DELPHI 2013 Annual Report Download - page 66

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reduction of $17 million in withholding tax expense, offset by an increase of $17 million primarily related to uncertain tax
positions outside the U.S. The effective tax rate in the year ended December 31, 2011 was impacted by the release of a $52
million valuation allowance, offset by an increase of $17 million in tax reserves and $10 million in withholding tax expense
primarily related to the funding of the redemption of all the outstanding Class A and Class C membership interests in Delphi
Automotive LLP.
The American Taxpayer Relief Act of 2012 was enacted on January 2, 2013. The tax bill retroactively reinstates expired
tax provisions known as tax extenders including the research and development tax credit. 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 is the first
quarter of 2013. As a result, the Company did not recognize a tax benefit of approximately $22 million in 2012 related to the
research and development credit which favorably impacted the first quarter results in 2013.
Equity Income
Year Ended December 31,
2012 2011 Favorable/
(unfavorable)
(in millions)
Equity income, net of tax............................................................................................ $ 27 $ 22 $ 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, 2012 as compared to the year ended
December 31, 2011 primarily due to improved performance of our Mexican and Korean joint ventures and a $7 million
impairment charge related to a European joint venture in 2011, partially offset by an $8 million of gain on the sale of our 49.5%
interest in Daesung Electric, Co., Ltd in 2011.
Results of Operations by Segment
Through December 31, 2012, we evaluated performance based on stand-alone segment EBITDA and accounted for inter-
segment sales and transfers as if the sales or transfers were to third parties, at current market prices. Our management believed
that EBITDA was a meaningful measure of performance and it was used by management to analyze Company and stand-alone
segment operating performance. Management also used EBITDA for planning and forecasting purposes. Effective January 1,
2013, our management began utilizing segment Adjusted EBITDA as a key performance measure because of our significant
restructuring and other acquisition-related costs. Segment Adjusted EBITDA and EBITDA should not be considered substitutes
for results prepared in accordance with U.S. GAAP and should not be considered alternatives to net income attributable to
Delphi, which is the most directly comparable financial measure to Adjusted EBITDA and EBITDA that is in accordance with
U.S. GAAP. Segment Adjusted EBITDA and EBITDA, as determined and measured by Delphi, should also not be compared to
similarly titled measures reported by other companies.