DELPHI 2015 Annual Report Download - page 70

Table of Contents
48
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.
The effective tax rate in the year ended December 31, 2013 was impacted by the enactment of the American Taxpayer
Relief Act of 2012 on January 2, 2013, which retroactively reinstated expired tax provisions known as tax extenders including
the research and development tax credit. The impact of this legislation was recorded as a discrete item during the first quarter of
2013, the period of enactment, and resulted in a tax benefit of approximately $19 million related to the 2012 research and
development credit in addition to the 2013 research and development credit. On July 17, 2013, the United Kingdom Finance
Bill of 2013 became law as the Finance Act 2013 (the “U.K. Finance Act”). The U.K. Finance Act provides for a reduction to
the corporate income tax rate from 23% to 21% effective April 1, 2014, with a further reduction to 20% effective April 1, 2015.
The impact of this legislation was recorded as a discrete item during the third quarter of 2013, the period of enactment, and
resulted in increased tax expense of approximately $12 million for the year ended December 31, 2013 due to the resultant
impact on the net deferred tax asset balances. Additionally, the effective tax rate in the year ended December 31, 2013 was
impacted by a reduction in tax reserves of $13 million, partially offset by an increase in withholding taxes due to overall
increased earnings and full year inclusion of MVL activity in 2013.
Equity Income
Year Ended December 31,
2014 2013
Favorable/
(unfavorable)
(in millions)
Equity income, net of tax ............................................................................................ $ 20 $ 15 $ 5
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 increased during the year ended December 31, 2014 as compared to the year ended
December 31, 2013, which was primarily attributable to improved operating results of our North American joint ventures as
compared to the prior period.
Income from Discontinued Operations
Year Ended December 31,
2014 2013
Favorable/
(unfavorable)
(in millions)
Income from discontinued operations, net of tax........................................................ $ 60 $ 60 $ —
Income from discontinued operations, net of tax reflects the results of the Company's previously reported Thermal
Systems segment, which have been reclassified to discontinued operations as a result of the sale of this business. Income from
discontinued operations, net of tax for the year ended December 31, 2014 was consistent with the year ended December 31,
2013. Increased sales and gross margin improvement resulting from successful cost reduction initiatives at Thermal Systems,
including restructuring programs, were offset due to a decline in equity income attributable to discontinued operations from our
Korean joint venture.
Refer to Note 25. Discontinued Operations to the audited consolidated financial statements included herein for additional
information.
Results of Operations by Segment
As described in Note 25. Discontinued Operations to the audited consolidated financial statements contained herein, the
Company's previously reported Thermal Systems segment has been classified as discontinued operations, which required
retrospective application to balance sheet, statement of operations and certain cash flow financial information for all periods
presented. Discontinued operations also includes the Company's thermal original equipment service business, the results of
which were previously reported within the Powertrain Systems segment. Certain operations, primarily related to contract
manufacturing services, which were previously included within the Thermal Systems segment but which were not included in
the scope of the divestiture, are reported in continuing operations and have been reclassified within the Electronics and Safety
segment for all periods presented. Amounts for shared general and administrative operating expenses that were allocated to the
Thermal Systems business in prior periods have been re-allocated to the Company's reportable operating segments.