for the three and six months ended June 30, 2020 and 2019, respectively.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS
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
30

Table of Contents

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 June 30, 2020 and December 31, 2019, Aptiv was in a net derivative liability position of $41 million and a net derivative asset position of $34 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 14. Derivatives and Hedging Activities for further information regarding derivatives.
Contingent consideration—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 ASC 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 actual or forecasted inputs utilized or in the discount rates used to determine the present value of contingent future cash flows. The Company regularly reviews these assumptions and makes adjustments to the fair value measurements as required by facts and circumstances. As of June 30, 2020, the Company has determined that all earn-out provisions have been achieved under existing agreements.
As of June 30, 2020 and December 31, 2019, the liability for contingent consideration was $51 million (of which $20 million was classified within other current liabilities and $31 million was classified within other long-term liabilities) and $51 million (of which $16 million was classified within other current liabilities and $35 million was classified within other long-term liabilities), respectively, representing the maximum required amounts to be paid under existing agreements. 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 statements of operations.
The changes in the contingent consideration liability classified as a Level 3 measurement for the six months ended June 30, 2020 were as follows:
Contingent Consideration Liability
 (in millions)
Fair value at beginning of period$51  
Additions—  
Payments—  
Interest accretion—  
Fair value at end of period$51  
In accordance with existing agreements, the Company was required to deposit $32 million related to the contingent consideration liability into an escrow account (of which $16 million was deposited in the second quarter of 2019 and $16 million was deposited in the first quarter of 2020). Accordingly, this amount is classified as restricted cash in the consolidated balance sheets. The remaining portion of the contingent consideration liability is required to be deposited into the escrow account in the first quarter of 2021 and all amounts are anticipated to be released from the escrow account in the fourth quarter of 2021.
31

Table of Contents

As of June 30, 2020 and December 31, 2019, Aptiv had the following assets measured at fair value on a recurring basis:
TotalQuoted Prices in Active Markets
Level 1
Significant Other Observable Inputs
Level 2
Significant Unobservable Inputs
Level 3
 (in millions)
As of June 30, 2020:
Commodity derivatives$ $—  $ $—  
Total$ $—  $ $—  
As of December 31, 2019:
Commodity derivatives$ $—  $ $—  
Foreign currency derivatives35  —  35  —  
Total$38  $—  $38  $—  
As of June 30, 2020 and December 31, 2019, Aptiv had the following liabilities measured at fair value on a recurring basis:
TotalQuoted Prices in Active Markets
Level 1
Significant Other Observable Inputs
Level 2
Significant Unobservable Inputs
Level 3
 (in millions)
As of June 30, 2020:
Commodity derivatives$ $—  $ $—  
Foreign currency derivatives42  —  42  —  
Contingent consideration51  —  —  51  
Total$96  $—  $45  $51  
As of December 31, 2019:
Commodity derivatives$ $—  $ $—  
Foreign currency derivatives —   —  
Contingent consideration51  —  —  51  
Total$55  $—  $ $51  
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, finance 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 June 30, 2020 and December 31, 2019, total debt was recorded at $4,146 million and $4,364 million, respectively, and had estimated fair values of $4,243 million and $4,593 million, respectively. For all other financial instruments recorded at June 30, 2020 and December 31, 2019, 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, assets held for sale, equity investments, intangible assets, asset retirement obligations, share-based compensation and liabilities for exit or disposal activities measured at fair value upon initial recognition. Aptiv recorded non-cash asset impairment charges totaling $4 million and $2 million for the three months ended June 30, 2020 and 2019, respectively, within costs of sales related to declines in the fair values of certain fixed assets. During the three months ended June 30, 2019, Aptiv recorded non-cash asset impairment charges totaling $8 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.

32

Table of Contents

16. OTHER INCOME, NET
Other income (expense), net included:
 Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
 (in millions)
Interest income$ $ $ $ 
Loss on modification of debt(4) —  (4) —  
Loss on extinguishment of debt—  —  —  (6) 
Components of net periodic benefit cost other than service cost (Note 9)(5) (5) (10) (10) 
Change in fair value of equity investments (Note 17)—  —  —  19  
Other, net   11  
Other (expense) income, net$(6) $ $(7) $22  
As further discussed in Note 8. Debt, during the three months ended June 30, 2020, Aptiv recorded a loss on debt modification of $4 million, in conjunction with the May 2020 Amendment to the Credit Agreement.
As further discussed in Note 17. Acquisitions and Divestitures, during the six months ended June 30, 2019, Aptiv recorded a pre-tax unrealized gain of $19 million related to increases in fair value of its equity investments without readily determinable fair values. Also, as further discussed in Note 8. Debt, during the six months ended June 30, 2019, Aptiv redeemed for cash the entire $650 million aggregate principal amount outstanding of the 3.15% Senior Notes, resulting in a loss on debt extinguishment of approximately $6 million.

17. ACQUISITIONS AND DIVESTITURES
Acquisition of gabo Systemtechnik GmbH
On November 19, 2019, Aptiv acquired 100% of the equity interests of gabo Systemtechnik GmbH (“gabocom”), a leading provider of highly-engineered cable management and protection solutions for the telecommunications industry, for total consideration of $311 million, net of cash acquired. The results of operations of gabocom are reported within the Signal and Power Solutions segment from the date of acquisition. The Company acquired gabocom 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 2019. The preliminary purchase price and related allocation to the acquired net assets of gabocom based on their estimated fair values is shown below (in millions):
Assets acquired and liabilities assumed
Purchase price, cash consideration, net of cash acquired$311  
Property, plant and equipment$25  
Intangible assets75  
Other liabilities, net(11) 
Identifiable net assets acquired89  
Goodwill resulting from purchase222  
Total purchase price allocation$311  
Intangible assets include $66 million recognized for the fair value of customer-based assets with estimated useful lives of approximately 9 years and $9 million recognized for the fair value of the acquired trade name, which has an estimated useful life of approximately 15 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 gabocom, and is not deductible for tax purposes.
33

Table of Contents

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 Falmat Inc.
On May 14, 2019, Aptiv acquired 100% of the equity interests of Falmat Inc. (“Falmat”), a leading manufacturer of high performance custom cable and cable assemblies for industrial applications, for total consideration of $25 million, net of cash acquired. The results of operations of Falmat are reported within the Signal and Power Solutions segment from the date of acquisition. The Company acquired Falmat 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 2019. The purchase price and related allocation were finalized in the second quarter of 2020, and resulted in minor adjustments from the amounts previously disclosed. These adjustments were not significant for any period presented after the acquisition date. The final purchase price and related allocation to the acquired net assets of Falmat based on their estimated fair values is shown below (in millions):
Assets acquired and liabilities assumed
Purchase price, cash consideration, net of cash acquired$25  
Intangible assets$12  
Other assets, net 
Identifiable net assets acquired17  
Goodwill resulting from purchase 
Total purchase price allocation$25  
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 Falmat, 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 Dynawave Inc.
In March 2020, Aptiv agreed to acquire Dynawave Inc. (“Dynawave”), a specialized manufacturer of custom-engineered interconnect solutions for a wide range of industries, for total consideration of approximately $22 million. The acquisition is subject to the satisfaction of customary closing conditions and the receipt of regulatory and other approvals, and is expected to close in the third quarter of 2020. The Company expects to acquire Dynawave primarily utilizing cash on hand. Upon completion, Dynawave will become part of the Signal and Power Solutions segment.
Technology Investments
The Company has made technology investments in certain non-consolidated affiliates for ownership interests of less than 20%, 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 2019, the Company’s Advanced Safety and User Experience segment made a $6 million investment in Krono-Safe, SAS, a leading software developer of safety-critical real-time embedded systems.
During the first quarter of 2019, the Company’s Advanced Safety and User Experience segment made an additional $3 million investment in Otonomo Technologies Ltd. (“Otonomo”), a connected car data marketplace developer. This investment was in addition to the Company’s $15 million investment made in the first quarter of 2017.
34

Table of Contents

As of June 30, 2020, the Company had the following technology investments, which are classified within other long-term assets in the consolidated balance sheets:
Investment NameSegmentInvestment DateInvestment
(in millions)
Krono-Safe, SASAdvanced Safety and User ExperienceQ4 2019$ 
Affectiva, Inc.Advanced Safety and User ExperienceQ4 201815  
Innoviz TechnologiesAdvanced Safety and User ExperienceQ3 201715  
LeddarTech, Inc.Advanced Safety and User ExperienceQ3 201710  
Valens Semiconductor Ltd.Signal and Power SolutionsQ2 201710  
Otonomo Technologies Ltd.Advanced Safety and User ExperienceQ1 2017; Q1 201937  
Quanergy Systems, IncAdvanced Safety and User ExperienceQ2 2015; Q1 2016 
Other investmentsAdvanced Safety and User ExperienceQ4 2018; Q3 2019 
$101  
During the six months ended June 30, 2019, the Company’s investment in Otonomo was remeasured to a fair value of $37 million, based on a subsequent round of financing observed to be for identical or similar investments of the same issuer. As a result, the Company recorded a pre-tax unrealized gain of $19 million to other income, net during the six months ended June 30, 2019.
There were no other material transactions, events or changes in circumstances requiring an impairment or an observable price change adjustment to 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.
Autonomous Driving Joint Venture
On March 26, 2020, Aptiv completed the transaction with Hyundai Motor Group (“Hyundai”) to form a new joint venture focused on the design, development and commercialization of autonomous driving technologies. Under the terms of the agreement, Aptiv contributed to the joint venture autonomous driving technology, intellectual property and approximately 700 employees for a 50% ownership interest in the newly formed entity. Hyundai contributed to the joint venture approximately $1.6 billion in cash, along with vehicle engineering services, research and development resources and access to intellectual property for a 50% ownership interest in the newly formed entity. As a result, subsequent to the closing of the transaction, the newly formed joint venture is expected to fund all of its future operating expenses and investments in autonomous driving technologies for the foreseeable future. Consequently, Aptiv is no longer required to fund these investments and expenses, which approximated $180 million for the year ended December 31, 2019 prior to the joint venture formation. Upon closing of the transaction, Aptiv deconsolidated the carrying value of the associated assets and liabilities contributed to the joint venture, previously classified as held for sale, and recognized an asset of approximately $2.0 billion within Investments in affiliates in the consolidated balance sheet, based on the preliminary fair value of its investment in the newly formed joint venture. The Company recognized a pre-tax gain of approximately $1.4 billion in the consolidated statement of operations (approximately $5.57 per diluted share during the six months ended June 30, 2020), net of transaction costs of $22 million, based on the difference between the carrying value of its contribution to the joint venture and the preliminary fair value of its investment in the newly formed entity. The estimated fair value of Aptiv’s ownership interest in the newly formed joint venture was determined primarily based on third-party valuations and management estimates, generally utilizing income and market approaches. The estimated fair value is preliminary and could be revised as a result of additional information obtained or adjustments made due to the completion of independent appraisals and valuations. The effects of this transaction would not materially impact the Company’s reported results for any period presented, and the transaction did not meet the criteria to be reflected as a discontinued operation.
In connection with the closing of the transaction, Aptiv and the newly formed entity entered into various agreements to facilitate an orderly transition and to provide a framework for their relationship going forward, which included a transition services agreement. The transition services primarily involve Aptiv providing certain administrative services to the joint venture for a period of up to 24 months after the closing date. These agreements are not material to Aptiv. The Company’s investment in the joint venture is accounted for using the equity method of accounting.
The Company determined that the assets and liabilities associated with Aptiv’s contribution to the joint venture, which were reported within the Advanced Safety and User Experience segment, met the held for sale criteria as of December 31, 2019. Accordingly, the held for sale assets and liabilities were reclassified in the consolidated balance sheet as of December 31, 2019 to current assets held for sale and current liabilities held for sale, respectively, as the contribution of such assets and liabilities to
35

Table of Contents

the joint venture was expected to occur within one year. Upon designation as held for sale, the Company ceased recording depreciation of the held for sale assets.
Assets and liabilities classified as held for sale are required to be recorded at the lower of carrying value or fair value less costs to sell. The estimated fair value less costs to sell of Aptiv’s contribution to the joint venture exceeded its carrying value as of December 31, 2019, and therefore no adjustment to these long-lived assets was necessary.
As a result of the completion of the transaction on March 26, 2020, there were no assets or liabilities held for sale as of June 30, 2020. The following table summarizes the carrying value of the major classes of assets and liabilities held for sale as of December 31, 2019:
December 31,
2019
(in millions)
Cash and cash equivalents$ 
Accounts receivable, net 
Property, net64  
Operating lease right-of-use assets12  
Intangible assets, net126  
Goodwill318  
Other assets10  
Total assets held for sale$532  
Accounts payable$ 
Accrued liabilities19  
Long-term operating lease liabilities10  
Other liabilities 
Total liabilities held for sale$43  
The pre-tax loss of Aptiv’s autonomous driving operations that were contributed to the joint venture on March 26, 2020, included within Aptiv’s consolidated operating results, was $41 million for the six months ended June 30, 2020 and $44 million and $85 million for the three and six months ended June 30, 2019, respectively.

18. SHARE-BASED COMPENSATION
Long-Term Incentive Plan
The Aptiv PLC Long-Term Incentive Plan, as amended and restated effective April 23, 2015 (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, restricted stock units (“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 2020 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.
Board of Director Awards
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 vested on April 24, 2019, and 23,999 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. 3,228 ordinary shares were withheld to cover withholding taxes.
On April 25, 2019, Aptiv granted 20,765 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 25,
36

Table of Contents

2019. The RSUs vested on April 22, 2020, and 23,816 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 $1 million. 2,041 ordinary shares were withheld to cover withholding taxes.
On April 23, 2020, Aptiv granted 48,745 RSUs to the Board of Directors at a grant date fair value of approximately $3 million. The grant date fair value was determined based on the closing price of the Company’s ordinary shares on April 23, 2020. The RSUs will vest on April 29, 2021, the day before the 2021 Annual General 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:
Metric2020
Grant
2016 - 2019
Grants
Average return on net assets (1)33%50%
Cumulative net income33%25%
Relative total shareholder return (2)33%25%
(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)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 DateRSUs GrantedGrant Date Fair ValueTime-Based Award Vesting DatesPerformance-Based Award Vesting Date
(in millions)
February 20160.71  $48  Annually on anniversary of grant date, 2017 - 2019December 31, 2018
February 20170.80  63  Annually on anniversary of grant date, 2018 - 2020December 31, 2019
February 20180.63  61  Annually on anniversary of grant date, 2019 - 2021December 31, 2020
February 20190.71  62  Annually on anniversary of grant date, 2020 - 2022December 31, 2021
February 20200.75  62  Annually on anniversary of grant date, 2021 - 2023December 31, 2022
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.
Any new executives hired after the annual executive RSU grant date may be eligible to participate in the PLC LTIP. The Company has also granted additional awards to employees in certain periods under the PLC LTIP. Any off cycle grants made for new hires or to other employees 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.
In February 2019, under the time-based vesting terms of the outstanding awards, 529,812 ordinary shares were issued to Aptiv employees at a fair value of approximately $44 million, of which 203,839 ordinary shares were withheld to cover withholding taxes. The performance-based RSUs associated with the 2016 grant, and applicable continuity awards, vested at the completion of a three-year performance period on December 31, 2018, and in the first quarter of 2019, 493,674 ordinary shares were issued to employees at a fair value of approximately $41 million, of which 199,547 ordinary shares were withheld to cover withholding taxes.
In February 2020, under the time-based vesting terms of the outstanding awards, 468,240 ordinary shares were issued to Aptiv employees at a fair value of approximately $37 million, of which 181,495 ordinary shares were withheld to cover withholding taxes. The performance-based RSUs associated with the 2017 grant vested at the completion of a three-year
37

Table of Contents

performance period on December 31, 2019, and in the first quarter of 2020, 580,390 ordinary shares were issued to employees at a fair value of approximately $45 million, of which 243,080 ordinary shares were withheld to cover withholding taxes.
A summary of RSU activity, including award grants, vesting and forfeitures is provided below:
RSUsWeighted Average Grant Date Fair Value
 (in thousands)
Nonvested, January 1, 20201,822  $89.32  
Granted866  81.03  
Vested(492) 80.65  
Forfeited(84) 86.25  
Nonvested, June 30, 20202,112  88.06  
Aptiv recognized compensation expense of $13 million ($13 million, net of tax) and $21 million ($20 million, net of tax) based on the Company’s best estimate of ultimate performance against the respective targets during the three months ended June 30, 2020 and 2019, respectively. Aptiv recognized compensation expense of $12 million ($12 million, net of tax) and $36 million ($35 million, net of tax) based on the Company’s best estimate of ultimate performance against the respective targets during the six months ended June 30, 2020 and 2019, 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 June 30, 2020, unrecognized compensation expense on a pre-tax basis of approximately $85 million is anticipated to be recognized over a weighted average period of approximately 2 years. For the six months ended June 30, 2020 and 2019, approximately $33 million and $34 million, respectively, of cash was paid and reflected as a financing activity in the statements of cash flows related to the tax withholding for vested RSUs.

19. 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 advanced safety, user experience and connectivity and security solutions, as well as advanced software development and autonomous driving technologies.
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) benefit, equity income (loss), 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 other transactions and deferred compensation related to acquisitions (“Adjusted Operating Income (Loss)”) 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 (Loss) as the key performance measure of segment income (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 (Loss) 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 (loss) attributable to Aptiv, which is the most directly comparable financial measure to Adjusted Operating Income (Loss) that is prepared in accordance with U.S. GAAP. Segment Adjusted Operating Income (Loss), as determined and measured by Aptiv, should also not be compared to similarly titled measures reported by other companies.
38

Table of Contents

Included below are sales and operating data for Aptiv’s segments for the three and six months ended June 30, 2020 and 2019, as well as balance sheet data as of June 30, 2020 and December 31, 2019.
Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and Other (1)Total
 (in millions)
For the Three Months Ended June 30, 2020:
Net sales$1,435  $530  $(5) $1,960  
Depreciation and amortization$143  $41  $—  $184  
Adjusted operating loss$(143) $(86) $—  $(229) 
Operating loss$(208) $(103) $—  $(311) 
Equity income (loss), net of tax$ $(21) $—  $(18) 
Net income attributable to noncontrolling interest
$ $—  $—  $ 

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and Other (1)Total
 (in millions)
For the Three Months Ended June 30, 2019:
Net sales$2,585  $1,050  $(8) $3,627  
Depreciation and amortization$136  $52  $—  $188  
Adjusted operating income$337  $68  $—  $405  
Operating income$302  $33  $—  $335  
Equity income, net of tax$ $—  $—  $ 
Net loss attributable to noncontrolling interest
$(3) $—  $—  $(3) 

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and Other (1)Total
 (in millions)
For the Six Months Ended June 30, 2020:
Net sales$3,765  $1,432  $(11) $5,186  
Depreciation and amortization$282  $82  $—  $364  
Adjusted operating income (loss)$82  $(80) $—  $ 
Operating (loss) income (2)$(9) $1,317  $—  $1,308  
Equity income (loss), net of tax$ $(22) $—  $(16) 
Net loss attributable to noncontrolling interest
$(4) $—  $—  $(4) 

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and Other (1)Total
 (in millions)
For the Six Months Ended June 30, 2019:
Net sales$5,147  $2,073  $(18) $7,202  
Depreciation and amortization$267  $94  $—  $361  
Adjusted operating income$620  $130  $—  $750  
Operating income$559  $73  $—  $632  
Equity income, net of tax$ $—  $—  $ 
Net income attributable to noncontrolling interest
$ $—  $—  $ 
39

Table of Contents

(1)Eliminations and Other includes the elimination of inter-segment transactions.
(2)Includes a pre-tax gain of $1.4 billion within Advanced Safety and User Experience for the completion of the autonomous driving joint venture. Refer to Note 17. Acquisitions and Divestitures for additional information.

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and Other (1)Total
 (in millions)
Balance as of June 30, 2020:
Investment in affiliates (2)$95  $1,978  $—  $2,073  
Goodwill$2,375  $26  $—  $2,401  
Total segment assets (2)$11,874  $6,741  $(3,335) $15,280  
Balance as of December 31, 2019:
Investment in affiliates$106  $—  $—  $106  
Goodwill$2,381  $26  $—  $2,407  
Total segment assets$12,726  $4,988  $(4,255) $13,459  
(1)Eliminations and Other includes the elimination of inter-segment transactions.
(2)Includes $2.0 billion within Advanced Safety and User Experience for the preliminary fair value of the investment in the autonomous driving joint venture reduced by an equity loss, net of tax, of $22 million recognized by the joint venture subsequent to its formation in March 2020 for the six months ended June 30, 2020. Refer to Note 17. Acquisitions and Divestitures for additional information.

The reconciliation of Adjusted Operating Income (Loss) to operating income (loss) 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 other transactions and deferred compensation related to acquisitions. The reconciliations of Adjusted Operating Income (Loss) to net income (loss) attributable to Aptiv for the three and six months ended June 30, 2020 and 2019 are as follows:
Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Three Months Ended June 30, 2020:
Adjusted operating loss$(143) $(86) $—  $(229) 
Restructuring(60) (12) —  (72) 
Other acquisition and portfolio project costs(1) (1) —  (2) 
Asset impairments(4) —  —  (4) 
Deferred compensation related to nuTonomy acquisition
—  (4) —  (4) 
Operating loss$(208) $(103) $—  (311) 
Interest expense(44) 
Other expense, net(6) 
Loss before income taxes and equity income
(361) 
Income tax benefit14  
Equity loss, net of tax
(18) 
Net loss(365) 
Net income attributable to noncontrolling interest
 
Net loss attributable to Aptiv$(366) 


40

Table of Contents

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Three Months Ended June 30, 2019:
Adjusted operating income$337  $68  $—  $405  
Restructuring(23) (8) —  (31) 
Other acquisition and portfolio project costs(11) (6) —  (17) 
Asset impairments(1) (9) —  (10) 
Deferred compensation related to nuTonomy acquisition
—  (12) —  (12) 
Operating income$302  $33  $—  335  
Interest expense(43) 
Other income, net 
Income before income taxes and equity income
298  
Income tax expense(31) 
Equity income, net of tax
 
Net income271  
Net loss attributable to noncontrolling interest
(3) 
Net income attributable to Aptiv$274  

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Six Months Ended June 30, 2020:
Adjusted operating income (loss)$82  $(80) $—  $ 
Restructuring(79) (21) —  (100) 
Other acquisition and portfolio project costs(8) (8) —  (16) 
Asset impairments(4) —  —  (4) 
Deferred compensation related to nuTonomy acquisition
—  (8) —  (8) 
Gain on business divestitures and other transactions—  1,434  —  1,434  
Operating (loss) income$(9) $1,317  $—  1,308  
Interest expense(87) 
Other expense, net(7) 
Income before income taxes and equity income
1,214  
Income tax benefit 
Equity loss, net of tax
(16) 
Net income1,202  
Net loss attributable to noncontrolling interest
(4) 
Net income attributable to Aptiv$1,206  
41

Table of Contents


Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Six Months Ended June 30, 2019:
Adjusted operating income$620  $130  $—  $750  
Restructuring(42) (15) —  (57) 
Other acquisition and portfolio project costs(18) (10) —  (28) 
Asset impairments(1) (9) —  (10) 
Deferred compensation related to nuTonomy acquisition
—  (23) —  (23) 
Operating income$559  $73  $—  632  
Interest expense(81) 
Other income, net22  
Income before income taxes and equity income
573  
Income tax expense(64) 
Equity income, net of tax
 
Net income516  
Net income attributable to noncontrolling interest
 
Net income attributable to Aptiv$514  

20. REVENUE
Revenue is recognized 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. Accordingly, 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 three and six months ended June 30, 2020 and 2019. Information concerning geographic market reflects the manufacturing location.
42

Table of Contents


For the Three Months Ended June 30, 2020:Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
(in millions)
Geographic Market
North America$401  $96  $(1) $496  
Europe, Middle East and Africa367  212  (1) 578  
Asia Pacific648  222  (3) 867  
South America19  —  —  19  
Total net sales$1,435  $530  $(5) $1,960  

For the Three Months Ended June 30, 2019:Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
(in millions)
Geographic Market
North America$1,092  $320  $—  $1,412  
Europe, Middle East and Africa770  460  (2) 1,228  
Asia Pacific654  266  (6) 914  
South America69   —  73  
Total net sales$2,585  $1,050  $(8) $3,627  

For the Six Months Ended June 30, 2020:Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
(in millions)
Geographic Market
North America$1,406  $388  $(1) $1,793  
Europe, Middle East and Africa1,145  655  (4) 1,796  
Asia Pacific1,140  389  (6) 1,523  
South America74  —  —  74  
Total net sales$3,765  $1,432  $(11) $5,186  

For the Six Months Ended June 30, 2019:Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
(in millions)
Geographic Market
North America$2,188  $646  $(1) $2,833  
Europe, Middle East and Africa1,559  903  (5) 2,457  
Asia Pacific1,276  520  (12) 1,784  
South America124   —  128  
Total net sales$5,147  $2,073  $(18) $7,202  
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 June 30, 2020 or December 31, 2019.
43

Table of Contents

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 June 30, 2020 and December 31, 2019, Aptiv has recorded $111 million (of which $26 million was classified within other current assets and $85 million was classified within other long-term assets) and $99 million (of which $20 million was classified within other current assets and $79 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 $5 million and $2 million for the three months ended June 30, 2020 and 2019, respectively, and $9 million and $5 million for the six months ended June 30, 2020 and 2019, respectively.

21. LEASES
Lease Portfolio
The Company has operating and finance leases for real estate, office equipment, automobiles, forklifts and certain other equipment. The Company's leases have remaining lease terms of 1 year to 30 years, some of which include options to extend the leases for up to 8 years, and some of which include options to terminate the leases within 1 year. Certain of our lease agreements include rental payments which are adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate is not a quoted rate and is primarily derived by applying a spread over U.S. Treasury rates with a similar duration to the Company’s lease payments. The spread utilized is based on the Company’s credit rating and the impact of full collateralization.
Related Party Lease Agreement
In connection with the closing of the autonomous driving joint venture, as further discussed in Note 17. Acquisitions and Divestitures, Aptiv agreed to sublease certain office space to the newly formed entity with a remaining lease term of approximately 9 years. Total income under the agreement was $1 million during the three months ended June 30, 2020. The sublease income and Aptiv’s associated operating lease cost are recorded to cost of sales in the consolidated statement of operations. The Company believes the terms of the lease agreement have not significantly been affected by the fact the Company and the lessee are related parties.
44

Table of Contents

The components of lease expense were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
 (in millions)
Lease cost:
Finance lease cost:
Amortization of right-of-use assets$ $—  $ $ 
Interest on lease liabilities    
Total finance lease cost    
Operating lease cost27  27  54  56  
Short-term lease cost    
Variable lease cost—  —  —   
Sublease income (1)(1) —  (1) —  
Total lease cost$31  $33  $63  $65  
(1)Sublease income excludes rental income from owned properties of $2 million and $5 million for the three and six months ended June 30, 2020, respectively and $3 million and $6 million three and six months ended June 30, 2019, respectively, which is included in other income, net.
Supplemental cash flow and other information related to leases was as follows:
Six Months Ended June 30,
20202019
 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leases$ $ 
Operating cash flows for operating leases53  56  
Financing cash flows for finance leases  
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$ $63  
Finance leases—  —  
45

Table of Contents

Supplemental balance sheet information related to leases was as follows:
June 30,
2020
December 31,
2019
(dollars in millions)
Operating leases:
Operating lease right-of-use assets$377  $413  
Accrued liabilities (Note 5)
$95  $94  
Long-term operating lease liabilities293  329  
Total operating lease liabilities$388  $423  
Finance leases:
Property and equipment$30  $30  
Less: accumulated depreciation(11) (9) 
Total property, net$19  $21  
Short-term debt (Note 8)
$ $ 
Long-term debt (Note 8)
16  18  
Total finance lease liabilities$20  $22  
Weighted average remaining lease term:
Operating leases6 years6 years
Finance leases6 years6 years
Weighted average discount rate:
Operating leases3.5 %3.5 %
Finance leases3.5 %4.0 %
Additionally, the Company reclassified $12 million of operating lease right-of-use assets and $13 million of operating lease liabilities as held for sale in the consolidated balance sheet as of December 31, 2019. Refer to Note 17. Acquisitions and Divestitures for further information regarding the Company's assets and liabilities held for sale.
Maturities of lease liabilities were as follows:
Operating
Leases
Finance
Leases
 (in millions)
As of June 30, 2020:
2020 (remaining as of June 30, 2020)$53  $ 
202198   
202280   
202360   
202441   
Thereafter96   
Total lease payments428  23  
Less: imputed interest(40) (3) 
Total$388  $20  
As of June 30, 2020, the Company has entered into additional operating leases which are not significant, primarily for real estate, that have not yet commenced.

46

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q, including the exhibits being filed as part of this report, as well as other statements made by Aptiv PLC (“Aptiv,” the “Company,” “we,” “us” and “our”), contain forward-looking statements that reflect, when made, the Company’s current views with respect to current events and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating to the Company’s operations and business environment, which may cause the actual results of the Company to be materially different from any future results, express or implied, by such forward-looking statements. All statements that address future operating, financial or business performance or the Company’s strategies or expectations are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “outlook” or “continue,” and other comparable terminology. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: global and regional economic conditions, including conditions affecting the credit market; uncertainties posed by the novel coronavirus (COVID-19) pandemic and the difficulty in predicting its future course and its impact on the global economy and the Company’s future operations; fluctuations in interest rates and foreign currency exchange rates; the cyclical nature of global automotive sales and production; the potential disruptions in the supply of and changes in the competitive environment for raw material integral to the Company’s products; the Company’s ability to maintain contracts that are critical to its operations; potential changes to beneficial free trade laws and regulations such as the United States-Mexico-Canada Agreement; the ability of the Company to integrate and realize the expected benefits of recent transactions; the ability of the Company to attract, motivate and/or retain key executives; the ability of the Company to avoid or continue to operate during a strike, or partial work stoppage or slow down by any of its unionized employees or those of its principal customers; and the ability of the Company to attract and retain customers. Additional factors are discussed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s filings with the Securities and Exchange Commission, including those set forth in the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2019 and within the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. It should be remembered that the price of the ordinary shares and any income from them can go down as well as up. Aptiv disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events and/or otherwise, except as may be required by law.
47

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to help you understand the business operations and financial condition of the Company for the three and six months ended June 30, 2020. This discussion should be read in conjunction with Item 1. Financial Statements. Our MD&A is presented in eight sections:
Executive Overview
Consolidated Results of Operations
Results of Operations by Segment
Liquidity and Capital Resources
Off-Balance Sheet Arrangements
Contingencies and Environmental Matters
Recently Issued Accounting Pronouncements
Critical Accounting Estimates
Within the MD&A, “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, 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 PLC 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.” The completion of the Separation positioned Aptiv as a new mobility provider focused on solving the complex challenges associated with safer, greener and more connected transportation. At the core of our capabilities is the software and vehicle architecture expertise that enables the advanced safety, automated driving, user experience and connected services that are enabling the future of mobility.

Executive Overview
Our Business
We are 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 market, creating the software and hardware foundation for vehicle features and functionality. We enable and deliver end-to-end smart mobility solutions, active safety and autonomous driving technologies and provide enhanced user experience and connected services. Our Advanced Safety and User Experience segment is focused on providing the necessary software and advanced computing platforms, and our Signal and Power Solutions segment is focused on providing the requisite networking architecture required to support the integrated systems in today’s complex vehicles. Together, our businesses develop the ‘brain’ and the ‘nervous system’ of increasingly complex vehicles, providing integration of the vehicle into its operating environment.
We are one of the largest vehicle component manufacturers and our customers include 23 of the 25 of the largest automotive original equipment manufacturers (“OEMs”) in the world.
Our total net sales during the three and six months ended June 30, 2020 were $2.0 billion and $5.2 billion, a decrease of 46% and 28% compared to the same periods of 2019, respectively. Our overall volumes decreased 42% for the three months ended June 30, 2020, primarily due to the impacts of the COVID-19 pandemic, which also resulted in global vehicle production declines of 45% (54% on an Aptiv weighted market basis, which represents global vehicle production weighted to the geographic regions in which the Company generates its revenue “AWM”). Our overall volumes decreased 25% for the six months ended June 30, 2020, primarily due to the impacts of the COVID-19 pandemic, which also resulted in global vehicle production declines of 33% (37% on an AWM basis). The adverse impacts of the pandemic have included extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules, disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from governmental “lock-down” orders for all non-essential activities initially in the first quarter in China and subsequently in Europe and North America. While the lock-downs in China were substantially all lifted early in the second quarter, much of Europe and North America remained in lock-down for the majority of the quarter. Although our overall lean
48

Table of Contents

cost structure, along with continued above-market sales growth, has historically enabled us to maintain strong levels of operating income, our operating loss was $311 million during the three months ended June 30, 2020, compared to operating income of $335 million during the three months ended June 30, 2019, primarily as a result of the negative impacts of the COVID-19 pandemic. We anticipate the adverse impacts of the pandemic will persist through 2020 and perhaps beyond, and will likely have an adverse impact on our operating earnings and cash flows.
We are focused on maintaining a low fixed cost structure that provides us flexibility to remain profitable at all points of the traditional vehicle industry production cycle, including during periods of reduced industry volumes. Accordingly, we will continue to adjust our cost structure and optimize our manufacturing footprint in response to changes in the global and regional automotive markets, particularly resulting from the current impacts of the COVID-19 pandemic, and in order to increase investment in advanced technologies and engineering as conditions permit. As we operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further refine our cost structure, as evidenced by our ongoing restructuring programs focused on the continued rotation of our manufacturing footprint to best cost locations and on reducing our global overhead costs, as described in Note 7. Restructuring to the consolidated financial statements contained herein. We believe our strong balance sheet coupled with our flexible cost structure will position us to capitalize on improvements in OEM production volumes as economic and pandemic conditions improve.
Trends, Uncertainties and Opportunities
COVID-19 pandemic. The global spread of the COVID-19 pandemic, which originated in late 2019 and was later declared a pandemic by the World Health Organization in March 2020, has negatively impacted the global economy, disrupted supply chains and created significant volatility in global financial markets. Most notably with respect to the automotive industry, we experienced extended work stoppages in China during the first quarter of 2020, where we have a major manufacturing base, and the subsequent suspension of vehicle production by our OEM customers in North America and Europe, which combined accounts for approximately 70% of our annual net sales, as the pandemic spread to those regions and governmental authorities initiated “lock-down” orders for all non-essential activities. The work stoppages began to abate in China in March, and North America and Europe OEM production is beginning to restart sporadically. We expect OEM production levels to ramp up slowly and cautiously over the course of the year in these regions, however the risk of renewed government “lock-down” orders resulting in further work stoppages remains. Although we have taken decisive actions to enhance our financial flexibility and minimize the impact on our business, such as the ramping down of certain production facilities in response to customer plant closures and changes in vehicle production schedules, imposing certain travel restrictions, suspending our ordinary share cash dividend, issuing $2.3 billion combined of preferred and ordinary shares, extending substantially all of our existing Revolving Credit Facility’s maturity to August 2022, and actively managing costs, capital spending and working capital to further strengthen our liquidity, the ultimate impact to our business continues to remain uncertain. During the three and six months ended June 30, 2020, our net sales were adversely impacted by volume decreases of approximately 42% and 25%, respectively, largely due to the impacts resulting from the COVID-19 pandemic, primarily as a result of extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules, disruptions to our supply chain and other resultant adverse global economic impacts. Although we are unable to predict the ultimate impact to our business due to a number of evolving factors, including the duration and spread of the pandemic, the impact of the pandemic on economic activity, consumer demand and vehicle production schedules, and the actions of governmental authorities across the globe, we expect to experience continued adverse impacts resulting from the pandemic throughout 2020 and possibly beyond. However, we continue to actively monitor the ongoing potential impacts of COVID-19 and will seek to aggressively mitigate and minimize its impact on our business.
Economic conditions. Our business is directly related to automotive sales and automotive vehicle production by our customers. Automotive sales depend on a number of factors, including global and regional economic conditions. Global automotive vehicle production decreased 6% from 2018 to 2019, representing automotive vehicle production declines across all major regions during 2019. Compared to 2018, vehicle production in 2019 decreased by 9% in China, 4% in North America, 4% in Europe and 4% in South America, our smallest region. Global automotive vehicle production has continued to decline through the second quarter of 2020, primarily due to the adverse global economic impacts and uncertainty caused by the worldwide spread of the COVID-19 pandemic. Compared to 2019, vehicle production in the first half of 2020 decreased by 33% and is currently anticipated to decrease significantly for the full year of 2020, although the extent to which the COVID-19 pandemic will impact global and regional automotive vehicle production for the remainder of 2020 and beyond remains highly uncertain.
Economic volatility or weakness in North America, Europe, China or South America could result in a significant reduction in automotive sales and production by our customers, which would have an adverse effect on our business, results of operations and financial condition. There is also potential that geopolitical factors could adversely impact the U.S. and other economies, and specifically the automotive sector. In particular, changes to international trade agreements such as the United States-Mexico-Canada Agreement, or other political pressures could affect the operations of our OEM customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions. Increases in interest
49

Table of Contents

rates could also negatively impact automotive production as a result of increased consumer borrowing costs or reduced credit availability. Additionally, economic weakness may result in shifts in the mix of future automotive sales (from vehicles with more content such as luxury vehicles, trucks and sport utility vehicles toward smaller passenger cars). While our diversified customer and geographic revenue base, along with our flexible cost structure, have well positioned us to withstand the impact of industry downturns and benefit from industry upturns, shifts in the mix of global automotive production to higher cost regions or to vehicles with less content could adversely impact our profitability.
Key growth markets. There have been periods of increased market volatility and moderation in the level of economic growth in China, which resulted in periods of lower automotive production growth rates in China than those previously experienced, as evidenced by the reduction in volumes in the region during the year ended December 31, 2019. In addition, while automotive vehicle production in China increased by 6% in the second quarter of 2020 as compared to 2019 as work stoppages began to abate, production still experienced a decrease of 20% during the first half of 2020 as compared to 2019. Production is currently anticipated to decrease significantly in China for the full year of 2020, primarily as a result of the COVID-19 pandemic. Despite these vehicle production declines and the recent moderation in the level of economic growth in China, rising income levels in China and other key growth markets are expected to result in stronger growth rates in these markets over the long-term. Our strong global presence, and presence in these markets, has positioned us to experience above-market growth rates over the long-term. We continue to expand our established presence in key growth markets, positioning us to benefit from the expected long-term growth opportunities in these regions. We are capitalizing on our long-standing relationships with the global OEMs and further enhancing our positions with the key growth market OEMs to continue expanding our worldwide leadership. We continue to build upon our extensive geographic reach to capitalize on fast-growing automotive markets. We believe that our presence in best cost countries positions us to realize incremental margin improvements as the global balance of automotive production shifts towards the key growth markets.
We have a strong local presence in China, including a major manufacturing base and well-established customer relationships. Each of our business segments have operations and sales in China. Our business in China remains sensitive to economic and market conditions that impact automotive sales volumes in China, and may be affected if the pace of growth slows as the Chinese market matures or if there are reductions in vehicle demand in China, as have recently been experienced as a result of the COVID-19 pandemic. However, we continue to believe there is long-term growth potential in this market based on increasing long-term automotive and vehicle content demand.
Market driven products. Our product offerings satisfy the OEMs’ needs to meet increasingly stringent government regulations and meet consumer preferences for products that address the mega-trends of Safe, Green and Connected, leading to increased content per vehicle, greater profitability and higher margins. With these offerings, we believe we are well-positioned to benefit from the growing demand for vehicle content and technology related to safety, electrification, high speed data, connectivity to the global information network and automated driving technologies. We are benefiting from the substantial increase in vehicle content, software and electrification that requires a complex and reliable electrical architecture and systems to operate, such as automated advanced driver assistance technologies, electrical vehicle monitoring, active safety systems, lane departure warning systems, integrated vehicle cockpit displays, navigation systems and technologies that enable connected infotainment in vehicles. Our ability to design a reliable electrical architecture that optimizes power distribution and/or consumption is key to satisfying the OEMs’ needs to reduce emissions while continuing to meet consumer demand for increased vehicle content and technology.
Global capabilities. Many OEMs are continuing to adopt global vehicle platforms to increase standardization, reduce per unit cost and increase capital efficiency and profitability. As a result, OEMs are selecting suppliers that have the capability to manufacture products on a worldwide basis, as well as the flexibility to adapt to regional variations. Suppliers with global scale and strong design, engineering and manufacturing capabilities are best positioned to benefit from this trend. Our global footprint enables us to serve the global OEMs on a worldwide basis as we gain market share with the emerging market OEMs. This regional model principally services the North American market out of Mexico, the South American market out of Brazil, the European market out of Eastern Europe and North Africa and the Asia Pacific market out of China, and we have continued to rotate our manufacturing footprint to best cost locations within these regions.
Our global operations are subject to certain risks inherent in doing business abroad, including unexpected changes in laws or regulations governing trade, or other monetary or tax fiscal policy changes, including tariffs, quotas, customs and other import or export restrictions or trade barriers. We are also subject to risks associated with actions taken by governmental authorities to impose changes in laws or regulations that restrict certain business operations, trade or travel in response to a pandemic or widespread outbreak of an illness. For instance, the worldwide spread of the COVID-19 pandemic is having adverse impacts on our global operations, the automotive industry and economies around the world. Most notably, the pandemic has resulted in extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules, disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from governmental “lock-down” orders for all non-essential activities, initially in the first quarter in China and subsequently in Europe and North America. While the lock-downs in China were
50

Table of Contents

substantially all lifted early in the second quarter, much of Europe and North America remained in lock-down for the majority of the quarter, however the risk of renewed “lock-down” orders resulting in further work stoppages remains. Although we are unable to predict the ultimate impact to our business due to a number of evolving factors, including the duration and spread of the pandemic, the impact of the pandemic on economic activity, consumer demand and vehicle production schedules, and the actions of governmental authorities across the globe, we expect to experience continued adverse impacts resulting from the pandemic through 2020 and possibly beyond. In addition, recent government changes in Mexico have yielded requirements that call for increases in minimum wages at the border as well as the interior of Mexico. These or any further political or governmental developments in response to the COVID-19 pandemic or in Mexico or other countries in which we operate could result in social, economic and labor instability.
In addition, existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such as China and Mexico, could have a material adverse effect on our business and financial results. For instance, beginning in 2018, the U.S. and Chinese governments have imposed a series of significant incremental retaliatory tariffs to certain imported products. Most notably with respect to the automotive industry, the U.S. imposed tariffs on imports of certain steel, aluminum and automotive components, and China imposed retaliatory tariffs on imports of U.S. vehicles and certain automotive components. While these tariffs could have potentially adverse economic impacts, particularly with respect to the automotive industry and vehicle production levels, we do not anticipate a significant impact to our operations, as we have developed and implemented strategies to mitigate adverse tariff impacts, such as production localization and relocation, contract review and renegotiation and working with the appropriate governmental agencies. Further, our global footprint and regional model serves to minimize our exposure to cross-border transactions. However, despite recent trade negotiations between the U.S. and Chinese governments, the scope and duration of the imposed tariffs remain uncertain.
Product development. The automotive technology and components industry is highly competitive, both domestically and internationally, and is characterized by rapidly changing technology, evolving industry standards and changes in customer needs. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely and cost competitive basis will be a significant factor in our ability to remain competitive. To compete effectively in the automotive technology and components industry, we must be able to develop and launch new products to meet our customers’ demands in a timely manner. Our innovative technologies and robust global engineering and development capabilities have well positioned us to meet the increasingly stringent vehicle manufacturer demands and consumer preferences for high-technology content in automobiles.
OEMs are increasingly looking to their suppliers to simplify vehicle design and assembly processes to reduce costs and weight. As a result, suppliers that sell vehicle components directly to manufacturers (Tier I suppliers) have assumed many of the design, engineering, research and development and assembly functions traditionally performed by vehicle manufacturers. Suppliers that can provide fully-engineered solutions, systems and pre-assembled combinations of component parts are positioned to leverage the trend toward system sourcing.
Engineering, design and development. Our history and culture of innovation have enabled us to develop significant intellectual property and design and development expertise to provide advanced technology solutions that meet the demands of our customers. Following the completion of the autonomous driving joint venture in the first quarter of 2020, we have a team of approximately 19,300 scientists, engineers and technicians focused on developing leading product solutions for our key markets, located at 12 major technical centers in China, Germany, India, Mexico, Poland, Singapore and the United States. We invest approximately $1.2 billion (which includes approximately $300 million co-investment by customers and government agencies) annually in research and development, including engineering, to maintain our portfolio of innovative products, and own/hold approximately 7,300 patents and protective rights. We also encourage “open innovation” and collaborate extensively with peers in the industry, government agencies and academic institutions. Our technology competencies are recognized by both customers and government agencies, who co-invest approximately $300 million annually in new product development, accelerating the pace of innovation and reducing the risk associated with successful commercialization of technological breakthroughs.
In the past, suppliers often incurred the initial cost of engineering, designing and developing automotive component parts, and recovered their investments over time by including a cost recovery component in the price of each part based on expected volumes. Recently, we and many other suppliers have negotiated for cost recovery payments independent of volumes. This trend reduces our economic risk.
Pricing. Cost-cutting initiatives adopted by our customers result in increased downward pressure on pricing. Our customer supply agreements generally require step-downs in component pricing over the periods of production and OEMs have historically possessed significant leverage over their outside suppliers because the automotive component supply industry is
51

Table of Contents

fragmented and serves a limited number of automotive OEMs. Our profitability depends in part on our ability to generate sufficient production cost savings in the future to offset price reductions.
We are focused on maintaining a low fixed cost structure that provides us flexibility to remain profitable at all points of the traditional vehicle industry production cycle. As a result, approximately 96% of our hourly workforce is located in best cost countries. Furthermore, we have substantial operational flexibility by leveraging a large workforce of temporary workers, which represented approximately 14% of the hourly workforce as of June 30, 2020. However, we will continue to adjust our cost structure and optimize our manufacturing footprint in response to changes in the global and regional automotive markets and in order to increase investment in advanced technologies and engineering, as evidenced by our ongoing restructuring programs focused on the continued rotation of our manufacturing footprint to best cost locations in Europe and on reducing our global overhead costs. As we continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further refine our cost structure.
We have a strong balance sheet with gross debt of approximately $4.1 billion and substantial available liquidity of approximately $4.1 billion as of June 30, 2020, and no significant U.S. defined benefit or workforce postretirement health care benefits and employer-paid postretirement basic life insurance benefits (“OPEB”) liabilities. As further described in Note 8. Debt to the consolidated financial statements contained herein, we extended substantially all of our existing Revolving Credit Facility’s maturity to August 2022, primarily to provide additional available liquidity and financial flexibility to mitigate the impacts on our business resulting from the uncertainty caused by the global spread of the COVID-19 pandemic. We intend to maintain strong financial discipline by targeting industry-leading earnings growth, cash flow generation and return on invested capital and to maintain sufficient liquidity to sustain our financial flexibility throughout the industry cycle.
OEM product recalls. The number of vehicles recalled globally by OEMs has increased above historical levels. These recalls can either be initiated by the OEMs or influenced by regulatory agencies. Although there are differing rules and regulations across countries governing recalls for safety issues, the overall transition towards global vehicle platforms may also contribute to increased recalls outside of the U.S., as automotive components are increasingly standardized across regions. Given the sensitivity to safety issues in the automotive industry, including increased focus from regulators and consumers, we anticipate the number of automotive recalls may remain above historical levels in the near future. Although we engage in extensive product quality programs and processes, it is possible that we may be adversely affected in the future if the pace of these recalls continues.
Efficient use of capital. The global vehicle components industry is generally capital intensive and a portion of a supplier’s capital equipment is frequently utilized for specific customer programs. Lead times for procurement of capital equipment are long and typically exceed start of production by one to two years. Substantial advantages exist for suppliers that can leverage their prior investments in capital equipment or amortize the investment over higher volume global customer programs.
Industry consolidation. Consolidation among worldwide suppliers is expected to continue as suppliers seek to achieve operating synergies and value stream efficiencies, acquire complementary technologies and build stronger customer relationships as OEMs continue to expand globally. Additionally, new entrants from outside the traditional automotive industry may seek to gain access to certain vehicle component markets, as evidenced by the acquisition of Harman International Industries, Incorporated by Samsung Electronics Co., Ltd. and the acquisition of Mobileye N.V. by Intel Corporation. We believe companies with strong balance sheets and financial discipline are in the best position to take advantage of the industry consolidation trend.
Commercializing the high-tech evolution of the automotive industry. The automotive industry is increasingly evolving towards the implementation of software-dependent components and solutions. In particular, the industry is focused on the development of advanced driver assistance technologies, with the goal of developing and introducing a commercially-viable, fully automated driving experience. We expect automated driving technologies will provide strong societal benefit as well as the opportunity for long-term growth for our product offerings in this space. We are focused on enabling and delivering end-to-end smart mobility solutions, accelerating the commercialization of active safety and autonomous driving technologies and providing enhanced user experience and connected services. Our Advanced Safety and User Experience segment is focused on providing the necessary software and advanced computing platforms, and our Signal and Power Solutions segment is focused on providing the requisite networking architecture required to support the integrated systems in today’s complex vehicles. Together, our businesses develop the ‘brain’ and the ‘nervous system’ of increasingly complex vehicles, providing integration of the vehicle into its operating environment.
We are continuing to invest in the automated driving space, and have continued to develop market-leading automated driving platform solutions such as automated driving software, key active safety sensing technologies and our Multi-Domain Controller, which fuses information from sensing systems as well as mapping and navigation data to make driving decisions. We believe we are well-aligned with industry technology trends that will result in sustainable future growth in this space, and have partnered with leaders in their respective fields to advance the pace of development and commercialization of these emerging technologies. Additionally, in 2017 we acquired nuTonomy, Inc. (“nuTonomy”) in order to further accelerate the
52

Table of Contents

commercialization of automated driving solutions. The acquisition of nuTonomy was the latest in a series of investments we made to expand our position in the new mobility space, including the 2015 acquisition of automated driving software developer Ottomatika.
In an effort to further our leadership position in the automated driving space, in March 2020 we completed the transaction with Hyundai Motor Group to form a new joint venture focused on the design, development and commercialization of autonomous driving technologies. We expect this partnership to advance the development of production-ready autonomous driving systems for commercialization by bringing together our innovative vehicle technologies in the new mobility space with one of the world’s largest vehicle manufacturers. The joint venture anticipates it will begin testing fully driverless systems in 2020 and have a production-ready autonomous driving platform available for robotaxi providers, fleet operators and automotive manufacturers in 2022. As a result of our substantial investments and strategic partnerships, we believe we are well-aligned with industry technology trends that will result in sustainable future growth in these evolving areas.
However, there are many risks associated with these evolving areas, including the high development costs of active safety and autonomous driving technologies, the uncertain timing of customer and consumer adoption of these technologies, increased competition from entrants outside the traditional automotive industry and new and emerging regulations, such as the recently released federal guidance for automated driving systems published by the U.S. Department of Transportation. While we believe we are well-positioned in these markets, the high development cost of active safety and autonomous driving technologies may result in a higher risk of exposure to the success of new or disruptive technologies different than those being developed by us or our partners.

Consolidated Results of Operations
Aptiv typically experiences fluctuations in revenue due to changes in OEM production schedules, vehicle sales mix and the net of new and lost business (which we refer to collectively as volume), increased prices attributable to escalation clauses in our supply contracts for recovery of increased commodity costs (which we refer to as commodity pass-through), fluctuations in foreign currency exchange rates (which we refer to as “FX”), contractual reductions of the sales price to the OEM (which we refer to as contractual price reductions) and engineering changes. Changes in sales mix can have either favorable or unfavorable impacts on revenue. Such changes can be the result of shifts in regional growth, shifts in OEM sales demand, as well as shifts in consumer demand related to vehicle segment purchases and content penetration. For instance, a shift in sales demand favoring a particular OEM’s vehicle model for which we do not have a supply contract may negatively impact our revenue. A shift in regional sales demand toward certain markets could favorably impact the sales of those of our customers that have a large market share in those regions, which in turn would be expected to have a favorable impact on our revenue.
We typically experience (as described below) fluctuations in operating income due to:
Volume, net of contractual price reductions—changes in volume offset by contractual price reductions (which typically range from 1% to 3% of net sales) and changes in mix;
Operational performance—changes to costs for materials and commodities or manufacturing and engineering variances; and
Other—including restructuring costs and any remaining variances not included in Volume, net of contractual price reductions or Operational performance.
The automotive technology and component supply industry is traditionally subject to inflationary pressures with respect to raw materials and labor which may place operational and profitability burdens on the entire supply chain. We will continue to work with our customers and suppliers to mitigate the impact of these inflationary pressures in the future. In addition, we expect commodity cost volatility, particularly related to copper and petroleum-based resin products, to have a continual impact on future earnings and/or operating cash flows. As such, we continually seek to mitigate both inflationary pressures and our material-related cost exposures using a number of approaches, including combining purchase requirements with customers and/or other suppliers, using alternate suppliers or product designs, negotiating cost reductions and/or commodity cost contract escalation clauses into our vehicle manufacturer supply contracts and hedging.
53

Table of Contents

Three and Six Months Ended June 30, 2020 versus Three and Six Months Ended June 30, 2019
The results of operations for the three and six months ended June 30, 2020 and 2019 were as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2020 2019 Favorable/(unfavorable)2020 2019 Favorable/(unfavorable)
 (dollars in millions)
Net sales$1,960  $3,627  $(1,667) $5,186  $7,202  $(2,016) 
Cost of sales1,947  2,958  1,011  4,672  5,920  1,248  
Gross margin13  0.7%669  18.4%(656) 514  9.9%1,282  17.8%(768) 
Selling, general and administrative217  260  43  469  516  47  
Amortization35  43   71  77   
Restructuring72  31  (41) 100  57  (43) 
Gain on autonomous driving joint venture—  —  —  (1,434) —  1,434  
Operating (loss) income(311) 335  (646) 1,308  632  676  
Interest expense(44) (43) (1) (87) (81) (6) 
Other (expense) income, net(6)  (12) (7) 22  (29) 
(Loss) income before income taxes and equity income
(361) 298  (659) 1,214  573  641  
Income tax benefit (expense)14  (31) 45   (64) 68  
(Loss) income before equity income
(347) 267  (614) 1,218  509  709  
Equity (loss) income, net of tax(18)  (22) (16)  (23) 
Net (loss) income(365) 271  (636) 1,202  516  686  
Net income (loss) attributable to noncontrolling interest
 (3)  (4)  (6) 
Net (loss) income attributable to Aptiv(366) 274  (640) 1,206  514  692  
Mandatory Convertible Preferred Share dividends(3) —  (3) (3) —  (3) 
Net (loss) income attributable to ordinary shareholders$(369) $274  $(643) $1,203  $514  $689  

Total Net Sales
Below is a summary of our total net sales for the three months ended June 30, 2020 versus June 30, 2019.
 Three Months Ended June 30,Variance Due To:
 20202019Favorable/(unfavorable)Volume, net of contractual price reductionsFXCommodity pass-throughOtherTotal
 (in millions)(in millions)
Total net sales$1,960  $3,627  $(1,667) $(1,588) $(65) $(14) $—  $(1,667) 
Total net sales for the three months ended June 30, 2020 decreased 46% compared to the three months ended June 30, 2019. Our overall volumes decreased 42% for the period, primarily due to the impacts of the COVID-19 pandemic, which also resulted in global vehicle production declines of 45% (54% on an AWM basis), over the same period. The adverse impacts of the pandemic included extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules, disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from governmental “lock-down” orders for all non-essential activities, initially in the first quarter in China and subsequently in Europe and North America. While the lock-downs in China were substantially all lifted early in the second quarter, much of Europe and North America remained in lock-down for the majority of the quarter. Volumes also reflect unfavorable foreign currency impacts, primarily related to the Euro and Chinese Yuan Renminbi, and contractual price reductions. Volume declines were partially offset by increased net sales of $24 million as a result of the acquisition of gabocom in 2019. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of our business acquisitions.
54

Table of Contents

Below is a summary of our total net sales for the six months ended June 30, 2020 versus 2019.
 Six Months Ended June 30,Variance Due To:
 20202019Favorable/(unfavorable)Volume, net of contractual price reductionsFXCommodity pass-throughOtherTotal
 (in millions)(in millions)
Total net sales$5,186  $7,202  $(2,016) $(1,867) $(128) $(21) $—  $(2,016) 
Total net sales for the six months ended June 30, 2020 decreased 28% compared to the six months ended June 30, 2019. Our overall volumes decreased 25% for the period, primarily due to the impacts of the COVID-19 pandemic, which also resulted in global vehicle production declines of 33% (37% on an AWM basis) over the same period. The adverse impacts of the pandemic included extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules, disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from governmental “lock-down” orders for all non-essential activities, initially in the first quarter in China and subsequently in Europe and North America. While the lock-downs in China were substantially all lifted early in the second quarter, much of Europe and North America remained in lock-down for the majority of the quarter. Volumes also reflect unfavorable foreign currency impacts, primarily related to the Euro and Chinese Yuan Renminbi, and contractual price reductions. Volume declines were partially offset by increased net sales of $46 million as a result of the acquisition of gabocom in 2019. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of our business acquisitions.

Cost of Sales
Cost of sales is primarily comprised of material, labor, manufacturing overhead, freight, fluctuations in foreign currency exchange rates, product engineering, design and development expenses, depreciation and amortization, warranty costs and other operating expenses. Gross margin is revenue less cost of sales and gross margin percentage is gross margin as a percentage of net sales.
Cost of sales decreased $1,011 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, as summarized below. The Company’s material cost of sales was approximately 50% of net sales in both the three months ended June 30, 2020 and 2019.
 Three Months Ended June 30,Variance Due To:
 20202019Favorable/(unfavorable)Volume (a)FXOperational performanceOtherTotal
 (dollars in millions)(in millions)
Cost of sales$1,947  $2,958  $1,011  $877  $64  $44  $26  $1,011  
Gross margin$13  $669  $(656) $(711) $(1) $44  $12  $(656) 
Percentage of net sales0.7 %18.4 %
(a)Presented net of contractual price reductions for gross margin variance.
The decrease in cost of sales reflects decreased volumes, largely resulting from the impacts of the COVID-19 pandemic, and the impacts from currency exchange and operational performance improvements. However, as certain of our costs remain fixed in nature over the near term, our gross margin as a percentage of sales was adversely impacted compared to the prior year period, primarily due to the COVID-19 pandemic. Cost of sales was also impacted by the following items in Other above:
$45 million of decreased engineering expense as a result of the formation of the autonomous driving joint venture with Hyundai in March 2020, which is now accounted for under the equity method of accounting; and
$14 million of decreased commodity pass-through costs; partially offset by
$14 million of increased warranty costs.
Cost of sales decreased $1,248 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, as summarized below. The Company’s material cost of sales was approximately 50% of net sales in both the six months ended June 30, 2020 and 2019.
55

Table of Contents

 Six Months Ended June 30,Variance Due To:
 20202019Favorable/(unfavorable)Volume (a)FXOperational performanceOtherTotal
 (dollars in millions)(in millions)
Cost of sales$4,672  $5,920  $1,248  $1,025  $120  $53  $50  $1,248  
Gross margin$514  $1,282  $(768) $(842) $(8) $53  $29  $(768) 
Percentage of net sales9.9 %17.8 %
(a)Presented net of contractual price reductions for gross margin variance.
The decrease in cost of sales reflects decreased volumes, largely resulting from the impacts of the COVID-19 pandemic, and the impacts from currency exchange and operational performance improvements. However, as certain of our costs remain fixed in nature over the near term, our gross margin as a percentage of sales was adversely impacted compared to the prior year period, primarily due to the COVID-19 pandemic. Cost of sales was also impacted by the following items in Other above:
$45 million of decreased engineering expense as a result of the formation of the autonomous driving joint venture with Hyundai in March 2020, which is now accounted for under the equity method of accounting; and
$21 million of decreased commodity pass-through costs; partially offset by
$14 million of increased warranty costs.

Selling, General and Administrative Expense

Three Months Ended June 30,
20202019Favorable/
(unfavorable)
(dollars in millions)
Selling, general and administrative expense$217  $260  $43  
Percentage of net sales11.1 %7.2 %
 Six Months Ended June 30,
 20202019Favorable/
(unfavorable)
 (dollars in millions)
Selling, general and administrative expense$469  $516  $47  
Percentage of net sales9.0 %7.2 %
Selling, general and administrative expense (“SG&A”) includes administrative expenses, information technology costs and incentive compensation related costs. SG&A increased as a percentage of net sales for the three and six months ended June 30, 2020 as compared to 2019, primarily due to the impacts of the COVID-19 pandemic on our overall net sales volumes. SG&A was also impacted by reduced incentive compensation costs.

56

Table of Contents

Amortization
Three Months Ended June 30,
20202019Favorable/
(unfavorable)
(in millions)
Amortization$35  $43  $ 
 Six Months Ended June 30,
 20202019Favorable/
(unfavorable)
 (in millions)
Amortization$71  $77  $ 
Amortization expense reflects the non-cash charge related to definite-lived intangible assets. The decrease in amortization during the three and six months ended June 30, 2020 compared to 2019 primarily reflects $8 million of intangible asset impairment charges recorded during the three months ended June 30, 2019, partially offset by the continued amortization of our definite-lived intangible assets, which resulted primarily from our acquisitions, over their estimated useful lives. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of our business acquisitions, including details of the intangible assets recorded in each transaction.

Restructuring
Three Months Ended June 30,
20202019Favorable/
(unfavorable)
(dollars in millions)
Restructuring$72  $31  $(41) 
Percentage of net sales3.7 %0.9 %
 Six Months Ended June 30,
 20202019Favorable/
(unfavorable)
 (dollars in millions)
Restructuring$100  $57  $(43) 
Percentage of net sales1.9 %0.8 %
The Company recorded employee-related and other restructuring charges totaling approximately $72 million and $100 million during the three and six months ended June 30, 2020, respectively, of which $42 million and $51 million, respectively, was recognized for programs implemented in the North America region and $24 million and $35 million, respectively, was recognized for programs implemented in the European region. The charges recorded during the three months ended June 30, 2020 included the recognition of approximately $60 million of employee-related and other costs related to actions taken to as a result of the global impacts of the COVID-19 pandemic. We expect to make cash payments of approximately $105 million over the next twelve months pursuant to currently implemented restructuring programs.
The Company recorded employee-related and other restructuring charges totaling approximately $31 million and $57 million during the three and six months ended June 30, 2019, respectively, of which $17 million and $34 million, respectively, was recognized for programs implemented in the North American region, pursuant to the Company’s ongoing overhead cost reduction strategy.
We expect to continue to incur additional restructuring expense in 2020 and beyond, primarily related to programs focused on aligning our production capabilities with the reduced levels of global vehicle production resulting from the COVID-19 pandemic and on reducing global overhead costs, which includes approximately $45 million (of which approximately $30 million relates to the Signal and Power Solutions segment and approximately $15 million relates to the Advanced Safety and User Experience segment) for programs approved as of June 30, 2020. Additionally, as we continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate
57

Table of Contents

opportunities to further adjust our cost structure and optimize our manufacturing footprint. The Company plans to implement additional restructuring activities in the future, if necessary, in order to align manufacturing capacity and other costs with prevailing regional automotive production levels and locations, to improve the efficiency and utilization of other locations and in order to increase investment in advanced technologies and engineering. Such future restructuring actions are dependent on market conditions, customer actions and other factors.
Refer to Note 7. Restructuring to the consolidated financial statements contained herein for additional information.

Interest Expense
Three Months Ended June 30,
20202019Favorable/
(unfavorable)
(in millions)
Interest expense$44  $43  $(1) 
 Six Months Ended June 30,
 20202019Favorable/
(unfavorable)
 (in millions)
Interest expense$87  $81  $(6) 
The increase in interest expense during the three and six months ended June 30, 2020 compared to 2019 reflects the drawdown of all remaining availability under the Revolving Credit Facility in the first quarter of 2020, which remained outstanding for substantially all of the second quarter of 2020. Refer to Note 8. Debt to the consolidated financial statements contained herein for additional information.

Other Income, Net
Three Months Ended June 30,
20202019Favorable/
(unfavorable)
(in millions)
Other (expense) income, net$(6) $ $(12) 
 Six Months Ended June 30,
 20202019Favorable/
(unfavorable)
 (in millions)
Other (expense) income, net$(7) $22  $(29) 
As further discussed in Note 8. Debt, during the three months ended June 30, 2020, Aptiv recorded a loss on debt modification of $4 million, in conjunction with the May 2020 Amendment to the Credit Agreement.
As further discussed in Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein, during the six months ended June 30, 2019, Aptiv recorded a pre-tax unrealized gain of $19 million related to increases in fair value of its equity investments without readily determinable fair values. Also, as further discussed in Note 8. Debt to the consolidated financial statements contained herein, during the six months ended June 30, 2019, Aptiv redeemed for cash the entire $650 million aggregate principal amount outstanding of the 3.15% Senior Notes, resulting in a loss on debt extinguishment of approximately $6 million.

58

Table of Contents

Income Taxes
Three Months Ended June 30,
20202019Favorable/
(unfavorable)
(in millions)
Income tax (benefit) expense$(14) $31  $45  
 Six Months Ended June 30,
 20202019Favorable/
(unfavorable)
 (in millions)
Income tax (benefit) expense$(4) $64  $68  
The Company’s tax rate is affected by the fact that its parent entity is an Irish resident taxpayer, the tax rates in Ireland 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. Due to the COVID-19 pandemic, losses for which no tax benefit was recognized were higher in the three and six months ended June 30, 2020 as compared to the previous year. The Company’s effective tax rate is also impacted by the receipt of certain tax incentives and holidays that reduce the effective tax rate for certain subsidiaries below the statutory rate.
The Company’s effective tax rate for the three and six months ended June 30, 2020 also includes net discrete tax benefits of $3 million and $6 million, respectively, primarily related to changes in reserves, changes in accruals for unremitted earnings and provision to return adjustments. Also included as a discrete item in the effective tax rate for the six months ended June 30, 2020 is the beneficial impact from the gain on the autonomous driving joint venture. The tax expense associated with the gain was insignificant as Aptiv’s aggregate autonomous driving assets were exempt from capital gains tax in the jurisdiction from which they were sold. The aggregate autonomous driving assets had been acquired, purchased or developed in taxable transactions in prior periods and reflect changes made to the corporate entity operating structure for intellectual property following the Separation of its former Powertrain Systems segment. The effective tax rate for the three and six months ended June 30, 2019 includes net discrete tax benefits of $21 million and $31 million, respectively, primarily related to changes in reserves, changes in accruals for unremitted earnings and provision to return adjustments. Refer to Note 11. Income Taxes to the consolidated financial statements contained herein for additional information.

Equity Income
Three Months Ended June 30,
20202019Favorable/
(unfavorable)
(in millions)
Equity (loss) income, net of tax$(18) $ $(22) 
 Six Months Ended June 30,
 20202019Favorable/
(unfavorable)
 (in millions)
Equity (loss) income, net of tax$(16) $ $(23) 
Equity (loss) income, net of tax reflects the Company’s interest in the results of ongoing operations of entities accounted for as equity-method investments. The equity losses recognized for the three and six months ended June 30, 2020 are primarily attributable to the performance of the joint venture formed in the transaction with Hyundai Motor Group, which closed on March 26, 2020.

59

Table of Contents

Results of Operations by Segment
We operate our 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 advanced safety, user experience and connectivity and security solutions, as well as advanced software development and autonomous driving technologies.
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.
Our management utilizes segment Adjusted Operating Income (Loss) 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 our operating segments. Segment Adjusted Operating Income (Loss) 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 (loss) attributable to Aptiv, which is the most directly comparable financial measure to Adjusted Operating Income (Loss) that is prepared in accordance with U.S. GAAP. Segment Adjusted Operating Income (Loss), as determined and measured by Aptiv, should also not be compared to similarly titled measures reported by other companies.
The reconciliation of Adjusted Operating Income (Loss) to operating income (loss) 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 other transactions and deferred compensation related to acquisitions. The reconciliations of Adjusted Operating Income (Loss) to net income (loss) attributable to Aptiv for the three and six months ended June 30, 2020 and 2019 are as follows:



Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Three Months Ended June 30, 2020:
Adjusted operating loss$(143) $(86) $—  $(229) 
Restructuring(60) (12) —  (72) 
Other acquisition and portfolio project costs(1) (1) —  (2) 
Asset impairments(4) —  —  (4) 
Deferred compensation related to nuTonomy acquisition
—  (4) —  (4) 
Operating loss$(208) $(103) $—  (311) 
Interest expense(44) 
Other expense, net(6) 
Loss before income taxes and equity income
(361) 
Income tax benefit14  
Equity loss, net of tax
(18) 
Net loss(365) 
Net income attributable to noncontrolling interest
 
Net loss attributable to Aptiv$(366) 

60

Table of Contents

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Three Months Ended June 30, 2019:
Adjusted operating income$337  $68  $—  $405  
Restructuring(23) (8) —  (31) 
Other acquisition and portfolio project costs(11) (6) —  (17) 
Asset impairments(1) (9) —  (10) 
Deferred compensation related to nuTonomy acquisition
—  (12) —  (12) 
Operating income$302  $33  $—  335  
Interest expense(43) 
Other income, net 
Income before income taxes and equity income
298  
Income tax expense(31) 
Equity income, net of tax
 
Net income271  
Net loss attributable to noncontrolling interest
(3) 
Net income attributable to Aptiv$274  

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Six Months Ended June 30, 2020:
Adjusted operating income (loss)$82  $(80) $—  $ 
Restructuring(79) (21) —  (100) 
Other acquisition and portfolio project costs(8) (8) —  (16) 
Asset impairments(4) —  —  (4) 
Deferred compensation related to nuTonomy acquisition
—  (8) —  (8) 
Gain on business divestitures and other transactions
—  1,434  —  1,434  
Operating (loss) income$(9) $1,317  $—  1,308  
Interest expense(87) 
Other expense, net(7) 
Income before income taxes and equity income
1,214  
Income tax benefit 
Equity loss, net of tax
(16) 
Net income1,202  
Net loss attributable to noncontrolling interest
(4) 
Net income attributable to Aptiv$1,206  

61

Table of Contents

Signal and Power SolutionsAdvanced Safety and User ExperienceEliminations and OtherTotal
 (in millions)
For the Six Months Ended June 30, 2019:
Adjusted operating income$620  $130  $—  $750  
Restructuring(42) (15) —  (57) 
Other acquisition and portfolio project costs(18) (10) —  (28) 
Asset impairments(1) (9) —  (10) 
Deferred compensation related to nuTonomy acquisition
—  (23) —  (23) 
Operating income$559  $73  $—  632  
Interest expense(81) 
Other income, net22  
Income before income taxes and equity income
573  
Income tax expense(64) 
Equity income, net of tax
 
Net income516  
Net income attributable to noncontrolling interest
 
Net income attributable to Aptiv$514  

Net sales, gross margin as a percentage of net sales and Adjusted Operating Income (Loss) by segment for the three and six months ended June 30, 2020 and 2019 are as follows:

Net Sales by Segment
 Three Months Ended June 30,Variance Due To:
 20202019Favorable/
(unfavorable)
Volume, net of contractual price reductionsFXCommodity pass-throughOtherTotal
 (in millions)(in millions)
Signal and Power Solutions
$1,435  $2,585  $(1,150) $(1,083) $(53) $(14) $—  $(1,150) 
Advanced Safety and User Experience
530  1,050  (520) (508) (12) —  —  (520) 
Eliminations and Other(5) (8)   —  —  —   
Total$1,960  $3,627  $(1,667) $(1,588) $(65) $(14) $—  $(1,667) 
 Six Months Ended June 30,Variance Due To:
 20202019Favorable/(unfavorable)Volume, net of contractual price reductionsFXCommodity pass-throughOtherTotal
 (in millions)(in millions)
Signal and Power Solutions
$3,765  $5,147  $(1,382) $(1,256) $(105) $(21) $—  $(1,382) 
Advanced Safety and User Experience
1,432  2,073  (641) (618) (23) —  —  (641) 
Eliminations and Other(11) (18)   —  —  —   
Total$5,186  $7,202  $(2,016) $(1,867) $(128) $(21) $—  $(2,016) 

62

Table of Contents

Gross Margin Percentage by Segment
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Signal and Power Solutions3.8 %21.4 %13.0 %20.4 %
Advanced Safety and User Experience(7.7)%11.1 %1.8 %11.1 %
Eliminations and Other— %— %— %— %
Total0.7 %18.4 %9.9 %17.8 %
Gross margin as a percentage of sales for the three and six months ended June 30, 2020 as compared to three and six months ended June 30, 2019 decreased primarily due to the adverse impacts of the COVID-19 pandemic.
Adjusted Operating (Loss) Income by Segment

 Three Months Ended June 30,Variance Due To:
 20202019Favorable/
(unfavorable)
Volume, net of contractual price reductionsOperational performanceOtherTotal
 (in millions)(in millions)
Signal and Power Solutions$(143) $337  $(480) $(511) $35  $(4) $(480) 
Advanced Safety and User Experience
(86) 68  (154) (200)  45  (154) 
Eliminations and Other—  —  —  —  —  —  —  
Total$(229) $405  $(634) $(711) $36  $41  $(634) 
As noted in the table above, Adjusted Operating Loss for the three months ended June 30, 2020 as compared to Adjusted Operating Income for the three months ended June 30, 2019 was impacted by volume decreases, net of contractual price reductions, including product mix, largely resulting from the impacts of the COVID-19 pandemic. The adverse impacts of the pandemic included extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules, disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from governmental “lock-down” orders for all non-essential activities, initially in the first quarter in China and subsequently in Europe and North America. While the lock-downs in China were substantially all lifted early in the second quarter, much of Europe and North America remained in lock-down for the majority of the quarter. Adjusted Operating Loss was also impacted by operational performance improvements and the following items included within Other in the table above:
$45 million of decreased engineering expense as a result of the formation of the autonomous driving joint venture with Hyundai in March 2020, which is now accounted for under the equity method of accounting; and
$31 million of decreased SG&A expense, not including the impact of other acquisition and portfolio project costs, primarily as a result of decreased incentive compensation costs; partially offset by
$14 million of increased warranty costs.
Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of our autonomous driving joint venture.

63

Table of Contents

 Six Months Ended June 30,Variance Due To:
 20202019Favorable/(unfavorable)Volume, net of contractual price reductionsOperational performanceOtherTotal
 (in millions)(in millions)
Signal and Power Solutions$82  $620  $(538) $(594) $65  $(9) $(538) 
Advanced Safety and User Experience
(80) 130  (210) (248) (27) 65  (210) 
Eliminations and Other—  —  —  —  —  —  —  
Total$ $750  $(748) $(842) $38  $56  $(748) 
As noted in the table above, Adjusted Operating Income for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 was impacted by volume decreases, net of contractual price reductions, including product mix, largely resulting from the impacts of the COVID-19 pandemic. The adverse impacts of the pandemic included extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules, disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from governmental “lock-down” orders for all non-essential activities, initially in the first quarter in China and subsequently in Europe and North America. While the lock-downs in China were substantially all lifted early in the second quarter, much of Europe and North America remained in lock-down for the majority of the quarter. Adjusted Operating Income was also impacted by operational performance improvements and the following items included within Other in the table above:
$45 million of decreased engineering expense as a result of the formation of the autonomous driving joint venture with Hyundai in March 2020, which is now accounted for under the equity method of accounting; and
$37 million of decreased SG&A expense, not including the impact of other acquisition and portfolio project costs, primarily as a result of decreased incentive compensation costs; partially offset by
$14 million of increased warranty costs; and
$9 million of increased depreciation and amortization, not including the impact of asset impairments, primarily as a result of a higher fixed asset base.

Liquidity and Capital Resources
COVID-19 Pandemic
Due to the unprecedented uncertainty related to the impact the COVID-19 pandemic is having on the global automotive industry and economies around the world, the Company initiated a series of precautionary actions during the first half of 2020 to further enhance its liquidity and financial flexibility. Among these, the Company has taken decisive actions to manage costs, capital spending and working capital to further strengthen its liquidity, including the ramping down of certain production facilities in response to customer plant closures and changes in vehicle production schedules. Additionally, as further described below, the Company issued $2.3 billion combined of preferred and ordinary shares, extended substantially all of our existing Revolving Credit Facility’s maturity to August 2022, and suspended the payment of its ordinary share cash dividend to further increase capital preservation during the pandemic. The impacts of COVID-19 are continuing to reduce visibility into when customers’ plants will be fully operational, as well as reducing consumer demand and creating additional supply chain interruptions, which has adversely impact global vehicle production and the viability and financial stability of our customers and suppliers. While the Company believes it has taken prudent actions to mitigate the impacts on its business resulting from the COVID-19 pandemic and to provide sufficient liquidity to fund our global operations and capital investments, the ultimate impact of the pandemic to our business remains highly uncertain. However, we will continue to actively monitor the ongoing potential impacts of COVID-19 and will continue to seek to aggressively mitigate and minimize its impact on our business.
Overview of Capital Structure
Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements and operational restructuring activities. Our primary sources of liquidity are cash flows from operations, our existing cash balance, and as necessary and available, borrowings under credit facilities and issuance of long-term debt and equity. To the extent we generate discretionary cash flow we may consider using this additional cash flow for optional prepayments of existing indebtedness, strategic acquisitions or investments, and/or general corporate purposes. We will also continually explore ways to enhance our capital structure.
As of June 30, 2020, we had cash and cash equivalents of $1.9 billion and net debt (defined as outstanding debt less cash and cash equivalents) of $2.3 billion. The following table summarizes our available liquidity, which includes cash, cash
64

Table of Contents

equivalents and funds available under our significant committed credit facilities, as of June 30, 2020. The amounts disclosed as available under the Company’s significant committed credit facilities are available without violating our existing debt covenants, which are described below.
June 30,
2020
 (in millions)
Cash and cash equivalents$1,885  
Revolving Credit Facility, unutilized portion (1)2,000  
Committed European accounts receivable factoring facility, unutilized portion (2)177  
Total available liquidity$4,062  
(1)Availability reduced by less than $1 million in letters of credit issued under the Credit Agreement as of June 30, 2020.
(2)Based on June 30, 2020 foreign currency rates, subject to the availability of eligible accounts receivable.
We also continue to expect to be able to move funds between different countries to manage our global liquidity needs without material adverse tax implications, subject to current monetary policies and the terms of the Credit Agreement. We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan repayments and other distributions and advances to provide the funds necessary to meet our global liquidity needs. There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Aptiv. As of June 30, 2020, the Company’s cash and cash equivalents held by our non-U.S. subsidiaries totaled approximately $1.8 billion. If additional non-U.S. cash was needed for our U.S. operations, we may be required to accrue and pay withholding taxes if we were to distribute such funds from non-U.S. subsidiaries to the U.S.; however, based on our current liquidity needs and strategies, we do not anticipate a need to accrue and pay such additional amounts.
Despite the current global economic impacts and uncertainty resulting from the ongoing COVID-19 pandemic and its impact on global vehicle production, as further described above, we currently expect existing cash, available liquidity and cash flows from operations to continue to be sufficient to fund our global operating activities, including restructuring payments, any mandatory payments required under the Credit Agreement as described below and capital expenditures.
Public Equity Offering
In June 2020, the Company completed the underwritten public offering of approximately 15.1 million ordinary shares at a price of $75.91 per share (the “Ordinary Share Offering”), resulting in net proceeds of approximately $1,115 million, after deducting expenses and the underwriters’ discount of $35 million. Simultaneously, the Company completed the underwritten public offering of 11.5 million 5.50% Mandatory Convertible Preferred Shares, Series A, $0.01 par value per share (the “MCPS”) with a liquidation preference of $100 per share (the “MCPS Offering”), resulting in net proceeds of approximately $1,115 million, after deducting expenses and the underwriters’ discount of $35 million. The Company intends to use the net proceeds from the Ordinary Share Offering and MCPS Offering for general corporate purposes, which may include funding potential future investments (including acquisitions), capital expenditures, working capital, repayment of outstanding indebtedness, including the repayment of the Revolving Credit Facility, which was fully drawn as of March 31, 2020, and the satisfaction of other obligations. Each share of MCPS will mandatorily convert on the mandatory conversion date of June 15, 2023, into between 1.0754 and 1.3173 shares of the Company’s ordinary shares, subject to customary anti-dilution adjustments.
Holders of the MCPS will be entitled to receive, when and if declared by the Company’s Board of Directors, cumulative dividends at the annual rate of 5.50% of the liquidation preference of $100 per share (equivalent to $5.50 annually per share), payable in cash or, subject to certain limitations, by delivery of the Company’s ordinary shares or any combination of cash and the Company’s ordinary shares, at the Company’s election. If declared, dividends on the MCPS will be payable quarterly on March 15, June 15, September 15 and December 15 of each year (commencing on September 15, 2020 to, and including June 15, 2023), to the holders of record of the MCPS as they appear on the Company’s share register at the close of business on the immediately preceding March 1, June 1, September 1 or December 1, respectively. Refer to Note 12. Shareholders’ Equity and Net Income Per Share to the consolidated financial statements contained herein for further detail on the June 2020 public equity offering.
Share Repurchases
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. 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.
65

Table of Contents

A summary of the ordinary shares repurchased during the three and six months ended June 30, 2020 and 2019 is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Total number of shares repurchased—  1,642,598  1,059,075  4,482,677  
Average price paid per share$—  $73.07  $53.73  $77.19  
Total (in millions)$—  $120  $57  $346  
As of June 30, 2020, approximately $13 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. Although both the April 2016 and this new share repurchase program remain authorized, the Company is restricted from executing further share repurchases under the terms of the May 2020 Amendment to the Credit Agreement for as long as the Covenant Relief Period remains in effect, as further described below (all as defined below). Furthermore, in order to preserve liquidity during the COVID-19 pandemic crisis, the Company does not anticipate executing further share repurchases until such time as the global economic uncertainties and business impacts resulting from the pandemic have abated.
Ordinary Share Dividends
Under the terms of the May 2020 Amendment to the Credit Agreement, the Company is restricted from the payment of further ordinary share cash dividends for as a long as the Covenant Relief Period remains in effect (all as defined below). Additionally, the Company does not anticipate making further ordinary share cash dividend payments, until such time as the global economic uncertainties and business impacts resulting from the COVID-19 pandemic have abated.
Acquisitions
gabocom—On November 19, 2019, Aptiv acquired 100% of the equity interests of gabo Systemtechnik GmbH (“gabocom”), a leading provider of highly-engineered cable management and protection solutions for the telecommunications industry, for total consideration of $311 million, net of cash acquired. The acquisition was accounted for as a business combination, with the operating results of gabocom included within the Company’s Signal and Power Solutions segment from the date of acquisition. The Company acquired gabocom utilizing cash on hand.
Falmat—On May 14, 2019, Aptiv acquired 100% of the equity interests of Falmat Inc. (“Falmat”), a leading manufacturer of high performance custom cable and cable assemblies for industrial applications, for total consideration of $25 million, net of cash acquired. The acquisition was accounted for as a business combination, with the operating results of Falmat included within the Company’s Signal and Power Solutions segment from the date of acquisition. The Company acquired Falmat utilizing cash on hand.
Dynawave—In March 2020, Aptiv agreed to acquire Dynawave Inc. (“Dynawave”), a specialized manufacturer of custom-engineered interconnect solutions for a wide range of industries, for total consideration of approximately $22 million. The acquisition is subject to the satisfaction of customary closing conditions and the receipt of regulatory and other approvals, and is expected to close in the third quarter of 2020. The Company expects to acquire Dynawave primarily utilizing cash on hand. Upon completion, Dynawave will become part of the Signal and Power Solutions segment.
Technology Investments—During the fourth quarter of 2019, the Company’s Advanced Safety and User Experience segment made a $6 million investment in Krono-Safe, SAS, a leading software developer of safety-critical real-time embedded systems. During the first quarter of 2019, the Company’s Advanced Safety and User Experience segment made an additional $3 million investment in Otonomo Technologies Ltd. (“Otonomo”), a connected car data marketplace developer. This investment was in addition to the Company’s $15 million investment made in the first quarter of 2017. 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.
Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of the Company’s business acquisitions and technology investments.
66

Table of Contents

Autonomous Driving Joint Venture
On March 26, 2020, Aptiv completed the transaction with Hyundai Motor Group (“Hyundai”) to form a new joint venture focused on the design, development and commercialization of autonomous driving technologies. Under the terms of the agreement, Aptiv contributed to the joint venture autonomous driving technology, intellectual property and approximately 700 employees for a 50% ownership interest in the newly formed entity. Hyundai contributed to the joint venture approximately $1.6 billion in cash, along with vehicle engineering services, research and development resources and access to intellectual property for a 50% ownership interest in the newly formed entity. As a result, subsequent to the closing of the transaction, the newly formed joint venture is expected to fund all of its future operating expenses and investments in autonomous driving technologies for the foreseeable future. Consequently, Aptiv is no longer required to fund these investments and expenses, which approximated $180 million for the year ended December 31, 2019 prior to the joint venture formation. Upon closing of the transaction, Aptiv deconsolidated the carrying value of the associated assets and liabilities contributed to the joint venture, previously classified as held for sale, and recognized an asset of approximately $2.0 billion within Investments in affiliates in the consolidated balance sheet, based on the preliminary fair value of its investment in the newly formed joint venture. The Company recognized a pre-tax gain of approximately $1.4 billion in the consolidated statement of operations (approximately $5.57 per diluted share during the six months ended June 30, 2020), net of transaction costs of $22 million, based on the difference between the carrying value of its contribution to the joint venture and the preliminary fair value of its investment in the newly formed entity. The estimated fair value of Aptiv’s ownership interest in the newly formed joint venture was determined primarily based on third-party valuations and management estimates, generally utilizing income and market approaches. The estimated fair value is preliminary and could be revised as a result of additional information obtained or adjustments made due to the completion of independent appraisals and valuations. The effects of this transaction would not materially impact the Company’s reported results for any period presented, and the transaction did not meet the criteria to be reflected as a discontinued operation.
In connection with the closing of the transaction, Aptiv and the newly formed entity entered into various agreements to facilitate an orderly transition and to provide a framework for their relationship going forward, which included a transition services agreement. The transition services primarily involve Aptiv providing certain administrative services to the joint venture for a period of up to 24 months after the closing date. These agreements are not material to Aptiv. The Company will account for its investment in the newly formed entity prospectively using the equity method of accounting.
The Company determined that the assets and liabilities associated with Aptiv’s contribution to the joint venture, which were reported within the Advanced Safety and User Experience segment, met the held for sale criteria as of December 31, 2019. Accordingly, the held for sale assets and liabilities were reclassified in the consolidated balance sheet as of December 31, 2019 to current assets held for sale and current liabilities held for sale, respectively, as the contribution of such assets and liabilities to the joint venture was expected to occur within one year. Upon designation as held for sale, the Company ceased recording depreciation of the held for sale assets. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for additional information.
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 unsecured credit facilities currently consisting of a term loan (the “Tranche A Term Loan”) and a revolving credit facility of $2 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 May 1, 2020 (the “May 2020 Amendment”) and June 8, 2020 (the “June 2020 Amendment”). The May 2020 Amendment extended the maturity of $1,779 million in principal amount of the Revolving Credit Facility and $298 million in principal amount of the Tranche A Term Loan from August 17, 2021 to August 17, 2022 and increased the leverage ratio maintenance covenant until July 1, 2021 (the “Covenant Relief Period”), unless Aptiv elects to terminate the Covenant Relief Period at an earlier date. Under the terms of the May 2020 Amendment, Aptiv’s consolidated leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the May 2020 Amendment) is increased from not more than 3.5 to 1.0 to not more than 4.5 to 1.0 during the Covenant Relief Period, and Aptiv is subject to certain additional covenant restrictions during the Covenant Relief Period, including restrictions on Aptiv’s ability to execute repurchases of or pay dividends on its outstanding ordinary shares. The maturity date of the remaining portions of the Revolving Credit Facility and Tranche A Term Loan were not extended and will mature on August 17, 2021. The May 2020 Amendment also required that Aptiv pay amendment fees of $18 million. The June 2020 Amendment amended the dividends and distributions covenant set forth in the Credit Agreement to permit the payment of dividends on convertible preferred shares in connection with the preferred equity offering as further discussed in Note 12. Shareholders’ Equity and Net Income Per Share to the consolidated financial statements contained herein.
Aptiv is obligated to make 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
67

Table of Contents

(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 June 30, 2020, Aptiv had no amounts outstanding under the Revolving Credit Facility and less than $1 million in letters of credit were issued under the Credit Agreement. Letters of credit issued under the Credit Agreement reduce availability under the Revolving Credit Facility. The maximum amount drawn under the Revolving Credit Facility during the six months ended June 30, 2020 was $2.0 billion, primarily to manage intra-month working capital requirements.
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:
June 30, 2020December 31, 2019
LIBOR plusABR plusLIBOR plusABR plus
Revolving Credit Facility (1)1.10 %0.10 %1.10 %0.10 %
Revolving Credit Facility (2)1.40 %0.40 %N/AN/A
Tranche A Term Loan (1)1.25 %0.25 %1.25 %0.25 %
Tranche A Term Loan (2)1.75 %0.75 %N/AN/A
(1)Applicable to principal balances under the Credit Agreement which were not extended as part of the May 2020 Amendment as described above.
(2)Applicable to principal balances under the Credit Agreement which were extended as part of the May 2020 Amendment as described above.
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 June 30, 2020, Aptiv selected the one-month LIBOR interest rate option on the Tranche A Term Loan, and the rate effective as of June 30, 2020, 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
June 30, 2020Rates effective as of
Applicable Rate(in millions)June 30, 2020
Tranche A Term Loan (1)LIBOR plus 1.25%$51  1.50 %
Tranche A Term Loan (2)LIBOR plus 1.75%$289  2.00 %
(1)Applicable to principal balances under the Credit Agreement which were not extended as part of the May 2020 Amendment as described above.
(2)Applicable to principal balances under the Credit Agreement which were extended as part of the May 2020 Amendment as described above.
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 not more than 3.5 to 1.0, which was increased to 4.5 to 1.0 until July 1, 2021 under the May 2020 Amendment. 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 June 30, 2020.
As of June 30, 2020, 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.
68

Table of Contents

Senior Unsecured Notes
As of June 30, 2020, the Company had the following senior unsecured notes issued and outstanding:
Aggregate Principal Amount
(in millions)
Stated Coupon RateIssuance DateMaturity DateInterest Payment Date
$700  4.15%March 2014March 2024March 15 and September 15
785  1.50%March 2015March 2025March 10
650  4.25%November 2015January 2026January 15 and July 15
561  1.60%September 2016September 2028September 15
300  4.35%March 2019March 2029March 15 and September 15
300  4.40%September 2016October 2046April 1 and October 1
350  5.40%March 2019March 2049March 15 and September 15
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 June 30, 2020, the Company was in compliance with the provisions of all series of the outstanding senior notes. Refer to Note 8. Debt to the consolidated financial statements contained herein for additional information.
Guarantor Summarized Financial Information
In March 2020, the Securities and Exchange Commission (“SEC”) adopted amendments to simplify the financial disclosure requirements for guarantors and issuers of guaranteed securities registered under Rule 3-10 of Regulation S-X. As permitted, the Company elected to early adopt these amendments during the first quarter of 2020. Accordingly, the below summarized financial information has been provided in lieu of the condensed consolidating financial statements provided in the Company’s 2019 Annual Report on Form 10-K.
As further described in Note 8. Debt to the consolidated financial statements contained herein, Aptiv Corporation issued the 2014 Senior Notes and is the borrower of obligations under the Credit Agreement, which are fully and unconditionally guaranteed by Aptiv PLC and certain of Aptiv PLC’s direct and indirect subsidiaries (the “Obligor Group”). Aptiv PLC issued the 2015 Euro-denominated Senior Notes, 4.25% Senior Notes, 2016 Euro-denominated Senior Notes, 2016 Senior Notes and 2019 Senior Notes, which are fully and unconditionally guaranteed by the Obligor Group. All other consolidated direct and indirect subsidiaries of Aptiv PLC are not subject to the guarantees (the “Non-Guarantors”). The guarantees rank equally in right of payment with all of the guarantors’ existing and future senior indebtedness, are effectively subordinated to any of their existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and are structurally subordinated to the indebtedness of each of their existing and future subsidiaries that is not a guarantor.
The below summarized financial information is presented on a combined basis after the elimination of intercompany balances and transactions among the Obligor Group and equity in earnings from and investments in the Non-Guarantors. The below summarized financial information should be read in conjunction with the Company’s consolidated financial statements contained herein, as the financial information may not necessarily be indicative of results of operations or financial position had the subsidiaries operated as independent entities.
69

Table of Contents

Obligor Group
Six Months Ended June 30, 2020(in millions)
Net sales$—  
Gross margin$—  
Operating income$14  
Net loss$(137) 
Net loss attributable to Aptiv$(137) 
As of June 30, 2020
Current assets (1)$204  
Long-term assets$14  
Current liabilities (2)$944  
Long-term liabilities (2)$4,149  
Noncontrolling interest$—  
As of December 31, 2019
Current assets (1)$522  
Long-term assets (1)$772  
Current liabilities (2)$6,579  
Long-term liabilities (2)$4,172  
Noncontrolling interest$—  
(1)Includes current assets of $201 million and $522 million as of June 30, 2020 and December 31, 2019, respectively, and long-term assets of $768 million as of December 31, 2019, due from Non-Guarantors.
(2)Includes current liabilities of $857 million and $6,409 million, and long-term liabilities of $225 million and $226 million, due to Non-Guarantors as of June 30, 2020 and December 31, 2019, respectively.
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. The rate effective on amounts outstanding as of June 30, 2020 was 0.42%. As of June 30, 2020 and December 31, 2019, Aptiv had $160 million and $266 million, respectively, outstanding on the European accounts receivable factoring facility. The maximum amount drawn under the European facility during the six months ended June 30, 2020 was $253 million, primarily to provide additional liquidity and financial flexibility to mitigate the impacts on its business resulting from the uncertainty caused by the global spread of the COVID-19 pandemic.
Finance leases and other—As of June 30, 2020 and December 31, 2019, approximately $27 million and $33 million, respectively, of other debt primarily issued by certain non-U.S. subsidiaries and finance lease obligations were outstanding.
Letter of credit facilities—In addition to the letters of credit issued under the Credit Agreement, Aptiv had approximately $2 million and $2 million outstanding through other letter of credit facilities as of June 30, 2020 and December 31, 2019, respectively, primarily to support arrangements and other obligations at certain of its subsidiaries.
Cash Flows
Intra-month cash flow cycles vary by region, but in general we are users of cash through the first half of a typical month and we generate cash during the latter half of a typical month. Due to this cycle of cash flows, we may utilize short-term financing, including our Revolving Credit Facility and European accounts receivable factoring facility, to manage our intra-month working capital needs. Our cash balance typically peaks at month end.
We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan structures and other distributions and advances, to provide the funds necessary to meet our global liquidity needs. We utilize a global cash pooling arrangement to consolidate and manage our global cash balances, which enables us to efficiently move cash into and out of a number of the countries in which we operate.
70

Table of Contents

Operating activities—Net cash provided by operating activities totaled $55 million and $596 million for the six months ended June 30, 2020 and 2019, respectively. Cash flows provided by operating activities for the six months ended June 30, 2020 consisted primarily of net earnings of $1,202 million, increased by $384 million for non-cash charges for depreciation, amortization and pension costs, partially offset by $1,434 million for the non-cash gain resulting from the formation of the autonomous driving joint venture and $114 million related to changes in operating assets and liabilities, net of restructuring and pension contributions. Cash flows provided by operating activities for the six months ended June 30, 2019 consisted primarily of net earnings of $516 million, increased by $386 million for non-cash charges for depreciation, amortization, pension costs and extinguishment of debt, partially offset by $340 million related to changes in operating assets and liabilities, net of restructuring and pension contributions.
Investing activities—Net cash used in investing activities totaled $394 million for the six months ended June 30, 2020, as compared to $469 million for the six months ended June 30, 2019. The decrease in usage is primarily attributable to decreased capital expenditures of $79 million during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.
Financing activities—Net cash provided by financing activities totaled $1,840 million for the six months ended June 30, 2020 and net cash used in financing activities totaled $315 million for the six months ended June 30, 2019. Cash flows provided by financing activities for the six months ended June 30, 2020 primarily included $1,115 million and $1,115 million in proceeds from the public offering of ordinary and preferred shares, net of issuance costs, respectively, partially offset by $57 million paid to repurchase ordinary shares and $56 million of dividend payments. Cash flows used in financing activities for the six months ended June 30, 2019 primarily included net proceeds of $641 million received from the issuance of the 2019 Senior Notes, which were utilized to redeem $650 million of the 3.15% Senior Notes, as well as $346 million paid to repurchase ordinary shares and $114 million of dividend payments, partially offset by $202 million in proceeds under other short-term debt agreements.

Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contingencies and Environmental Matters
The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 10. Commitments and Contingencies to the unaudited consolidated financial statements included in Part I, Item 1 of this report is incorporated herein by reference.
Recently Issued Accounting Pronouncements
The information concerning recently issued accounting pronouncements contained in Note 2. Significant Accounting Policies to the unaudited consolidated financial statements included in Part I, Item 1 of this report is incorporated herein by reference.
Critical Accounting Estimates
There have been no significant changes in our critical accounting estimates during the three and six months ended June 30, 2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the information concerning our exposures to market risk as stated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. As described in the Form 10-K, we have currency exposures related to buying, selling and financing in currencies other than the local functional currencies in which we operate (“transactional exposure”). We also have currency exposures related to the translation of the financial statements of our non-U.S. subsidiaries that use the local currency as their functional currency into U.S. dollars, the Company’s reporting currency (“translational exposure”). As described in Note 14. Derivatives and Hedging Activities to the unaudited consolidated financial statements included in Part I, Item 1 of this report, to manage this risk the Company designates certain qualifying instruments 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 the cumulative translation adjustment component of OCI to offset changes in the value of the net investment in these foreign currency-denominated operations.
71

Table of Contents


ITEM 4. CONTROLS AND PROCEDURES
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance of achieving their objectives.
As of June 30, 2020, the Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated, for disclosure purposes, the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the desired control objectives were achieved as of June 30, 2020.
Changes in Internal Control over Financial Reporting
There were no material changes in the Company’s internal controls over financial reporting during the three and six months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.


72

Table of Contents

PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are from time to time subject to various actions, claims, suits, government investigations, and other proceedings incidental to our business, including those arising out of alleged defects, breach of contracts, competition and antitrust matters, product warranties, intellectual property matters, personal injury claims and employment-related matters. For a description of risks related to various legal proceedings and claims, see Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2019. For a description of our outstanding material legal proceedings, see Note 10. Commitments and Contingencies to the unaudited consolidated financial statements included in this report.

ITEM 1A. RISK FACTORS
Other than as described in the Company's Form 10-Q for the quarter ended March 31, 2020, there have been no material changes to the risk factors described in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no repurchases of equity securities during the three months ended June 30, 2020. In January 2019, the Board of Directors authorized a share repurchase program of up to $2.0 billion. This program will commence following the completion of the previously announced share repurchase program of $1.5 billion, which was approved by the Board of Directors in April 2016. As of June 30, 2020, approximately $2,013 million remained available for repurchases pursuant to these programs.

ITEM 6. EXHIBITS
Exhibit
Number
Description
3.1
10.1
10.2
22
31.1
31.2
32.1
32.2
101.INSInline XBRL Instance Document# - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document#
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document#
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document#
101.LABInline XBRL Taxonomy Extension Label Linkbase Document#
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document#
104Cover Page Interactive Data File# - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
* Filed herewith.
# Filed electronically with the Report.
73

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
APTIV PLC
 /s/ Joseph R. Massaro
 By: Joseph R. Massaro
 Senior Vice President and
 Chief Financial Officer
Dated: July 30, 2020
74