APTIV PLC
The following management's discussion and analysis of financial condition and
results of operations ("MD&A") is intended to help you understand the business
operations and financial condition of the Company for the three and six months
ended June 30, 2022 . This discussion should be read in conjunction with Item 1.
Financial Statements. Our MD&A is presented in eight sections:
•Executive Overview
•Consolidated Results of Operations
•Results of Operations by Segment
•Liquidity and Capital Resources
•Off-Balance Sheet Arrangements
•Contingencies and Environmental Matters
•Recently Issued Accounting Pronouncements
•Critical Accounting Estimates
Within the MD&A, "Aptiv," the "Company," "we," "us" and "our" refer toAptiv PLC (formerly known asDelphi Automotive PLC ), a public limited company formed under the laws of Jersey onMay 19, 2011 , which completed an initial public offering onNovember 22, 2011 , and its consolidated subsidiaries. OnDecember 4, 2017 , following the spin-off ofDelphi Technologies PLC , the Company changed its name toAptiv PLC andNew York Stock Exchange ("NYSE") symbol to "APTV." Executive Overview Our Business We are a leading global technology and mobility architecture company primarily serving the automotive sector. We deliver end-to-end mobility solutions enabling our customers' transition to more electrified, software-defined vehicles. We design and manufacture vehicle components and provide electrical, electronic and active safety technology solutions to the global automotive and commercial vehicle markets, creating the software and hardware foundation for vehicle features and functionality. Our Advanced Safety and User Experience segment is focused on providing the necessary software and advanced computing platforms, and our Signal and Power Solutions segment is focused on providing the requisite networking architecture required to support the integrated systems in today's complex vehicles. Together, our businesses develop the 'brain' and the 'nervous system' of increasingly complex vehicles, providing integration of the vehicle into its operating environment.
We are one of the largest vehicle technology suppliers and our customers include the 25 largest automotive original equipment manufacturers ("OEMs") in the world.
Our total net sales during the three and six months endedJune 30, 2022 were$4.1 billion and$8.2 billion , an increase of 7% and 5% compared to the same periods of 2021, respectively. Our overall volumes increased 8% for the three months endedJune 30, 2022 , despite decreased global automotive production of 1% (up 1% on an Aptiv weighted market basis, which represents global vehicle production weighted to the geographic regions in which the Company generates its revenue, "AWM"). The increase in volumes for the three months endedJune 30, 2022 is primarily attributable to increased volumes inNorth America , partially offset by a decline inChina . Our overall volumes increased 6% for the six months endedJune 30, 2022 , despite decreased global automotive production of 3% (3% on an AWM basis). The increase in volumes for the six months endedJune 30, 2022 is primarily attributable to increased volumes inNorth America andChina . We are focused on maintaining a low fixed cost structure that provides us flexibility to remain profitable at all points of the traditional vehicle industry production cycle, including during periods of reduced industry volumes. Accordingly, we will continue to adjust our cost structure and optimize our manufacturing footprint in response to changes in the global and regional automotive markets and in order to increase investment in advanced technologies and engineering as conditions permit. As we operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further refine our cost structure, as evidenced by our ongoing restructuring programs focused on the continued rotation of our manufacturing footprint to best cost locations and on reducing our global overhead costs, as described in Note 7. Restructuring to the consolidated financial statements contained herein. We believe our strong balance sheet coupled with our flexible cost structure will position us to capitalize on improvements in OEM production volumes as economic and pandemic conditions improve. 45
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Proposed Acquisition of
InJanuary 2022 , the Company entered into a definitive agreement to acquireWind River Systems, Inc. ("Wind River"), a global leader in delivering software for the intelligent edge, for approximately$4.3 billion . The transaction is subject to regulatory approvals and customary closing conditions, and we are targeting a closing this year as we work through the regulatory approval process. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for more information. With Aptiv and Wind River's synergistic technologies and decades of experience delivering safety critical systems, the Company believes this acquisition will accelerate the journey to a software-defined future of the automotive industry.
Trends, Uncertainties and Opportunities
Ukraine /Russia conflict. The conflict betweenUkraine andRussia , which began inFebruary 2022 , has had, and is expected to continue to have, negative economic impacts to both countries and to the European and global economies. In response to the conflict, theEuropean Union (the "E.U."),United States (the "U.S.") and other nations implemented broad economic sanctions againstRussia . These countries may impose further sanctions and take other actions as the situation continues. Given the sanctions put in place by the E.U.,U.S. and other governments throughJune 30, 2022 , which restrict our ability to conduct business inRussia , we initiated a plan to exit our majority owned subsidiary inRussia . As a result, the Company determined that this subsidiary, which is reported within the Signal and Power Solutions segment, met the held for sale criteria as ofJune 30, 2022 . Consequently, during the three months endedJune 30, 2022 , the Company recorded a pre-tax charge of$51 million to impair the carrying value of the Russian subsidiary's net assets to fair value, which was recorded primarily within cost of sales in the consolidated statement of operations. Approximately$25 million of these charges were attributable to the noncontrolling interest based on the noncontrolling shareholder's economic interest. The remaining assets and liabilities, which are de minimis, were reclassified to other current assets and other current liabilities, respectively, in the consolidated balance sheet as ofJune 30, 2022 .Ukraine andRussia are also significant global producers of raw materials used in our supply chain, including copper, aluminum, palladium and neon gases. Disruptions in the supply and volatility in the price of these materials and other inputs produced byUkraine orRussia , including increased logistics costs and longer transit times, could adversely impact our business and results of operations. In addition, inJuly 2022 , the E.U. introduced an emergency natural gas rationing plan to reduce the use of natural gas by businesses and in public buildings in E.U. member states fromAugust 2022 throughMarch 2023 in order to replenish gas reserves. Among other impacts, this may cause widespread economic disruptions during this time period, including potential shutdowns at our suppliers' or customers' facilities in the region. The conflict has also increased the possibility of cyberattacks occurring, which could either directly or indirectly impact our operations. Furthermore, the conflict has caused our customers to analyze their presence in the region and future customer production plans in the region remain uncertain. We do not have a material physical presence in eitherUkraine orRussia , with approximately 1% of our workforce located in the countries as ofDecember 31, 2021 , while approximately 2% of our annual net sales were generated from manufacturing facilities in those countries for the year endedDecember 31, 2021 . However, the impacts of the conflict have adversely impacted, and may continue to adversely impact, global economies, and in particular, the European economy, a region which accounted for approximately 33% of our total net sales for the year endedDecember 31, 2021 . We have incurred costs (including capital expenditures), to relocate production for certain customers out ofUkraine and to duplicate such production in other countries, which we substantially completed in the second quarter of 2022. We have recovered substantially all of the costs related to this relocation from impacted customers as ofJune 30, 2022 . Aggregate costs and recoveries related to this process were not significant for the three and six months endedJune 30, 2022 . However, the Company recorded asset impairments and other related charges of approximately$6 million during the three months endedJune 30, 2022 , primarily for long-lived assets and inventory for certain sites inUkraine . These charges were primarily recorded within cost of sales in the statement of operations. Furthermore, as a result of the conflict, we estimate that the adverse impacts to revenue fromRussia operations were approximately$20 million and$30 million during the three and six months endedJune 30, 2022 , respectively. We continue to monitor the situation and will seek to minimize its impact to our business, while prioritizing the safety and well-being of our employees located in both countries and our compliance with applicable laws and regulations in the locations where we operate. Any of the impacts mentioned above, among others, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows. COVID-19 pandemic. The global spread of COVID-19, which originated in late 2019 and was later declared a pandemic by theWorld Health Organization inMarch 2020 , negatively impacted the global economy, disrupted supply chains and created significant volatility in global financial markets in 2020 with various adverse impacts continuing throughout 2021 and to date in 2022. 46
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Beginning late in the first quarter of 2022 and continuing into the second quarter, various regions inChina , including regions where Aptiv has operations, were subjected to lockdowns imposed by governmental authorities to mitigate the spread of COVID-19 in those areas. In response, our manufacturing facilities located in these areas implemented measures designed to minimize the impacts of any shutdowns. Despite these measures, industry-wide production interruptions adversely impacted our sales and profitability beginning at the end of the first quarter and continuing throughout much of the second quarter. Estimated total indirect and direct adverse impacts to revenue as a result of these lockdowns during the three and six months endedJune 30, 2022 , were approximately$165 million and$210 million , respectively. Despite the easing of most lockdowns inChina late in the second quarter, the overall duration and impact as well as possible reoccurrence of these lockdowns, remains uncertain and may adversely impact our results of operations and cash flows in future periods. In 2021, the pandemic impacted economies and communities throughout the world, including in all of the markets and regions served by Aptiv. Although vaccines were introduced that have reduced the effect of COVID-19, governmental authorities throughout the world may continue to implement numerous measures aimed at containing and mitigating the effects of the pandemic, including renewed travel bans and restrictions, quarantines, social distancing orders, "lockdown" orders and shutdowns of non-essential activities. In 2021, our manufacturing facilities were not impacted by prolonged shutdowns directly resulting from the COVID-19 pandemic. Certain direct and indirect adverse impacts of the COVID-19 pandemic persisted throughout 2021 and are expected to continue throughout 2022, including the worldwide semiconductor supply shortage and global supply chain disruptions. As a result, due to the continuing uncertainties surrounding the ultimate impacts of the COVID-19 pandemic and resulting potential future governmental actions and economic impacts, it is possible that these adverse impacts could reoccur, resulting in further adverse impacts on our future operating earnings and cash flows. We will continue to actively monitor all direct and indirect potential impacts of the COVID-19 pandemic, and will seek to aggressively mitigate and minimize their impact on our business. Global supply chain disruptions. Due to various factors that are beyond our control, there are currently global supply chain disruptions, including a worldwide semiconductor supply shortage. The semiconductor supply shortage, due in part to increased demand across multiple industries, is impacting production in automotive and other industries. We anticipate these supply chain disruptions will persist throughout 2022 and likely continue into 2023. We, along with most automotive component manufacturers that use semiconductors, have been unable to fully meet the vehicle production demands of OEMs because of events which are outside our control, including but not limited to, the COVID-19 pandemic, the global semiconductor shortage, fires in our suppliers' facilities, unprecedented weather events in the southwesternUnited States , and other extraordinary events. Although we are working closely with suppliers and customers to minimize any potential adverse impacts of these events, some of our customers have indicated that they expect us to bear at least some responsibility for their lost production and other costs. While no assurances can be made as to the ultimate outcome of these customer expectations or any other future claims, we do not currently believe a loss is probable. We will continue to actively monitor all direct and indirect potential impacts of these supply chain disruptions, and will seek to aggressively mitigate and minimize their impact on our business. In addition, we are carrying critical inventory items and key components, and we continue to procure productive, raw material and non-critical inventory components in order to satisfy our customers' vehicle production schedules. However, as a result of our customers' recent production volatility and cancellations, our balance of productive, raw and component material inventories has increased substantially from customary levels as ofJune 30, 2022 andDecember 31, 2021 . We will continue to actively monitor and manage inventory levels across all inventory types in order to maximize both supply continuity and the efficient use of working capital. Commercializing the high-tech evolution of the automotive industry. The automotive industry is increasingly evolving towards the implementation of software-dependent components and solutions. In particular, the industry is focused on the development of advanced driver assistance technologies, with the goal of developing and introducing a commercially-viable, fully automated driving experience. We expect automated driving technologies will provide strong societal benefit as well as the opportunity for long-term growth for our product offerings in this space. We are focused on enabling and delivering end-to-end smart mobility solutions, enabling our customers' transition to more electrified, software-defined vehicles, accelerating the commercialization of active safety and autonomous driving technologies and providing enhanced user experience and connected services. In an effort to harness the full potential of connected intelligent systems across industries, strengthen our capabilities in software-defined mobility and to enable advanced smart vehicle architecture changes, we entered into a definitive agreement to acquire Wind River inJanuary 2022 . The transaction is subject to regulatory approvals and customary closing conditions, and we are targeting a closing this year as we work through the regulatory approval process. Wind River is a global leader in delivering software for the intelligent edge. Previously, in 2021, we executed a strategic collaboration agreement with Wind River to develop a software toolchain for various automotive applications. 47
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We are also continuing to invest in the automated driving space, and have continued to develop market-leading automated driving platform solutions such as automated driving software, key active safety sensing technologies and our multi-domain controller, which fuses information from sensing systems as well as mapping and navigation data to make driving decisions. We believe we are well-aligned with industry technology trends that will result in sustainable future growth in this space, and have partnered with leaders in their respective fields to advance the pace of development and commercialization of these emerging technologies. InMarch 2020 , to further our leadership position in the automated driving space we completed a transaction withHyundai Motor Group ("Hyundai") to formMotional, Inc. ("Motional"), a joint venture focused on the design, development and commercialization of autonomous driving technologies. Motional began testing fully driverless systems in 2020 and anticipates it will have a production-ready autonomous driving platform available for robotaxi providers, meal delivery providers, fleet operators and automotive manufacturers to test at prototype scale in 2022, with higher volumes available for deployment in 2023. In addition, Motional is involved in collaborative arrangements with mobility providers and with smart cities such asBoston ,Las Vegas ,Los Angeles andSingapore as solutions are developed for the evolving nature of the mobility industry. As a result of our substantial investments and strategic partnerships, we believe we are well-aligned with industry technology trends that will result in sustainable future growth in these evolving areas. However, there are many risks associated with these evolving areas, including the high development costs of active safety and autonomous driving technologies, the uncertain timing of customer and consumer adoption of these technologies, increased competition from entrants outside the traditional automotive industry and evolving regulations, such as the guidance for automated driving systems published by theU.S. Department of Transportation . While we believe we are well-positioned in these markets, the high development cost of active safety and autonomous driving technologies may result in a higher risk of exposure to the success of new or disruptive technologies different than those being developed by us or our partners. Economic conditions. Our business is directly related to automotive sales and automotive vehicle production by our customers. Automotive sales depend on a number of factors, including global and regional economic conditions. Global automotive vehicle production increased 2% (flat on an AWM basis) from 2020 to 2021, primarily due to the impacts of the global supply chain disruptions, including the worldwide semiconductor supply shortage, which followed the significant decrease in vehicle production in 2020 due to the adverse impacts of the COVID-19 pandemic. Although 2021 global vehicle sales and production rates increased slightly, they were still significantly below historic levels. Compared to the unusually low 2020 production rates, vehicle production in 2021 increased by 2% inChina , 1% inNorth America and 18% inSouth America , our smallest region, and decreased by 4% inEurope . Compared to 2021, vehicle production in the first half of 2022 decreased by 3% (3% on an AWM basis). Economic volatility or weakness inNorth America ,Europe ,China orSouth America could result in a significant reduction in automotive sales and production by our customers, which would have an adverse effect on our business, results of operations and financial condition. In 2022, global inflationary pressures have both reduced consumer demand for automotive vehicles and increased the price of inputs to our products, which has adversely impacted our profitability. There is also potential that geopolitical factors could adversely impact theU.S. and other economies, and specifically the automotive sector. In particular, changes to international trade agreements such asthe United States -Mexico -Canada Agreement, or other political pressures could affect the operations of our OEM customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions. Increases in interest rates could also negatively impact automotive production as a result of increased consumer borrowing costs or reduced credit availability. Additionally, economic weakness may result in shifts in the mix of future automotive sales (from vehicles with more content such as luxury vehicles, trucks and sport utility vehicles toward smaller passenger cars). While our diversified customer and geographic revenue base, along with our flexible cost structure, have well positioned us to withstand the impact of industry downturns and benefit from industry upturns, shifts in the mix of global automotive production to higher cost regions or to vehicles with less content could adversely impact our profitability. Key growth markets. There have been periods of increased market volatility and moderation in the level of economic growth inChina , which resulted in periods of lower automotive production growth rates inChina than those previously experienced. For example, automotive production inChina experienced minimal growth of 2% in 2021, primarily due to the adverse impacts of the global supply chain disruptions impacting the industry and trade uncertainties, which follows a decrease of 3% in the region in 2020. Despite this lack of significant growth and the moderation in the level of economic growth inChina , rising income levels inChina and other key growth markets are expected to result in stronger growth rates in these markets over the long-term. Our strong global presence, and presence in these markets, has positioned us to experience above-market growth rates over the long-term. We continue to expand our established presence in key growth markets, positioning us to benefit from the expected long-term growth opportunities in these regions. We are capitalizing on our long-standing relationships with the global OEMs and further enhancing our positions with the key growth market OEMs to continue expanding our worldwide leadership. We continue to build upon our extensive geographic reach to capitalize on fast-growing 48
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automotive markets. We believe that our presence in best cost countries positions us to realize incremental margin improvements as the global balance of automotive production shifts towards the key growth markets.
We have a strong local presence inChina , including a major manufacturing base and well-established customer relationships. Each of our business segments have operations and sales inChina . Our business inChina remains sensitive to economic and market conditions that impact automotive sales volumes inChina , and may be affected if the pace of growth slows as the Chinese market matures or if there are reductions in vehicle demand inChina , as have recently been experienced as a result of the COVID-19 pandemic and related governmental lockdowns. However, we continue to believe this market will benefit from long-term demand for new vehicles and stringent governmental regulation driving increased vehicle content, including accelerated demand for electrified vehicles. Market driven products. Our product offerings satisfy the OEMs' needs to meet increasingly stringent government regulations and meet consumer preferences for products that address the mega-trends of Safe, Green and Connected, leading to increased content per vehicle, greater profitability and higher margins. With these offerings, we believe we are well-positioned to benefit from the growing demand for vehicle content and technology related to safety, electrification, high speed data, connectivity to the global information network and automated driving technologies. We are benefiting from the substantial increase in vehicle content, software and electrification that requires a complex and reliable electrical architecture and systems to operate, such as automated advanced driver assistance technologies, electrical vehicle monitoring, active safety systems, lane departure warning systems, integrated vehicle cockpit displays, navigation systems and technologies that enable connected infotainment in vehicles. Our ability to design a reliable electrical architecture that optimizes power distribution and/or consumption is key to satisfying the OEMs' needs to reduce emissions while continuing to meet consumer demand for increased vehicle content and technology. Global capabilities. Many OEMs are continuing to adopt global vehicle platforms to increase standardization, reduce per unit cost and increase capital efficiency and profitability. As a result, OEMs are selecting suppliers that have the capability to manufacture products on a worldwide basis, as well as the flexibility to adapt to regional variations. Suppliers with global scale and strong design, engineering and manufacturing capabilities are best positioned to benefit from this trend. Our global footprint enables us to serve the global OEMs on a worldwide basis as we gain market share with key growth market OEMs. This regional model is structured primarily to service the North American market fromMexico , the South American market fromBrazil , the European market fromEastern Europe andNorth Africa and theAsia Pacific market fromChina , and we have continued to rotate our manufacturing footprint to best cost locations within these regions. Our operations are subject to certain risks inherent in doing business globally, including military conflicts in regions in which we operate, unexpected changes in laws or regulations governing trade, or other monetary or tax fiscal policy changes, including tariffs, quotas, customs and other import or export restrictions or trade barriers. We are also subject to risks associated with actions taken by governmental authorities to impose changes in laws or regulations that restrict certain business operations, trade or travel in response to a pandemic or widespread outbreak of an illness. For instance, as described above, the conflict betweenUkraine andRussia has created numerous economic uncertainties, including the impact of sanctions announced to date againstRussia and potential further sanctions, the impact on the global supply chain for raw materials produced in each country, as well as increased logistics costs and transit times, the impact of the E.U. natural gas rationing plan and the actions of automotive OEMs and suppliers as it relates to production plans in each country. Any of the impacts mentioned above, among others, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows. In addition, the global spread of the COVID-19 pandemic and variants thereof in 2020, throughout 2021 and to date in 2022, has had various direct and indirect adverse impacts on our global operations, the automotive industry and economies around the world. Although certain of the adverse impacts of the pandemic abated during the second half of 2020, other direct and indirect adverse impacts continued throughout 2021 and to date in 2022, such as the overall supply chain disruptions, including the global semiconductor supply shortage and the regional lockdowns imposed by governmental authorities inChina during the first half of 2022. These impacts continue to negatively affect the global economy and automotive industry, and we anticipate that certain impacts will persist throughout 2022 and into 2023. As a result, we are unable to predict the ultimate impact to our business due to a number of evolving factors, including the duration and spread of the pandemic, the impact of the pandemic on economic activity, our supply chain, consumer demand and vehicle production schedules, and the actions of governmental authorities across the globe. Furthermore, existing free trade laws and regulations, such asthe United States -Mexico-Canada Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such asChina andMexico , could have a material adverse effect on our business and financial results. Furthermore, management continues to monitor the volatile geopolitical environment to identify, quantify and assess threatened duties, taxes or other business restrictions which could adversely affect our business and financial results. 49
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Product development. The automotive technology and components industry is highly competitive and is characterized by rapidly changing technology, evolving industry standards and changes in customer needs. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely and cost competitive basis will be a significant factor in our ability to remain competitive. To compete effectively in the automotive technology and components industry, we must be able to develop and launch new products to meet our customers' demands in a timely manner. Our innovative technologies and robust global engineering and development capabilities have us well positioned to meet the increasingly stringent vehicle manufacturer demands and consumer preferences for high-technology content in automobiles. OEMs are increasingly looking to their suppliers to simplify vehicle design and assembly processes to reduce costs and weight. As a result, suppliers that sell vehicle components directly to manufacturers (Tier I suppliers) have assumed many of the design, engineering, research and development and assembly functions traditionally performed by vehicle manufacturers. Suppliers that can provide fully-engineered solutions, systems and pre-assembled combinations of component parts are positioned to leverage the trend toward system sourcing. Engineering, design and development. Our history and culture of innovation have enabled us to develop significant intellectual property and design and development expertise to provide advanced technology solutions that meet the demands of our customers. We have a team of approximately 18,900 scientists, engineers and technicians focused on developing leading product solutions for our key markets, located at 12 major technical centers inChina ,Germany ,India ,Mexico ,Poland ,Singapore andthe United States . During the year endedDecember 31, 2021 , we invested approximately$1.4 billion (which includes approximately$320 million co-investment by customers and government agencies) in research and development, including engineering, to maintain our portfolio of innovative products, and own/hold approximately 8,500 patents and protective rights. We also encourage "open innovation" and collaborate extensively with peers in the industry, government agencies and academic institutions. Our technology competencies are recognized by both customers and government agencies,who co-invest approximately$320 million annually in new product development, accelerating the pace of innovation and reducing the risk associated with successful commercialization of technological breakthroughs. In the past, suppliers often incurred the initial cost of engineering, designing and developing automotive component parts, and recovered their investments over time by including a cost recovery component in the price of each part based on expected volumes. Recently, we and many other suppliers have negotiated for cost recovery payments independent of volumes. This trend reduces our economic risk. Pricing. Cost-cutting initiatives adopted by our customers result in increased downward pressure on pricing. Our customer supply agreements generally require step-downs in component pricing over the periods of production and OEMs have historically possessed significant leverage over their outside suppliers because the automotive component supply industry is fragmented and serves a limited number of automotive OEMs. Our profitability depends in part on our ability to generate sufficient production cost savings in the future to offset price reductions. In addition, during 2021, global economies and our industry were subjected to significant inflationary cost pressures, and these pressures have worsened in 2022. We continue to work with our customers, both through price recoveries and adjustments as well as future pricing adjustments as contracts renew, to mitigate the impact of these inflationary pressures on our results of operations. We are focused on maintaining a low fixed cost structure that provides us flexibility to remain profitable at all points of the traditional vehicle industry production cycle. As a result, approximately 97% of our hourly workforce is located in best cost countries. Furthermore, we have substantial operational flexibility by leveraging a large workforce of contingent workers, which represented approximately 23% of the hourly workforce as ofJune 30, 2022 . However, we will continue to adjust our cost structure and optimize our manufacturing footprint in response to changes in the global and regional automotive markets and in order to increase investment in advanced technologies and engineering, as evidenced by our ongoing restructuring programs focused on reducing our global overhead costs and on the continued rotation of our manufacturing footprint to best cost locations inEurope . As we continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further refine our cost structure. We have a strong balance sheet with gross debt of approximately$6.5 billion and substantial available liquidity of approximately$7.1 billion of cash equivalents, available financing under our Revolving Credit Facility and committed European accounts receivable factoring facility as ofJune 30, 2022 , and no significantU.S. defined benefit or workforce postretirement health care benefits and employer-paid postretirement basic life insurance benefits ("OPEB") liabilities. We intend to maintain strong financial discipline by targeting industry-leading earnings growth, cash flow generation and return on invested capital and to maintain sufficient liquidity to sustain our financial flexibility throughout the industry cycle. OEM product recalls. The number of vehicles recalled globally by OEMs has increased above historical levels. These recalls can either be initiated by the OEMs or influenced by regulatory agencies. Although there are differing rules and regulations across countries governing recalls for safety issues, the overall transition towards global vehicle platforms may also contribute to increased recalls outside of theU.S. , as automotive components are increasingly standardized across regions. 50
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Given the sensitivity to safety issues in the automotive industry, including increased focus from regulators and consumers, we anticipate the number of automotive recalls may remain above historical levels in the near future. Although we engage in extensive product quality programs and processes, it is possible that we may be adversely affected in the future if the pace of these recalls continues. Efficient use of capital. The global vehicle components industry is generally capital intensive and a portion of a supplier's capital equipment is frequently utilized for specific customer programs. Lead times for procurement of capital equipment are long and typically exceed start of production by one to two years. Substantial advantages exist for suppliers that can leverage their prior investments in capital equipment or amortize the investment over higher volume global customer programs. Industry consolidation and disruptive new entrants. Consolidation among worldwide OEMs and suppliers is expected to continue as these companies seek to achieve operating synergies and value stream efficiencies, acquire complementary technologies and build stronger customer relationships. Additionally, the rise of advanced software and technologies in vehicles has attracted new and disruptive entrants from outside the traditional automotive supply industry. These entrants may seek to gain access to certain vehicle technology and component markets. Any of these new competitors may develop and introduce technologies that gain greater customer or consumer acceptance, which could adversely affect the future growth of the Company. We believe companies with strong balance sheets and financial discipline are in the best position to take advantage of these trends.
Consolidated Results of Operations
Aptiv typically experiences fluctuations in revenue due to changes in OEM production schedules, vehicle sales mix and the net of new and lost business (which we refer to collectively as volume), increased prices attributable to escalation clauses in our supply contracts for recovery of increased commodity costs (which we refer to as commodity pass-through), fluctuations in foreign currency exchange rates (which we refer to as "FX"), contractual reductions of the sales price to the OEM (which we refer to as contractual price reductions) and engineering changes. Changes in sales mix can have either favorable or unfavorable impacts on revenue. Such changes can be the result of shifts in regional growth, shifts in OEM sales demand, as well as shifts in consumer demand related to vehicle segment purchases and content penetration. For instance, a shift in sales demand favoring a particular OEM's vehicle model for which we do not have a supply contract may negatively impact our revenue. A shift in regional sales demand toward certain markets could favorably impact the sales of those of our customers that have a large market share in those regions, which in turn would be expected to have a favorable impact on our revenue.
We typically experience (as described below) fluctuations in operating income due to:
•Volume, net of contractual price reductions-changes in volume offset by contractual price reductions (which typically range from 1% to 3% of net sales) and changes in mix;
•Operational performance-changes to costs for materials and commodities or manufacturing and engineering variances; and
•Other-including restructuring costs and any remaining variances not included in Volume, net of contractual price reductions or Operational performance.
The automotive technology and component supply industry is traditionally subject
to inflationary pressures with respect to raw materials and labor which may
place operational and profitability burdens on the entire supply chain. For
instance, in 2021 and to date in 2022, the industry has been subjected to
increased pricing pressures, specifically in relation to copper and
petroleum-based resin products, which have experienced significant volatility in
price. In 2022, we have been impacted globally by increased overall inflation as
a result of a variety of global trends. Due to various factors, the industry is
also facing increased operating and logistics challenges from certain global
supply chain disruptions, including a worldwide semiconductor supply shortage.
This shortage has resulted in increased pricing pressures on semiconductors as
well. In addition, we expect semiconductor supply cost and commodity cost
volatility to have a continual impact on future earnings and/or operating cash
flows. As such, we continually seek to mitigate both inflationary pressures and
our material-related cost exposures using a number of approaches, including
combining purchase requirements with customers and/or other suppliers, using
alternate suppliers or product designs, negotiating cost reductions and/or
commodity cost contract escalation clauses into our vehicle manufacturer supply
contracts and hedging.
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Three and Six Months Ended
The results of operations for the three and six months ended
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Favorable/(unfavorable) 2022 2021 Favorable/(unfavorable)
(dollars in millions)
Net sales $ 4,057 $ 3,807 $ 250 $ 8,235 $ 7,830 $ 405
Cost of sales 3,617 3,205 (412) 7,206 6,501 (705)
Gross margin 440 10.8% 602 15.8% (162) 1,029 12.5% 1,329 17.0% (300)
Selling, general and administrative 286 266 (20) 560 521 (39)
Amortization 38 37 (1) 75 74 (1)
Restructuring 19 14 (5) 41 20 (21)
Operating income 97 285 (188) 353 714 (361)
Interest expense (56) (38) (18) (99) (78) (21)
Other (expense) income, net (25) - (25) (64) 1 (65)
Income before income taxes and equity loss 16 247 (231) 190 637 (447)
Income tax expense (16) (28) 12 (37) (76) 39
Income before equity loss - 219 (219) 153 561 (408)
Equity loss, net of tax (72) (53) (19) (135) (95) (40)
Net (loss) income (72) 166 (238) 18 466 (448)
Net (loss) income attributable to noncontrolling
interest (27) 3 (30) (26) 8 (34)
Net (loss) income attributable to Aptiv (45) 163 (208) 44 458 (414)
Mandatory convertible preferred share dividends (16) (16) - (32) (32) -
Net (loss) income attributable to ordinary
shareholders $ (61) $ 147 $ (208) $ 12 $ 426 $ (414)
Total Net Sales
Below is a summary of our total net sales for the three months ended June 30,
2022 versus June 30, 2021 .
Three Months Ended June 30, Variance Due To:
Volume, net of
contractual price Commodity
2022 2021 Favorable/(unfavorable) reductions FX pass-through Other Total
(in millions) (in millions)
Total net sales $ 4,057 $ 3,807 $ 250 $ 357 $ (143) $ 36 $ - $ 250
Total net sales for the three months ended June 30, 2022 increased 7% compared
to the three months ended June 30, 2021 . Our volumes increased 8% for the
period, despite decreased global automotive production of 1% (up 1% on an AWM
basis). The increase in volumes is primarily attributable to an increase in
North America , partially offset by a decline in China . Our total net sales also
reflect the favorable impact of price recoveries, net of contractual price
reductions of $36 million and unfavorable foreign currency impacts, primarily
related to the Euro.
Below is a summary of our total net sales for the six months ended June 30, 2022
versus 2021.
Six Months Ended June 30, Variance Due To:
Volume, net of
contractual price Commodity
2022 2021
Favorable/(unfavorable) reductions FX pass-through Other Total
(in millions) (in millions)
Total net sales $ 8,235 $ 7,830 $ 405 $ 502 $ (203) $
106 $ -
Total net sales for the six months endedJune 30, 2022 increased 5% compared to the six months endedJune 30, 2021 . Our overall volumes increased 6% for the period, despite decreased global automotive production of 3% (3% on an AWM 52
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basis). The increase in volumes is primarily attributable to increases in
Cost of Sales
Cost of sales is primarily comprised of material, labor, manufacturing overhead, freight, fluctuations in foreign currency exchange rates, product engineering, design and development expenses, depreciation and amortization, warranty costs and other operating expenses. Gross margin is revenue less cost of sales and gross margin percentage is gross margin as a percentage of net sales. Cost of sales increased$412 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , as summarized below. The Company's material cost of sales was approximately 55% and 50% of net sales for the three months endedJune 30, 2022 and 2021, respectively. Three Months Ended June 30, Variance Due To: Operational 2022 2021 Favorable/(unfavorable) Volume (a) FX performance Other Total (dollars in millions) (in millions) Cost of sales$ 3,617 $ 3,205 $ (412)$ (245) $ 142 $ (214)$ (95) $ (412) Gross margin$ 440 $ 602 $ (162)$ 112 $ (1) $ (214)$ (59) $ (162) Percentage of net sales 10.8 % 15.8 %
(a)Presented net of contractual price reductions for gross margin variance.
The increase in cost of sales reflects increased volumes and operational performance, partially offset by favorable impacts from currency exchange. Our operational performance for the three months endedJune 30, 2022 includes approximately$165 million of increased costs for semiconductors and commodities, as well as approximately$35 million of increased costs, primarily related to material logistics costs associated with the global supply chain disruptions due to the worldwide semiconductor shortage and other extraordinary events. The total impacts within cost of sales resulting from the global supply chain disruptions were incremental costs of approximately$25 million during the three months endedJune 30, 2022 . Cost of sales was also impacted by the following items in Other above:
•$57 million of charges, primarily to impair the carrying value of our majority owned Russian subsidiary's net assets to fair value; and
•$36 million of increased commodity pass-through costs.
Cost of sales increased
Six Months Ended June 30, Variance Due To:
Operational
2022 2021 Favorable/(unfavorable) Volume (a) FX performance Other Total
(dollars in millions) (in millions)
Cost of sales $ 7,206 $ 6,501 $ (705) $ (362) $ 195 $ (417) $ (121) $ (705)
Gross margin $ 1,029 $ 1,329 $ (300) $ 140 $ (8) $ (417) $ (15) $ (300)
Percentage of net sales 12.5 % 17.0 %
(a)Presented net of contractual price reductions for gross margin variance.
The increase in cost of sales reflects increased volumes and operational performance, partially offset by favorable impacts from currency exchange. Our operational performance for the six months endedJune 30, 2022 includes approximately$295 million of increased costs for semiconductors and commodities, as well as approximately$55 million of increased costs, primarily related to material logistics costs associated with the global supply chain disruptions due to the worldwide semiconductor shortage and other extraordinary events. The total impacts within cost of sales resulting from the global supply chain disruptions were incremental costs of approximately$40 million during the six months endedJune 30, 2022 . Cost of sales was also impacted by the following items in Other above:
•$106 million of increased commodity pass-through costs; and
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•$57 million of charges, primarily to impair the carrying value of our majority owned Russian subsidiary's net assets to fair value.
Selling, General and Administrative Expense
Three Months Ended
Favorable/
2022 2021 (unfavorable)
(dollars in millions)
Selling, general and administrative expense $ 286 $ 266 $ (20)
Percentage of net sales 7.0 % 7.0 %
Six Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(dollars in millions)
Selling, general and administrative expense $ 560 $ 521 $ (39)
Percentage of net sales 6.8 % 6.7 %
Selling, general and administrative expense ("SG&A") includes administrative
expenses, information technology costs and incentive compensation related costs.
SG&A increased as a percentage of net sales for the six months ended June 30,
2022 compared to 2021, primarily due to increased payroll costs.
Amortization
Three Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Amortization $ 38 $ 37 $ (1)
Six Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Amortization $ 75 $ 74 $ (1)
Amortization expense reflects the non-cash charge related to definite-lived
intangible assets. The consistency in amortization during the three and six
months ended June 30, 2022 compared to 2021 reflects the continued amortization
of our definite-lived intangible assets, which resulted primarily from our
acquisitions, over their estimated useful lives. Refer to Note 17. Acquisitions
and Divestitures to the consolidated financial statements contained herein for
further detail of our business acquisitions, including details of the intangible
assets recorded in each transaction.
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Restructuring
Three Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(dollars in millions)
Restructuring $ 19 $ 14 $ (5)
Percentage of net sales 0.5 % 0.4 %
Six Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(dollars in millions)
Restructuring $ 41 $ 20 $ (21)
Percentage of net sales 0.5 % 0.3 %
The Company recorded employee-related and other restructuring charges totaling
approximately $19 million and $41 million during the three and six months ended
June 30, 2022 , respectively. We expect to make cash payments of approximately
$55 million over the next twelve months pursuant to currently implemented
restructuring programs.
The Company recorded employee-related and other restructuring charges totaling
approximately $14 million and $20 million during the three and six months ended
June 30, 2021 , respectively.
We expect to continue to incur additional restructuring expense in 2022 and
beyond, primarily related to programs focused on reducing global overhead costs
and on the continued rotation of our manufacturing footprint to best cost
locations in Europe , which includes approximately $60 million (of which
approximately $45 million relates to the Advanced Safety and User Experience
segment and approximately $15 million relates to the Signal and Power Solutions
segment) for programs approved as of June 30, 2022 . Additionally, as we continue
to operate in a cyclical industry that is impacted by movements in the global
and regional economies, we continually evaluate opportunities to further adjust
our cost structure and optimize our manufacturing footprint. The Company plans
to implement additional restructuring activities in the future, if necessary, in
order to align manufacturing capacity and other costs with prevailing regional
automotive production levels and locations, to improve the efficiency and
utilization of other locations and in order to increase investment in advanced
technologies and engineering. Such future restructuring actions are dependent on
market conditions, customer actions and other factors.
Refer to Note 7. Restructuring to the consolidated financial statements contained herein for additional information.
Interest Expense
Three Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Interest expense $ 56 $ 38 $ (18)
Six Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Interest expense $ 99 $ 78 $ (21)
The increase in interest expense during the three and six months ended June 30,
2022 compared to 2021 reflects the issuance of $2.5 billion in aggregate
principal amount of senior unsecured notes in February 2022 (the "2022 Senior
Notes"), partially offset by the issuance of $1.5 billion in aggregate principal
amount of 3.10% senior unsecured notes due 2051, which were utilized to redeem
$700 million in aggregate principal amount of 4.15% senior unsecured notes due
2024 and $650 million in aggregate principal amount of 4.25% senior unsecured
notes due 2026. Refer to Note 8. Debt to the consolidated financial statements
contained herein for additional information.
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Other Income, Net
Three Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Other expense, net $ (25) $ - $ (25)
Six Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Other (expense) income, net $ (64) $ 1 $ (65)
Other expense (income), net for the three and six months ended June 30, 2022
includes losses of $17 million and $49 million , respectively, recognized for the
change in fair value of publicly traded equity securities.
Other expense (income) income, net for the three and six months ended June 30,
2021 includes a gain of $9 million recognized for the change in fair value of
publicly traded equity securities. Also, as further discussed in Note 8. Debt to
the consolidated financial statements contained herein, during the three months
ended June 30, 2021 , Aptiv recorded a loss on debt modification of $1 million in
conjunction with the June 2021 amendment to the Credit Agreement.
Refer to Note 16. Other Income, net to the consolidated financial statements contained herein for additional information.
Income Taxes
Three Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Income tax expense $ 16 $ 28 $ 12
Six Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Income tax expense $ 37 $ 76 $ 39
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. 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. For
the three and six months ended June 30, 2022 , the Company's effective tax rate
was impacted by impairments and other charges related to the Ukraine /Russia
conflict for which no tax benefit was recognized.
The Company's effective tax rate for the three and six months ended June 30,
2022 includes net discrete tax expenses of approximately $0 million and net
discrete tax benefits of approximately $4 million , respectively, primarily
related to net changes in accruals for unremitted earnings, provision to return
adjustments and changes in reserves. The effective tax rate for the three and
six months ended June 30, 2021 includes net discrete tax benefits of $3 million
and $4 million , primarily related to changes in accruals for unremitted
earnings, provision to return adjustments, changes in reserves and the impact of
a tax rate change. Refer to Note 11. Income Taxes to the consolidated financial
statements contained herein for additional information.
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Equity Loss
Three Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Equity loss, net of tax $ 72 $ 53 $ (19)
Six Months Ended June 30,
Favorable/
2022 2021 (unfavorable)
(in millions)
Equity loss, net of tax $ 135 $ 95 $ (40)
Equity loss, net of tax reflects the Company's interest in the results of ongoing operations of entities accounted for as equity method investments. The equity losses recognized by Aptiv for each period presented are primarily attributable to the Motional autonomous driving joint venture.
Results of Operations by Segment
We operate our core business along the following operating segments, which are grouped on the basis of similar product, market and operating factors:
•Signal and Power Solutions, which includes complete electrical architecture and component products.
•Advanced Safety and User Experience, which includes vehicle technology and systems integration expertise in advanced safety, user experience and connectivity and security solutions, as well as advanced software development and autonomous driving technologies. •Eliminations and Other, which includes i) the elimination of inter-segment transactions, and ii) certain other expenses and income of a non-operating or strategic nature. Our management utilizes segment Adjusted Operating Income as the key performance measure of segment income or loss to evaluate segment performance, and for planning and forecasting purposes to allocate resources to the segments, as management believes this measure is most reflective of the operational profitability or loss of our operating segments. Segment Adjusted Operating Income should not be considered a substitute for results prepared in accordance withU.S. GAAP and should not be considered an alternative to net income attributable to Aptiv, which is the most directly comparable financial measure to Adjusted Operating Income that is prepared in accordance withU.S. GAAP. Segment Adjusted Operating Income, as determined and measured by Aptiv, should also not be compared to similarly titled measures reported by other companies. Effective onJanuary 1, 2022 , the Company now excludes amortization expense of intangible assets from the calculation of Adjusted Operating Income, as reflected in the definition below. The Company's management believes that the updated calculation of this non-GAAP financial measure will be more useful to both management and investors in their analysis of the Company's results of operations due to recent and pending acquisitions. Amortization of intangible assets generally results from a write-up in the value of assets in connection with an acquisition. The Company believes that exclusion of amortization expense will facilitate more comparable operating results of the Company over time, between periods when the Company is more or less acquisitive and allows for improved comparison with both acquisitive and non-acquisitive peer companies. The historical presentation of Adjusted Operating Income in the tables below has been revised to be consistent with this updated calculation. The reconciliation of Adjusted Operating Income to operating income includes, as applicable, amortization, restructuring, other acquisition and portfolio project costs (which includes costs incurred to integrate acquired businesses and to plan and execute product portfolio transformation actions, including business and product acquisitions and divestitures), asset impairments and other related charges and gains (losses) on business divestitures and other transactions. The reconciliations of Adjusted Operating Income to net income (loss) attributable to Aptiv for the three and six months endedJune 30, 2022 and 2021 are as follows: 57
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Advanced Safety
Signal and Power and User
Solutions Experience Total
(in millions)
For the Three Months Ended June 30, 2022 :
Adjusted operating income (loss) $ 243 $ (30) $ 213
Amortization (37) (1) (38)
Restructuring (13) (6) (19)
Other acquisition and portfolio project costs - (2) (2)
Asset impairments (3) - (3)
Other charges related to Ukraine/Russia conflict (1) (54) - (54)
Operating income (loss) $ 136 $ (39) 97
Interest expense (56)
Other expense, net (25)
Income before income taxes and equity loss 16
Income tax expense (16)
Equity loss, net of tax (72)
Net loss (72)
Net loss attributable to noncontrolling interest (27)
Net loss attributable to Aptiv $ (45)
(1)Primarily consists of charges related to the designation of our majority
owned Russian subsidiary as held for sale as of June 30, 2022 . Refer to Note 17.
Acquisitions and Divestitures to the consolidated financial statements contained
herein for further information.
Advanced
Safety and
Signal and Power User
Solutions Experience Total
(in millions)
For the Three Months Ended June 30, 2021 :
Adjusted operating income $ 313 $ 25 $ 338
Amortization (36) (1) (37)
Restructuring (11) (3) (14)
Other acquisition and portfolio project costs (1) (1) (2)
Operating income $ 265 $ 20 285
Interest expense (38)
Income before income taxes and equity loss 247
Income tax expense (28)
Equity loss, net of tax (53)
Net income 166
Net income attributable to noncontrolling interest 3
Net income attributable to Aptiv $ 163
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Advanced Safety
Signal and Power and User
Solutions Experience Total
(in millions)
For the Six Months Ended June 30, 2022 :
Adjusted operating income (loss) $ 551 $ (14) $ 537
Amortization (72) (3) (75)
Restructuring (22) (19) (41)
Other acquisition and portfolio project costs (7) (4) (11)
Asset impairments (3) - (3)
Other charges related to Ukraine/Russia conflict (1) (54) - (54)
Operating income (loss) $ 393 $ (40) 353
Interest expense (99)
Other expense, net (64)
Income before income taxes and equity loss 190
Income tax expense (37)
Equity loss, net of tax (135)
Net income 18
Net loss attributable to noncontrolling interest (26)
Net income attributable to Aptiv $ 44
(1)Primarily consists of charges related to the designation of our majority
owned Russian subsidiary as held for sale as of June 30, 2022 . Refer to Note 17.
Acquisitions and Divestitures to the consolidated financial statements contained
herein for further information.
Advanced
Safety and
Signal and Power User
Solutions Experience Total
(in millions)
For the Six Months Ended June 30, 2021 :
Adjusted operating income $ 719 $ 93 $ 812
Amortization (71) (3) (74)
Restructuring (9) (11) (20)
Other acquisition and portfolio project costs (2) (2) (4)
Operating income $ 637 $ 77 714
Interest expense (78)
Other income, net 1
Income before income taxes and equity loss 637
Income tax expense (76)
Equity loss, net of tax (95)
Net income 466
Net income attributable to noncontrolling interest 8
Net income attributable to Aptiv $ 458
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Net sales, gross margin as a percentage of net sales and Adjusted Operating Income (Loss) by segment for the three and six months endedJune 30, 2022 and 2021 are as follows:Net Sales by Segment Three Months Ended June 30, Variance Due To: Volume, net of Favorable/ contractual price Commodity 2022 2021 (unfavorable) reductions FX pass-through Other Total (in millions) (in millions) Signal and Power Solutions$ 3,039 $ 2,846 $ 193 $ 292$ (135) $ 36 $ -$ 193 Advanced Safety and User Experience 1,026 970 56 65 (9) - - 56 Eliminations and Other (8) (9) 1 - 1 - - 1 Total$ 4,057 $ 3,807 $ 250 $ 357$ (143) $ 36 $ -$ 250 Six Months Ended June 30, Variance Due To: Volume, net of contractual price Commodity 2022 2021 Favorable/(unfavorable) reductions FX pass-through Other Total (in millions) (in millions) Signal and Power Solutions$ 6,145 $ 5,868 $ 277 $ 362$ (191) $ 106 $ -$ 277 Advanced Safety and User Experience 2,108 1,981 127 140 (13) - - 127 Eliminations and Other (18) (19) 1 - 1 - - 1 Total$ 8,235 $ 7,830 $ 405 $ 502$ (203) $ 106 $ -$ 405
Gross Margin Percentage by Segment
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Signal and Power Solutions 13.4 % 18.1 % 14.8 % 19.1 %
Advanced Safety and User Experience 3.3 % 8.9 % 5.6 % 10.6 %
Total 10.8 % 15.8 % 12.5 % 17.0 %
Adjusted Operating Income (Loss) by Segment
Three Months Ended June 30, Variance Due To:
Volume, net of
Favorable/ contractual price Operational
2022 2021 (unfavorable) reductions performance Other Total
(in millions) (in millions)
Signal and Power Solutions $ 243 $ 313 $ (70) $ 83 $ (113) $ (40) $ (70)
Advanced Safety and User
Experience (30) 25 (55) 29 (101) 17 (55)
Total $ 213 $ 338 $ (125) $ 112 $ (214) $ (23) $ (125)
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As noted in the table above, Adjusted Operating Income for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 was impacted by volume, including product mix, and the favorable impact of price recoveries, net of contractual price reductions, and operational performance. Our operational performance for the three months endedJune 30, 2022 includes approximately$165 million of increased costs for semiconductors and commodities, as well as approximately$35 million of increased costs, primarily related to material logistics costs associated with the global supply chain disruptions due to the worldwide semiconductor shortage and other extraordinary events. The total impacts within Adjusted Operating Income resulting from the global supply chain disruptions were incremental costs of approximately$25 million during the three months endedJune 30, 2022 . Adjusted Operating Income was also impacted by the following items included within Other in the table above:
•$15 million of increased SG&A expense, not including the impact of other acquisition and portfolio project costs; partially offset by
•$8 million of favorable foreign currency impacts.
Six Months Ended June 30, Variance Due To:
Volume, net of
contractual price Operational
2022 2021 Favorable/(unfavorable) reductions performance Other Total
(in millions) (in millions)
Signal and Power Solutions $ 551 $ 719 $ (168) $ 85 $ (236) $ (17) $ (168)
Advanced Safety and User
Experience (14) 93 (107) 55 (181) 19 (107)
Total $ 537 $ 812 $ (275) $ 140 $ (417) $ 2 $ (275)
As noted in the table above, Adjusted Operating Income for the six months ended
June 30, 2022 as compared to the six months ended June 30, 2021 was impacted by
volume, including product mix, and the favorable impact of price recoveries, net
of contractual price reductions, and operational performance. Our operational
performance for the six months ended June 30, 2022 includes approximately
$295 million of increased costs for semiconductors and commodities, as well as
approximately $55 million of increased costs, primarily related to material
logistics costs associated with the global supply chain disruptions due to the
worldwide semiconductor shortage and other extraordinary events. The total
impacts within Adjusted Operating Income resulting from the global supply chain
disruptions were incremental costs of approximately $40 million during the six
months ended June 30, 2022 . Adjusted Operating Income was also impacted by the
following item included within Other in the table above:
•$30 million of increased SG&A expense, not including the impact of other acquisition and portfolio project costs; and; partially offset by
•$8 million of favorable foreign currency impacts.
Liquidity and Capital Resources
Overview of Capital Structure
Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements, operational restructuring activities and dividends on our outstanding preferred shares. Our primary sources of liquidity are cash flows from operations, our existing cash balance, and as necessary and available, borrowings under credit facilities and issuance of long-term debt and equity. To the extent we generate discretionary cash flow we may consider using this additional cash flow for optional prepayments of existing indebtedness, strategic acquisitions or investments, and/or general corporate purposes. We will also continually explore ways to enhance our capital structure. As ofJune 30, 2022 , we had cash and cash equivalents of$4.7 billion and net debt (defined as outstanding debt less cash and cash equivalents) of$1.8 billion . The following table summarizes our available liquidity, which includes cash, cash equivalents and funds available under our significant committed credit facilities, as ofJune 30, 2022 : 61
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June 30,
2022
(in millions)
Cash and cash equivalents $ 4,670
Revolving Credit Facility, unutilized portion (1) 2,000
Committed European accounts receivable factoring facility, unutilized portion (2) 473
Total available liquidity $ 7,143 (1)Availability reduced by less than
(2)Based on
Despite the current global economic impacts and uncertainties resulting from the conflict betweenUkraine andRussia , the ongoing global supply chain disruptions, the COVID-19 pandemic and the resulting direct and indirect impacts on global vehicle production, we currently expect existing cash, available liquidity and cash flows from operations to continue to be sufficient to fund our global operating activities, including restructuring payments, any mandatory payments required under the Credit Agreement as described below, dividends on preferred shares and capital expenditures. Furthermore, we expect to acquire Wind River and pay other required fees and expenses in connection with the proposed acquisition primarily utilizing cash on hand, including proceeds from the issuance of the 2022 Senior Notes. We also continue to expect to be able to move funds between different countries to manage our global liquidity needs without material adverse tax implications, subject to current monetary policies and the terms of the Credit Agreement. We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan repayments and other distributions and advances to provide the funds necessary to meet our global liquidity needs. There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Aptiv. As ofJune 30, 2022 , the Company's cash and cash equivalents held by our non-U.S. subsidiaries totaled approximately$4.6 billion . If additional non-U.S. cash was needed for ourU.S. operations, we may be required to accrue and pay withholding if we were to distribute such funds from non-U.S. subsidiaries to theU.S. ; however, based on our current liquidity needs and strategies, we do not anticipate a need to accrue and pay such additional amounts.
2020 Public Equity Offering
InJune 2020 , the Company completed the underwritten public offering of approximately 15.1 million ordinary shares at a price of$75.91 per share, 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 . Each share of MCPS will mandatorily convert on the mandatory conversion date ofJune 15, 2023 , into between 1.0754 and 1.3173 shares of the Company's ordinary shares, subject to customary anti-dilution adjustments. Holders of the MCPS will be entitled to receive, when and if declared by the Company's Board of Directors, cumulative dividends at the annual rate of 5.50% of the liquidation preference of$100 per share (equivalent to$5.50 annually per share), payable in cash or, subject to certain limitations, by delivery of the Company's ordinary shares or any combination of cash and the Company's ordinary shares, at the Company's election. If declared, dividends on the MCPS will be payable quarterly onMarch 15 ,June 15 ,September 15 andDecember 15 of each year (commencing onSeptember 15, 2020 to, and includingJune 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 precedingMarch 1 ,June 1 ,September 1 orDecember 1 , respectively. Refer to Note 12. Shareholders' Equity and Net Income Per Share to the consolidated financial statements contained herein for further detail on theJune 2020 public equity offering.
Share Repurchases
InApril 2016 , the Board of Directors authorized a share repurchase program of up to$1.5 billion of ordinary shares, which commenced inSeptember 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.
There were no shares repurchased during the three and six months ended
As ofJune 30, 2022 , approximately$13 million of share repurchases remained available under theApril 2016 share repurchase program, which is in addition to the share repurchase program of up to$2.0 billion that was previously announced inJanuary 2019 . This program, which will commence following the completion of theApril 2016 share repurchase program, 62
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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. All previously 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. Preferred Dividends
In the second quarter of 2022, the Board of Directors declared and paid a
quarterly cash dividend of approximately
Acquisitions and Other Transactions
El-Com-OnDecember 30, 2021 , Aptiv acquired 100% of the equity interests ofEl-Com, Inc. ("El-Com"), a manufacturer of custom wire harnesses and cable assemblies for high-reliability products and industries, for total consideration of up to$88 million . The total consideration includes a cash payment of up to$10 million , contingent upon the achievement of certain performance metrics over a one-year period following the acquisition. The acquisition was accounted for as a business combination, with the operating results of El-Com included within the Company's Signal and Power Solutions segment from the date of acquisition. The Company acquired El-Com utilizing cash on hand.Krono-Safe Automotive -OnNovember 9, 2021 , Aptiv acquired 100% of the equity interests ofKrono-Safe Automotive , SAS ("Krono-Safe Automotive "), a leading software developer of safety-critical real-time embedded systems, for total consideration of$13 million , which was comprised of Aptiv's previous investment of$6 million in Krono-Safe, SAS and$7 million of cash. The acquisition was accounted for as a business combination, with the operating results ofKrono-Safe Automotive included within the Company's Advanced Safety and User Experience segment from the date of acquisition. Ulti-Mate-OnApril 30, 2021 , Aptiv acquired certain assets ofUlti-Mate Connector, Inc. ("Ulti-Mate"), a manufacturer of miniature and micro-miniature connectors and cable assemblies, for total consideration of$45 million . The acquisition was accounted for as a business combination, with the operating results of Ulti-Mate included within the Company's Signal and Power Solutions segment from the date of acquisition. The Company acquired Ulti-Mate utilizing cash on hand. Wind River-InJanuary 2022 , Aptiv entered into a definitive agreement to acquire 100% of the equity interests of Wind River, a global leader in delivering software for the intelligent edge, for approximately$4.3 billion , subject to customary post-closing adjustments. The transaction is subject to regulatory approvals and customary closing conditions, and we are targeting a closing this year as we work through the regulatory approval process. Upon completion, we anticipate that Wind River will become part of Aptiv's Advanced Safety and User Experience segment. The Company intends to acquire Wind River primarily utilizing cash on hand, including proceeds from the issuance of the 2022 Senior Notes. Planned Exit from Majority Owned Russian Subsidiary-Given the sanctions put in place by the E.U.,U.S. and other governments throughJune 30, 2022 , which restrict our ability to conduct business inRussia , we initiated a plan to exit our majority owned subsidiary inRussia . As a result, the Company determined that this subsidiary, which is reported within the Signal and Power Solutions segment, met the held for sale criteria as ofJune 30, 2022 . Consequently, during the three months endedJune 30, 2022 , the Company recorded a pre-tax charge of$51 million to impair the carrying value of the Russian subsidiary's net assets to fair value, which was recorded primarily within cost of sales in the consolidated statement of operations. Approximately$25 million of these charges were attributable to the noncontrolling interest based on the noncontrolling shareholder's economic interest. The remaining assets and liabilities, which are de minimis, were reclassified to other current assets and other current liabilities, respectively, in the consolidated balance sheet as ofJune 30, 2022 .
Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of the Company's business acquisitions and divestitures.
Technology Investments-During the second quarter of 2022, the Company's Advanced Safety and User Experience segment made an investment totaling50 billion South Korean Won (approximately$40 million , using foreign currency rates on the investment date) inStradVision, Inc , a provider of deep learning-based camera perception software for automotive applications. InFebruary 2022 , Quanergy Systems, Inc. ("Quanergy") merged with a publicly traded special purpose acquisition company ("SPAC") and shares of Quanergy began trading on the NYSE under the symbol QNGY. As part of theSPAC merger, our preferred shares in Quanergy were converted into Quanergy ordinary shares. During the six months endedJune 30, 2022 , the Company sold all of its Quanergy ordinary shares for net proceeds of approximately$3 million . The Company's Advanced Safety and User Experience segment had previously made a$3 million investment in Quanergy during 2016, which was in addition to the Company's$3 million investment made during 2015. InSeptember 2021 , Valens Semiconductor Ltd. ("Valens") merged with a publicly tradedSPAC and shares of Valens began trading on the NYSE under the symbol VLN. As part of theSPAC merger, our preferred shares in Valens were converted into Valens ordinary shares. 63
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InAugust 2021 , Otonomo Technologies Ltd. ("Otonomo") merged with a publicly tradedSPAC and shares of Otonomo began trading on the Nasdaq Capital Market under the symbol OTMO. As part of theSPAC merger, our preferred shares in Otonomo were converted into Otonomo ordinary shares. During the second half of 2021, the Company sold a portion of its Otonomo ordinary shares for net proceeds of approximately$3 million . The Company's Advanced Safety and User Experience segment had previously made a$3 million investment in Otonomo during 2019, which was in addition to the Company's$15 million investment made during 2017. InJune 2021 ,Affectiva, Inc. ("Affectiva") was acquired by Smart Eye AB ("Smart Eye"), which is publicly traded on theNasdaq Stockholm AB stock exchange . As part of the acquisition, Aptiv received shares of Smart Eye in exchange for Aptiv's Affectiva preferred shares. InApril 2021 , Innoviz Technologies ("Innoviz") merged with a publicly tradedSPAC and shares of Innoviz began trading on the Nasdaq Capital Market under the symbol INVZ. As part of theSPAC merger, our preferred shares in Innoviz were converted into Innoviz ordinary shares. During the second half of 2021, the Company sold all of its Innoviz ordinary shares for net proceeds of approximately$18 million . The Company's Advanced Safety and User Experience segment had previously made a$15 million investment in Innoviz during 2017.
Following each of the transactions described above for Quanergy, Valens, Otonomo, Smart Eye and Innoviz, the fair value of each respective investment is measured on a recurring basis, with changes in fair value recorded to other income (expense), net.
Investment inTTTech Auto AG -OnMarch 15, 2022 , Aptiv acquired approximately 20% of the equity interests ofTTTech Auto AG ("TTTech Auto"), a leading provider of safety-critical middleware solutions for advanced driver-assistance systems and autonomous driving applications, in exchange for €200 million (approximately$220 million , using foreign currency rates on the investment date). The Company made the investment inTTTech Auto utilizing cash on hand. The Company's investment inTTTech Auto is accounted for using the equity method of accounting following the date of the investment.
Refer to Note 21. Investments in Affiliates to the consolidated financial statements contained herein for further detail of the Company's investments.
Credit Agreement
Aptiv PLC and its wholly-owned subsidiaryAptiv Corporation entered into a credit agreement (the "Credit Agreement") withJPMorgan Chase Bank, N.A ., as administrative agent (the "Administrative Agent"), under which it maintains senior unsecured credit facilities currently consisting of a term loan (the "Tranche A Term Loan") and a revolving credit facility of$2 billion (the "Revolving Credit Facility"). Subsequently,Aptiv Global Financing Limited ("AGFL"), a wholly-owned subsidiary ofAptiv 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. The Credit Agreement was entered into inMarch 2011 and has been subsequently amended and restated on several occasions, most recently onJune 24, 2021 . TheJune 2021 amendment, among other things, (1) refinanced and replaced the existing term loan A and revolver with a new term loan A that matures in 2026, and a new five-year revolving credit facility with aggregate commitments of$2 billion , (2) utilized the Company's existing sustainability-linked metrics and commitments, that, if achieved, would change the facility fee and interest rate margins as described below, and (3) established the leverage ratio maintenance covenant that requires the Company to maintain total net leverage (as calculated in accordance with the Credit Agreement) of less than 3.5 to 1.0 (or 4.0 to 1.0 for four full fiscal quarters following completion of material acquisitions, as defined in the Credit Agreement) and allowed for dividends and other payments on equity. Losses on modification of debt totaled$1 million during the three months endedJune 30, 2021 related to theJune 2021 amendment. Aptiv paid amendment fees of$6 million during the three months endedJune 30, 2021 which are reflected as a financing activity in the consolidated statements of cash flows. The Tranche A Term Loan and the Revolving Credit Facility mature onJune 24, 2026 . Beginning onSeptember 30, 2022 , Aptiv is obligated to make quarterly principal payments on 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. As ofJune 30, 2022 , there were no amounts drawn on the Revolving Credit Facility and less than$1 million in letters of credit were issued under the Credit Agreement. Letters of credit issued under the Credit Agreement reduce availability under the Revolving Credit Facility. No amounts were drawn on the Revolving Credit Facility during the six months endedJune 30, 2022 . 64
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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 June 2021 amendment also contains provisions to facilitate the replacement
of the LIBOR-based rate with a Secured Overnight Financing Rate ("SOFR") based
rate upon the discontinuation or unavailability of LIBOR. The Applicable Rates
under the Credit Agreement on the specified dates are set forth below:
June 30, 2022 December 31, 2021
LIBOR plus ABR plus LIBOR plus ABR plus
Revolving Credit Facility 1.10 % 0.10 % 1.10 % 0.10 %
Tranche A Term Loan 1.125 % 0.125 % 1.125 % 0.125 %
Under the June 2021 amendment, the Applicable Rate under the Credit Agreement,
as well as the facility fee, may increase or decrease from time to time based on
changes in the Company's credit ratings and whether the Company achieves or
fails to achieve certain sustainability-linked targets with respect to
greenhouse gas emissions and workplace safety. Such adjustments may be up to
0.04% per annum on interest rate margins on the Revolving Credit Facility, 0.02%
per annum on interest rate margins on the Tranche A Term Loan and up to 0.01%
per annum on the facility fee. Accordingly, the interest rate is subject to
fluctuation during the term of the Credit Agreement based on changes in the ABR,
LIBOR, changes in the Company's corporate credit ratings or whether the Company
achieves or fails to achieve its sustainability-linked targets. The Credit
Agreement also requires that Aptiv pay certain facility fees on the Revolving
Credit Facility, which are also subject to adjustment based on the
sustainability-linked targets as described above, and certain letter of credit
issuance and fronting fees. As a result of meeting the sustainability-linked
targets for the 2021 calendar year, the interest rate margins and facility fees
will be reduced by the amounts specified above, effective in the third quarter
of 2022.
The interest rate period with respect to LIBOR interest rate options can be set
at one-, three-, or six-months as selected by Aptiv in accordance with the terms
of the Credit Agreement (or other period as may be agreed by the applicable
lenders). Aptiv may elect to change the selected interest rate option in
accordance with the provisions of the Credit Agreement. As of June 30, 2022 ,
Aptiv selected the one-month LIBOR interest rate option on the Tranche A Term
Loan, and the rates effective as of June 30, 2022 , as detailed in the table
below, were based on the Company's current credit rating and the Applicable Rate
for the Credit Agreement:
Borrowings as of
June 30, 2022 Rates effective as of
Applicable Rate (in millions) June 30, 2022
Tranche A Term Loan LIBOR plus 1.125% $ 313 2.8125 %
Borrowings under the Credit Agreement are prepayable at Aptiv's option without premium or penalty.
The Credit Agreement contains certain covenants that limit, among other things, the Company's (and the Company's subsidiaries') ability to incur certain additional indebtedness or liens or to dispose of substantially all of its assets. In addition, under theJune 2021 amendment, the Credit Agreement requires that the Company maintain a consolidated leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the Credit Agreement) of not more than 3.5 to 1.0 (or 4.0 to 1.0 for four full fiscal quarters following completion of material acquisitions, as defined in the Credit Agreement). 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 ofJune 30, 2022 . As ofJune 30, 2022 , all obligations under the Credit Agreement were borrowed byAptiv Corporation and jointly and severally guaranteed byAGFL andAptiv PLC , subject to certain exceptions set forth in the Credit Agreement. 65
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Senior Unsecured Notes
As ofJune 30, 2022 , the Company had the following senior unsecured notes issued and outstanding: Aggregate Principal Amount (in millions) Stated Coupon Rate Issuance Date
Maturity Date Interest Payment Date
$ 700 2.396% February 2022 February 2025 February 18 and August 18
736 1.50% March 2015 March 2025 March 10
525 1.60% September 2016 September 2028 September 15
300 4.35% March 2019 March 2029 March 15 and September 15
800 3.25% February 2022 March 2032 March 1 and September 1
300 4.40% September 2016 October 2046 April 1 and October 1
350 5.40% March 2019 March 2049 March 15 and September 15
1,500 3.10% November 2021 December 2051 June 1 and December 1
1,000 4.15% February 2022 May 2052 May 1 and November 1
Although the specific terms of each indenture governing each series of senior
notes vary, the indentures contain certain restrictive covenants, including with
respect to Aptiv's (and Aptiv's subsidiaries) ability to incur liens, enter into
sale and leaseback transactions and merge with or into other entities. As of
June 30, 2022 , the Company was in compliance with the provisions of all series
of the outstanding senior notes. Refer to Note 8. Debt to the consolidated
financial statements contained herein for additional information.
Guarantor Summarized Financial Information
As further described in Note 8. Debt to the consolidated financial statements contained herein,Aptiv PLC ,Aptiv Corporation and AGFL are each potential borrowers under the Credit Agreement, under which such borrowings would be guaranteed by each of the other two entities.Aptiv PLC issued the 2015 Euro-denominated Senior Notes, 2016 Euro-denominated Senior Notes, 2016 Senior Notes, 2019 Senior Notes and 2021 Senior Notes. InFebruary 2022 ,Aptiv Corporation and AGFL were added as guarantors on each series of outstanding senior notes previously issued byAptiv PLC . AGFL was added as a joint and several co-issuer of the 2021 Senior Notes inDecember 2021 , effective as of the date of issuance.Aptiv PLC andAptiv Corporation jointly issued the 2022 Senior Notes, which are guaranteed by AGFL. Together,Aptiv PLC ,Aptiv Corporation and AGFL comprise the "Obligor Group ." All other consolidated direct and indirect subsidiaries ofAptiv PLC are not subject to any guarantee under any series of notes outstanding (the "Non-Guarantors"). The guarantees rank equally in right of payment with all of the guarantors' existing and future senior indebtedness, are effectively subordinated to any of their existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and are structurally subordinated to the indebtedness of each of their existing and future subsidiaries that is not a guarantor. The below summarized financial information is presented on a combined basis after the elimination of intercompany balances and transactions among theObligor Group and equity in earnings from and investments in the Non-Guarantors. The below summarized financial information should be read in conjunction with the Company's consolidated financial statements contained herein, as the financial information may not necessarily be indicative of results of operations or financial position had the subsidiaries operated as independent entities. The historical presentation of the summarized financial information has been revised to be consistent with the presentation of the entities that comprise the structure of theObligor Group as ofJune 30, 2022 . 66
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Obligor Group
Six Months Ended June 30, 2022 (in millions)
Net sales $ -
Gross margin $ -
Operating loss $ (23)
Net loss $ (147)
Net loss attributable to Aptiv $ (147)
As ofJune 30, 2022 : Current assets (1)$ 8,157 Long-term assets (2) $ 47 Current liabilities (3)$ 5,962 Long-term liabilities (3)$ 6,650 Noncontrolling interest $ - As ofDecember 31, 2021 Current assets (1)$ 6,432 Long-term assets $ 14 Current liabilities (3)$ 6,572 Long-term liabilities (3)$ 4,276 Noncontrolling interest $ -
(1)Includes current assets of
(2)Includes long-term assets of
(3)Includes current liabilities of
Other Financing
Receivable factoring-Aptiv maintains a €450 million European accounts receivable factoring facility that is available on a committed basis and allows for factoring of receivables denominated in both Euros andU.S. dollars ("USD"). 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 facility became effective onJanuary 1, 2021 and has a term of three years, subject to Aptiv's right to terminate at any time with three months' notice. After expiration of the three year term, either party can terminate with three months' notice. Borrowings denominated in Euros under the facility bear interest at the three-month Euro Interbank Offered Rate ("EURIBOR") plus 0.50% and USD borrowings bear interest at two-month LIBOR plus 0.50%, with borrowings under either denomination carrying a minimum interest rate of 0.20%. As ofJune 30, 2022 andDecember 31, 2021 , Aptiv had no amounts drawn on the European accounts receivable factoring facility. No amounts were drawn under the European accounts receivable factoring facility during the six months endedJune 30, 2022 .
Finance leases and other-As of
Letter of credit facilities-In addition to the letters of credit issued under the Credit Agreement, Aptiv had approximately$3 million and$3 million outstanding through other letter of credit facilities as ofJune 30, 2022 andDecember 31, 2021 , respectively, primarily to support arrangements and other obligations at certain of its subsidiaries.
Cash Flows
Intra-month cash flow cycles vary by region, but in general we are users of cash
through the first half of the month and we generate cash during the latter half
of the month. Due to this cycle of cash flows, we may utilize short-term
financing, including our Revolving Credit Facility and European accounts
receivable factoring facility, to manage our intra-month working capital needs.
Our cash balance typically peaks at month end.
We utilize a combination of strategies, including dividends, cash pooling
arrangements, intercompany loan structures and other distributions and advances,
to provide the funds necessary to meet our global liquidity needs. We utilize a
global cash
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pooling arrangement to consolidate and manage our global cash balances, which enables us to efficiently move cash into and out of a number of the countries in which we operate. Operating activities-Net cash used in operating activities totaled$107 million for the six months endedJune 30, 2022 and net cash provided by operating activities totaled$549 million for the six months endedJune 30, 2021 . Cash flows used in operating activities for the six months endedJune 30, 2022 consisted primarily of net earnings of$18 million , increased by$400 million for non-cash charges for depreciation, amortization and pension costs, offset by$759 million related to changes in operating assets and liabilities, net of restructuring and pension contributions. Cash flows provided by operating activities for the six months endedJune 30, 2021 consisted primarily of net earnings of$466 million , increased by$414 million for non-cash charges for depreciation, amortization and pension costs, partially offset by$498 million related to changes in operating assets and liabilities, net of restructuring and pension contributions. Investing activities-Net cash used in investing activities totaled$705 million for the six months endedJune 30, 2022 , as compared to$314 million for the six months endedJune 30, 2021 . The increase in usage is primarily attributable to$220 million paid for business acquisitions and other transactions, and increased capital expenditures of$193 million during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . Financing activities-Net cash provided by financing activities totaled$2,394 million for the six months endedJune 30, 2022 and net cash used in financing activities totaled$103 million for the six months endedJune 30, 2021 . Cash flows provided by financing activities for the six months endedJune 30, 2022 primarily included net proceeds of$2,472 million received from the issuance of the 2022 Senior Notes, partially offset by$32 million of MCPS dividend payments. Cash flows used in financing activities for the six months endedJune 30, 2021 primarily included$20 million in repayments under debt agreements and$32 million of MCPS dividend payments.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contingencies and Environmental Matters
The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 10. Commitments and Contingencies to the unaudited consolidated financial statements included in Part I, Item 1 of this report is incorporated herein by reference.
Recently Issued Accounting Pronouncements
The information concerning recently issued accounting pronouncements contained in Note 2. Significant Accounting Policies to the unaudited consolidated financial statements included in Part I, Item 1 of this report is incorporated herein by reference.
Critical Accounting Estimates
There have been no significant changes in our critical accounting estimates
during the three and six months ended
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