DELPHI 2011 Annual Report Download - page 146

Table of Contents
on the participants' level of responsibility within the Company and the country in which the participant is located. The awards cliff vest fully at the end of the
performance period, but may immediately fully vest upon a change in control, as defined in the VCP, for certain participants. In the event of a qualified
termination, as defined, the participant shall vest in a pro-rata percentage of their award as of the termination date. For any other termination, the award shall
be forfeited.
The amounts to be settled under the VCP will be determined based on Delphi's enterprise value and accumulated distributions (as well as $4.4 billion
paid to repurchase Class A and Class C membership interests (Refer to Note 1. General for more information)), any Class B membership interest repurchases,
any additional distributions to Class B and Class E-1 membership interest holders and any amounts distributed to holders of Class E-1 membership interests to
repurchase their Class E-1 membership interests) as of December 31, 2012, compared to a target enterprise value of $8.25 billion. An enterprise value of $2.5
billion must be achieved to receive a minimum award payout and above this level the payout is determined as a percentage of the target award. The authorized
target amount of the awards is $135 million (of which $105 million are outstanding as of December 31, 2011), but the ultimate final settlement amount of the
awards could be higher or lower, depending on the enterprise value of Delphi at December 31, 2012. The estimated fair value of the awards granted as of
December 31, 2011 was $186 million. Because of Delphi's completed initial public offering, the estimated enterprise value will be based on the average daily
closing market price of the Company between November 17, 2011 and the end of the performance period, plus any distributions to holders of all membership
interests and the approximately $4.4 billion paid to repurchase Class A and Class C membership interests, any Class B membership interest repurchases, any
additional distributions to Class B and Class E-1 membership interest holders and any amounts distributed to holders of Class E-1 membership interests with
respect to or to repurchase their Class E-1 membership interests. Delphi recognized compensation cost in 2011 and 2010 and will continue to recognize
compensation cost, based on estimates of the enterprise value, over the requisite vesting periods of the awards. Compensation expense recognized during the
years ended December 31, 2011 and 2010 totaled $76 million ($61 million, net of tax) and $31 million ($21 million, net of tax), respectively. Based on the
estimate of enterprise value as of December 31, 2011, unrecognized compensation expense on a pretax basis of approximately $79 million is anticipated to be
recognized during 2012. There were no cash flow impacts for the years ended December 31, 2011 and 2010.
Final settlement can be made in cash or ordinary shares or a combination thereof as provided in the participation agreement or as otherwise determined
by the Compensation and Human Resources Committee of the Board of Directors.
The VCP awards are accounted for as liability awards pursuant to FASB ASC 718, Compensation-Stock Compensation. Estimating the fair value of the
liability awards under the VCP requires assumptions regarding the Company's enterprise value. Any differences in actual results from management's estimates
could result in fair values different from estimated fair values, which could materially impact the Company's future results of operations and financial
condition. Prior to public quoted market prices for averages to determine fair value estimates for VCP, the fair market value of the liability awards were based
on contemporaneous valuations performed by an independent valuation specialist, utilizing generally accepted valuation approaches.
Significant Factors, Assumptions, and Methodologies Used in Estimating Fair Value of Enterprise Value for VCP Awards and Fair Value of E-1
Membership Interests
The estimated fair value of the Class E-1 membership interests were based on a contemporaneous valuation performed as of the grant date. The liability
awards under the VCP were based on contemporaneous valuations performed periodically by an independent valuation specialist. Both the Class E-1
membership interests and VCP valuations utilize appropriate weighting of the market and income approaches.
Market Approach: The market approach measures the value of a company through analysis of recent sales or offerings of comparable companies. Based
on analysis of guideline public companies and guideline merged or
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