DELPHI 2013 Annual Report Download - page 132

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ending December 31, 2012. Each individual participant’s target value was based on the participants’ level of responsibility
within the Company and the country in which the participant is located. The awards cliff vested on December 31, 2012, the end
of the performance period. In the event of a qualified termination, as defined in the VCP, prior to December 31, 2012, the
participant would have vested in a pro-rata percentage of their award as of the termination date. For any other termination, the
award would have been forfeited.
Approximately $200 million of the VCP awards were settled in cash during the year ended December 31, 2012 and
approximately $31 million (including $11 million of taxes to be paid) that remained in accrued liabilities as of December 31,
2012 related to certain legal entities was paid out in the first quarter of 2013. Final settlement of the awards for Delphi's officers
was comprised of a combination of cash and ordinary shares. On December 31, 2012, 717,230 ordinary shares were issued to
Delphi's officers, of which 290,798 ordinary shares were withheld to cover U.S. withholding taxes. For the years ended
December 31, 2013 and 2012, respectively, approximately $11 million and $0 million of cash was paid and reflected as a
financing activity in the statements of cash flows related to the minimum statutory tax withholding for the vested ordinary
shares. Delphi recognized compensation expense based on estimates of the enterprise value over the requisite vesting periods of
the awards. Compensation expense recognized during the years ended December 31, 2013, 2012, and 2011 totaled $0 million
($0 million, net of tax), $140 million ($112 million, net of tax), and $76 million ($61 million, net of tax), respectively.
The VCP awards were accounted for as liability awards pursuant to FASB ASC 718, Compensation-Stock Compensation.
Estimating the fair value of the liability awards under the VCP required assumptions regarding the Company’s enterprise value.
Prior to public quoted market prices for averages to determine fair value estimates for the VCP, the fair market value of the
liability awards was 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 utilized 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 acquired companies, Delphi
utilized 2010 EBITDA and 2011 EBITDA multiples of 4.5x-6.25x to value the Class E-1 membership interests and VCP
awards in periods prior to the completion of the initial public offering.
In addition to the guideline public company and guideline merged or acquired company approaches, the Company
considered the trading price of its Class B membership interests by qualified institutional investors in determining the
enterprise value of the Company in periods prior to the completion of the initial public offering.
Income Approach: The income approach derives the value of a company based on assumptions about the company’s
future stream of cash flows. Delphi provided its independent valuation specialist with projected net sales, expenses and cash
flows for the years ended December 31, 2010, 2011 and 2012 for the Class E-1 awards and for the years ended December 31,
2010, 2011, 2012 and 2013 for the VCP awards. These financial projections represented management’s best estimate at the time
of the contemporaneous valuations. Discount rates used to determine the present value of future cash flows were based on the
weighted average cost of capital which ranged from 11.6%-13.7%.
22. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS
Basis of Presentation
In May 2011, Delphi Corporation issued the 2011 Senior Notes in a transaction exempt from registration under Rule
144A and Regulation S of the Securities Act. The 2011 Senior Notes were exchanged for the New Senior Notes in an exchange
offer completed in May 2012. Additionally, in February 2013, Delphi Corporation issued the 2013 Senior Notes registered
under the Securities Act. All series of the Company's outstanding senior notes have been issued by Delphi Corporation
(“Subsidiary Issuer”) and are fully and unconditionally guaranteed by certain of its direct and indirect parent companies the
(“Parent Companies”) and by certain of Delphi Automotive PLC’s direct and indirect subsidiaries which are directly or
indirectly 100% owned by the Company (the “Guarantor Subsidiaries”), on a joint and several basis, subject to customary
release provisions (other than in the case of Delphi Automotive PLC). Subsidiaries not subject to the guarantee (“Non-
Guarantor Subsidiaries”) consist primarily of the non-U.S. subsidiaries of the Company. Refer to Note 11. Debt for more
information.