Company Quick10K Filing
Veoneer
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 111 $1,928
10-Q 2019-10-23 Quarter: 2019-09-30
10-Q 2019-07-26 Quarter: 2019-06-30
S-1 2019-05-20 Public Filing
S-1 2019-05-20 Public Filing
10-Q 2019-04-29 Quarter: 2019-03-31
10-K 2019-02-22 Annual: 2018-12-31
10-Q 2018-10-25 Quarter: 2018-09-30
10-Q 2018-07-27 Quarter: 2018-06-30
8-K 2020-02-03 M&A, Earnings, Regulation FD, Exhibits
8-K 2020-01-03 Other Events, Exhibits
8-K 2019-10-30 Enter Agreement
8-K 2019-10-30 Regulation FD, Exhibits
8-K 2019-07-26 Earnings, Regulation FD, Exhibits
8-K 2019-06-14 Enter Agreement, Exhibits
8-K 2019-06-10 Officers
8-K 2019-05-28 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-05-22 Enter Agreement, Other Events, Exhibits
8-K 2019-05-20 Regulation FD, Other Events, Exhibits
8-K 2019-05-08 Shareholder Vote, Other Events, Exhibits
8-K 2019-04-29 Earnings, Regulation FD, Exhibits
8-K 2019-02-20 Officers, Exhibits
8-K 2019-02-13 Earnings, Regulation FD, Exhibits
8-K 2019-01-08 Officers, Exhibits
8-K 2019-01-07 Enter Agreement, Exhibits
8-K 2018-12-20 Officers, Exhibits
8-K 2018-10-25 Earnings, Regulation FD, Exhibits
8-K 2018-10-23 Officers, Exhibits
8-K 2018-10-23 Officers
8-K 2018-07-27 Earnings, Regulation FD, Exhibits
8-K 2018-06-28 Enter Agreement, M&A, Control, Officers, Amend Bylaw, Code of Ethics, Other Events, Exhibits
8-K 2018-06-12 Amend Bylaw, Exhibits
VNE 2019-09-30
Part I - Financial Information
Item 1 - Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
Note 2. Summary of Significant Accounting Policies
Note 3. Revenue
Note 4. Leases
Note 5. Debt
Note 6. Fair Value Measurements
Note 7. Income Taxes
Note 8. Inventories
Note 9. Equity Method Investment
Note 10. Accrued Expenses
Note 11. Retirement Plans
Note 12. Stock Incentive Plan
Note 13. Contingent Liabilities
Note 14. Loss per Share
Note 15. Segment Information
Note 16. Relationship with Former Parent and Related Entities
Note 17. Factoring
Note 18. Subsequent Events
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 - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 vneex101q3201910q.htm
EX-10.2 vneex102q3201910q.htm
EX-31.1 vneex311q3201910q.htm
EX-31.2 vneex312q3201910q.htm
EX-32.1 vneex321q3201910q.htm
EX-32.2 vneex322q3201910q.htm

Veoneer Earnings 2019-09-30

VNE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
DAN 2,809 7,346 5,427 8,605 1,182 237 650 5,042 14% 7.8 3%
LCII 2,261 1,330 577 2,362 510 136 258 2,446 22% 9.5 10%
ADNT 2,061 10,574 8,248 12,691 767 -1,778 -774 4,806 6% -6.2 -17%
MTOR 1,984 2,728 2,217 4,440 653 288 459 2,631 15% 5.7 11%
VNE 1,928 2,967 903 2,044 370 -452 -302 880 18% -2.9 -15%
DLPH 1,575 3,903 3,403 4,602 740 235 580 2,887 16% 5.0 6%
VC 1,527 2,192 1,715 2,882 314 93 214 1,437 11% 6.7 4%
THRM 1,364 752 287 1,014 290 32 99 1,435 29% 14.5 4%
AXL 1,359 7,548 5,976 5,240 963 -203 612 4,843 18% 7.9 -3%
GTX 1,193 2,172 4,589 3,220 728 1,111 411 2,577 23% 6.3 51%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No.: 001-38471

Veoneer, Inc.
(Exact name of registrant as specified in its charter)
Delaware
82-3720890
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
 
Klarabergsviadukten 70, Section C6
 
Box 13089
 
Stockholm Sweden
(Address of principal executive offices)
 
SE- 103 02
(Zip Code)
+46 8 527 762 00
(Registrant’s telephone number, including area code)
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, $1.00 par value
VNE
New York Stock Exchange
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:   No: 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes:      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 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
 
 
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:   
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of October 18, 2019, there were 111,399,085 shares of common stock of Veoneer, Inc., par value $1.00 per share, outstanding.
Exhibit index located on page 45

1



FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including without limitation, statements regarding management’s examination of historical operating trends and data, estimates of future sales (including estimates related to order intake), operating margin, cash flow, taxes or other future operating performance or financial results, are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “would,” “should,” “could,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words. We have based these forward-looking statements on our current expectations and assumptions and/or data available from third parties about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs.
New risks and uncertainties arise from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Factors that could cause actual results to differ materially from these forward-looking statements include, without limitation, the following: cyclical nature of automotive sales and production; changes in general industry and market conditions or regional growth or decline; our ability to achieve the intended benefits from our separation from our Former Parent; our ability to be awarded new business or loss of business from increased competition; higher than anticipated costs and use of resources related to developing new technologies; our ability to secure financing to meet future capital needs; higher raw material, energy and commodity costs; component shortages; changes in customer and consumer preferences for end products; market acceptance of our new products; dependence on and relationships with customers and suppliers; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; costs or difficulties related to the integration of any new or acquired businesses and technologies; successful integration of acquisitions and operations of joint ventures; successful implementation of strategic partnerships and collaborations; product liability, warranty and recall claims and investigations and other litigation and customer reactions thereto; higher expenses for our pension and other post-retirement benefits, including higher funding needs for our pension plans; work stoppages or other labor issues; possible adverse results of future litigation, regulatory actions or investigations or infringement claims; our ability to protect our intellectual property rights; tax assessments by governmental authorities and changes in our tax rate; dependence on key personnel; legislative or regulatory changes impacting or limiting our business; political conditions; and other risks and uncertainties contained in this Quarterly Report on Form 10-Q, the Prospectus forming part of our Registration Statement on Form S-1 related to our common stock offering (File No. 333-231607), filed with the Securities and Exchange Commission ("SEC") on May 24, 2019, and (ii) the Prospectus forming part of our Registration Statement on Form S-1 related to our convertible notes offering (File No. 333-231609), filed with the SEC on May 24, 2019 and in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission ("SEC") on February 22, 2019.
For any forward-looking statements contained in this Quarterly Report on Form 10-Q or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

2



Veoneer, Inc.
Table of Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3



Part I – Financial Information
Item 1 – Condensed Consolidated Financial Statements
Veoneer, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(U.S. DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Net sales
Note 3
$
462

 
$
526

 
$
1,446

 
$
1,692

Cost of sales
 
(389
)
 
(428
)
 
(1,211
)
 
(1,371
)
Gross profit
 
73

 
99

 
235

 
321

Selling, general and administrative expenses
 
(45
)
 
(44
)
 
(148
)
 
(112
)
Research, development and engineering expenses, net
 
(144
)
 
(109
)
 
(459
)
 
(334
)
Amortization of intangibles
 
(6
)
 
(5
)
 
(17
)
 
(16
)
Other income, net
 

 
1

 
1

 
18

Operating loss
 
(122
)
 
(58
)
 
(388
)
 
(122
)
Loss from equity method investment
Note 9
(16
)
 
(15
)
 
(50
)
 
(45
)
Interest income
 
7

 
3

 
14

 
4

Interest expense
 
(5
)
 

 
(7
)
 
(1
)
Other non-operating items, net
 

 
1

 
1

 
1

Loss before income taxes
Note 15
(136
)
 
(70
)
 
(430
)
 
(163
)
Income tax benefit / (expense)
Note 7
(3
)
 
(3
)
 
1

 
(12
)
Net loss
 
(139
)
 
(72
)
 
(429
)
 
(175
)
Less: Net loss attributable to non-controlling interest
 
(6
)
 
(5
)
 
(26
)
 
(13
)
Net loss attributable to controlling interest
 
$
(133
)
 
$
(68
)
 
$
(403
)
 
$
(162
)
 
 
 
 
 
 
 
 
 
Net loss per share - basic
Note 14
$
(1.20
)
 
$
(0.78
)
 
$
(4.10
)
 
$
(1.86
)
Net loss per share - diluted
 
$
(1.20
)
 
$
(0.78
)
 
$
(4.10
)
 
$
(1.86
)
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding,
   (in millions)
 
111.40

 
87.15

 
98.32

 
87.15

Weighted average number of shares outstanding,
   assuming dilution (in millions)
 
111.40

 
87.15

 
98.32

 
87.15

See notes to the unaudited condensed consolidated financial statements.


4



Veoneer, Inc.
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
(U.S. DOLLARS IN MILLIONS)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net loss
$
(139
)
 
$
(72
)
 
$
(429
)
 
$
(175
)
Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
Change in cumulative translation adjustment
(27
)
 
(2
)
 
(40
)
 
(6
)
Net change in cash flow hedges

 

 

 
1

Pension liability

 
(1
)
 

 
(2
)
Other comprehensive income (loss), before tax
(27
)
 
(3
)
 
(40
)
 
(7
)
Expense for taxes

 

 

 

Other comprehensive income (loss), net of tax
(27
)
 
(3
)
 
(40
)
 
(7
)
Comprehensive loss
(166
)
 
(75
)
 
(469
)
 
(182
)
Less: Comprehensive loss attributable to non-controlling interest
(7
)
 
(9
)
 
(26
)
 
(16
)
Comprehensive loss attributable to controlling interest
$
(159
)
 
$
(66
)
 
$
(443
)
 
$
(166
)
See notes to the unaudited condensed consolidated financial statements.

5



Veoneer, Inc.
Condensed Consolidated Balance Sheets
(U.S. DOLLARS IN MILLIONS)
 
 
 
(unaudited)
 
 
 
 
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
 
 
Cash and cash equivalents
 
 
$
1,062

 
$
864

Short-term investments
 
 

 
5

Receivables, net
 
 
309

 
376

Inventories, net
Note 8
 
159

 
172

Related party receivables
Note 16
 
14

 
64

Prepaid expenses
 
 
46

 
39

Other current assets
 
 
12

 
22

Total current assets
 
 
1,602

 
1,543

Property, plant and equipment, net
 
 
570

 
499

Operating lease right-of-use assets
 
 
99

 

Equity method investment
Note 9
 
75

 
101

Goodwill
 
 
290

 
291

Intangible assets, net
 
 
87

 
102

Deferred tax assets
 
 
11

 
11

Related party notes receivables
Note 16
 

 
1

Investments
 
 
10

 
8

Other non-current assets
 
 
111

 
77

Total assets
 
 
$
2,855

 
$
2,632

Liabilities and equity
 
 
 

 
 

Accounts payable
 
 
$
317

 
$
369

Short-term debt
Note 5
 
21

 

Related party payables
Note 16
 
4

 
16

Accrued expenses
Note 10
 
227

 
193

Income tax payable
 
 
6

 
9

Related party short-term debt
 
 
2

 
1

Other current liabilities
 
 
36

 
47

Total current liabilities
 
 
613

 
636

4.00% Convertible Senior Notes due 2024
Note 5
 
158

 

Related party long-term debt
Note 16
 
12

 
13

Pension liability
Note 11
 
21

 
20

Deferred tax liabilities
 
 
12

 
13

Operating lease non-current liabilities
Note 4
 
81

 

Finance lease non-current liabilities
Note 4
 
33

 
1

Other non-current liabilities
 
 
25

 
24

Total non-current liabilities
 
 
342

 
70

Equity
 
 
 

 
 

Common stock  (par value $1.00, 325 million shares authorized, 111 million and 87 million shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively)
 
 
111

 
87

Additional paid-in capital
 
 
2,343

 
1,938

Accumulated deficit
 
 
(584
)
 
(181
)
Accumulated other comprehensive loss
 
 
(59
)
 
(19
)
Total equity
 
 
1,811

 
1,826

Non-controlling interest
 
 
89

 
101

Total equity and non-controlling interest
 
 
1,900

 
1,927

Total liabilities, equity and non-controlling interest
 
 
$
2,855

 
$
2,632

See notes to the unaudited condensed consolidated financial statements.

6



Veoneer, Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(U.S. DOLLARS IN MILLIONS)
 
Nine months ended September 30, 2019
 
Equity attributable to
 
Common Stock
 
Additional Paid In Capital
 
Accumulated Deficit
 
Accumulated Other
Comprehensive Loss
 
Non-controlling
Interest
 
Total
Balance at beginning of period
$
87

 
$
1,938

 
$
(181
)
 
$
(19
)
 
$
101

 
$
1,927

Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 
(403
)
 

 
(26
)
 
(429
)
Foreign currency translation

 

 

 
(40
)
 

 
(40
)
     Stock based compensation expense

 
5

 

 

 

 
5

     Issuance of common stock
24

 
379

 

 

 

 
403

     Purchase of minority interest

 
(14
)
 

 

 
14

 

     Equity component of issuance of
     convertible notes, net of taxes
     (Note 5)

 
35

 

 

 

 
35

Total Comprehensive Income (Loss)
24

 
405

 
(403
)
 
(40
)
 
(12
)
 
(26
)
Balance at end of period
$
111

 
$
2,343

 
$
(584
)
 
$
(59
)
 
$
89

 
$
1,900


 
Nine months ended September 30, 2018
 
Equity attributable to
 
Common Stock
 
Additional Paid In Capital
 
Net Former Parent Investment
 
Accumulated Deficit
 
Accumulated Other
Comprehensive Loss
 
Non-controlling
Interest
 
Total
Balance at beginning of period
$

 
$

 
$
844

 
$

 
$
(8
)
 
$
121

 
$
957

Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 
(95
)
 
(68
)
 

 
(13
)
 
(175
)
Foreign currency translation

 

 

 

 
(3
)
 
(3
)
 
(6
)
Net change in cash flow hedges

 

 

 

 
1

 

 
1

Pension liability

 

 

 

 
(2
)
 

 
(2
)
Reclassification of Net Former Parent investment and issuance of ordinary shares in connection with separation
87

 
1,926

 
(2,002
)
 

 

 

 
11

Stock based compensation expense

 
3

 

 

 

 

 
3

Total Comprehensive Income (Loss)
87

 
1,929

 
(2,097
)
 
(68
)
 
(4
)
 
(16
)
 
(169
)
Net transfers from Former Parent

 

 
1,253

 

 

 
(1
)
 
1,252

Balance at end of period
$
87

 
$
1,929

 
$

 
$
(68
)
 
$
(12
)
 
$
104

 
$
2,040


7



Veoneer, Inc.
Condensed Consolidated Statements of Cash Flow (Unaudited)
(U.S. DOLLARS IN MILLIONS)
 
Nine Months Ended September 30,
 
2019
 
2018
Operating activities
 
 
 
Net loss
$
(429
)
 
$
(175
)
Depreciation and amortization
90

 
82

Undistributed loss from equity method investments
50

 
45

Stock-based compensation
5

 

Deferred income taxes
(7
)
 

Contingent consideration write-down

 
(14
)
Other, net
(7
)
 
(49
)
Change in operating assets and liabilities:
 
 
 
Receivables, gross
48

 
13

Accrued expenses
42

 
51

Related party receivables and payables, net
37

 
(58
)
Accounts payable
(18
)
 

Prepaid expenses
(10
)
 
(7
)
Inventories, gross
1

 
(16
)
Income taxes

 
(31
)
Other current assets and liabilities, net
(23
)
 
(22
)
Net cash used in operating activities
(221
)
 
(181
)
 
 
 
 
Investing activities
 

 
 

Capital expenditures
(168
)
 
(123
)
Equity method investment
(32
)
 
(71
)
Short-term investments mature into cash
5

 
(5
)
Long term investments
(3
)
 

Net decrease in related party notes receivable

 
76

Proceeds from sale of property, plant and equipment

 
3

Net cash used in investing activities
(198
)
 
(120
)
 
 
 
 
Financing activities
 

 
 

Issuance of common stock
405

 

Proceeds from long-term debt
206

 

Proceeds from short-term debt
22

 

Proceeds from related party short-term debt
1

 

Cash provided at separation by Former Parent

 
980

Net transfers from Former Parent

 
275

Decrease in related party long-term debt

 
(49
)
Net cash provided by financing activities
634

 
1,206

Effect of exchange rate changes on cash and cash equivalents
(17
)
 
14

Increase in cash and cash equivalents
198

 
919

Cash and cash equivalents at beginning of period
864

 

Cash and cash equivalents at end of period
$
1,062

 
$
919

See notes to the unaudited condensed consolidated financial statements.

8



Veoneer, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(U.S. DOLLARS IN MILLIONS)
Note 1. Basis of Presentation
Spin-Off
On June 29, 2018 (the “Distribution Date”), Veoneer, Inc. (“Veoneer” or “the Company”) became an independent, publicly-traded company as a result of the distribution by Autoliv, Inc. (“Autoliv” or “Former Parent”) of 100 percent of the outstanding common stock of Veoneer to the stockholders of Autoliv (the “Spin-Off”). Each Autoliv stockholder and holder of Autoliv’s Swedish Depository Receipts (SDRs) of record as of certain specified dates received one share of Veoneer common stock or one Veoneer SDR, respectively, for every one share of Autoliv common stock or Autoliv SDR. The Spin-Off was completed on June 29, 2018 in a tax free transaction pursuant to Section 355 of the U.S. Internal Revenue Code.
On July 2, 2018, Veoneer common stock began regular trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “VNE” and Veoneer SDRs began trading on Nasdaq Stockholm under the symbol “VNE-SDB”. Agreements entered into between Veoneer and Autoliv in connection with the Spin-Off govern the relationship between the parties following the Spin-Off and provide for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to be provided on a temporary basis between the parties.
In advance of the Spin-Off, Autoliv completed a series of internal transactions, in which Autoliv transferred its Electronics business to Veoneer. These transactions are referred to herein as the “internal reorganization”. The internal reorganization was completed on April 1, 2018.
The Company has two operating segments, Electronics and Brake Systems. Electronics includes all electronics resources and expertise, Restraint Control Systems and Active Safety products, and Brake Systems provides brake control and actuation systems.
The accompanying unaudited condensed consolidated financial statements for the period prior to the Spin-Off have been prepared from Autoliv’s historical accounting records and are presented on a stand-alone basis as if the operations had been conducted independently from Autoliv. Prior to the Spin-Off, Autoliv’s net investment in these operations (Net Former Parent Investment) is shown in lieu of a controlling interest’s equity in the unaudited condensed consolidated financial statements. Subsequent to the Spin-Off and the related distribution of shares, Veoneer Common stock, Additional paid-in capital and future income (losses) were reflected in Retained earnings (Accumulated deficit). For periods prior to June 29, 2018, the Company’s financial statements are presented on a combined basis and for the periods subsequent to June 29, 2018, they are presented on a consolidated basis (the financial statements for all periods are referred to herein as "condensed consolidated financial statements").
The unaudited condensed consolidated financial statements include the historical operations, assets, and liabilities that were considered to comprise the Veoneer business. The allocations and estimates in the unaudited condensed consolidated financial statements for the periods prior to the Spin-Off are based on assumptions that management of Autoliv and Veoneer believe are reasonable. However, the historical statements of operations, comprehensive loss, balance sheets, and cash flows of Veoneer included herein may not be indicative of what they would have been had Veoneer actually been a stand-alone entity during such periods, nor are they necessarily indicative of Veoneer's future results.
The accompanying unaudited condensed consolidated financial statements for Veoneer do not include all of the information and notes required by the accounting principles generally accepted in the U.S. (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to Veoneer’s Audited Consolidated Financial Statements for the year ended December 31, 2018 and corresponding notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 22, 2019.
Certain amounts in the unaudited condensed consolidated financial statements and associated notes may not reconcile due to rounding. All percentages have been calculated using unrounded amounts.
Joint Venture with Nissin Kogyo
On June 14, 2019, the Company signed agreements with Nissin Kogyo, its joint venture partner in Veoneer Nissin Brake Systems ("VNBS"), providing for certain structural changes to the joint venture and the funding of VNBS.
Pursuant to the agreements, Veoneer acquired Nissin Kogyo’s interests in the US operations of VNBS, referred to as Veoneer Nissin Brake America ("VNBA"), and VNBS transferred or licensed the VNBS technologies necessary to operate the VNBA

9



business to VNBA. VNBA, including the transferred or licensed technologies, is a wholly-owned Veoneer business effective on the closing date, June 28, 2019. VNBS will also provide certain transition services to VNBA.
The VNBS operations in Japan and China will remain a part of the joint venture, with Veoneer owning 51% and Nissin Kogyo owning 49% of the joint venture.
Under the agreement, Nissin Kogyo provided guarantees for certain VNBS commercial loans corresponding to 49% of the funding Veoneer had previously unilaterally provided to VNBS. During the nine months ended September 30, 2019, Veoneer received approximately $20 million as debt repayment from VNBS.
The agreement between Veoneer and Nissin Kogyo resolved the funding situation previously described by Veoneer in its public filings and allows Veoneer to continue reviewing and evaluating the development priorities and strategic options with respect to its brake systems business.
Follow-on Offerings
On May 28, 2019, the Company completed follow-on public offerings of 24,000,000 shares of common stock and $207 million aggregate principal amount of 4.00% Convertible Senior Notes due 2024 (the “Notes”) (including $27 million aggregate principal amount pursuant to the underwriters’ over-allotment option to purchase additional notes). The public offering price for our common stock offering was $17.50 per share. The Company received net proceeds of approximately $404 million from the common stock offering and approximately $200 million from the Notes offering, in each case after deducting the underwriting discounts and issuance costs directly attributable to each offering.
Note 2. Summary of Significant Accounting Policies
A summary of significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 22, 2019.
New Accounting Standards
Adoption of New Accounting Standards
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 affects any entity that enters into a lease, with some specified scope exceptions. For public business entities, the amendments in ASU 2016-02 are effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. The Company adopted ASU 2016-02 in the annual period beginning January 1, 2019. The Company applied the modified retrospective transition method and elected the transition option to use the effective date January 1, 2019, as the date of initial application. The Company did not adjust its comparative period financial statements for effects of ASU 2016-02, and has not made the new required lease disclosures for periods before the effective date. The Company has recognized its cumulative effect transition adjustment as of the effective date. In addition, the Company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, have allowed the Company to carry forward the historical lease classification. The adoption of the new standard resulted in recording operating lease assets and lease liabilities of approximately $75 million as of January 1, 2019, which is shown in the table below. The adoption of the new lease standard did not have a material impact on the Company's Condensed Consolidated Statements of Operations or Statements of Cash Flows.

10



 
 
 
(unaudited)
 
(unaudited)
Balance Sheet
(Dollars in millions)
Balance at
December 31,
2018
 
Adjustments due to ASU 2016-02
 
Balance at
January 1,
2019
Assets
 
 
 
 
 
Right-of-use assets, operating leases
$

 
$
75

 
$
75

Current liabilities
 
 
 
 


Other current liabilities

 
16

 
16

Non-current liabilities
 
 
 
 


Operating lease non-current liabilities

 
57

 
57

Equity
 
 
 
 
 
Accumulated deficit
(181
)
 

 
(181
)

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance issued by the FASB, including industry specific guidance. In 2016, the FASB issued accounting standard updates to address implementation issues and to clarify guidance in certain areas. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In addition, ASU 2014-09 requires certain additional disclosure around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASU 2014-09 effective January 1, 2018 and utilized the modified retrospective (cumulative effect) transition method. The Company applied the modified retrospective transition method through a cumulative adjustment to equity. The adoption of the new revenue standard did not have a material impact on the Company’s condensed consolidated financial statements.
Accounting Standards Issued But Not Yet Adopted
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. ASU 2018-14 removes the requirements to disclose: amounts in accumulated other comprehensive income (loss) expected to be recognized as components of net periodic benefit cost over the next fiscal year; the amount and timing of plan assets expected to be returned to the employer; and the effects of a one-percentage point change in assumed health care cost trend rates. ASU 2018-14 requires disclosure of an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted for all entities and the amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact on the Company's condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. ASU 2018-13 requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company does not expect ASU 2018-13 to have a material impact on its condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held and requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. ASU 2016-13 is effective for public business entities for annual periods beginning after December 15, 2019, and early adoption is permitted for

11



annual periods beginning after December 15, 2018. The Company does not expect ASU 2016-13 to have a material impact on its condensed consolidated financial statements.
Note 3. Revenue
Disaggregation of revenue
In the following tables, revenue is disaggregated by primary region and products.
Net Sales by Region
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
(Dollars in millions)
Electronics
 
Brake Systems
 
Total
 
Electronics
 
Brake Systems
 
Total
Asia
$
80

 
$
77

 
$
157

 
$
98

 
$
85

 
$
183

Americas
133

 
14

 
147

 
166

 
15

 
181

Europe
158

 

 
158

 
163

 

 
163

Total net sales
$
371

 
$
91

 
$
462

 
$
426

 
$
100

 
$
526

Net Sales by Region
 
Nine Months Ended September 30, 2019
 
 Nine Months Ended September 30, 2018
(Dollars in millions)
Electronics
 
Brake Systems
 
Total
 
Electronics
 
Brake Systems
 
Total
Asia
$
259

 
$
229

 
$
488

 
$
314

 
$
280

 
$
594

Americas
432

 
46

 
478

 
517

 
45

 
562

Europe
480

 

 
480

 
537

 

 
537

Total net sales
$
1,171

 
$
275

 
$
1,446

 
$
1,367

 
$
325

 
$
1,692

Net Sales by Products
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
(Dollars in millions)
Electronics
 
Brake Systems
 
Total
 
Electronics
 
Brake Systems
 
Total
Restraint Control Systems
$
193

 
$

 
$
193

 
$
226

 
$

 
$
226

Active Safety products
178

 

 
178

 
201

 

 
201

Brake Systems

 
91

 
91

 

 
100

 
100

Total net sales
$
371

 
$
91

 
$
462

 
$
426

 
$
100

 
$
526


Net Sales by Products
 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
(Dollars in millions)
Electronics
 
Brake Systems
 
Total
 
Electronics
 
Brake Systems
 
Total
Restraint Control Systems
$
617

 
$

 
$
617

 
$
739

 
$

 
$
739

Active Safety products
554

 

 
554

 
628

 

 
628

Brake Systems

 
275

 
275

 

 
325

 
325

Total net sales
$
1,171

 
$
275

 
$
1,446

 
$
1,367

 
$
325

 
$
1,692


Note 4. Leases
The Company has operating and finance leases for offices, manufacturing and research buildings, machinery, automobiles, data processing and other equipment. The leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 month to 2 year(s). As of September 30, 2019, assets recorded under finance leases included in Property, plant and equipment, net were $49 million, and accumulated depreciation associated with finance leases was $4 million.

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The Company has elected the practical expedient not to separate lease components from non-lease components for all its underlying assets.
If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.
The components of lease expense for the nine months ended September 30, 2019 were as follows:
(Dollars in millions)
Three months ended
September 30, 2019
 
Nine months ended
September 30, 2019
Operating lease cost
$
7

 
$
18

Finance lease cost
 
 
 
     Amortization of right-of-use assets
1

 
2

     Interest on lease liabilities

 
1

Total finance lease cost
1

 
3

Short-term lease cost

 

Variable lease cost

 

Total lease cost
$
8

 
$
21


Other information related to leases for the nine months ended September 30, 2019 was as follows:
Supplemental Cash Flows Information
Nine months ended
September 30, 2019
(Dollars in millions)
 
Cash paid for amounts included in the measurement of lease liabilities
 
     Operating cash flows used for operating leases
$
16

     Operating cash flows used for finance leases
1

     Financing cash flows used for finance leases
1

Right-of-use assets obtained in exchange for new lease obligations:
 
     Operating leases
46

     Finance leases
33

 
As of
(Lease term in years and discount rate)
September 30, 2019
Weighted-average remaining lease term
 
Operating Leases
8

Finance Leases
11

Weighted-average discount rate
 
Operating leases
3.9
%
Finance leases
4.9
%


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Future minimum lease payments under non-cancellable leases as of September 30, 2019 were as follows:
(Dollars in millions)
 Operating Leases
 
 Finance Leases
2019 (excluding the nine months ended September 30, 2019)
$
6

 
$
1

2020
21

 
4

2021
16

 
15

2022
14

 
3

2023
13

 
3

Thereafter
49

 
37

Total lease payments
119

 
63

Less imputed interest
20

 
17

Total lease liabilities
$
99

 
$
46


Lease obligations reported as of September 30, 2019 were as follows:
(Dollars in millions)
 Operating Leases
 
Finance Leases
Other current liabilities
$
18

 
$
1

Lease liabilities - non current
81

 
33

Related party leases

 
12

Total lease liabilities
$
99

 
$
46


As of September 30, 2019, the Company has additional obligations relating to operating leases, primarily for offices, manufacturing and research buildings, machinery, automobiles, data processing and other equipment, that have not yet commenced of $1 million. These operating leases will commence in 2019 and 2020 with lease terms of 3 years to 5 years.
Note 5. Debt
The Company’s short and long-term debt consists of the following:
 
 
As of
(Dollars in millions)
 
September 30, 2019
 
December 31, 2018
Short-Term Debt:
 
 
 
 
Short-term borrowings
 
$
21

 
$

Long-Term Debt:
 
 
 
 
4.00% Convertible Senior Notes due 2024 (Carrying value)
 
158

 

Other long-term borrowings
 
4

 
 
Total Debt
 
$
183

 
$


Short-Term Debt:
Short-term borrowings are primarily related to the Company's non-U.S. joint ventures and are payable in Japanese Yen. The term loan bears interest at a rate of 0.58% per year.
Long-Term Debt:
4.00% Convertible Senior Notes
On May 28, 2019, the Company issued, in a registered public offering in the U.S., Convertible Senior Notes (the “Notes”) with an aggregate principal amount of $207 million. The Notes bear interest at a rate of 4.00% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning December 1, 2019. The Notes will mature on June 1, 2024, unless repurchased, redeemed or converted in accordance with their terms prior to such date.
The net proceeds from the offering of the Notes were approximately $200 million, after deducting issuance costs of $7 million. The Company accounted for these issuance costs as a direct deduction from the carrying amount of the Notes. These costs are being amortized into interest expense for 5 years or through June 2024.

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The conversion rate is 44.8179 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $