Company Quick10K Filing
Visteon
Price77.11 EPS3
Shares28 P/E25
MCap2,175 P/FCF18
Net Debt-98 EBIT113
TEV2,077 TEV/EBIT18
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-04-30
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-10-24
10-Q 2019-06-30 Filed 2019-07-25
10-Q 2019-03-31 Filed 2019-04-25
10-K 2018-12-31 Filed 2019-02-21
10-Q 2018-09-30 Filed 2018-10-25
10-Q 2018-06-30 Filed 2018-07-26
10-Q 2018-03-31 Filed 2018-04-26
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-10-26
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-30 Filed 2016-10-27
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-25
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-02-25
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-02-28
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-02
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-03-09
10-Q 2010-09-30 Filed 2010-10-27
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-04-30
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-06-11
8-K 2020-06-03
8-K 2020-04-30
8-K 2020-04-17
8-K 2020-04-05
8-K 2020-03-19
8-K 2020-03-05
8-K 2020-02-20
8-K 2020-01-29
8-K 2019-12-19
8-K 2019-12-19
8-K 2019-11-06
8-K 2019-10-24
8-K 2019-09-20
8-K 2019-09-05
8-K 2019-08-13
8-K 2019-07-25
8-K 2019-06-05
8-K 2019-04-25
8-K 2019-02-21
8-K 2019-01-15
8-K 2018-11-06
8-K 2018-10-25
8-K 2018-09-05
8-K 2018-08-08
8-K 2018-07-24
8-K 2018-06-06
8-K 2018-05-30
8-K 2018-04-26
8-K 2018-03-06
8-K 2018-02-22
8-K 2018-02-12
8-K 2018-01-15

VC 10Q Quarterly Report

Part I
Item 1. Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Revenue Recognition
Note 3. Segment Information
Note 4. Earnings per Share
Note 5. Restructuring Activities
Note 6. Non - Consolidated Affiliates
Note 7. Inventories
Note 8. Long - Lived Assets
Note 9. Other Assets
Note 10. Debt
Note 11. Other Liabilities
Note 12. Employee Benefit Plans
Note 13. Income Taxes
Note 14. Stockholders' Equity and Non - Controlling Interests
Note 15. Fair Value Measurements and Financial Instruments
Note 17. Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex-311q1202010xq.htm
EX-31.2 ex-312q1202010xq.htm
EX-32.1 ex-321q1202010xq.htm
EX-32.2 ex-322q1202010xq.htm

Visteon Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
2.31.81.30.80.3-0.22012201420172020
Rev, G Profit, Net Income
2.71.70.7-0.3-1.3-2.32012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
________________
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 001-15827
VISTEON CORPORATION
(Exact name of registrant as specified in its charter)
State of
Delaware
 
38-3519512
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Village Center Drive,
Van Buren Township,
Michigan
48111
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: (800)-VISTEON
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, Par Value $.01 Per Share
VC
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ü No__
Indicate by check mark whether the registrant: has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ü No __
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer," "accelerated filer,” "smaller reporting company" and “emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ü  Accelerated filer  __   Non-accelerated filer __   Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. __
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ü
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ü No__
As of April 24, 2020, the registrant had outstanding 27,825,046 shares of common stock.
Exhibit index located on page number 37.


1





Visteon Corporation and Subsidiaries
Index


2




Part I
Financial Information

Item 1.
Consolidated Financial Statements
 
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions except per share amounts)
(Unaudited)
 
Three Months Ended March 31
 
2020
 
2019
Net sales
$
643

 
$
737

Cost of sales
(590
)
 
(671
)
Gross margin
53

 
66

Selling, general and administrative expenses
(54
)
 
(57
)
Restructuring expense, net
(33
)
 
(1
)
Interest expense
(3
)
 
(3
)
Interest income
1

 
1

Equity in net income of non-consolidated affiliates
1

 
3

Other income, net
4

 
2

Income (loss) before income taxes
(31
)
 
11

Benefit (provision) for income taxes
(5
)
 
5

Net income (loss)
(36
)
 
16

Net (income) loss attributable to non-controlling interests
1

 
(2
)
Net income (loss) attributable to Visteon Corporation
$
(35
)
 
$
14

 
 
 
 
Comprehensive income (loss)
$
(73
)
 
$
21

Comprehensive income (loss) attributable to Visteon Corporation
$
(72
)
 
$
18

 
 
 
 
Basic earnings (loss) per share attributable to Visteon Corporation
$
(1.25
)
 
$
0.50

 
 
 
 
Diluted earnings (loss) per share attributable to Visteon Corporation
$
(1.25
)
 
$
0.49


See accompanying notes to the consolidated financial statements.

3




VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
 
(Unaudited)
 
 
 
March 31
 
December 31
 
2020
 
2019
ASSETS
Cash and equivalents
$
822

 
$
466

Restricted cash
3

 
3

Accounts receivable, net
401

 
514

Inventories, net
180

 
169

Other current assets
177

 
193

Total current assets
1,583

 
1,345

Property and equipment, net
420

 
436

Intangible assets, net
126

 
127

Right-of-use assets
161

 
165

Investments in non-consolidated affiliates
48

 
48

Other non-current assets
150

 
150

Total assets
$
2,488

 
$
2,271

LIABILITIES AND EQUITY
Short-term debt
$
36

 
$
37

Accounts payable
442

 
511

Accrued employee liabilities
59

 
73

Current lease liability
30

 
30

Other current liabilities
162

 
147

Total current liabilities
729

 
798

Long-term debt, net
748

 
348

Employee benefits
284

 
292

Non-current lease liability
140

 
139

Deferred tax liabilities
27

 
27

Other non-current liabilities
59

 
72

Stockholders’ equity:
 
 
 
Preferred stock (par value $0.01, 50 million shares authorized, none outstanding as of March 31, 2020 and December 31, 2019)

 

Common stock (par value $0.01, 250 million shares authorized, 55 million shares issued, 28 million shares outstanding as of March 31, 2020 and December 31, 2019)
1

 
1

Additional paid-in capital
1,337

 
1,342

Retained earnings
1,644

 
1,679

Accumulated other comprehensive loss
(304
)
 
(267
)
Treasury stock
(2,284
)
 
(2,275
)
Total Visteon Corporation stockholders’ equity
394

 
480

Non-controlling interests
107

 
115

Total equity
501

 
595

Total liabilities and equity
$
2,488

 
$
2,271


See accompanying notes to the consolidated financial statements.

4




VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Three Months Ended March 31
 
2020
 
2019
Operating Activities
 
 
 
Net income (loss)
$
(36
)
 
$
16

Adjustments to reconcile net income to net cash provided from operating activities:
 
 
 
Depreciation and amortization
25

 
25

Non-cash stock-based compensation
5

 
5

Equity in net income of non-consolidated affiliates, net of dividends remitted
(1
)
 
(3
)
Other non-cash items
6

 
3

Changes in assets and liabilities:
 
 
 
Accounts receivable
102

 
3

Inventories
(16
)
 
(11
)
Accounts payable
(42
)
 
9

Other assets and other liabilities
(18
)
 
(43
)
Net cash provided from operating activities
25

 
4

Investing Activities
 
 
 
Capital expenditures, including intangibles
(44
)
 
(37
)
Loan repayments from non-consolidated affiliates
2

 
2

Other
1

 
1

Net cash used by investing activities
(41
)
 
(34
)
Financing Activities
 
 
 
Borrowings on revolving credit facility
400

 

Repurchase of common stock
(16
)
 

Dividends paid to non-controlling interests
(7
)
 

Short-term debt repayments, net

 
(2
)
Net cash provided from (used by) financing activities
377

 
(2
)
Effect of exchange rate changes on cash
(5
)
 

Net increase (decrease) in cash
356

 
(32
)
Cash and restricted cash at beginning of the period
469

 
467

Cash and restricted cash at end of the period
$
825

 
$
435


See accompanying notes to the consolidated financial statements.

5




VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In millions)
(Unaudited)
 
Total Visteon Corporation Stockholders' Equity
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Total Visteon Corporation Stockholders' Equity
 
Non-Controlling Interests
 
Total Equity
December 31, 2019
$
1

 
$
1,342

 
$
1,679

 
$
(267
)
 
$
(2,275
)
 
$
480

 
$
115

 
$
595

Net loss

 

 
(35
)
 

 

 
(35
)
 
(1
)
 
(36
)
Other comprehensive loss

 

 

 
(37
)
 

 
(37
)
 

 
(37
)
Stock-based compensation, net

 
(5
)
 

 

 
7

 
2

 

 
2

Repurchase of shares of common stock

 

 

 

 
(16
)
 
(16
)
 

 
(16
)
Cash dividends

 

 

 

 

 

 
(7
)
 
(7
)
March 31, 2020
$
1

 
$
1,337

 
$
1,644

 
$
(304
)
 
$
(2,284
)
 
$
394

 
$
107

 
$
501

 
Total Visteon Corporation Stockholders' Equity
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Total Visteon Corporation Stockholders' Equity
 
Non-Controlling Interests
 
Total Equity
December 31, 2018
$
1

 
$
1,335

 
$
1,609

 
$
(216
)
 
$
(2,264
)
 
$
465

 
$
117

 
$
582

Net income

 

 
14

 

 

 
14

 
2

 
16

Other comprehensive income

 

 

 
4

 

 
4

 
1

 
5

Stock-based compensation, net

 
(5
)
 

 

 
7

 
2

 

 
2

Acquisition of non-controlling interest

 
2

 

 

 

 
2

 
(2
)
 

March 31, 2019
$
1

 
$
1,332

 
$
1,623

 
$
(212
)
 
$
(2,257
)

$
487

 
$
118

 
$
605


See accompanying notes to the consolidated financial statements.

6





VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Summary of Significant Accounting Policies

The unaudited consolidated financial statements of Visteon Corporation (the "Company" or "Visteon") have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. These interim consolidated financial statements include all adjustments (consisting of normal recurring adjustments, except as otherwise disclosed) that management believes are necessary for a fair presentation of the results of operations, financial position and cash flows of the Company for the interim periods presented. Interim results are not necessarily indicative of full-year results.

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported herein. Such estimates and assumptions affect, among other things, the Company’s goodwill and long-lived asset valuation; inventory valuation; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; and credit losses related to our financial assets. Considerable judgment is involved in making these determinations and the use of different estimates or assumptions could result in significantly different results. Management believes its assumptions and estimates are reasonable and appropriate. However, actual results could differ from those reported herein. Events and changes in circumstances arising after March 31, 2020, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.

Recently Adopted Accounting Pronouncements:

The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments", effective for fiscal years beginning after December 15, 2019. The guidance requires financial asset (or a group of financial assets) measured on the basis of amortized cost to be presented at the net amount expected to be collected. The guidance also requires that the income statement reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. Additionally, the guidance limits the credit loss to the amount by which fair value is below amortized cost.

The Company adopted the guidance effective January 1, 2020. The guidance allows for various methods for measuring expected credit losses. The Company elected to apply a historical loss rate based on historic write offs by region to aging categories. The historical loss rate will be adjusted for current conditions and reasonable and supportable forecasts of future losses as necessary. The adoption of the guidance did not have a material impact on the Company's consolidated financial statements. Accordingly, the allowance for doubtful accounts balance was $10 million as of March 31, 2020 and December 31, 2019.

The FASB issued ASU 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes." The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes and the recognition of deferred tax liabilities for outside basis differences.  It also clarifies and simplifies other aspects of the accounting for income taxes.  For public companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years.  Early adoption is permitted in interim or annual periods with any adjustments reflected as of the beginning of the annual period that includes that interim period.  Additionally, entities that elect early adoption must adopt all the amendments in the same period.  Amendments are to be applied prospectively, except for certain amendments that are to be applied either retrospectively or with a modified retrospective approach through a cumulative effect adjustment recorded to retained earnings.  The Company adopted the guidance effective January 1, 2020. The adoption of the guidance did not have a material impact on the Company's consolidated financial statements.
 
Accounting Pronouncements Not Yet Adopted:

In March 2020, the FASB issued ASU 2020-04. "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in the guidance are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impacts of the provisions of ASU 2020-04 on its financial position, results of operations, and cash flows.

7




NOTE 2. Revenue Recognition
Disaggregated revenue by geographical market and product lines is as follows:

Three Months Ended March 31
(In millions)
2020
 
2019
Geographical Markets

 
 
Europe
$
254

 
$
262

Americas
192

 
190

China Domestic
57

 
108

China Export
64

 
69

Other Asia-Pacific
116

 
157

Eliminations
(40
)
 
(49
)

$
643

 
$
737


 
Three Months Ended March 31
(In millions)
2020
 
2019
Product Lines
 
 
 
Instrument clusters
$
312

 
$
314

Audio and infotainment
145

 
196

Information displays
109

 
123

Body and security
25

 
32

Climate controls
10

 
21

Telematics
12

 
11

Other
30

 
40

 
$
643

 
$
737


During the three months ended March 31, 2020, revenue recognized related performance obligations satisfied in previous periods represented less than 1% of consolidated net sales. The Company has no material contract assets, contract liabilities or capitalized contract acquisition costs as of March 31, 2020.

NOTE 3. Segment Information
Financial results for the Company's reportable segment have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's chief operating decision maker in allocating resources and in assessing performance. The Company’s chief operating decision maker, the Chief Executive Officer, evaluates the performance of the Company’s segment primarily based on net sales, before elimination of inter-company shipments, Adjusted EBITDA (a non-GAAP financial measure, as defined below) and operating assets. As the Company has one reportable segment, net sales, total assets, depreciation, amortization and capital expenditures are equal to consolidated results.
The Company’s current reportable segment is Electronics, which provides vehicle cockpit electronics products to customers, including instrument clusters, information displays, infotainment systems, audio systems, telematics solutions and head-up displays.
Adjusted EBITDA

The Company defines Adjusted EBITDA as net income attributable to the Company adjusted to eliminate the impact of depreciation and amortization, restructuring expense, net interest expense, equity in net income of non-consolidated affiliates, gain and loss on divestiture, provision for income taxes, discontinued operations, net income attributable to non-controlling interests, non-cash stock-based compensation expense, and other gains and losses not reflective of the Company's ongoing operations.

Adjusted EBITDA is presented as a supplemental measure of the Company's financial performance that management believes is useful to investors because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company's operating activities across reporting periods. Not all companies use identical calculations and, accordingly, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is not a recognized term under U.S. GAAP and does not purport to be a substitute for net

8




income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and is not intended to be a measure of cash flow available for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. In addition, the Company uses Adjusted EBITDA (i) as a factor in incentive compensation decisions, (ii) to evaluate the effectiveness of the Company's business strategies and (iii) the Company's credit agreements use measures similar to Adjusted EBITDA to measure compliance with certain covenants.

Segment Adjusted EBITDA and reconciliation to net income attributable to Visteon is as follows:
 
Three Months Ended March 31
(In millions)
2020
 
2019
Net income (loss) attributable to Visteon Corporation
$
(35
)
 
$
14

  Depreciation and amortization
25

 
25

  Non-cash, stock-based compensation expense
5

 
5

  Provision (benefit) for income taxes
5

 
(5
)
  Interest expense, net
2

 
2

  Net income (loss) attributable to non-controlling interests
(1
)
 
2

  Restructuring expense, net
33

 
1

  Equity in net income of non-consolidated affiliates
(1
)
 
(3
)
Adjusted EBITDA
$
33

 
$
41


NOTE 4. Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to Visteon by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted average number of common and potentially dilutive common shares outstanding. Performance based share units are considered contingently issuable shares, and are included in the computation of diluted earnings per share based on the number of shares that would be issuable if the reporting date were the end of the contingency period and if the result would be dilutive.
The table below provides details underlying the calculations of basic and diluted earnings per share:
 
Three Months Ended March 31
(In millions, except per share amounts)
2020
 
2019
Numerator:
 
 
 
Net income (loss) attributable to Visteon
$
(35
)
 
$
14

Denominator:
 
 
 
Average common stock outstanding - basic
27.9

 
28.2

Dilutive effect of performance based share units and other

 
0.2

Diluted shares
27.9

 
28.4

Basic and Diluted Per Share Data:
 
 
 
Basic earnings (loss) per share attributable to Visteon
$
(1.25
)
 
$
0.50

 
 
 
 
Diluted earnings (loss) per share attributable to Visteon:
$
(1.25
)
 
$
0.49


For the three months ended March 31, 2020, approximately 170,000 performance based share units were excluded from the calculation of diluted loss per share because the effect of including them would have been anti-dilutive.

NOTE 5. Restructuring Activities
Given the economically-sensitive and highly competitive nature of the automotive electronics industry, the Company continues to closely monitor current market factors and industry trends, taking action as necessary which may include restructuring actions. However, there can be no assurance that any such actions will be sufficient to fully offset the impact of adverse factors on the Company or its results of operations, financial position and cash flows.

9




Electronics

During January 2020, the Company approved a restructuring program impacting primarily European engineering and administrative functions to improve the Company’s efficiency and rationalize its footprint. During the three months ended March 31, 2020, the Company recorded $21 million in relation to the program and expects to incur up to $24 million under this program. The total expected costs include employee severance, retention and termination costs. As of March 31, 2020, $20 million remains accrued for the program.

During March 2020, the Company approved a global restructuring program impacting engineering, administrative and manufacturing facilities to improve efficiency and further rationalize the Company’s footprint. During the three months ended March 31, 2020, the Company recorded $11 million in relation to the program and expects to incur up to $15 million under this program. The total expected costs include employee severance, retention and termination costs. As of March 31, 2020, $9 million remains accrued for the program.

Additionally, during 2020 the Company recorded and paid $1 million related to restructuring expenses at two North American manufacturing facilities.

During the first quarter of 2019, the Company approved a restructuring program impacting two European manufacturing facilities due to the end of life of certain product lines. During the three months ended March 31, 2019, the Company recorded $2 million of restructuring expenses for this program.

During the second quarter of 2018, the Company approved a restructuring program impacting legacy employees at a South America facility and employees at North America manufacturing facilities due to the wind-down of certain products, as of March 31, 2020, $3 million remains accrued related to this program.

During the third quarter of 2018, the Company approved a restructuring program impacting engineering and administrative functions to optimize operations, as of March 31, 2020, $2 million remains accrued for the program.

Other and Discontinued Operations
As of March 31, 2020, the Company retained restructuring reserves as part of the Company's divestiture of the majority of its global Interiors business (the "Interiors Divestiture") of $2 million associated with completed programs for the fundamental reorganization of operations at facilities in Brazil and France.
Restructuring Reserves
Restructuring reserve balances of $36 million and $10 million as of March 31, 2020 and December 31, 2019, respectively, are classified as "Other current liabilities" on the consolidated balance sheets. The Company anticipates that the activities associated with the current restructuring reserve balance will be substantially complete by mid-2021. The Company’s consolidated restructuring reserves and related activity are summarized below, including amounts associated with discontinued operations.
(In millions)
Electronics
 
Other and Discontinued Operations
 
Total
December 31, 2019
$
8

 
$
2

 
$
10

   Expense
33

 

 
33

   Utilization
(6
)
 

 
(6
)
   Foreign currency
(1
)
 

 
(1
)
March 31, 2020
$
34

 
$
2

 
$
36



10




NOTE 6. Non-Consolidated Affiliates
Variable Interest Entities
The Company determines whether joint ventures in which it has invested are Variable Interest Entities (“VIE”) at the start of each new venture and when a reconsideration event has occurred. An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Visteon and Yangfeng Automotive Trim Systems Co. Ltd. ("YF") each own 50% of a joint venture under the name of Yanfeng Visteon Investment Co., Ltd. ("YFVIC"). In October 2014, YFVIC completed the purchase of YF’s 49% direct ownership in Yanfeng Visteon Automotive Electronics Co., Ltd. ("YFVE") a consolidated joint venture of the Company ("The YFVIC Transaction"). The purchase by YFVIC was financed through a shareholder loan from YF and external borrowings, guaranteed by Visteon, which was paid in 2019.
The Company determined that YFVIC is a VIE. The Company holds a variable interest in YFVIC primarily related to its ownership interests and subordinated financial support. The Company and YF each own 50% of YFVIC and neither entity has the power to control the operations of YFVIC; therefore, the Company is not the primary beneficiary of YFVIC and does not consolidate the joint venture.
A summary of the Company's investments in YFVIC is provided below:
 
March 31
 
December 31
(In millions)
2020
 
2019
Payables due to YFVIC
$
9

 
$
9

Exposure to loss in YFVIC:
 
 
 
Investment in YFVIC
$
43

 
$
43

Receivables due from YFVIC
28

 
41

Subordinated loan receivable from YFVIC
6

 
8

    Maximum exposure to loss in YFVIC
$
77

 
$
92



NOTE 7. Inventories
Inventories, net consist of the following components:
 
March 31
 
December 31
(In millions)
2020
 
2019
Raw materials
$
115

 
$
100

Work-in-process
25

 
28

Finished products
40

 
41

 
$
180

 
$
169



11




NOTE 8. Long-Lived Assets
Intangible assets, net are comprised of the following:
 
 
 
March 31, 2020
(In millions)
Estimated Weighted Average Useful Life (years)
 
Gross Intangibles
 
Accumulated Amortization
 
Net Intangibles
Definite-Lived:
 
 
Developed technology
5
 
$
40

 
$
(36
)
 
$
4

Customer related
10
 
87

 
(52
)
 
35

Capitalized software development
3
 
37

 
(5
)
 
32

Other
19
 
15

 
(5
)
 
10

Subtotal
 
 
179

 
(98
)
 
81

Indefinite-Lived:
 
 
Goodwill
 
 
45

 

 
45

Total
 
 
$
224

 
$
(98
)
 
$
126


A roll-forward of the carrying amounts of intangible assets is presented below:
 
December 31, 2019
 
March 31, 2020
(In millions)
Gross Intangibles
 
Accumulated Amortization
 
Net Intangibles 
 
Additions
 
Foreign Currency
 
Amortization Expense
 
Net Intangibles
Definite-Lived:
 
 
 
 
 
 
Developed technology
$
40

 
$
(35
)
 
$
5

 
$

 
$

 
$
(1
)
 
$
4

Customer related
89

 
(51
)
 
38

 

 
(1
)
 
(2
)
 
35

Capitalized software development
32

 
(5
)
 
27

 
5

 

 

 
32

Other
15

 
(4
)
 
11

 

 

 
(1
)
 
10

Subtotal
176

 
(95
)
 
81

 
5

 
(1
)
 
(4
)
 
81

Indefinite-Lived:
 
 
 
 
 
 
Goodwill
46

 

 
46

 

 
(1
)
 

 
45

Total
$
222

 
$
(95
)
 
$
127

 
$
5

 
$
(2
)
 
$
(4
)
 
$
126


The Company recorded amortization expense of $4 million for each three month period ended March 31, 2020 and 2019 related to definite-lived intangible assets. The Company currently estimates annual amortization expense to be $15 million , $17 million, $17 million, $14 million, $8 million and $7 million for the years ended 2020, 2021, 2022, 2023, 2024, and 2025, respectively. Indefinite-lived intangible assets are not amortized but are tested for impairment at least annually, or earlier when events and circumstances indicate that it is more likely than not that such assets have been impaired.

The Company considered the global COVID-19 pandemic as a possible indicator of impairment for all its long-lived assets. The Company concluded that its long-lived assets were not impaired as of March 31, 2020.


12




NOTE 9. Other Assets
Other current assets are comprised of the following components:
 
March 31
 
December 31
(In millions)
2020
 
2019
Recoverable taxes
$
62

 
$
61

Prepaid assets and deposits
30

 
22

Joint venture receivables
28

 
41

Contractually reimbursable engineering costs
25

 
29

China bank notes
19

 
16

Royalty agreements
10

 
17

Other
3

 
7

 
$
177

 
$
193


The Company sold $27 million and $23 million of China bank notes during the three months ended March 31, 2020 and 2019 respectively. The collection of such bank notes are included in operating cash flows based on the substance of the underlying transactions, which are operating in nature. As of March 31, 2020, $24 million remains outstanding and will mature by the end of the third quarter of 2020.
Other non-current assets are comprised of the following components:
 
March 31
 
December 31
(In millions)
2020
 
2019
Deferred tax assets
$
56

 
$
59

Contractually reimbursable engineering costs
33

 
24

Recoverable taxes
21

 
28

Royalty agreements
14

 
11

Joint venture notes receivables
6

 
8

Other
20

 
20

 
$
150

 
$
150

During 2019, the Company amended royalty agreements with certain suppliers as part of cost reduction efforts. As of March 31, 2020, $10 million was recorded in other current assets and $14 million in other non-current assets, with an offsetting amount of $14 million in accounts payable and $7 million in other non-current liabilities relating to these agreements. The Company recorded $4 million of royalty expense during the three months ended March 31, 2020 associated with such arrangements.

Current and non-current contractually reimbursable engineering costs are related to pre-production design and development costs incurred pursuant to long-term supply arrangements that are contractually guaranteed for reimbursement by customers. The Company expects to receive cash reimbursement payments of $19 million during the remainder of 2020, $15 million in 2021, $14 million in 2022, $3 million in 2023 and $7 million in 2024 and beyond.


13




NOTE 10. Debt
The Company’s short and long-term debt consists of the following:
 
March 31
 
December 31
(In millions)
2020
 
2019
Short-Term Debt:
 
 
 
Short-term borrowings
$
36

 
$
37

 
 
 
 
Long-Term Debt:
 
 
 
Term debt facility, net
$
348

 
$
348

Revolving credit facility
400

 

Total long-term debt, net
$
748

 
$
348


Short-Term Debt
Short-term borrowings are primarily related to the Company's non-U.S. joint ventures and are payable in Chinese Renminbi and India Rupee. As of March 31, 2020, the available borrowings under these affiliate credit facilities are $117 million. Certain of these facilities have pledged assets as security or accompanied by corporate credit support.
Long-Term Debt

On March 19, 2020, the Company borrowed the entire amount of revolving loans available under the Revolving Credit Facility to increase its cash position and maximize its flexibility in light of the current uncertainty surrounding the impact of COVID-19. As of March 31, 2020, the Company had $350 million of Term Facility loans and $400 million of Revolving Credit Facility loans outstanding under the Company's credit agreement (the "Credit Agreement"), both facilities will mature during 2024.

Interest on the Term Facility loans accrue at a rate equal to a LIBOR-based rate plus an applicable margin of 1.75% per annum. Revolving Credit Facility loans accrue interest at a rate equal to a LIBOR-based rate plus an applicable margin of between 1.00% - 2.00%, as determined by the Company's total gross leverage ratio. As of March 31, 2020, the all-in rates for the Term Facility and Revolving Credit Facility loans were 2.79% and 2.49%, respectively.

The Credit Agreement requires compliance with customary affirmative and negative covenants and contains customary events of default.  The Revolving Credit Facility also requires that the Company maintain a total net leverage ratio no greater than 3.50:1.00. During any period when the Company’s corporate and family ratings meet investment grade ratings, certain of the negative covenants shall be suspended. As of March 31, 2020, the Company was in compliance with all its debt covenants. 

The Revolving Credit Facility also provides $75 million availability for the issuance of letters of credit and a maximum of $20 million for swing line borrowings.  Any amount of the facility utilized for letters of credit or swing line loans outstanding will reduce the amount available under the existing Revolving Credit Facility. The Company may request increases in the limits under the Credit Agreement and may request the addition of one or more term loan facilities. Outstanding borrowings may be prepaid without penalty (other than borrowings made for the purpose of reducing the effective interest rate margin or weighted average yield of the loans). There are mandatory prepayments of principal in connection with: (i) excess cash flow sweeps above certain leverage thresholds, (ii) certain asset sales or other dispositions, (iii) certain refinancing of indebtedness and (iv) over-advances under the Revolving Credit Facility. There are no excess cash flow sweeps required at the Company’s current leverage level.

All obligations under the Credit Agreement and obligations with respect to certain cash management services and swap transaction agreements between the Company and its lenders are unconditionally guaranteed by certain of the Company’s subsidiaries. Under the terms of the Credit Agreement, any amounts outstanding are secured by a first-priority perfected lien (subject to certain exceptions) on substantially all property of the Company and the subsidiaries party to the security agreement, subject to certain limitations. 







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Other

The Company has a $5 million letter of credit facility, whereby the Company is required to maintain a cash collateral account equal to 103% (110% for non-U.S. dollar denominated letters) of the aggregate stated amount of issued letters of credit and must reimburse any amounts drawn under issued letters of credit. The Company had $2 million of outstanding letters of credit issued under this facility secured by restricted cash, as of March 31, 2020. Additionally, the Company had $12 million of locally issued letters of credit with less than $1 million of collateral as of March 31, 2020, to support various tax appeals, customs arrangements and other obligations at its local affiliates.

NOTE 11. Other Liabilities
Other current liabilities are summarized as follows:
 
March 31
 
December 31
(In millions)
2020
 
2019
Restructuring reserves
$
36

 
$
10

Product warranty and recall accruals
35

 
34

Deferred income
19

 
22

Royalties
17

 
19

Non-income taxes payable
12

 
17

Joint venture payables
9

 
9

Income taxes payable
5

 
7

Dividends payable to non-controlling interests
2

 
3

Other
27

 
26

 
$
162

 
$
147


Other non-current liabilities are summarized as follows:
 
March 31
 
December 31
(In millions)
2020
 
2019
Product warranty and recall accruals
$
14

 
$
15

Derivative financial instruments
12

 
14

Deferred income
8

 
9

Royalty agreements
7

 
13

Income tax reserves
5

 
5

Non-income tax reserves
1

 
1

Other
12

 
15

 
$
59

 
$
72


During 2019, the Company amended royalty agreements with certain suppliers as part of cost reduction efforts. As of March 31, 2020, $10 million was recorded in other current assets and $14 million in other non-current assets, with an offsetting amount of $14 million in accounts payable and $7 million in other non-current liabilities relating to these agreements. The Company recorded $4 million of royalty expense during the three months ended March 31, 2020 associated with such arrangements.


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NOTE 12. Employee Benefit Plans
Defined Benefit Plans
The Company's net periodic benefit costs for all defined benefit plans for the three month periods ended March 31, 2020 and 2019 were as follows:
 
U.S. Plans
 
Non-U.S. Plans
(In millions)
2020
 
2019
 
2020
 
2019
Costs Recognized in Income:
 
 
 
 
 
 
 
Pension financing benefits (cost):
 
 
 
 
 
 
 
Interest cost
$
(6
)
 
$
(8
)
 
$
(2
)
 
$
(2
)
Expected return on plan assets
10

 
10

 
2

 
2

Restructuring related pension cost:
 
 
 
 
 
 
 
Special termination benefits
(1
)
 

 

 

Net pension benefit (cost)
$
3

 
$
2

 
$

 
$


Pension financing benefits of $4 million and $2 million for the three months ended March 31, 2020 and 2019, respectively are classified as Other income, net on the Company's Consolidated Statement of Operations.
Required 2020 contributions to the Company's defined benefit plans are approximately $20 million. The Company is currently evaluating opportunities to defer some or all of its 2020 contributions pursuant to relief measures offered by the U.S. and U.K. governments in light of COVID-19.
NOTE 13. Income Taxes
During the three month period ended March 31, 2020, the Company recorded a provision for income tax on continuing operations of $5 million, which reflects income tax expense in countries where the Company is profitable; accrued withholding taxes; ongoing assessments related to the recognition and measurement of uncertain tax benefits; the inability to record a tax benefit for pretax losses and/or recognize expense for pretax income in certain jurisdictions (including the U.S.) due to valuation allowances; and other non-recurring tax items, including changes in judgment about valuation allowances. Pretax losses from continuing operations in jurisdictions where valuation allowances are maintained and no income tax benefits are recognized totaled $52 million and $13 million for the three month periods ended March 31, 2020 and 2019, respectively, resulting in an increase in the Company's effective tax rate in those years.
The Company's provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against income before income taxes, excluding equity in net income of non-consolidated affiliates for the period. Effective tax rates vary from period to period as separate calculations are performed for those countries where the Company's operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are maintained. In determining the estimated annual effective tax rate, the Company analyzes various factors, including but not limited to, forecasts of projected annual earnings, taxing jurisdictions in which the pretax income and/or pretax losses will be generated, available tax planning strategies and estimated impacts attributable to the Tax Cuts and Jobs Act of 2017 (the "Act"). The changing and volatile macro-economic conditions connected with the COVID-19 pandemic may cause fluctuations in forecasted earnings before income taxes. As such, the Company's effective tax rate could be subject to volatility as forecasted earnings before income taxes are impacted by events which cannot be predicted. The Company’s estimated annual effective tax rate is updated each quarter and may be significantly impacted by changes to the mix of forecasted earnings by tax jurisdiction. The tax impact of adjustments to the estimated annual effective tax rate are recorded in the period such estimates are revised. The Company is also required to record the tax impact of certain other non-recurring tax items, including changes in judgment about valuation allowances and uncertain tax positions, and changes in tax laws or rates, in the interim period in which they occur, rather than include them in the estimated annual effective tax rate.
The need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will cause variability in the Company’s quarterly and annual effective tax rates. Full valuation allowances against deferred tax assets in the U.S. and applicable foreign countries will be maintained until sufficient positive evidence exists to reduce or eliminate them. The factors considered by management in its determination of the probability of the realization of the deferred tax assets include, but are not limited to, recent historical financial results, historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, tax planning strategies and projected future impacts attributable to the Act. If, based upon the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation

16




allowance is recorded. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses, in particular, when there is a cumulative loss incurred over a three-year period. However, the three-year loss position is not solely determinative and, accordingly, management considers all other available positive and negative evidence in its analysis. In regards to the full valuation allowance recorded against the U.S. net deferred tax assets, despite recent improvement in the U.S. financial results, management concluded that the weight of negative evidence continues to outweigh the positive evidence, as the impact of COVID-19 reinforces the prevailing uncertainty surrounding global production volumes in 2020 that had already showed signs of softening which contributed to the reduction in the U.S. profitability during 2019. These factors further contribute to the relative uncertainty surrounding the ability that the U.S. operations will demonstrate sustained profitability in the future. Additionally, the Company has made a policy election to apply the incremental cash tax savings approach when analyzing the impact the Act's provisions for global intangible low-taxed income ("GILTI") could have on its U.S. valuation allowance assessment. As a result of future expected GILTI inclusions, and because of the Act’s ordering rules, U.S. companies may now expect to utilize tax attribute carryforwards (e.g. net operating losses and foreign tax credits) for which a valuation allowance has historically been recorded (this is referred to as the “tax law ordering approach”). However, due to the mechanics of the GILTI rules, companies that have a GILTI inclusion may realize a reduced (or no) cash tax savings from utilizing such tax attribute carryforwards (this view is referred to as the “incremental cash tax savings approach”). These positions, along with management’s analysis of all other available evidence, resulted in the conclusion that the Company maintain the valuation allowance against deferred tax assets in the U.S. Based on the Company’s current assessment, it is possible that within the next 12 to 24 months, the existing valuation allowance against the U.S. net deferred tax assets could be partially released. Any such release is dependent upon the sustained improvement in U.S. operating results, and, if such a release of the valuation allowance were to occur, it could have a significant impact on net income in the quarter in which it is deemed appropriate to partially release the reserve.
In March 2019, the closure of tax audits in Germany allowed the Company to initiate a tax planning strategy previously determined not to be prudent. This strategy provided the necessary positive evidence to support the future utilization of a portion of the Company's deferred tax assets in Germany resulting in a $12 million valuation allowance release during the three months ended March 31, 2019.
Unrecognized Tax Benefits
Gross unrecognized tax benefits as of March 31, 2020 and December 31, 2019, including amounts attributable to discontinued operations, were $13 million in both years. Of these amounts, approximately $6 million in both years represent the amount of unrecognized benefits that, if recognized, would impact the effective tax rate. The gross unrecognized tax benefit differs from that which would impact the effective tax rate due to uncertain tax positions embedded in other deferred tax attributes carrying a full valuation allowance. If the uncertainty is resolved while a full valuation allowance is maintained, these uncertain tax positions should not impact the effective tax rate in current or future periods. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense and related amounts accrued at March 31, 2020 and December 31, 2019 was $2 million in both years.
With few exceptions, the Company is no longer subject to U.S. federal tax examinations for years before 2014, or state, local or non-U.S. income tax examinations for years before 2003, although U.S. net operating losses carried forward into open tax years technically remain open to adjustment. Although it is not possible to predict the timing of the resolution of all ongoing tax audits with accuracy, it is reasonably possible that certain tax proceedings in the U.S., Europe, Asia and Mexico could conclude within the next twelve months and result in a significant increase or decrease in the balance of gross unrecognized tax benefits. Given the number of years, jurisdictions and positions subject to examination, the Company is unable to estimate the full range of possible adjustments to the balance of unrecognized tax benefits. The long-term portion of uncertain income tax positions (including interest) in the amount of $5 million is included in "Other non-current liabilities" on the consolidated balance sheet, while $3 million is reflected as a reduction of a deferred tax asset related to a net operating loss included in Other-non current assets on the consolidated balance sheet.
During 2012, Brazil tax authorities issued tax assessment notices to Visteon Sistemas Automotivos (“Sistemas”) related to the sale of its chassis business to a third party, which required a deposit in the amount of $15 million during 2013 necessary to open a judicial proceeding against the government in order to suspend the debt and allow Sistemas to operate regularly before the tax authorities after attempts to reopen an appeal of the administrative decision failed. Adjusted for currency impacts and accrued interest, the deposit amount is $11 mill