aptv-20200930

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 September 30, 2020


☐			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 class

Trading symbol(s)

Name of each exchange on which registered

Ordinary Shares. $0.01 par value per share

APTV

New York Stock Exchange

5.50% Mandatory Convertible Preferred Shares, Series A, $0.01 par value per share

APTV PRA

New York Stock Exchange

1.500% Senior Notes due 2025

APTV

New York Stock Exchange

4.250% Senior Notes due 2026

APTV

New York Stock Exchange

1.600% Senior Notes due 2028

APTV

New York Stock Exchange

4.350% Senior Notes due 2029

APTV

New York Stock Exchange

4.400% Senior Notes due 2046

APTV

New York Stock Exchange

5.400% Senior Notes due 2049

APTV

New 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 October 23, 2020, was 270,025,374.

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APTIV PLC

INDEX


		Page
Part I - Financial Information
Item 1.	Financial Statements
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	3
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	4
	Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)	6
	Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	9
	Cautionary Statement Regarding Forward Looking Information	48
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	73
Item 4.	Controls and Procedures	73

Part II - Other Information
Item 1.	Legal Proceedings	74
Item 1A.	Risk Factors	74
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74

Item 6.	Exhibits	74

Signatures		75
Exhibits

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APTIV PLC

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(in millions, except per share amounts)
Net sales	$	3,668	$	3,559	$	8,854	$	10,761
Operating expenses:
Cost of sales	3,021		2,882		7,693		8,802
Selling, general and administrative	229		262		698		778
Amortization	36		34		107		111
Restructuring (Note 7)	18		61		118		118
Gain on autonomous driving joint venture (Note 17)	—		—		(1,434)		—
Total operating expenses	3,304		3,239		7,182		9,809
Operating income	364		320		1,672		952
Interest expense	(38)		(42)		(125)		(123)
Other income (expense), net (Note 16)	1		7		(6)		29
Income before income taxes and equity income	327		285		1,541		858
Income tax benefit (expense)	2		(38)		6		(102)
Income before equity income	329		247		1,547		756
Equity (loss) income, net of tax	(24)		5		(40)		12


Net income	305		252		1,507		768
Net income attributable to noncontrolling interest	6		6		2		8
Net income attributable to Aptiv	299		246		1,505		760
Mandatory Convertible Preferred Share dividends (Note 12)	(16)		—		(19)		—
Net income attributable to ordinary shareholders	$	283	$	246	$	1,486	$	760






Basic net income per share:


Basic net income per share attributable to ordinary shareholders	$	1.05	$	0.96	$	5.69	$	2.95
Weighted average number of basic shares outstanding	270.03		255.89		261.22		257.32

Diluted net income per share (Note 12):


Diluted net income per share attributable to ordinary shareholders	$	1.05	$	0.96	$	5.63	$	2.95
Weighted average number of diluted shares outstanding	270.38		256.44		267.14		257.74

See notes to consolidated financial statements.

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APTIV PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(in millions)
Net income	$	305	$	252	$	1,507	$	768
Other comprehensive income (loss):
Currency translation adjustments	91		(110)		(21)		(129)
Net change in unrecognized gain (loss) on derivative instruments, net of tax (Note 14)	37		(5)		(40)		13
Employee benefit plans adjustment, net of tax	(1)		5		9		10
Other comprehensive income (loss)	127		(110)		(52)		(106)
Comprehensive income	432		142		1,455		662
Comprehensive income (loss) attributable to noncontrolling interests	7		3		(1)		5
Comprehensive income attributable to Aptiv	$	425	$	139	$	1,456	$	657

See notes to consolidated financial statements.

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APTIV PLC

CONSOLIDATED BALANCE SHEETS


	September 30, 2020		December 31, 2019
	(Unaudited)

	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2,122	$	412
Restricted cash	32		16
Accounts receivable, net of allowances of $58 million and $37 million, respectively (Note 2)	2,620		2,569
Inventories (Note 3)	1,229		1,286
Other current assets (Note 4)	586		504
Assets held for sale (Note 17)	—		532
Total current assets	6,589		5,319
Long-term assets:
Property, net	3,223		3,309
Operating lease right-of-use assets (Note 21)	375		413
Investments in affiliates	2,047		106
Intangible assets, net (Note 2)	1,095		1,186
Goodwill (Note 2)	2,479		2,407
Other long-term assets (Note 4)	636		719

Total long-term assets	9,855		8,140
Total assets	$	16,444	$	13,459
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (Note 8)	$	99	$	393
Accounts payable	2,186		2,463

Accrued liabilities (Note 5)	1,294		1,155
Liabilities held for sale (Note 17)	—		43
Total current liabilities	3,579		4,054
Long-term liabilities:
Long-term debt (Note 8)	3,935		3,971
Pension benefit obligations	484		483
Long-term operating lease liabilities (Note 21)	294		329
Other long-term liabilities (Note 5)	598		611

Total long-term liabilities	5,311		5,394
Total liabilities	8,890		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 September 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 September 30, 2020 and December 31, 2019, respectively	3		3
Additional paid-in-capital	3,861		1,645
Retained earnings	4,267		2,890
Accumulated other comprehensive loss (Note 13)	(768)		(719)
Total Aptiv shareholders’ equity	7,363		3,819
Noncontrolling interest	191		192
Total shareholders’ equity	7,554		4,011
Total liabilities and shareholders’ equity	$	16,444	$	13,459

See notes to consolidated financial statements.

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APTIV PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended September 30,
	2020		2019

	(in millions)
Cash flows from operating activities:
Net income	$	1,507	$	768


Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	449		428
Amortization	107		111
Amortization of deferred debt issuance costs	7		4
Restructuring expense, net of cash paid	—		31
Deferred income taxes	10		14
Pension and other postretirement benefit expenses	31		29
Income from equity method investments, net of dividends received	46		(9)
Loss on modification of debt	4		—
Loss on extinguishment of debt	—		6
Loss (gain) on sale of assets	2		(2)
Share-based compensation	24		43
Gain on autonomous driving joint venture, net	(1,434)		—
Changes in operating assets and liabilities:
Accounts receivable, net	(51)		(173)
Inventories	60		(63)
Other assets	(57)		(140)
Accounts payable	(144)		(19)
Accrued and other long-term liabilities	114		(21)
Other, net	(38)		(56)
Pension contributions	(23)		(30)


Net cash provided by operating activities	614		921
Cash flows from investing activities:
Capital expenditures	(489)		(619)
Proceeds from sale of property / investments	6		13


Cost of business acquisitions and other transactions, net of cash acquired	(49)		(23)

Cost of technology investments	(1)		(4)

Settlement of derivatives	1		1




Net cash used in investing activities	(532)		(632)
Cash flows from financing activities:
Net (repayments) proceeds under other short-term debt agreements	(370)		133
Net repayments under other long-term debt agreements	(30)		(15)
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 costs	1,115		—
Proceeds from the public offering of preferred shares, net of issuance costs	1,115		—



Dividend payments of consolidated affiliates to minority shareholders	(6)		—
Repurchase of ordinary shares	(57)		(390)
Distribution of Mandatory Convertible Preferred Share cash dividends	(16)		—
Distribution of ordinary share cash dividends	(56)		(170)
Taxes withheld and paid on employees’ restricted share awards	(33)		(34)
Net cash provided by (used in) financing activities	1,644		(489)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash	(1)		(10)
Increase (decrease) in cash, cash equivalents and restricted cash	1,725		(210)
Cash, cash equivalents and restricted cash at beginning of the period	429		568
Cash, cash equivalents and restricted cash at end of the period	$	2,154	$	358

See notes to consolidated financial statements.

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APTIV PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)


	Three Months Ended September 30,

	Ordinary Shares			Preferred Shares

	Number of shares	Amount of shares		Number of shares	Amount of shares		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Aptiv Shareholders’ Equity		Noncontrolling Interest		Total Shareholders’ Equity

2020	(in millions)
Balance at June 30, 2020	270	$	3	12	$	—	$	3,849	$	3,984	$	(894)	$	6,942	$	184	$	7,126
Net income	—	—		—	—		—		299		—		299		6		305
Other comprehensive income	—	—		—	—		—		—		126		126		1		127


Mandatory Convertible Preferred Share cumulative dividends	—	—		—	—		—		(16)		—		(16)		—		(16)




Share-based compensation	—	—		—	—		12		—		—		12		—		12


Balance at September 30, 2020	270	$	3	12	$	—	$	3,861	$	4,267	$	(768)	$	7,363	$	191	$	7,554

2019
Balance at June 30, 2019	256	$	3	—	$	—	$	1,618	$	2,597	$	(699)	$	3,519	$	213	$	3,732
Net income	—	—		—	—		—		246		—		246		6		252
Other comprehensive loss	—	—		—	—		—		—		(107)		(107)		(3)		(110)
Dividends on ordinary shares	—	—		—	—		1		(57)		—		(56)		—		(56)


Repurchase of ordinary shares	—	—		—	—		(3)		(41)		—		(44)		—		(44)
Share-based compensation	—	—		—	—		7		—		—		7		—		7


Balance at September 30, 2019	256	$	3	—	$	—	$	1,623	$	2,745	$	(806)	$	3,565	$	216	$	3,781

See notes to consolidated financial statements.

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APTIV PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued) (Unaudited)


	Nine Months Ended September 30,

	Ordinary Shares			Preferred Shares

	Number of shares	Amount of shares		Number of shares	Amount of shares		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Aptiv Shareholders’ Equity		Noncontrolling Interest		Total Shareholders’ Equity

2020	(in millions)
Balance at January 1, 2020	255	$	3	—	$	—	$	1,645	$	2,890	$	(719)	$	3,819	$	192	$	4,011
Net income	—	—		—	—		—		1,505		—		1,505		2		1,507
Other comprehensive loss	—	—		—	—		—		—		(49)		(49)		(3)		(52)
Dividends on ordinary shares	—	—		—	—		1		(57)		—		(56)		—		(56)

Mandatory Convertible Preferred Shares cumulative dividends	—	—		—	—		—		(19)		—		(19)		—		(19)
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	1	—		—	—		24		—		—		24		—		24

Adjustment for recently adopted accounting pronouncements (Note 2)	—	—		—	—		—		(1)		—		(1)		—		(1)
Balance at September 30, 2020	270	$	3	12	$	—	$	3,861	$	4,267	$	(768)	$	7,363	$	191	$	7,554

2019
Balance at January 1, 2019	260	$	3	—	$	—	$	1,639	$	2,511	$	(694)	$	3,459	$	211	$	3,670
Net income	—	—		—	—		—		760		—		760		8		768
Other comprehensive loss	—	—		—	—		—		—		(103)		(103)		(3)		(106)
Dividends on ordinary shares	—	—		—	—		2		(172)		—		(170)		—		(170)

Taxes withheld on employees’ restricted share award vestings	—	—		—	—		(34)		—		—		(34)		—		(34)
Repurchase of ordinary shares	(5)	—		—	—		(27)		(363)		—		(390)		—		(390)
Share-based compensation	1	—		—	—		43		—		—		43		—		43

Adjustment for recently adopted accounting pronouncements	—	—		—	—		—		9		(9)		—		—		—
Balance at September 30, 2019	256	$	3	—	$	—	$	1,623	$	2,745	$	(806)	$	3,565	$	216	$	3,781

See notes to consolidated financial statements.

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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 September 30, 2020 and during the nine months ended September 30, 2019, Aptiv received dividends of $6 million and $3 million, respectively, from 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 $102 million and $101 million as of September 30, 2020 and December 31, 2019, respectively, and are classified within other long-term assets in the consolidated balance sheets. Refer to Note 17. Acquisitions and Divestitures for additional information regarding Aptiv’s equity investments.

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,

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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.

Net income per share—Basic net income per share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted net income per share reflects the weighted average dilutive impact of all potentially dilutive securities from the date of issuance and is computed using the treasury stock 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 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 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, for which book value approximates fair value.

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 September 30, 2020 and December 31, 2019, the Company reported $2,620 million and $2,569 million, respectively, of accounts receivable, net of the allowance for doubtful accounts of $58 million and $37 million, respectively. Changes in the allowance were not material for the nine months ended September 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.

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Intangible assets—Intangible assets were $1,095 million and $1,186 million as of September 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 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 $36 million and $107 million for the three and nine months ended September 30, 2020, respectively, and $34 million and $111 million for the three and nine months ended September 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 nine months ended September 30, 2020 and 2019. Goodwill was $2,479 million and $2,407 million as of September 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

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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 30% and 27% of our total net sales for the three and nine months ended September 30, 2020, respectively, and 28% and 28% of our total net sales for the three and nine months ended September 30, 2019, respectively.


	Percentage of Total Net Sales								Accounts Receivable
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2020		December 31, 2019
	2020		2019		2020		2019

									(in millions)
GM	10	%	9	%	9	%	10	%	$	232	$	205
VW	11	%	10	%	10	%	9	%	225		135
FCA	9	%	9	%	8	%	9	%	218		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.

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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:


	September 30, 2020		December 31, 2019

	(in millions)
Productive material	$	718	$	706
Work-in-process	107		102
Finished goods	404		478
Total	$	1,229	$	1,286

4. ASSETS

Other current assets consisted of the following:


	September 30, 2020		December 31, 2019

	(in millions)
Value added tax receivable	$	132	$	205

Prepaid insurance and other expenses	64		88
Reimbursable engineering costs	181		101
Notes receivable	5		10
Income and other taxes receivable	163		45
Deposits to vendors	4		4
Derivative financial instruments (Note 14)	12		30
Capitalized upfront fees (Note 20)	25		20
Other	—		1
Total	$	586	$	504

Other long-term assets consisted of the following:


	September 30, 2020		December 31, 2019

	(in millions)
Deferred income taxes, net	$	116	$	164
Unamortized Revolving Credit Facility debt issuance costs	13		3
Income and other taxes receivable	22		45
Reimbursable engineering costs	192		217
Value added tax receivable	50		59
Equity investments (Note 17)	102		101
Derivative financial instruments (Note 14)	6		8
Capitalized upfront fees (Note 20)	93		79
Other	42		43
Total	$	636	$	719

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5. LIABILITIES

Accrued liabilities consisted of the following:


	September 30, 2020		December 31, 2019

	(in millions)
Payroll-related obligations	$	316	$	226
Employee benefits, including current pension obligations	67		97
Income and other taxes payable	174		180
Warranty obligations (Note 6)	46		29
Restructuring (Note 7)	95		86
Customer deposits	46		43
Derivative financial instruments (Note 14)	21		4
Accrued interest	23		47
MCPS dividends payable	3		—
Deferred compensation related to nuTonomy acquisition	47		35
Operating lease liabilities (Note 21)	96		94
Other	360		314
Total	$	1,294	$	1,155

Other long-term liabilities consisted of the following:


	September 30, 2020		December 31, 2019

	(in millions)
Environmental (Note 10)	$	4	$	3

Extended disability benefits	6		6
Warranty obligations (Note 6)	8		8
Restructuring (Note 7)	40		48
Payroll-related obligations	10		10
Accrued income taxes	168		199
Deferred income taxes, net	210		229
Derivative financial instruments (Note 14)	3		—

Other	149		108
Total	$	598	$	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 September 30, 2020. The Company estimates the reasonably possible amount to ultimately resolve all matters in excess of the recorded reserves as of September 30, 2020 to be zero to $10 million.

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The table below summarizes the activity in the product warranty liability for the nine months ended September 30, 2020:


	Warranty Obligations

	(in millions)
Accrual balance at beginning of period	$	37
Provision for estimated warranties incurred during the period	25
Changes in estimate for pre-existing warranties	27
Settlements made during the period (in cash or in kind)	(35)
Foreign currency translation and other	—
Accrual balance at end of period	$	54

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 from 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 $18 million and $118 million during the three and nine months ended September 30, 2020, respectively, of which $9 million and $60 million, respectively, was recognized for programs implemented in the North America region and $8 million and $42 million, respectively, was recognized for programs implemented in the European region. The charges recorded during the three and nine months ended September 30, 2020 included the recognition of approximately $15 million and $75 million, respectively, of employee-related and other costs related to actions taken as a result of the global impacts of the COVID-19 pandemic. The Company expects to incur additional restructuring costs of approximately $30 million (of which approximately $20 million relates to the Signal and Power Solutions segment and approximately $10 million relates to the Advanced Safety and User Experience segment) for programs approved as of September 30, 2020, which are primarily expected to be incurred within the next twelve months.

During the three and nine months ended September 30, 2019, Aptiv recorded employee-related and other restructuring charges totaling approximately $61 million and $118 million, respectively, of which $43 million and $59 million, respectively, was recognized for programs implemented in the European 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 $118 million and $87 million in the nine months ended September 30, 2020 and 2019, respectively.

The following table summarizes the restructuring charges recorded for the three and nine months ended September 30, 2020 and 2019 by operating segment:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(in millions)
Signal and Power Solutions	$	9	$	46	$	88	$	88
Advanced Safety and User Experience	9		15		30		30
Total	$	18	$	61	$	118	$	118

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The table below summarizes the activity in the restructuring liability for the nine months ended September 30, 2020:


	Employee Termination Benefits Liability		Other Exit Costs Liability		Total

	(in millions)
Accrual balance at January 1, 2020	$	134	$	—	$	134
Provision for estimated expenses incurred during the period	118		—		118
Payments made during the period	(118)		—		(118)
Foreign currency and other	1		—		1
Accrual balance at September 30, 2020	$	135	$	—	$	135

8. DEBT

The following is a summary of debt outstanding, net of unamortized issuance costs and discounts, as of September 30, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019

	(in millions)
Accounts receivable factoring	$	—	$	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)	813		779
4.25%, senior notes, due 2026 (net of $2 and $3 unamortized issuance costs, respectively)	648		647
1.60%, Euro-denominated senior notes, due 2028 (net of $3 and $3 unamortized issuance costs, respectively)	580		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)	328		359
Finance leases and other	30		33
Total debt	4,034		4,364
Less: current portion	(99)		(393)
Long-term debt	$	3,935	$	3,971

Credit Agreement

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The May 2020 Amendment also required that Aptiv pay amendment fees of $18 million during the nine months ended September 30, 2020, which is reflected as a financing activity in the consolidated statements of cash flows. 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. During the three months ended September 30, 2020, Aptiv Global Financing Limited (“AGFL”), a wholly-owned Irish subsidiary of Aptiv PLC, executed a joinder agreement to the Credit Agreement, which allows it to act as a borrower under the Credit Agreement, and a guaranty supplement, under which AGFL guarantees the obligations under the Credit Agreement, subject to certain exceptions set forth in the Credit Agreement.

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 upon Aptiv’s request, the agreement of the lenders participating in the increase, and the approval of the Administrative Agent and existing lenders.

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:


	September 30, 2020				December 31, 2019
	LIBOR plus		ABR plus		LIBOR plus		ABR plus
Revolving Credit Facility (1)	1.10	%	0.10	%	1.10	%	0.10	%
Revolving Credit Facility (2)	1.40	%	0.40	%	N/A		N/A
Tranche A Term Loan (1)	1.25	%	0.25	%	1.25	%	0.25	%
Tranche A Term Loan (2)	1.75	%	0.75	%	N/A		N/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 September 30, 2020, Aptiv selected the one-month LIBOR interest rate option on the Tranche A Term Loan, and the rate effective as of September 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
		September 30, 2020		Rates effective as of
	Applicable Rate	(in millions)		September 30, 2020




Tranche A Term Loan (1)	LIBOR plus 1.25%	$	49	1.44	%
Tranche A Term Loan (2)	LIBOR plus 1.75%	$	281	1.94	%

(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.

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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 September 30, 2020.

As of September 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 nine months ended September 30, 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.

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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 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 September 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. As of September 30, 2020, Aptiv had no amounts outstanding on the European accounts receivable factoring facility. As of December 31, 2019, Aptiv had $266 million outstanding on the European accounts receivable factoring facility.

Finance leases and other—As of September 30, 2020 and December 31, 2019, approximately $30 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 $142 million and $136 million for the nine months ended September 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 September 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.

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The amounts shown below reflect the defined benefit pension expense for the three and nine months ended September 30, 2020 and 2019:


	Non-U.S. Plans				U.S. Plans

	Three Months Ended September 30,
	2020		2019		2020		2019

	(in millions)
Service cost	$	5	$	5	$	—	$	—
Interest cost	6		6		—		—
Expected return on plan assets	(5)		(4)		—		—


Amortization of actuarial losses	5		3		—		—

Net periodic benefit cost	$	11	$	10	$	—	$	—

	Non-U.S. Plans				U.S. Plans

	Nine Months Ended September 30,
	2020		2019		2020		2019

	(in millions)
Service cost	$	15	$	14	$	—	$	—
Interest cost	17		20		—		—
Expected return on plan assets	(14)		(13)		—		—


Amortization of actuarial losses	12		7		1		1

Net periodic benefit cost	$	30	$	28	$	1	$	1

Other postretirement benefit obligations were approximately $1 million and $2 million at September 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 September 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 September 30, 2020, claims totaling approximately $100 million (using September 30, 2020 foreign currency rates) have been asserted against Aptiv in Brazil. As of September 30, 2020, the Company maintains accruals for these asserted claims of $20 million (using September 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.

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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 September 30, 2020 and December 31, 2019, the undiscounted reserve for environmental investigation and 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 September 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 nine months ended September 30, 2020 and 2019 were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019

	(dollars in millions)
Income tax (benefit) expense	$	(2)		$	38		$	(6)		$	102
Effective tax rate	(1)		%	13		%	0		%	12		%

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 nine months ended September 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 nine months ended September 30, 2020 also includes net discrete tax benefits of $38 million and $44 million respectively, primarily related to changes in reserves, provision to return adjustments and the tax impact of certain intragroup reorganizations in the three months ended September 30, 2020 meant to streamline and simplify the Company’s operating and legal structure, which resulted in the recognition of losses for tax purposes. Also included as a discrete item in the effective tax rate for the nine months ended September 30, 2020 is the beneficial impact from the gain on the formation of the Motional 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 nine months ended September 30,

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2019 includes net discrete tax benefits of $8 million and $39 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.

Cash paid or withheld for income taxes was $97 million and $125 million for the nine months ended September 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 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 Per Share

Basic net income per share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted net income per share reflects the weighted average dilutive impact of all potentially dilutive securities from the date of issuance and is computed using the treasury stock 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 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 September 30, 2020, the impact of the MCPS calculated under the if-converted method was anti-dilutive, and as such 13.71 million ordinary shares underlying the MCPS were excluded from the diluted net income per share calculation. For the nine months ended September 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 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.

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Weighted Average Shares

The following table illustrates net 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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(in millions, except per share data)
Numerator, basic:




Net income attributable to ordinary shareholders	$	283	$	246	$	1,486	$	760
Numerator, diluted:
Net income attributable to Aptiv	$	299	$	246	$	1,505	$	760
MCPS dividends (1)	(16)		—		—		—
Numerator, diluted	$	283	$	246	$	1,505	$	760
Denominator:
Weighted average ordinary shares outstanding, basic	270.03		255.89		261.22		257.32
Dilutive shares related to restricted stock units (“RSUs”)	0.35		0.55		0.28		0.42
Weighted average MCPS Converted Shares (1)	—		—		5.64		—
Weighted average ordinary shares outstanding, including dilutive shares	270.38		256.44		267.14		257.74

Net income per share attributable to ordinary shareholders:


Basic	$	1.05	$	0.96	$	5.69	$	2.95



Diluted	$	1.05	$	0.96	$	5.63	$	2.95

(1)For purposes of calculating net income per share under the if-converted method, the Company has included the impact of the MCPS dividends for the three months ended September 30, 2020, as the impact was more dilutive to net income 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 nine months ended September 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 nine months ended September 30, 2020 and 2019 is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Total number of shares repurchased	—		538,165		1,059,075		5,020,842
Average price paid per share	$	—	$	81.27	$	53.73	$	77.62
Total (in millions)	$	—	$	44	$	57	$	390

As of September 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

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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 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.

Dividends

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


	Ordinary Shares				Preferred Shares
	Dividend		Amount		Dividend		Amount
	Per Share		(in millions)		Per Share		(in millions)
2020:
Third quarter	$	—	$	—	$	1.42	$	16
Second quarter	—		—		—		—
First quarter	0.22		56		—		—
Total	$	0.22	$	56	$	1.42	$	16
2019:
Fourth quarter	$	0.22	$	56	$	—	$	—
Third quarter	0.22		56		—		—
Second quarter	0.22		57		—		—
First quarter	0.22		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.

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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 nine months ended September 30, 2020 and 2019 are shown below.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(in millions)
Foreign currency translation adjustments:
Balance at beginning of period	$	(705)	$	(574)	$	(597)	$	(555)
Aggregate adjustment for the period (1)	90		(107)		(18)		(126)
Balance at end of period	(615)		(681)		(615)		(681)

Gains (losses) on derivatives:
Balance at beginning of period	(64)		(25)		13		(35)
Other comprehensive income (loss) before reclassifications (net tax effect of $0, $1, $0 and $5)	33		(8)		(62)		8
Reclassification to income (net tax effect of $0, $1, $0 and $1)	4		3		22		5
Adoption of ASU 2018-02	—		—		—		(8)
Balance at end of period	(27)		(30)		(27)		(30)

Pension and postretirement plans:
Balance at beginning of period	(125)		(100)		(135)		(104)
Other comprehensive income (loss) before reclassifications (net tax effect of $2, $2, $1 and $2)	(5)		3		(1)		4
Reclassification to income (net tax effect of $1, $0, $3 and $1)	4		2		10		6
Adoption of ASU 2018-02	—		—		—		(1)
Balance at end of period	(126)		(95)		(126)		(95)

Accumulated other comprehensive loss, end of period	$	(768)	$	(806)	$	(768)	$	(806)

(1)Includes losses of $54 million and $56 million for the three and nine months ended September 30, 2020, respectively, and gains of $54 million and $62 million for the three and nine months ended September 30, 2019, respectively, related to non-derivative net investment hedges. Refer to Note 14. Derivatives and Hedging Activities for further description of these hedges.

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Reclassifications from accumulated other comprehensive income (loss) to income for the three and nine months ended September 30, 2020 and 2019 were as follows:


Reclassification Out of Accumulated Other Comprehensive Income (Loss)
Details About Accumulated Other Comprehensive Income Components	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Statements of Operations
	2020		2019		2020		2019

	(in millions)


Gains (losses) on derivatives:
Commodity derivatives	$	—	$	(5)	$	(11)	$	(9)	Cost of sales
Foreign currency derivatives	(4)		3		(11)		5		Cost of sales

	(4)		(2)		(22)		(4)		Income before income taxes
	—		(1)		—		(1)		Income tax benefit (expense)
	(4)		(3)		(22)		(5)		Net income
	—		—		—		—		Net income attributable to noncontrolling interest
	$	(4)	$	(3)	$	(22)	$	(5)	Net income attributable to Aptiv

Pension and postretirement plans:

Actuarial losses	$	(5)	$	(2)	$	(13)	$	(7)	Other income (expense), net (1)

	(5)		(2)		(13)		(7)		Income before income taxes
	1		—		3		1		Income tax benefit (expense)
	(4)		(2)		(10)		(6)		Net income
	—		—		—		—		Net income attributable to noncontrolling interest
	$	(4)	$	(2)	$	(10)	$	(6)	Net income attributable to Aptiv

Total reclassifications for the period	$	(8)	$	(5)	$	(32)	$	(11)

(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.

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As of September 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:

Commodity

Quantity Hedged

Unit of Measure

Notional Amount
(Approximate USD Equivalent)

(in thousands)

(in millions)

Copper

58,112

pounds

175


Foreign Currency	Quantity Hedged	Unit of Measure	Notional Amount (Approximate USD Equivalent)

	(in millions)
Mexican Peso	10,449	MXN	$	465
Chinese Yuan Renminbi	2,367	RMB	350
Euro	192	EUR	225
Polish Zloty	521	PLN	130

As of September 30, 2020, Aptiv has entered into derivative instruments to hedge cash flows extending out to September 2022.

Gains and losses on derivatives qualifying as cash flow hedges are recorded in accumulated 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 September 30, 2020 were $7 million (approximately $7 million, net of tax). Of this total, approximately $8 million of losses are expected to be included in cost of sales within the next 12 months and approximately $1 million of gains 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 nine months ended September 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 nine months ended September 30, 2019, the Company received $2 million and $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 nine months ended September 30, 2020, $54 million and $56 million of losses, respectively, were recognized within the cumulative translation adjustment component of OCI. During the three and nine months ended September 30, 2019, $54 million and $62 million of gains, respectively, were recognized

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within the cumulative translation adjustment component of OCI. Included in accumulated OCI related to these net investment hedges were cumulative losses of $77 million and $21 million as of September 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 September 30, 2020 and December 31, 2019 are as follows:


	Asset Derivatives			Liability Derivatives			Net Amounts of Assets and (Liabilities) Presented in the Balance Sheet
	Balance Sheet Location	September 30, 2020		Balance Sheet Location	September 30, 2020		September 30, 2020

	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	Other current assets	$	10	Accrued liabilities	$	—

Foreign currency derivatives*	Accrued liabilities	5		Accrued liabilities	26		$	(21)
Commodity derivatives	Other long-term assets	6		Other long-term liabilities	—
Foreign currency derivatives*	Other long-term assets	2		Other long-term assets	2		—
Foreign currency derivatives*	Other long-term liabilities	1		Other long-term liabilities	4		(3)


Total derivatives designated as hedges		$	24		$	32

Derivatives not designated:

Foreign currency derivatives*	Other current assets	$	2	Other current assets	$	—	2




Total derivatives not designated as hedges		$	2		$	—


	Asset Derivatives			Liability Derivatives			Net Amounts of Assets and (Liabilities) Presented in the Balance Sheet
	Balance Sheet Location	December 31, 2019		Balance Sheet Location	December 31, 2019		December 31, 2019

	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	Other current assets	$	1	Accrued liabilities	$	3
Foreign currency derivatives*	Other current assets	35		Other current assets	6		$	29

Commodity derivatives	Other long-term assets	2		Other long-term liabilities	—
Foreign currency derivatives*	Other long-term assets	8		Other long-term assets	2		6



Total derivatives designated as hedges		$	46		$	11

Derivatives not designated:


Foreign currency derivatives*	Accrued liabilities	$	—	Accrued liabilities	$	1	(1)



Total derivatives not designated as hedges		$	—		$	1

* 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.

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The fair value of Aptiv’s derivative financial instruments was in a net liability position as of September 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 nine months ended September 30, 2020 and 2019 is as follows:


Three Months Ended September 30, 2020	Gain Recognized in OCI		Loss Reclassified from OCI into Income

	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	$	18	$	—
Foreign currency derivatives	15		(4)


Total	$	33	$	(4)


	Gain Recognized in Income

	(in millions)
Derivatives not designated:

Foreign currency derivatives	$	—
Total	$	—


Three Months Ended September 30, 2019	(Loss) Gain Recognized in OCI		(Loss) Gain Reclassified from OCI into Income

	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	$	(11)	$	(5)
Foreign currency derivatives	2		3
Derivatives designated as net investment hedges:
Foreign currency derivatives	2		—
Total	$	(7)	$	(2)


	Loss Recognized in Income

	(in millions)
Derivatives not designated:

Foreign currency derivatives	$	(1)
Total	$	(1)


Nine Months Ended September 30, 2020	Gain (Loss) Recognized in OCI		Loss Reclassified from OCI into Income

	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	$	7	$	(11)
Foreign currency derivatives	(70)		(11)
Derivatives designated as net investment hedges:
Foreign currency derivatives	1		—
Total	$	(62)	$	(22)

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	Loss Recognized in Income

	(in millions)
Derivatives not designated:

Foreign currency derivatives	$	(4)
Total	$	(4)


Nine Months Ended September 30, 2019	(Loss) Gain Recognized in OCI		(Loss) Gain Reclassified from OCI into Income

	(in millions)
Derivatives designated as cash flow hedges:
Commodity derivatives	$	(9)	$	(9)
Foreign currency derivatives	21		5
Derivatives designated as net investment hedges:
Foreign currency derivatives	1		—
Total	$	13	$	(4)


	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 nine months ended September 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 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 September 30, 2020 and December 31, 2019, Aptiv was in a net derivative liability position of $6 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

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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 September 30, 2020, the Company has determined that all earn-out provisions have been achieved under existing agreements.

As of September 30, 2020 and December 31, 2019, the liability for contingent consideration was $52 million (of which $20 million was classified within other current liabilities and $32 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 nine months ended September 30, 2020 were as follows:


	Contingent Consideration Liability

	(in millions)
Fair value at beginning of period	$	51
Additions	—
Payments	—
Interest accretion	1
Fair value at end of period	$	52

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.

As of September 30, 2020 and December 31, 2019, Aptiv had the following assets measured at fair value on a recurring basis:


	Total		Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3

	(in millions)
As of September 30, 2020:
Commodity derivatives	$	16	$	—	$	16	$	—
Foreign currency derivatives	2		—		2		—

Total	$	18	$	—	$	18	$	—
As of December 31, 2019:
Commodity derivatives	$	3	$	—	$	3	$	—
Foreign currency derivatives	35		—		35		—

Total	$	38	$	—	$	38	$	—

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As of September 30, 2020 and December 31, 2019, Aptiv had the following liabilities measured at fair value on a recurring basis:


	Total		Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3

	(in millions)
As of September 30, 2020:

Foreign currency derivatives	$	24	$	—	$	24	$	—
Contingent consideration	52		—		—		52
Total	$	76	$	—	$	24	$	52
As of December 31, 2019:
Commodity derivatives	$	3	$	—	$	3	$	—
Foreign currency derivatives	1		—		1		—
Contingent consideration	51		—		—		51
Total	$	55	$	—	$	4	$	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 September 30, 2020 and December 31, 2019, total debt was recorded at $4,034 million and $4,364 million, respectively, and had estimated fair values of $4,321 million and $4,593 million, respectively. For all other financial instruments recorded at September 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 for the nine months ended September 30, 2020 and $1 million and $3 million for the three and nine months ended September 30, 2019, respectively, within costs of sales related to declines in the fair values of certain fixed assets. During the nine months ended September 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.

16. OTHER INCOME, NET

Other income (expense), net included:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(in millions)
Interest income	$	2	$	3	$	6	$	11
Loss on modification of debt	—		—		(4)		—
Loss on extinguishment of debt	—		—		—		(6)
Components of net periodic benefit cost other than service cost (Note 9)	(6)		(5)		(16)		(15)


Change in fair value of equity investments (Note 17)	—		—		—		19
Other, net	5		9		8		20
Other income (expense), net	$	1	$	7	$	(6)	$	29

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As further discussed in Note 8. Debt, during the nine months ended September 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 nine months ended September 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 nine months ended September 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 Dynawave Inc.

On August 4, 2020, Aptiv acquired 100% of the equity interests of Dynawave Inc. (“Dynawave”), a specialized manufacturer of custom-engineered interconnect solutions for a wide range of industries, for total consideration of $22 million. The results of the operations of Dynawave are reported within the Signal and Power Solutions segment from the date of the acquisition. The Company acquired Dynawave 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 third quarter of 2020. The preliminary purchase price and related allocation to the acquired net assets of Dynawave based on their estimated fair values is shown below (in millions):

Assets acquired and liabilities assumed


Purchase price, cash consideration, net of cash acquired	$	22




Intangible assets	$	7
Other assets, net	5
Identifiable net assets acquired	12
Goodwill resulting from purchase	10
Total purchase price allocation	$	22

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 Dynawave, and is not deductible for tax purposes.

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

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

Acquisition of 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):

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Assets acquired and liabilities assumed


Purchase price, cash consideration, net of cash acquired	$	311

Property, plant and equipment	$	25
Intangible assets	75
Other liabilities, net	(11)
Identifiable net assets acquired	89
Goodwill resulting from purchase	222
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.

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	5
Identifiable net assets acquired	17
Goodwill resulting from purchase	8
Total purchase price allocation	$	25

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.

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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.

As of September 30, 2020, the Company had the following technology investments, which are classified within other long-term assets in the consolidated balance sheets:

Investment Name

Segment

Investment Date

Investment
(in millions)

Krono-Safe, SAS