DELPHI 2015 Annual Report Download - page 63

Table of Contents
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recorded a loss of $15 million on option contracts entered into in order to hedge portions of the currency risk associated with
the acquisition of HellermannTyton. Partially offsetting these expenses, Delphi recorded $8 million for certain fees earned
pursuant to the transition services agreement in connection with the sale of the Company's wholly owned Thermal Systems
business, and $5 million of interest income.
During the year ended December 31, 2014, Delphi repaid a portion of the Tranche A Term Loan and redeemed the
5.875% Senior Notes, resulting in a loss on extinguishment of debt of $34 million. Additionally, during the year ended
December 31, 2014, Delphi incurred approximately $6 million in transaction costs related to its 2014 acquisitions. Partially
offsetting these expenses during the year ended December 31, 2014, Delphi recorded $10 million of interest income and also
reached a final settlement with its insurance carrier related to a business interruption insurance claim, and received proceeds
from the settlement of approximately $14 million, net of related costs and expenses.
Refer to Note 19. Other income, net and Note 11. Debt to the audited consolidated financial statements included herein
for additional information.
Income Taxes
Year Ended December 31,
2015 2014
Favorable/
(unfavorable)
(in millions)
Income tax expense..................................................................................................... $ 263 $ 255 $ (8)
The Company’s tax rate is affected by the tax rates in the 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 effective tax rate was 17% and 16% for the years ended December 31, 2015 and 2014, respectively. The effective tax
rate in the year ended December 31, 2015 was impacted by increased tax expense of $15 million resulting from changes in
judgment related to deferred tax asset valuation allowances, as well as the enactment of the UK Finance (No. 2) Act 2015 (the
“UK 2015 Finance Act”) on November 18, 2015, which provides for a reduction of the corporate income tax rate from 20% to
19% effective April 1, 2017, with a further reduction to 18% effective April 1, 2020. The income tax accounting effect,
including any retroactive effect, of a tax law change is accounted for in the period of enactment, which in this case was the
fourth quarter of 2015. As a result, the effective tax rate was impacted by an increased tax expense of approximately $11
million for the year ended December 31, 2015 due to the resultant impact on the net deferred tax asset balances. Additionally,
the effective tax rate in the year ended December 31, 2015 was impacted by unfavorable geographic income mix in 2015 as
compared to 2014, primarily due to changes in the underlying operations of the business, offset by tax planning initiatives and
the resulting favorable impact on foreign tax credits.
The effective tax rate in the year ended December 31, 2014 was impacted by favorable geographic income mix in 2014 as
compared to 2013, primarily due to changes in the underlying operations of the business as well as tax planning initiatives, and
the resulting favorable impact on foreign tax credits. These favorable impacts were offset by net increases resulting from
changes in judgment related to deferred tax asset valuation allowances of $18 million in 2014.
Equity Income
Year Ended December 31,
2015 2014
Favorable/
(unfavorable)
(in millions)
Equity income, net of tax ............................................................................................ $ 16 $ 20 $ (4)
Equity income, net of tax reflects Delphi’s interest in the results of ongoing operations of entities accounted for as equity-
method investments. Equity income decreased during the year ended December 31, 2015 as compared to the year ended
December 31, 2014, which is primarily attributable to declines in performance at certain of our joint ventures as compared to
the prior period.