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 ~~September~~June 30, ~~2020~~2021

☐ 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__~~No ☐

As of ~~October 23, 2020,~~July 22, 2021, the registrant had outstanding ~~27,832,807~~27,984,324 shares of common stock.

Exhibit index located on page number ~~40.~~34.

Visteon Corporation and Subsidiaries

Index

Part I

Financial Information

Item 1.Condensed Consolidated Financial Statements

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions except per share amounts)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net sales	Net sales	$	747	$	731	$	1,761	$	2,201	Net sales	$	610	$	371	$	1,356	$	1,014
Cost of sales	Cost of sales	(648)		(647)		(1,605)		(1,981)		Cost of sales	(575)		(367)		(1,248)		(957)
Gross margin	Gross margin	99		84		156		220		Gross margin	35		4		108		57
Selling, general and administrative expenses	Selling, general and administrative expenses	(45)		(52)		(140)		(167)		Selling, general and administrative expenses	(44)		(41)		(89)		(95)
Restructuring expense, net		(32)		(1)		(69)		(2)
Restructuring, net										Restructuring, net	(1)		(4)		0		(37)
Interest expense	Interest expense	(6)		(4)		(14)		(10)		Interest expense	(3)		(5)		(6)		(8)
Interest income	Interest income	1		1		4		3		Interest income	1		2		2		3
Equity in net income of non-consolidated affiliates	Equity in net income of non-consolidated affiliates	2		1		4		7		Equity in net income of non-consolidated affiliates	0		1		0		2
Other income, net	Other income, net	3		2		10		7		Other income, net	5		3		9		7
Income (loss) before income taxes	Income (loss) before income taxes	22		31		(49)		58		Income (loss) before income taxes	(7)		(40)		24		(71)
Provision for income taxes	Provision for income taxes	(12)		(13)		(19)		(16)		Provision for income taxes	(4)		(2)		(16)		(7)

Net income (loss)	Net income (loss)	10		18		(68)		42		Net income (loss)	(11)		(42)		8		(78)
Net income attributable to non-controlling interests		(4)		(4)		(6)		(7)
Less: Net (income) loss attributable to non-controlling interests										Less: Net (income) loss attributable to non-controlling interests	0		(3)		(3)		(2)
Net income (loss) attributable to Visteon Corporation	Net income (loss) attributable to Visteon Corporation	$	6	$	14	$	(74)	$	35	Net income (loss) attributable to Visteon Corporation	$	(11)	$	(45)	$	5	$	(80)

Comprehensive income (loss)	Comprehensive income (loss)	$	30	$	(4)	$	(80)	$	21	Comprehensive income (loss)	$	8	$	(37)	$	9	$	(110)
Less: Comprehensive income attributable to non-controlling interests		7		1		9		4
Less: Comprehensive (income) loss attributable to non-controlling interests										Less: Comprehensive (income) loss attributable to non-controlling interests	(3)		(3)		(5)		(2)
Comprehensive income (loss) attributable to Visteon Corporation	Comprehensive income (loss) attributable to Visteon Corporation	$	23	$	(5)	$	(89)	$	17	Comprehensive income (loss) attributable to Visteon Corporation	$	5	$	(40)	$	4	$	(112)

Basic earnings (loss) per share attributable to Visteon Corporation	Basic earnings (loss) per share attributable to Visteon Corporation	$	0.22	$	0.50	$	(2.65)	$	1.25	Basic earnings (loss) per share attributable to Visteon Corporation	$	(0.39)	$	(1.62)	$	0.18	$	(2.87)

Diluted earnings (loss) per share attributable to Visteon Corporation	Diluted earnings (loss) per share attributable to Visteon Corporation	$	0.21	$	0.50	$	(2.65)	$	1.24	Diluted earnings (loss) per share attributable to Visteon Corporation	$	(0.39)	$	(1.62)	$	0.18	$	(2.87)

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)


		(Unaudited)					(Unaudited)
		September 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
ASSETS	ASSETS					ASSETS
Cash and equivalents	Cash and equivalents	$	431	$	466	Cash and equivalents	$	466	$	496
Restricted cash	Restricted cash	4		3		Restricted cash	4		4
Accounts receivable, net	Accounts receivable, net	476		514		Accounts receivable, net	426		484
Inventories, net	Inventories, net	164		169		Inventories, net	210		177
Other current assets	Other current assets	193		193		Other current assets	138		180
Total current assets	Total current assets	1,268		1,345		Total current assets	1,244		1,341
Property and equipment, net	Property and equipment, net	418		436		Property and equipment, net	410		436
Intangible assets, net	Intangible assets, net	126		127		Intangible assets, net	122		127
Right-of-use assets	Right-of-use assets	168		165		Right-of-use assets	157		172
Investments in non-consolidated affiliates	Investments in non-consolidated affiliates	51		48		Investments in non-consolidated affiliates	63		60
Other non-current assets	Other non-current assets	133		150		Other non-current assets	126		135
Total assets	Total assets	$	2,164	$	2,271	Total assets	$	2,122	$	2,271
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Short-term debt	Short-term debt	$	0	$	37	Short-term debt	$	6	$	0
Accounts payable	Accounts payable	494		511		Accounts payable	427		500
Accrued employee liabilities	Accrued employee liabilities	74		73		Accrued employee liabilities	70		83
Current lease liability	Current lease liability	31		30		Current lease liability	31		32
Other current liabilities	Other current liabilities	189		147		Other current liabilities	221		209
Total current liabilities	Total current liabilities	788		798		Total current liabilities	755		824
Long-term debt, net	Long-term debt, net	348		348		Long-term debt, net	349		349
Employee benefits	Employee benefits	280		292		Employee benefits	298		322
Non-current lease liability	Non-current lease liability	145		139		Non-current lease liability	132		146
Deferred tax liabilities	Deferred tax liabilities	29		27		Deferred tax liabilities	28		28
Other non-current liabilities	Other non-current liabilities	72		72		Other non-current liabilities	73		92
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock (par value $0.01, 50 million shares authorized, none outstanding as of September 30, 2020 and December 31, 2019)		0		0
Common stock (par value $0.01, 250 million shares authorized, 55 million shares issued, 28 million shares outstanding as of September 30, 2020 and December 31, 2019)		1		1
Preferred stock (par value $0.01, 50 million shares authorized, NaN outstanding as of June 30, 2021 and December 31, 2020)						Preferred stock (par value $0.01, 50 million shares authorized, NaN outstanding as of June 30, 2021 and December 31, 2020)	0		0
Common stock (par value $0.01, 250 million shares authorized, 55 million shares issued, 28 million shares outstanding as of June 30, 2021 and December 31, 2020)						Common stock (par value $0.01, 250 million shares authorized, 55 million shares issued, 28 million shares outstanding as of June 30, 2021 and December 31, 2020)	1		1
Additional paid-in capital	Additional paid-in capital	1,344		1,342		Additional paid-in capital	1,341		1,348
Retained earnings	Retained earnings	1,605		1,679		Retained earnings	1,628		1,623
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(282)		(267)		Accumulated other comprehensive loss	(305)		(304)
Treasury stock	Treasury stock	(2,283)		(2,275)		Treasury stock	(2,271)		(2,281)
Total Visteon Corporation stockholders’ equity	Total Visteon Corporation stockholders’ equity	385		480		Total Visteon Corporation stockholders’ equity	394		387
Non-controlling interests	Non-controlling interests	117		115		Non-controlling interests	93		123
Total equity	Total equity	502		595		Total equity	487		510
Total liabilities and equity	Total liabilities and equity	$	2,164	$	2,271	Total liabilities and equity	$	2,122	$	2,271

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
Operating Activities	Operating Activities					Operating Activities
Net income (loss)	Net income (loss)	$	(68)	$	42	Net income (loss)	$	8	$	(78)
Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities:	Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities:					Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities:
Depreciation and amortization	Depreciation and amortization	75		74		Depreciation and amortization	55		50
Non-cash stock-based compensation	Non-cash stock-based compensation	13		14		Non-cash stock-based compensation	9		9
Equity in net income of non-consolidated affiliates, net of dividends remitted	Equity in net income of non-consolidated affiliates, net of dividends remitted	(4)		(7)		Equity in net income of non-consolidated affiliates, net of dividends remitted	—		(2)
Other non-cash items	Other non-cash items	1		5		Other non-cash items	3		2
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	38		17		Accounts receivable	51		170
Inventories	Inventories	5		(13)		Inventories	(35)		(5)
Accounts payable	Accounts payable	11		49		Accounts payable	(66)		(149)
Other assets and other liabilities	Other assets and other liabilities	26		(63)		Other assets and other liabilities	(24)		(10)
Net cash provided from operating activities		97		118
Net cash provided from (used by) operating activities						Net cash provided from (used by) operating activities	1		(13)
Investing Activities	Investing Activities					Investing Activities
Capital expenditures, including intangibles	Capital expenditures, including intangibles	(83)		(109)		Capital expenditures, including intangibles	(33)		(65)
Contributions to equity method investments						Contributions to equity method investments	(2)		0
Loan repayments from non-consolidated affiliates	Loan repayments from non-consolidated affiliates	2		11		Loan repayments from non-consolidated affiliates	2		2
Net investment hedge		7		4
Other	Other	(3)		(2)		Other	2		6
Net cash used by investing activities	Net cash used by investing activities	(77)		(96)		Net cash used by investing activities	(31)		(57)
Financing Activities	Financing Activities					Financing Activities
Borrowings on revolving credit facility	Borrowings on revolving credit facility	400		0		Borrowings on revolving credit facility	0		400
Payments on revolving credit facility		(400)		0
Repurchase of common stock	Repurchase of common stock	(16)		(20)		Repurchase of common stock	0		(16)
Dividends paid to non-controlling interests	Dividends paid to non-controlling interests	(7)		(7)		Dividends paid to non-controlling interests	(1)		(7)
Short-term debt repayments, net		(37)		(8)
Net cash used by financing activities		(60)		(35)
Short-term debt, net						Short-term debt, net	6		(14)
Other						Other	1		0
Net cash provided from financing activities						Net cash provided from financing activities	6		363
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	6		(8)		Effect of exchange rate changes on cash	(6)		(3)
Net decrease in cash		(34)		(21)
Cash and restricted cash at beginning of the period		469		467
Cash and restricted cash at end of the period		$	435	$	446
Net (decrease) increase in cash, equivalents, and restricted cash						Net (decrease) increase in cash, equivalents, and restricted cash	(30)		290
Cash, equivalents, and restricted cash at beginning of the period						Cash, equivalents, and restricted cash at beginning of the period	500		469
Cash, equivalents, and restricted cash at end of the period						Cash, equivalents, and restricted cash at end of the period	$	470	$	759

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In millions)

(Unaudited)


		Total Visteon Corporation Stockholders' Equity																	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			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
December 31, 2020																		December 31, 2020	$	1	$	1,348	$	1,623	$	(304)	$	(2,281)	$	387	$	123	$	510
Net income (loss)	Net income (loss)	0		0		(35)		0		0		(35)		(1)		(36)		Net income (loss)	—		—		16		—		—		16		3		19
Other comprehensive income (loss)	Other comprehensive income (loss)	0		0		0		(37)		0		(37)		0		(37)		Other comprehensive income (loss)	—		—		—		(17)		—		(17)		(1)		(18)
Stock-based compensation, net	Stock-based compensation, net	0		(5)		0		0		7		2		0		2		Stock-based compensation, net	—		(11)		—		—		9		(2)		—		(2)
Repurchase of shares of common stock		0		0		0		0		(16)		(16)		0		(16)
Dividends declared to non-controlling interests	Dividends declared to non-controlling interests	0		0		0		0		0		0		(7)		(7)		Dividends declared to non-controlling interests	—		—		—		—		—		—		(3)		(3)
March 31, 2020		$	1	$	1,337	$	1,644	$	(304)	$	(2,284)	$	394	$	107	$	501
March 31, 2021																		March 31, 2021	$	1	$	1,337	$	1,639	$	(321)	$	(2,272)	$	384	$	122	$	506
Net income (loss)	Net income (loss)	0		0		(45)		0		0		(45)		3		(42)		Net income (loss)	—		—		(11)		—		—		(11)		—		(11)
Other comprehensive income (loss)	Other comprehensive income (loss)	0		0		0		5		0		5		0		5		Other comprehensive income (loss)	—		—		—		16		—		16		3		19
Stock-based compensation, net	Stock-based compensation, net	0		4		0		0		0		4		—		4		Stock-based compensation, net	—		4		—		—		1		5		—		5

June 30, 2020		$	1	$	1,341	$	1,599	$	(299)	$	(2,284)	$	358	$	110	$	468
Net income (loss)		0		0		6		0		0		6		4		10
Other comprehensive income (loss)		0		0		0		17		0		17		3		20
Stock-based compensation, net		0		3		0		0		1		4		0		4

September 30, 2020		$	1	$	1,344	$	1,605	$	(282)	$	(2,283)	$	385	$	117	$	502
Cash dividends																		Cash dividends	—		—		—		—		—		—		(1)		(1)
Dividends declared to non-controlling interests																		Dividends declared to non-controlling interests	—		—		—		—		—		—		(31)		(31)
June 30, 2021																		June 30, 2021	$	1	$	1,341	$	1,628	$	(305)	$	(2,271)	$	394	$	93	$	487


		Total Visteon Corporation Stockholders' Equity																	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			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
December 31, 2019																		December 31, 2019	$	1	$	1,342	$	1,679	$	(267)	$	(2,275)	$	480	$	115	$	595
Net income (loss)	Net income (loss)	0		0		14		0		0		14		2		16		Net income (loss)	—		—		(35)		—		—		(35)		(1)		(36)
Other comprehensive income (loss)	Other comprehensive income (loss)	0		0		0		4		0		4		1		5		Other comprehensive income (loss)	—		—		—		(37)		—		(37)		—		(37)
Stock-based compensation, net	Stock-based compensation, net	0		(5)		0		0		7		2		0		2		Stock-based compensation, net	—		(5)		—		—		7		2		—		2
Acquisition of non-controlling interest		0		2		0		0		0		2		(2)		0

March 31, 2019		$	1	$	1,332	$	1,623	$	(212)	$	(2,257)	$	487	$	118	$	605
Net income (loss)		0		0		7		0		0		7		1		8
Repurchase of shares of common stock																		Repurchase of shares of common stock	—		—		—		—		(16)		(16)		—		(16)
Cash dividends																		Cash dividends	—		—		—		—		—		—		(7)		(7)
March 31, 2020																		March 31, 2020	$	1	$	1,337	$	1,644	$	(304)	$	(2,284)	$	394	$	107	$	501
Net (income) loss																		Net (income) loss	—		—		(45)		—		—		(45)		3		(42)
Other comprehensive income (loss)	Other comprehensive income (loss)	0		0		0		(3)		0		(3)		(1)		(4)		Other comprehensive income (loss)	—		—		—		5		—		5		—		5
Stock-based compensation, net	Stock-based compensation, net	0		6		0		0		0		6		0		6		Stock-based compensation, net	—		4		—		—		—		4		—		4
Dividends declared to non-controlling interests		0		0		0		0		0		0		(2)		(2)
Repurchase of shares of common stock		0		0		0		0		(20)		(20)		0		(20)
June 30, 2019		$	1	$	1,338	$	1,630	$	(215)	$	(2,277)	$	477	$	116	$	593
Net income (loss)		0		0		14		0		0		14		4		18
Other comprehensive income (loss)		0		0		0		(19)		0		(19)		(3)		(22)
Stock-based compensation, net		0		2		0		0		0		2		0		2
Dividends declared to non-controlling interests		0		0		0		0		0		0		(7)		(7)

September 30, 2019		$	1	$	1,340	$	1,644	$	(234)	$	(2,277)	$	474	$	110	$	584
June 30, 2020																		June 30, 2020	$	1	$	1,341	$	1,599	$	(299)	$	(2,284)	$	358	$	110	$	468

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. Summary of Significant Accounting Policies

Basis of Presentation - Interim Financial Statements

The condensed consolidated financial statements of Visteon Corporation (the "Company" or "Visteon") have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") have been condensed or omitted pursuant to such rules and regulations. These interim condensed 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, stockholders' equity, 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 ~~September~~June 30, ~~2020,~~2021, including those resulting from the impacts of COVID-19 and the subsequent semiconductor supply shortage, as further described in Note 14, "Commitments and Contingencies", will be reflected in ~~management’s~~management's estimates ~~for~~in future periods.

Allowance for Doubtful ~~Accounts~~

Accounts:

The ~~following table provides a rollforward of changes in the~~Company establishes an allowance for doubtful ~~accounts:~~


	~~Nine Months Ended September 30,~~
~~(In millions)~~	~~2020~~
~~Beginning balance~~	$	10
~~Provision~~	2
~~Recoveries~~	~~(3)~~
~~Write-offs charged against the allowance~~	~~(4)~~
~~Ending balance~~	$	5

~~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~~accounts for ~~fiscal years beginning after December 15, 2019. The guidance requires financial asset (or a group of financial assets) measured~~accounts receivable based 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 ofcurrent 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.~~impairment model (“CECL”). The Company elected to apply a historical loss rate based on historic ~~write offs~~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~~Company may also record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the ~~guidance did not have~~case of a ~~material impact on~~bankruptcy filing or deterioration in the ~~Company's condensed consolidated~~customer's operating results or financial ~~statements.~~position.

The ~~FASB issued ASU 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting~~allowance 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 taxesdoubtful accounts was $5 million and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. 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$4 million 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 condensed consolidated financial statements.

~~Accounting Pronouncements Not Yet Adopted~~June 30, 2021 and December 31, 2020, respectively.

Recently Adopted Accounting Pronouncements

Reference Rate Reform - 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~~.Reporting." ~~The guidance provides~~Subsequently, in 2021, the FASB issued ASU 2021-01, "Reference Rate Reform", to further clarify and expand certain aspects of ASC 848. ASU 2020-04 and ASU 2021-01 provide optional expedients and exceptions related to certain contract modifications and hedging relationships that reference ~~LIBOR~~the London Interbank Offered Rate ("LIBOR") or another rate that is expected to be discontinued. The ~~amendments in the~~ guidance ~~are~~was effective ~~for all entities as of March 12, 2020~~upon issuance and is generally applied to applicable contract modifications and hedge relationships prospectively through December 31, 2022. The ~~Company is~~ ~~currently evaluating the impacts~~adoption of the ~~provisions of ASU 2020-04.~~

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." The guidance (i) removes disclosures that are no longer considered cost beneficial, (ii) clarifies the specific requirements of disclosures and (iii) adds disclosure requirements including reasons for significant gains and losses related to changes in the benefit obligation. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company doesdid not ~~expect application of this accounting standards update to~~ have a material impact on ~~its condensed~~the Company’s consolidated financial statements.

NOTE 2. Non-Consolidated Affiliates

Investments in Affiliates

The ~~Company recorded equity in the net income of non-consolidated affiliates of $4 million and $7 million for the nine months ended~~ ~~September 30, 2020~~ ~~and 2019, respectively.~~

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.

~~A summary of the~~ Company's investments in non-consolidated equity method affiliates ~~is provided below:~~include the following:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
YFVIC (50%)		$	46	$	43
PT Astra Visteon Indonesia (50%)		5		5
Yanfeng Visteon Investment Co., Ltd. ("YFVIC") (50%)						Yanfeng Visteon Investment Co., Ltd. ("YFVIC") (50%)	$	49	$	50
Other						Other	14		10
Total investments in non-consolidated affiliates	Total investments in non-consolidated affiliates	$	51	$	48	Total investments in non-consolidated affiliates	$	63	$	60

Variable Interest Entities

The Company evaluates 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. The Company consolidates a VIE if it is determined to be the primary beneficiary of the VIE having 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.

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 YFYangfeng Automotive Trim Systems Co. Ltd. ("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~~The Company's investments in YFVIC ~~is provided below:~~consists of the following:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Payables due to YFVIC	Payables due to YFVIC	$	11	$	9	Payables due to YFVIC	$	7	$	9
Exposure to loss in YFVIC:	Exposure to loss in YFVIC:					Exposure to loss in YFVIC:
Investment in YFVIC	Investment in YFVIC	$	46	$	43	Investment in YFVIC	$	49	$	50
Receivables due from YFVIC	Receivables due from YFVIC	52		41		Receivables due from YFVIC	28		53
Subordinated loan receivable from YFVIC	Subordinated loan receivable from YFVIC	6		8		Subordinated loan receivable from YFVIC	0		6

Maximum exposure to loss in YFVIC	Maximum exposure to loss in YFVIC	$	104	$	92	Maximum exposure to loss in YFVIC	$	77	$	109

Investments

In 2018, the Company committed to make a $15 million investment in two ~~entities~~funds managed by venture capital firms principally focused on the automotive sector pursuant to limited partnership agreements. As a limited partner in each ~~entity,~~fund, the Company will periodically make capital contributions toward this total commitment amount. As of ~~September~~June 30, ~~2020,~~2021, the Company has contributed a total of $3$7 million toward the aggregate investment ~~commitments.~~commitments, including a $2 million contribution in the second quarter 2021. These limited partnerships are classified as equity method investments.

NOTE 3. 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, including potential impacts related to COVID-19 and the related semiconductor shortage, 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 onon the Company or its results of operations, financial position and cash flows.

~~Restructuring actions initiated during 2020 include~~During the ~~following:~~

•~~In September, in response to COVID-19 and to improve efficiency and rationalize the Company’s footprint,~~second quarter of 2021, the Company approved ~~a plan related to cash severance, retention,~~ and ~~termination costs. The Company has incurred $31~~recorded $2 million inof net restructuring ~~costs related to this plan and expects to incur up to $40 million.~~expense for various restructuring actions, primarily impacting Brazil. As of ~~September~~June 30, ~~2020, $30~~2021, $2 million remains accrued related to ~~this action.~~these programs.

•

~~In March,~~

During 2020 the Company approved ~~a global~~various restructuring ~~plan~~programs impacting engineering, administrative and manufacturing functions to improve ~~the Company’s~~ efficiency and rationalize ~~its~~the Company’s footprint. The Company ~~incurred $16~~recorded $4 million and $37 million of net restructuring expense for cash severance, retention, and termination costs ~~related to this plan.~~for the three and six months ended June 30, 2020, respectively. As of ~~September~~June 30, ~~2020, $4~~2021, $17 million remains accrued related to ~~this action.~~

•In January, the Company approved a plan primarily related to European engineering and administrative functions to improve the Company’s efficiency and rationalize its footprint. The Company incurred $22 million of net restructuring expense for cash severance, retention, and termination costs related to this plan and expects to incur up to $24 million. As of September 30, 2020, $13 million remains accrued related to this action.

•~~During the nine months ended September 30, 2020, the Company incurred $1 million of restructuring expense for cash severance payments at two North American manufacturing facilities.~~these programs.

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 nine months ended September 30, 2019, the Company recorded net restructuring expense of $2 million related to 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~~products. As of ~~September~~June 30, ~~2020, $3~~2021, $2 million remains accrued related to this program.

As of ~~September~~June 30, ~~2020,~~2021, 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 ~~$52~~$21 million and $2 million as of June 30, 2021 are classified as Other current liabilities and Other non-current liabilities, respectively. Restructuring reserve balances of $39 million and $10 million as of ~~September 30, 2020 and~~ December 31, ~~2019, respectively,~~2020 are classified as ~~"Other~~Other current ~~liabilities" on the condensed consolidated balance sheets.~~liabilities and Other non-current liabilities, respectively. The Company anticipates that the activities associated with the current restructuring ~~reserve balance~~programs will be substantially complete by the end of ~~2021.~~2022. The Company’s ~~condensed consolidated~~ restructuring reserves and related activity are summarized below ~~including~~and include amounts associated with discontinued operations.


(In millions)
December 31, ~~2019~~2020	$	1049
Expense	33 0
Change in estimate	(1)
Utilization	~~(6)~~(16)
Foreign currency	(1)
March 31, ~~2020~~2021	$	3631
Expense	12
Change in estimate	3 (1)
Utilization	(9)
Foreign currency	10
June 30, ~~2020~~2021	$	32
~~Expense~~	31
~~Change in estimate~~	1
~~Utilization~~	~~(12)~~
~~September 30, 2020~~	$	5223

NOTE 4. Inventories

Inventories, net consist of the following components:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Raw materials	Raw materials	$	102	$	100	Raw materials	$	152	$	114
Work-in-process	Work-in-process	25		28		Work-in-process	23		25
Finished products	Finished products	37		41		Finished products	35		38
		$	164	$	169		$	210	$	177

109

NOTE 5. Goodwill and Other Intangible Assets

Intangible assets, net are comprised of the following:


			September 30, 2020								June 30, 2021						December 31, 2020
(In millions)	(In millions)	Estimated Weighted Average Useful Life (years)	Gross Intangibles		Accumulated Amortization		Net Intangibles		(In millions)	Estimated Weighted Average Useful Life (years)	Gross Intangibles		Accumulated Amortization		Net Intangibles		Gross Intangibles		Accumulated Amortization		Net Intangibles
Definite-Lived:	Definite-Lived:								Definite-Lived:
Developed technology	Developed technology	5	$	40	$	(37)	$	3	Developed technology	10	$	41	$	(38)	$	3	$	41	$	(38)	$	3
Customer related	Customer related	10	91		(59)		32		Customer related	10	95		(69)		26		95		(64)		31
Capitalized software development	Capitalized software development	3	41		(6)		35		Capitalized software development	5	45		(8)		37		44		(7)		37
Other	Other	20	16		(7)		9		Other	32	14		(7)		7		14		(7)		7
Subtotal	Subtotal		188		(109)		79		Subtotal		195		(122)		73		194		(116)		78
Indefinite-Lived:	Indefinite-Lived:								Indefinite-Lived:
Goodwill	Goodwill		47		0		47		Goodwill		49		—		49		49		—		49
Total	Total		$	235	$	(109)	$	126	Total		$	244	$	(122)	$	122	$	243	$	(116)	$	127

~~A rollforward~~Capitalized software development consists of ~~the carrying amounts of intangible assets is presented below:~~

December 31, 2019 September 30, 2020
(In millions) Gross Intangibles Accumulated Amortization Net Intangibles Additions Foreign Currency Amortization Expense Net Intangibles
Definite-Lived:
Developed technology $ 40 $ (35) $ 5 $ 0 $ 0 $ (2) $ 3
Customer related 89 (51) 38 0 0 (6) 32
Capitalized software development 32 (5) 27 9 0 (1) 35
Other 15 (4) 11 0 0 (2) 9
Subtotal 176 (95) 81 9 0 (11) 79
Indefinite-Lived:
Goodwill 46 0 46 0 1 0 47
Total $ 222 $ (95) $ 127 $ 9 $ 1 $ (11) $ 126
software development costs intended for integration into customer products.

NOTE 6. Other Assets

Other current assets are comprised of the following components:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Recoverable taxes	Recoverable taxes	$	68	$	64	Recoverable taxes	$	39	$	52
Contractually reimbursable engineering costs						Contractually reimbursable engineering costs	37		31
Joint venture receivables	Joint venture receivables	52		41		Joint venture receivables	28		53
Contractually reimbursable engineering costs		32		29
Prepaid assets and deposits	Prepaid assets and deposits	19		22		Prepaid assets and deposits	24		18
Royalty agreements						Royalty agreements	4		7
China bank notes	China bank notes	11		16		China bank notes	0		15
Royalty agreements		11		17
Other	Other	0		4		Other	6		4
		$	193	$	193		$	138	$	180

The Company receives bank notes from certain customers in China to settle trade accounts receivable. 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. The Company redeemed ~~$104~~$82 million and ~~$59~~$73 million of China bank notes during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Remaining amounts outstanding at ~~third party~~third-party institutions related to sold bank notes will mature by ~~March 31,~~the end of the fourth quarter of 2021.

Other non-current assets are comprised of the following components:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Deferred tax assets	Deferred tax assets	$	55	$	59	Deferred tax assets	$	56	$	55
Contractually reimbursable engineering costs	Contractually reimbursable engineering costs	30		24		Contractually reimbursable engineering costs	34		31
Recoverable taxes	Recoverable taxes	19		28		Recoverable taxes	22		21
Royalty agreements	Royalty agreements	8		11		Royalty agreements	3		8
Joint venture notes receivable	Joint venture notes receivable	6		8		Joint venture notes receivable	0		7
Other	Other	15		20		Other	11		13
		$	133	$	150		$	126	$	135

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 ~~$12~~$28 million during the remainder of ~~2020, $24~~2021, $18 million in ~~2021,~~2022, $15 million in 2023, $8 million in ~~2022, $7~~2024 and $2 million in ~~2023 and $11 million in 2024~~2025 and beyond.

NOTE 7. Other Liabilities

Other current liabilities are summarized as follows:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Restructuring reserves		$	52	$	10
Product warranty and recall accruals	Product warranty and recall accruals	37		34		Product warranty and recall accruals	$	48	$	52
Deferred income	Deferred income	21		22		Deferred income	45		46
Dividends payable to non-controlling interests						Dividends payable to non-controlling interests	36		2
Restructuring reserves						Restructuring reserves	21		39
Royalty reserves						Royalty reserves	15		13
Non-income taxes payable	Non-income taxes payable	19		17		Non-income taxes payable	12		15
Royalty reserves		14		19
Income taxes payable						Income taxes payable	10		5
Joint venture payables	Joint venture payables	11		9		Joint venture payables	7		9

Income taxes payable		4		7
Dividends payable to non-controlling interests		2		3
Other	Other	29		26		Other	27		28
		$	189	$	147		$	221	$	209

Other non-current liabilities are summarized as follows:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Derivative financial instruments	Derivative financial instruments	$	27	$	14	Derivative financial instruments	$	25	$	38
Product warranty and recall accruals	Product warranty and recall accruals	13		15		Product warranty and recall accruals	13		12

Income tax reserves						Income tax reserves	7		6
Deferred income	Deferred income	7		9		Deferred income	6		7
Royalty reserves		6		13
Income tax reserves		5		5
Non-income tax reserves		1		1
Royalty agreements						Royalty agreements	5		6
Restructuring reserves						Restructuring reserves	2		10
Other	Other	13		15		Other	15		13
		$	72	$	72		$	73	$	92

1211

NOTE 8. Debt

The Company’s ~~short and long-term~~ debt consists of the following:


		September 30,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Short-Term Debt:	Short-Term Debt:					Short-Term Debt:
Short-term borrowings	Short-term borrowings	$	—	$	37	Short-term borrowings	$	6	$	—

Long-Term Debt:	Long-Term Debt:					Long-Term Debt:

Term debt facility, net	Term debt facility, net	$	348	$	348	Term debt facility, net	$	349	$	349

Short-Term Debt

Short-term borrowings ~~primarily~~are related to ~~the Company's non-U.S. joint ventures, were fully repaid during the third quarter of 2020.~~affiliate borrowings and are primarily payable in Brazilian real. As of ~~September~~June 30, ~~2020,~~2021, the Company has $6 million short-term borrowing and there is $179 million available ~~borrowings~~capacity under ~~these~~ affiliate credit ~~facilities are $153 million.~~facilities.

Long-Term Debt

As of ~~September~~June 30, ~~2020,~~2021, the Company has an amended credit agreement ("Credit Agreement") which includes a $350 million Term Facility maturing March 24, 2024 and a $400 million Revolving Credit Facility which matures the earlier of (i) December 24, 2024, (ii) 90 days prior to the scheduled maturity of the Term Facility, or (iii) the date of the termination of the Company's credit agreement.

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 response to unprecedented uncertainty related to the impact of COVID-19. On September 24, 2020, the Company fully repaid the amount borrowed under the Revolving Credit Facility following stronger than expected industry recovery and improved Company performance in the third quarter of 2020. The Company has no outstanding borrowings on the Revolving Credit Facility as of June 30, 2021.

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. Loans under the ~~Company'~~Company's Revolving Credit Facility 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.

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 are suspended. As of ~~September~~June 30, ~~2020,~~2021, 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 on substantially all property of the Company and the subsidiaries party to the security agreement, subject to certain limitations.

1312

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 $3$2 million of outstanding letters of credit issued under this facility secured by restricted cash, as of ~~September~~June 30, ~~2020.~~2021. Additionally, the Company had $7$11 million of locally issued letters of credit with less than $1 million of collateral as of ~~September~~June 30, ~~2020,~~2021, to support various tax appeals, customs arrangements and other obligations at its local affiliates.

NOTE 9. Employee ~~Benefit Plans~~

~~Defined~~ Benefit Plans

The Company's net periodic benefit costs for all defined benefit plans for the three month periods ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		U.S. Plans				Non-U.S. Plans					U.S. Plans				Non-U.S. Plans
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)	2021		2020		2021		2020
Costs Recognized in Income:	Costs Recognized in Income:									Costs Recognized in Income:

Pension service cost:										Pension service cost:
Service cost										Service cost	$	—	$	—	$	—	$	(1)
Pension financing benefits (cost):	Pension financing benefits (cost):									Pension financing benefits (cost):
Interest cost	Interest cost	$	(6)	$	(8)	$	(2)	$	(2)	Interest cost	$	(4)	$	(6)	$	(1)	$	(1)
Expected return on plan assets	Expected return on plan assets	10		10		2		2		Expected return on plan assets	10		9		2		2
Amortization of losses and other	Amortization of losses and other	—		—		(1)		—		Amortization of losses and other	(1)		—		(1)		(1)
Total Pension financing benefits (cost):		4		2		(1)		—
Total pension financing benefits:										Total pension financing benefits:	5		3		—		—
Restructuring related pension cost:	Restructuring related pension cost:									Restructuring related pension cost:
Special termination benefits	Special termination benefits	(1)		—		—		(1)		Special termination benefits	—		(1)		—		(1)
Net pension benefit (cost)	Net pension benefit (cost)	$	3	$	2	$	(1)	$	(1)	Net pension benefit (cost)	$	5	$	2	$	—	$	(2)

Pension financing benefits, net of $3$5 million and $2$3 million for the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019~~respectively, are classified as Other income, net on the Company's condensed consolidated statements of comprehensive income.

The Company's net periodic benefit costs for all defined benefit plans for the ~~nine~~six month periods ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		U.S. Plans				Non-U.S. Plans					U.S. Plans				Non-U.S. Plans
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)	2021		2020		2021		2020
Costs Recognized in Income:	Costs Recognized in Income:									Costs Recognized in Income:
Pension service cost:	Pension service cost:									Pension service cost:
Service cost	Service cost	$	—	$	—	$	(1)	$	(1)	Service cost	$	0	$	0	$	0	$	(1)
Pension financing benefits (cost):
Pension financing benefits (costs):										Pension financing benefits (costs):
Interest cost	Interest cost	(18)		(23)		(5)		(6)		Interest cost	$	(8)	$	(12)	$	(3)	$	(3)
Expected return on plan assets	Expected return on plan assets	29		30		6		7		Expected return on plan assets	19		19		4		4
Amortization of losses and other	Amortization of losses and other	—		—		(2)		(1)		Amortization of losses and other	(2)		0		(1)		(1)
Total Pension financing benefits (cost):		11		7		(1)		—
Total pension financing benefits:										Total pension financing benefits:	9		7		0		0
Restructuring related pension cost:	Restructuring related pension cost:									Restructuring related pension cost:
Special termination benefits	Special termination benefits	(3)		—		(1)		(1)		Special termination benefits	0		(2)		0		(1)
Net pension benefit (cost)	Net pension benefit (cost)	$	8	$	7	$	(3)	$	(2)	Net pension benefit (cost)	$	9	$	5	$	0	$	(2)

Pension financing benefits, net of ~~$10~~$9 million and $7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, are classified as Other income, net on the Company's condensed consolidated statements of comprehensive income.

~~The Company has deferred approximately $17 million of~~During the six months ended June 30, 2021, cash contributions ~~related~~ to ~~its~~the Company's defined benefit ~~U.S. pension~~ plans ~~pursuant to COVID-19 relief measures. The Company intends to make contributions related to such~~were approximately $8 million for the U.S. plans ~~by year end 2020.~~and $3 million for the non-U.S. plans. The Company estimates that total cash contributions ~~related~~ to its ~~non-U.S. defined benefit~~pension plans during 2021 will ~~approximate $1 million for~~be $25 million.

1413

~~the remainder of 2020. Contributions of $3 million have been made and approximately $2 million deferred until 2024, due to COVID-19 relief measures, for these non-U.S. plans.~~

NOTE 10. Income Taxes

During the three and ~~nine~~six month period ended ~~September~~June 30, ~~2020,~~2021, the Company recorded a provision for income tax of ~~$12~~$4 million and ~~$19~~$16 million, respectively, 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.~~enacted tax law changes. Pretax losses ~~from continuing operations~~ in jurisdictions where valuation allowances are maintained and no income tax benefits are recognized totaled ~~$106~~$34 million and ~~$46~~$101 million for the ~~nine~~six month periods ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, 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 and available tax planning ~~strategies and estimated impacts attributable to the Tax Cuts and Jobs Act of 2017 (the "Act").~~strategies. The changing and volatile macro-economic conditions connected with the ongoing COVID-19 pandemic and the subsequent semiconductor shortage 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.~~occur.

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~~Company evaluates its deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. This assessment considers, among other matters, the nature, frequency, and amount of recent losses, the duration of statutory carryforward periods, and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified. If (i) recent improvements to financial results continue in ~~its determination~~the U.S., or (ii) recovery of the ~~probability of~~global economy after the ~~realization of~~COVID-19 pandemic and the ~~deferred tax assets include, but are not limited to, recent historical financial results, historical taxable income, projected future taxable income,~~subsequent semiconductor shortages occurs faster than expected, 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,~~Company believes it is ~~more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded. The weight given to the~~possible that sufficient 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~~available to release all, or a portion, 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 determinate 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 12six 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 an 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 first quarter of 2019. In September 2020, the Company approved a restructuring program impacting engineering and administrative functions globally, including German operations. The September action, combined with earlier 2020 actions, necessitated a reassessment of the future utilization of deferred tax assets in Germany resulting in recording a $4 million discrete income tax expense adjustment during the third quarter of 2020.18 months.

Unrecognized Tax Benefits

Gross unrecognized tax benefits as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$13~~$15 million ~~in both years.~~and $14 million, respectively. Of these amounts, approximately $6$8 million ~~in both years~~and $7 million, respectively, 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. IfDuring the ~~uncertainty is resolved while~~six months ended June 30, 2021, the Company recorded a ~~full valuation allowance is maintained, these~~$2 million increase in tax expense related to uncertain tax positions ~~should not impact the effective tax rate in current or future periods.~~attributable to certain related party transactions. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense and related amounts accrued at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 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$7 million is included in ~~"Other~~Other non-current ~~liabilities"~~liabilities on the condensed 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~~Other non-current assets on the condensed 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~~Adjusted for currency impacts and accrued interest, the deposit amount is ~~$10~~approximately $12 million as of ~~September~~June 30, ~~2020.~~2021. The Company believes that the risk of a negative outcome is remote once the matter is fully litigated at the highest judicial level. These appeal payments, as well as income tax refund claims associated with other jurisdictions, total ~~$13~~$17 million as of ~~September~~June 30, ~~2020,~~2021, and are included in ~~"Other~~Other non-current ~~assets"~~assets on the condensed consolidated balance sheets.

NOTE 11. Stockholders’ Equity and Non-controlling Interests

Non-Controlling Interests

The Company's non-controlling interests are as follows:


	June 30,		December 31,
(In millions)	2021		2020
Shanghai Visteon Automotive Electronics, Co., Ltd.	$	43	$	44
Yanfeng Visteon Automotive Electronics Co., Ltd.	28		57
Changchun Visteon FAWAY Automotive Electronics, Co., Ltd.	20		20
Other	2		2
	$	93	$	123

Accumulated Other Comprehensive Income (Loss)

Changes in Accumulated other comprehensive income (loss) (“AOCI”) and reclassifications out of AOCI by component include:


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Changes in AOCI:
Beginning balance	$	(321)	$	(304)	$	(304)	$	(267)
Other comprehensive income (loss) before reclassification, net of tax	14		5		(4)		(31)
Amounts reclassified from AOCI	2		0		3		(1)
Ending balance	$	(305)	$	(299)	$	(305)	$	(299)
Changes in AOCI by Component:
Foreign currency translation adjustments
Beginning balance	$	(148)	$	(191)	$	(115)	$	(153)
Other comprehensive income (loss) before reclassification, net of tax (a)	17		6		(16)		(32)
Ending balance	(131)		(185)		(131)		(185)
Net investment hedge
Beginning balance	(2)		12		(15)		4
Other comprehensive income (loss) before reclassification, net of tax (a)	(1)		(1)		13		8
Amounts reclassified from AOCI	(2)		(2)		(3)		(3)
Ending balance	(5)		9		(5)		9
Benefit plans
Beginning balance	(163)		(112)		(165)		(114)
Other comprehensive income (loss) before reclassification, net of tax (b)	(1)		0		0		2
Amounts reclassified from AOCI	2		1		3		1
Ending balance	(162)		(111)		(162)		(111)
Unrealized hedging gain (loss)
Beginning balance	(8)		(13)		(9)		(4)
Other comprehensive income (loss) before reclassification, net of tax (c)	(1)		0		(1)		(9)
Amounts reclassified from AOCI	2		1		3		1
Ending balance	(7)		(12)		(7)		(12)
Total AOCI	$	(305)	$	(299)	$	(305)	$	(299)

(a) There were no income tax effects for either period due to the valuation allowance.

(b) Net tax expense was less than $1 million related to benefit plans for the three and six months ended June 30, 2021 and 2020.

(c) There were no income tax effects related to unrealized hedging gain (loss) for either period due to the valuation allowance.

Share Repurchase Program

During the first quarter of 2020, the Company purchased a total of 233,769 shares of Visteon common stock at an average price of $67.87 for an aggregate purchase amount of $16 million pursuant to an agreement with a third-party financial institution.

During 2019, the Company purchased a total of 322,120 shares of Visteon common stock at an average price of $62.06 for an aggregate purchase amount of $20 million pursuant to various programs with third-party financial institutions.

As of September 30, 2020, $364 million is available for additional share repurchases under the Board of Directors authorization which expires on December 31, 2020. The Company currently does not intend to repurchase additional shares under this authorization.

~~Non-Controlling Interests~~

~~The Company's non-controlling interests are as follows:~~

September 30, December 31,
(In millions) 2020 2019
Yanfeng Visteon Automotive Electronics Co., Ltd. $ 53 $ 56
Shanghai Visteon Automotive Electronics, Co., Ltd. 43 41
Changchun Visteon FAWAY Electronics, Co., Ltd. 19 17
Other 2 1
$ 117 $ 115

~~Accumulated Other Comprehensive Income (Loss)~~

~~Changes in Accumulated other comprehensive income (loss) (“AOCI”) and reclassifications out of AOCI by component include:~~

Three Months Ended September 30, Nine Months Ended
September 30,
(In millions) 2020 2019 2020 2019
Changes in AOCI:
Beginning balance $ (299) $ (215) $ (267) $ (216)
Other comprehensive income (loss) before reclassification, net of tax 18 (17) (13) (14)
Amounts reclassified from AOCI (1) (2) (2) (4)
Ending balance $ (282) $ (234) $ (282) $ (234)
Changes in AOCI by Component:
Foreign currency translation adjustments
  Beginning balance $ (185) $ (140) $ (153) $ (142)
Other comprehensive income (loss) before reclassification, net of tax (a) 28 (28) (4) (26)
  Ending balance (157) (168) (157) (168)
Net investment hedge
  Beginning balance 9 (1) 4 (5)
  Other comprehensive income (loss) before reclassification, net of tax (a) (9) 13 (1) 20
  Amounts reclassified from AOCI (2) (2) (5) (5)
  Ending balance (2) 10 (2) 10
Benefit plans
  Beginning balance (111) (70) (114) (71)
  Other comprehensive income (loss) before reclassification, net of tax (b) (2) 0 0 0
  Amounts reclassified from AOCI 1 0 2 1
  Ending balance (112) (70) (112) (70)
Unrealized hedging gain (loss)
  Beginning balance (12) (4) (4) 2
  Other comprehensive income (loss) before reclassification, net of tax (c) 1 (2) (8) (8)
Amounts reclassified from AOCI 0 0 1 0
  Ending balance (11) (6) (11) (6)
Total AOCI $ (282) $ (234) $ (282) $ (234)

~~(a) There were no income tax effects for either period due to the valuation allowance.~~

~~(b) Net tax expense was less than $1 million related to benefit plans for the three and nine months ended September 30, 2020 and 2019.~~

~~(c) There were no income tax effects related to unrealized hedging gain (loss) for either period due to the valuation allowance.~~

NOTE 12. 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~~calculated 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 September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share amounts)	(In millions, except per share amounts)	2020		2019		2020		2019		(In millions, except per share amounts)	2021		2020		2021		2020
Numerator:	Numerator:									Numerator:

Net income (loss) attributable to Visteon	Net income (loss) attributable to Visteon	$	6	$	14	$	(74)	$	35	Net income (loss) attributable to Visteon	$	(11)	$	(45)	$	5	$	(80)
Denominator:	Denominator:									Denominator:
Average common stock outstanding - basic	Average common stock outstanding - basic	27.8		28.0		27.9		28.1		Average common stock outstanding - basic	28.0		27.8		27.9		27.9
Dilutive effect of performance based share units and other	Dilutive effect of performance based share units and other	0.2		0.1		—		0.1		Dilutive effect of performance based share units and other	0		0		0.4		0
Diluted shares	Diluted shares	28.0		28.1		27.9		28.2		Diluted shares	28.0		27.8		28.3		27.9
Basic and Diluted Per Share Data:	Basic and Diluted Per Share Data:									Basic and Diluted Per Share Data:

Basic earnings (loss) per share attributable to Visteon	Basic earnings (loss) per share attributable to Visteon	$	0.22	$	0.50	$	(2.65)	$	1.25	Basic earnings (loss) per share attributable to Visteon	$	(0.39)	$	(1.62)	$	0.18	$	(2.87)

Diluted earnings (loss) per share attributable to Visteon:	Diluted earnings (loss) per share attributable to Visteon:	$	0.21	$	0.50	$	(2.65)	$	1.24	Diluted earnings (loss) per share attributable to Visteon:	$	(0.39)	$	(1.62)	$	0.18	$	(2.87)

Performance based share units of approximately ~~181,000~~390,000 were excluded from the calculation of diluted loss per share because the effect of including them would have been anti-dilutive for the ~~nine~~three months ended ~~September~~June 30, ~~2020.~~2021. Performance based share units of approximately 114,000 and 144,000 were excluded from the calculation of diluted loss per share because the effect of including them would have been anti-dilutive for the three and six months ended June 30, 2020, respectively.

NOTE 13. Fair Value Measurements and Financial Instruments

Fair Value Measurements

The Company uses a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs.

•Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

•Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.

•Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Items Measured at Fair Value on a Recurring Basis

The Company is exposed to various market risks including, but not limited to, changes in currency exchange rates arising from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt, dividends and investments in subsidiaries. The Company manages these risks, in part, through the use of derivative financial instruments. The maximum length of time over which the Company hedges the variability in the future cash flows related to transactions, excluding those transactions as related to the payment of variable interest on existing debt, is eighteen months. The maximum length of time over which the Company hedges forecasted transactions related to variable interest payments is the term of the underlying debt.

Hedge instruments are measured at fair value on a recurring basis under an income approach using industry-standard models

that consider various assumptions, including time value, volatility factors, current market and contractual prices for the underlying and non-performance risk. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument or may derived from observable data. Accordingly, the Company's currency instruments are classified as Level 2 ~~"Other Observable Inputs"~~ in the fair value hierarchy.

The Company presents its derivative positions and any related material collateral under master netting arrangements that provide for the net settlement of contracts, by counterparty, in the event of default or termination. Derivative financial instruments are included in the Company’s condensed consolidated balance sheets. There is no cash collateral on any of these derivatives.

Currency Exchange Rate Instruments: The Company primarily uses forward contracts denominated in euro, Japanese yen, Thai baht and Mexican peso intended to mitigate the variability of cash flows denominated in currency other than the hedging entity's functional currency.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had foreign currency economic derivative instruments with ~~gross~~ notional ~~values~~amounts of ~~$78~~$51 million and ~~$40~~$18 million, respectively. At ~~September~~June 30, ~~2020, approximately $8 million of~~2021, these instruments ~~have been designated as cash flow hedges. Accordingly, the total change in fair~~are undesignated hedges of local currency value of ~~these transactions~~recognized net monetary balances that are ~~recognized~~denominated in a currency other ~~comprehensive income, a component of shareholders' equity. Upon settlement of~~than the ~~transactions, the accumulated gains and losses are reclassified to income in the same periods during which the hedged cash flows impact earnings.~~particular entity's functional currency. The aggregate fair value of these derivative instruments is a liability of less than $1 million and an asset of $1 million, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019. The difference between the gross and net value of these derivatives after offset by counter party is not material. As of September 30,~~ 2020, ~~a loss of less than $1 million is expected to be reclassified out of accumulated other comprehensive income into earnings within the next 12 months related to these designated hedges.~~respectively.

Cross Currency Swaps: The Company has executed cross-currency swap transactions intended to mitigate the variability of the U.S. dollar value of its investment in certain of its non-U.S. entities. These transactions are designated as net investment hedges and the Company has elected to assess hedge effectiveness under the spot method. Accordingly, periodic changes in the fair value of the derivative instruments attributable to factors other than spot exchange rate variability are excluded from the measurement of hedge ineffectiveness and reported directly in earnings each reporting period.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had cross currency swaps with an aggregate notional value of $250 million. The aggregate fair value of these derivatives is a non-current liability of ~~$15~~$17 million and $6$27 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of ~~September~~June 30, ~~2020,~~2021, a gain of $6 million is expected to be reclassified out of accumulated other comprehensive income into earnings within the next 12 months.

Interest Rate Swaps: The Company utilizes interest rate swap instruments to manage its exposure and to mitigate the impact of interest rate variability. The instruments are designated as cash flow hedges, accordingly, the effective portion of the periodic changes in fair value is recognized in accumulated other comprehensive income, a component of shareholders' equity. Subsequently, the accumulated gains and losses recorded in equity are reclassified to income in the period during which the hedged cash flow impacts earnings.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had interest rate swaps with an aggregate notional value of $300 ~~million and $250 million, respectively.~~million. The aggregate fair value of these derivative transactions is a non-current liability of ~~$12~~$8 million and $7$11 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of ~~September~~June 30, ~~2020,~~2021, a loss of $6 million is expected to be reclassified out of accumulated other comprehensive income into earnings within the next 12twelve months.

1918

Financial Statement Presentation

Gains and losses on derivative financial instruments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 are as follows:


		Recorded Income (Loss) into AOCI, net of tax				Reclassified from AOCI into Income (Loss)				Recorded Income (Loss) into AOCI, net of tax				Reclassified from AOCI into Income (Loss)				Recorded in (Income) Loss
(In millions)	(In millions)	2020		2019		2020		2019			(In millions)	2021		2020		2021		2020		2021		2020
Three months ended September 30,

Three months ended June 30,											Three months ended June 30,
Foreign currency risk - Cost of sales:	Foreign currency risk - Cost of sales:										Foreign currency risk - Cost of sales:
Cash flow hedges	Cash flow hedges	$	1	$	—	$	—	$	—		Cash flow hedges	$	—	$	1	$	—	$	—	$	1	$	0

Interest rate risk - Interest expense, net:	Interest rate risk - Interest expense, net:										Interest rate risk - Interest expense, net:
Interest rate swap	Interest rate swap	0		(2)		0		0			Interest rate swap	(1)		(1)		(2)		(1)		0		0
Net investment hedges	Net investment hedges	(9)		13		2		2			Net investment hedges	(1)		(1)		2		2		0		0
		$	(8)	$	11	$	2	$	2			$	(2)	$	(1)	$	—	$	1	$	1	$	—
Nine months ended September 30,

Six months ended June 30,											Six months ended June 30,
Foreign currency risk - Cost of sales:	Foreign currency risk - Cost of sales:										Foreign currency risk - Cost of sales:
Cash flow hedges	Cash flow hedges	$	—	$	—	$	—	$	—		Cash flow hedges	$	0	$	(1)	$	0	$	0	$	1	$	0

Interest rate risk - Interest expense, net:	Interest rate risk - Interest expense, net:										Interest rate risk - Interest expense, net:
Interest rate swap	Interest rate swap	(8)		(8)		(1)		0			Interest rate swap	(1)		(8)		(3)		(1)		0		0
Net investment hedges	Net investment hedges	(1)		20		5		5			Net investment hedges	13		8		3		3		0		0
		$	(9)	$	12	$	4	$	5			$	12	$	(1)	$	0	$	2	$	1	$	—

Items Not Carried at Fair Value

The Company's fair value of debt was ~~$342~~$353 million and ~~$390~~$347 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. Fair value estimates were based on the current rates offered to the Company for debt of the same remaining maturities. Accordingly, the Company's debt fair value disclosures are classified as Level 2 ~~"Other Observable Inputs"~~ in the fair value hierarchy.

Concentrations of Credit Risk

Financial instruments including cash equivalents, derivative contracts, and accounts receivable, expose the Company to counter-party credit risk for non-performance. The Company’s counterparties for cash equivalents and derivative contracts are banks and financial institutions that meet the Company’s credit rating requirements. The Company’s counterparties for derivative contracts are substantial investment and commercial banks with significant experience using such derivatives. The Company manages its credit risk pursuant to written policies that specify minimum counterparty credit profile and by limiting the concentration of credit exposure amongst its multiple counterparties.

The Company's credit risk with any single customer does not exceed ten percent of total accounts receivable except for Ford and its affiliates which represent ~~14%~~13% and ~~12%~~13%, Mazda which represents 10% and 8%, and Renault/Nissan which represents ~~12%~~10% and ~~13%~~11%, of the Company's balance as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

NOTE 14. Commitments and Contingencies

Litigation and Claims

In 2003, the Local Development Finance Authority of the Charter Township of Van Buren, Michigan issued approximately $28 million in bonds finally maturing in 2032, the proceeds of which were used at least in part to assist in the development of the Company’s U.S. headquarters located in the Township. During January 2010, the Company and the Township entered into a settlement agreement (the “Settlement Agreement”) that, among other things, reduced the taxable value of the headquarters property to current market value. The Settlement Agreement also provided that the Company would negotiate in good faith with the Township, pursuant to the terms of the Settlement Agreement, in the event that property tax payments were inadequate to permit the Township to meet its payment obligations with respect to the bonds. In October 2019, the Township notified the

Company that the Township had incurred a shortfall under the bonds of less than $1 million and requested that the Company

meet to discuss payment. The parties met in November 2019 but no agreement was reached. On December 9, 2019, the Township commenced litigation against the Company in Michigan’s Wayne County Circuit Court claiming damages of $28 million related to what the Township alleges to be the current shortfall and projected future shortfalls under the bonds. The Company disputes the factual and legal assertions made by the Township and intends to defend the matter vigorously. The Company is not able to estimate the possible loss or range of loss in connection with this matter.

In November 2013, the Company and Halla Visteon Climate Control Corporation (“HVCC”), jointly filed an Initial Notice of Voluntary Self-Disclosure statement with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) regarding certain sales of automotive HVAC components by a minority-owned, Chinese joint venture of HVCC into Iran. The Company updated that notice in December 2013, and subsequently filed a voluntary self-disclosure regarding these sales with OFAC in March 2014. In May 2014, the Company voluntarily filed a supplementary self-disclosure identifying additional sales of automotive HVAC components by the Chinese joint venture, as well as similar sales involving an HVCC subsidiary in China, totaling $12 million, and filed a final voluntary-self disclosure with OFAC on October 17, 2014. OFAC is currently reviewing the results of the Company’s investigation. Following that review, OFAC may conclude that the disclosed sales resulted in violations of U.S. economic sanctions laws and warrant the imposition of civil penalties, such as fines, limitations on the Company's ability to export products from the United States, and/or referral for further investigation by the U.S. Department of Justice. Any such fines or restrictions may be material to the Company’s financial results in the period in which they are imposed, but the Company is not able to estimate the possible loss or range of loss in connection with this matter. Additionally, disclosure of this conduct and any fines or other action relating to this conduct could harm the Company’s reputation and have a material adverse effect on its business, operating results and financial condition. The Company cannot predict when OFAC will conclude its own review of voluntary self-disclosures or whether it may impose any of the potential penalties described above.

The Company's operations in Brazil are subject to highly complex labor, tax, customs and other laws. While the Company believes that it is in compliance with such laws, it is periodically engaged in litigation regarding the application of these laws. The Company maintained accruals of $8$10 million for claims aggregating ~~$52~~$60 million in Brazil as of ~~September~~June 30, ~~2020.~~2021. The amounts accrued represent claims that are deemed probable of loss and are reasonably estimable based on the Company's assessment of the claims and prior experience with similar matters.

The adverse impacts of the COVID-19 pandemic led to a significant reduction in vehicle production in the first half of 2020, which was followed by increased consumer demand and vehicle production schedules in the second half of 2020, particularly in the fourth quarter. Because semiconductor suppliers have been unable to rapidly reallocate production to serve the automotive industry, the surge in demand has led to a worldwide semiconductor supply shortage. The Company's semiconductor suppliers, along with most automotive component supply companies that use semiconductors, have been unable to fully meet the vehicle production demands of our customers due to events which are outside the Company's control, including but not limited to, the COVID-19 pandemic, the global semiconductor shortage, a recent fire at a semiconductor fabrication facility in Japan, significant weather events impacting semiconductor supplier facilities in the southern United States, and other extraordinary events. The Company is working closely with suppliers and customers to attempt to minimize potential adverse impacts of these events. Certain customers have communicated that they expect the Company to absorb some of the financial impact of their reduced production and are reserving their rights to claim damages arising from supply shortages, however, the Company believes it has a number of legal defenses to such claims and intends to defend any such claims vigorously. The Company has also notified semiconductor suppliers that it will seek compensation from them for failure to deliver sufficient quantities. The Company is not able to estimate the possible loss or range of loss in connection with this matter at this time.

While the Company believes its accruals for litigation and claims are adequate, the final amounts required to resolve such matters could differ materially from recorded estimates and the Company's results of operations and cash flows could be materially affected.

Guarantees and Commitments

As part of the agreements involving the divestiture of the Climate business (the "Climate Transaction") and Interiors Divestiture, the Company continues to provide lease guarantees to divested Climate and Interiors entities. As of ~~September~~June 30, ~~2020,~~2021, the Company has $5 million and $1$2 million of outstanding guarantees, related to the divested Climate and Interiors entities, respectively. The guarantees represent the maximum potential amount that the Company could be required to pay under the guarantees in the event of default by the guaranteed parties. The guarantees will generally cease upon expiration of current lease agreement which expire in 2026 and ~~2021~~2024 for the Climate and Interiors entities, respectively.

Product Warranty and Recall

Amounts accrued for product warranty and recall claims are based on management’s best estimates of the amounts that will ultimately be required to settle such items. The Company’s estimates for product warranty and recall obligations are developed with support from its sales, engineering, quality and legal functions and include due consideration of contractual arrangements, past experience, current claims and related information, production changes, industry and regulatory developments and various other considerations. The Company can provide no assurances that it will not experience material claims in the future or that it will not incur significant costs to defend or settle such claims beyond the amounts accrued or beyond what the Company may recover from its suppliers. Specific cause actions represent customer actions related to defective supplier parts and related software.

The following table provides a rollforward of changes in the product warranty and recall claims liability:


		Nine Months Ended September 30,					Six Months Ended June 30,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Beginning balance	Beginning balance	$	49	$	48	Beginning balance	$	64	$	49
Accruals for products shipped		11		15
Provisions						Provisions	8		11
Changes in estimates	Changes in estimates	(2)		2		Changes in estimates	1		(1)
Specific cause actions		5		3

Currency/other						Currency/other	(2)		0
Settlements	Settlements	(14)		(16)		Settlements	(10)		(10)
Foreign currency translation		1		(1)
Ending balance	Ending balance	$	50	$	51	Ending balance	$	61	$	49

Other Contingent Matters

Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against the Company, including those arising out of alleged defects in the Company’s products; governmental regulations relating to safety; employment-related matters; customer, supplier and other contractual relationships; intellectual property rights; product warranties; product recalls; and environmental matters. Some of the foregoing matters may involve compensatory, punitive or antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions, or other relief which, if granted, would require very large expenditures. The Company enters into agreements that contain indemnification provisions in the normal course of business for which the risks are considered nominal and impracticable to estimate.

Contingencies are subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by the Company for matters discussed in the immediately foregoing paragraphs where losses are deemed probable and reasonably estimable. It is possible, however, that some of the matters discussed in the foregoing paragraphs could be decided unfavorably to the Company and could require the Company to pay damages or make other expenditures in amounts, or a range of amounts, that cannot be estimated as of ~~September~~June 30, ~~2020~~2021 and that are in excess of established reserves. The Company does not reasonably expect, except as otherwise described herein, based on its analysis, that any adverse outcome from such matters would have a material effect on the Company’s financial condition, results of operations or cash flows, although such an outcome is possible.

NOTE 15. Segment Information and Revenue Recognition

The Company’s single reportable segment is Electronics. The Company's Electronics segment provides vehicle cockpit electronics products to customers, including instrument clusters, information displays, infotainment systems, audio systems, telematics solutions, head-up displays, as well as battery monitoring systems. As the Company has 1 reportable segment, total assets, depreciation, amortization, and capital expenditures are equal to consolidated results.

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~~non-U.S. GAAP financial measure, as defined below), and operating assets.

The Company’s single 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. As the Company has one reportable segment, net sales, total assets, depreciation, amortization and capital expenditures are equal to consolidated results.

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 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. The Company uses Adjusted EBITDA as a factor in incentive compensation decisions and to evaluate the effectiveness of the Company's business strategies. In addition, 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 (loss) attributable to Visteon is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)	2021		2020		2021		2020
Net income (loss) attributable to Visteon Corporation	Net income (loss) attributable to Visteon Corporation	$	6	$	14	$	(74)	$	35	Net income (loss) attributable to Visteon Corporation	$	(11)	$	(45)	$	5	$	(80)
Depreciation and amortization	Depreciation and amortization	25		25		75		74		Depreciation and amortization	28		25		55		50
Non-cash, stock-based compensation expense	Non-cash, stock-based compensation expense	4		3		13		14		Non-cash, stock-based compensation expense	5		4		9		9
Provision for income taxes	Provision for income taxes	12		13		19		16		Provision for income taxes	4		2		16		7
Interest expense, net	Interest expense, net	5		3		10		7		Interest expense, net	2		3		4		5
Net income attributable to non-controlling interests		4		4		6		7
Restructuring expense, net		32		1		69		2

Net income (loss) attributable to non-controlling interests										Net income (loss) attributable to non-controlling interests	0		3		3		2
Restructuring, net										Restructuring, net	1		4		0		37
Equity in net income of non-consolidated affiliates	Equity in net income of non-consolidated affiliates	(2)		(1)		(4)		(7)		Equity in net income of non-consolidated affiliates	0		(1)		0		(2)
Other	Other	1		0		3		1		Other	1		2		2		2
Adjusted EBITDA	Adjusted EBITDA	$	87	$	62	$	117	$	149	Adjusted EBITDA	$	30	$	(3)	$	94	$	30

Revenue Recognition

Disaggregated ~~revenue~~net sales by geographical market and product lines is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)	2021		2020		2021		2020
Geographical Markets	Geographical Markets									Geographical Markets
Europe	Europe	$	281	$	221	$	667	$	726	Europe	$	219	$	132	$	495	$	386
Americas	Americas	192		201		446		597		Americas	159		62		361		254
China Domestic	China Domestic	140		143		323		372		China Domestic	115		126		239		183
China Export	China Export	58		70		145		204		China Export	43		23		97		87
Other Asia-Pacific	Other Asia-Pacific	107		141		261		440		Other Asia-Pacific	95		38		214		154
Eliminations	Eliminations	(31)		(45)		(81)		(138)		Eliminations	(21)		(10)		(50)		(50)
		$	747	$	731	$	1,761	$	2,201		$	610	$	371	$	1,356	$	1,014


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)	2021		2020		2021		2020
Product Lines	Product Lines									Product Lines
Instrument clusters	Instrument clusters	$	388	$	322	$	901	$	959	Instrument clusters	$	329	$	201	$	716	$	513
Audio and infotainment	Audio and infotainment	134		182		333		562		Audio and infotainment	103		54		248		199
Information displays	Information displays	135		120		298		365		Information displays	96		54		213		163
Body and security	Body and security	28		27		66		91		Body and security	28		13		63		38
Climate controls	Climate controls	14		18		31		59		Climate controls	15		7		29		17
Telematics	Telematics	14		29		43		51		Telematics	16		17		34		29
Other	Other	34		33		89		114		Other	23		25		53		55
		$	747	$	731	$	1,761	$	2,201		$	610	$	371	$	1,356	$	1,014

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, 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 ~~September~~June 30, ~~2020.~~2021.

2423

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations, financial condition, and cash flows of Visteon Corporation (“Visteon” or the “Company”). MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission on February ~~20, 2020,~~18, 2021 and the financial statements and accompanying notes to the financial statements included elsewhere herein.

Executive Summary

Strategic Priorities

Visteon is a global automotive supplier that designs, engineers, and manufactures innovative ~~cockpit~~automotive electronics and connected car solutions for the world’s major vehicle manufacturers. The ~~cockpit~~automotive electronics market is expected to grow faster than underlying vehicle production volumes as the ~~cockpit~~vehicle shifts from analog to digital and towards device and cloud connectivity, electric vehicles, and more advanced safety features.

The Company has laid out the following strategic priorities:

•Technology Innovation - The Company is an established global leader in ~~cockpit~~automotive electronics and is positioned to provide solutions as the industry transitions to the next generation automotive ~~cockpit~~ experience. The cockpit is becoming fully digital, connected, automated, learning, and voice ~~enabled.~~enabled while vehicles are also becoming electric and featuring more advanced safety capabilities. Visteon's broad portfolio of cockpit electronics technology, the industry's first wireless battery management system, and the development of the DriveCore™ advanced safety platform positions Visteon to support these macro trends in the automotive industry.

•Long-Term Growth and Margin Expansion - The Company has continued to win business at a rate that exceeds ~~market growth~~current sales levels by demonstrating product quality, technical and development capability, new product innovation, reliability, timeliness, product design, manufacturing capability, and flexibility, as well as overall customer service.

•Enhance Shareholder Returns - The Company has returned approximately $3.3 billion to shareholders since 2015 through a combination of ongoing share repurchases and a onetime $1.75 billion special distribution in 2016.

2524

Financial Results

The pie charts below highlight the net sales breakdown for ~~Visteon's Electronics segment~~Visteon for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Three Months Ended ~~September~~June 30, ~~2020~~2021

~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

*Regional net sales are based on the geographic region where ~~sale originates~~sales originate and not where customer is located (excludes inter-regional ~~eliminations ).~~eliminations).

Global Automotive Market Conditions

The automotive industry was negatively impacted in 2020 by the COVID-19 pandemic, with industry production coming to a stop at most locations at varying times throughout the first half of the year, followed by a faster than anticipated recovery in the second half of 2020. This trend continued in the second quarter of 2021 with strong retail demand in the United States and ~~Production Levels~~China while dealer inventories have continued to decrease.

~~Third~~The surge in demand in the second half of 2020 has led to a worldwide semiconductor supply shortage, both in automotive and in other industries, through the second quarter ~~2020 global light vehicle~~of 2021. In addition, recent events including unusually cold weather in Austin, Texas in February and a supplier fire in Japan have led to reduced semiconductor availability. These factors have been further exacerbated by the continued COVID-19 pandemic and other supply chain related disruptions such as the Suez Canal blockage. The magnitude of the impact on the Company's 2021 financial statements and results of operations and cash flows will depend on the evolution of the semiconductor supply shortage, related plant production ~~decreased 3% over the same period last year. Light vehicle production levels for the nine months ended September 30, 2020~~schedules and ~~2019 by geographic region are provided below:~~

(Units in millions) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 Change 2020 2019 Change
China 6.4 5.8 10.6 % 15.8 17.3 (8.8) %
Other Asia Pacific 4.5 5.2 (14.7) % 11.9 16.3 (27.3) %
Europe 4.3 4.7 (7.7) % 11.2 16.0 (29.5) %
Americas 4.7 4.9 (3.4) % 10.7 15.0 (28.9) %
Other 0.4 0.4 — % 1.2 1.5 (19.4) %
Global 20.3 21.0 (3.4) % 50.8 66.1 (23.2) %
Source: IHS Automotive, October 2020
supply chain impacts.

2625

Results of Operations - Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

The Company's consolidated results of operations for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended September 30,							Three Months Ended June 30,
(In millions)	(In millions)	2020		2019		Change		(In millions)	2021		2020		Change
Net sales	Net sales	$	747	$	731	$	16	Net sales	$	610	$	371	$	239
Cost of sales	Cost of sales	(648)		(647)		(1)		Cost of sales	(575)		(367)		(208)
Gross margin	Gross margin	99		84		15		Gross margin	35		4		31
Selling, general and administrative expenses	Selling, general and administrative expenses	(45)		(52)		7		Selling, general and administrative expenses	(44)		(41)		(3)
Restructuring expense, net		(32)		(1)		(31)
Restructuring, net								Restructuring, net	(1)		(4)		3
Interest expense, net	Interest expense, net	(5)		(3)		(2)		Interest expense, net	(2)		(3)		1
Equity in net income of non-consolidated affiliates	Equity in net income of non-consolidated affiliates	2		1		1		Equity in net income of non-consolidated affiliates	—		1		(1)
Other income, net	Other income, net	3		2		1		Other income, net	5		3		2
Provision for income taxes	Provision for income taxes	(12)		(13)		1		Provision for income taxes	(4)		(2)		(2)

Net income (loss)	Net income (loss)	10		18		(8)		Net income (loss)	(11)		(42)		31
Net income attributable to non-controlling interests		(4)		(4)		—
Less: Net (income) loss attributable to non-controlling interests								Less: Net (income) loss attributable to non-controlling interests	—		(3)		3
Net income (loss) attributable to Visteon Corporation	Net income (loss) attributable to Visteon Corporation	$	6	$	14	$	(8)	Net income (loss) attributable to Visteon Corporation	$	(11)	$	(45)	$	34
Adjusted EBITDA*	Adjusted EBITDA*	$	87	$	62	$	25	Adjusted EBITDA*	$	30	$	(3)	$	33
* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.	* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.							* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.

Net Sales, Cost of Sales and Gross Margin


(In millions)	(In millions)	Net Sales		Cost of Sales		Gross Margin		(In millions)	Net Sales		Cost of Sales		Gross Margin
Three months ended September 30, 2019		$	731	$	(647)	$	84
Three months ended June 30, 2020								Three months ended June 30, 2020	$	371	$	(367)	$	4
Volume, mix, and net new business	Volume, mix, and net new business	38		(50)		(12)		Volume, mix, and net new business	236		(180)		56
Currency	Currency	(3)		1		(2)		Currency	20		(16)		4
Customer pricing	Customer pricing	(17)		—		(17)		Customer pricing	(13)		—		(13)
Engineering costs, net *	Engineering costs, net *	—		24		24		Engineering costs, net *	—		1		1
Cost performance, design changes and other	Cost performance, design changes and other	(2)		24		22		Cost performance, design changes and other	(4)		(13)		(17)
Three months ended September 30, 2020		$	747	$	(648)	$	99
Three months ended June 30, 2021								Three months ended June 30, 2021	$	610	$	(575)	$	35
*Excludes the impact of currency.	*Excludes the impact of currency.							*Excludes the impact of currency.

Net sales for the three months ended ~~September~~June 30, ~~2020~~2021 totaled ~~$747~~$610 million, representing an increase of ~~$16~~$239 million compared with the same period of ~~2019.~~2020. Volumes and net new business increased net sales by ~~$38~~$236 million. ~~Unfavorable~~Favorable currency ~~decreased~~increased net sales by $3$20 million, primarily attributable to the euro, ~~Brazilian real~~Japanese yen and Chinese renminbi. Customer pricing decreased net sales by ~~$17~~$13 million. Cost performance and design changes ~~and other revenue claims~~ decreased net sales by $2$4 million.

Cost of sales increased by $1$208 million for the three months ended ~~September~~June 30, ~~2020~~2021 compared with the same period in ~~2019. Increased volumes~~2020. Volume, mix and ~~unfavorable product mix,~~net new business increased cost of sales by ~~$50~~$180 million. Foreign currency ~~decreased~~increased cost of sales by $1$16 million, primarily attributable to the euro, Mexican peso and Chinese renminbi. Net engineering costs, excluding currency, decreased cost of sales by ~~$24~~$1 million. ~~Favorable~~Unfavorable cost performance primarily due to ~~material,~~the semiconductor supply shortage and the non-recurrence of certain 2020 temporary cost control measures, partially offset by design ~~and usage economics decreased~~changes increased cost of sales by ~~$24~~$13 million.

~~A summary of net engineering costs is shown below:~~

Three Months Ended September 30,
(In millions) 2020 2019
Gross engineering costs $ (79) $ (105)
Engineering recoveries 31 32
Engineering costs, net $ (48) $ (73)

Gross engineering costs relate to forward model program development and advanced engineering activities and exclude contractually reimbursable engineering costs. Net engineering costs of $48 million for the three months ended September 30, 2020, including the impacts of currency, were $25 million lower than the same period of 2019, primarily related to short-term and long-term cost reduction initiatives including the benefits of previously announced restructuring actions implemented to optimize structure while supporting future growth.

The Company's gross margin was $99 million or 13.3% of net sales for the three months ended September 30, 2020 compared to $84 million or 11.5 % of net sales for the same period of 2019. Increased volumes offset by unfavorable product mix decreased gross margin by $12 million. Lower net engineering costs excluding currency, increased gross margin by $24 million. Favorable cost performance of $20 million, including material, design and usage economics, lower manufacturing costs, and the non-recurrence of prior year operational challenges more than offset annual customer pricing of $17 million.

~~Selling, General and Administrative Expenses~~

Selling, general, and administrative expenses were $45 million or 6.0% and $52 million or 7.1% of net sales, during the three months ended September 30, 2020 and 2019, respectively. The decrease is primarily related to temporary salary reductions, other cost reduction initiatives, and previously announced restructuring actions.

~~Restructuring Expense, Net~~

~~Restructuring actions initiated during 2020 include the following :~~

•In September, in response to COVID-19 and to improve efficiency and rationalize the Company’s footprint, the Company approved a plan related to cash severance, retention, and termination costs. The Company has incurred $31 million in restructuring costs related to this plan.

•In March, the Company approved a global restructuring plan impacting engineering, administrative and manufacturing functions to improve the Company’s efficiency and rationalize its footprint. During the three months ended September 30, 2020, the Company recorded net restructuring expense of $1 million in relation to the program.

•In January, the Company approved a plan primarily related to European engineering and administrative functions to improve the Company’s efficiency and rationalize its footprint. During the three months ended September 30, 2020, the Company recorded net restructuring expense of $1 million in relation to the program.

During the third quarter of 2018, the Company approved a restructuring program impacting engineering and administrative functions to optimize operations. During the three months ended September 30, 2019, the Company has recorded net restructuring expense of approximately $1 million.

~~Interest Expense, Net~~

Interest expense, net, of $5 million and $2 million for the three months ended September 30, 2020 and 2019, respectively. The increase in net interest expense is primarily due to interest on the $400 million revolving credit facility.

~~Equity in Net Income of Non-Consolidated Affiliates~~

Equity in net income of non-consolidated affiliates was $2 million and $1 million for the three month periods ending September 30, 2020 and 2019, respectively. The increase in income is primarily attributable due to increased engineering services revenue at the Company's equity investment in Yanfeng Visteon Investment Company.

~~Other Income, Net~~

~~Other income, net of $3 million and $2 million for the three month periods ending September 30, 2020 and 2019, respectively, is primarily due to net pension financing benefits.~~

~~Income Taxes~~

The Company's provision for income taxes of $12 million for the three months ended September 30, 2020, represents a decrease of $1 million, when compared with $13 million in the same period of 2019. The decrease in tax expense is primarily attributable to changes in the mix of earnings and differing tax rates between jurisdictions which reflects the overall decrease in year-over-year earnings in jurisdictions where the Company is profitable and withholding taxes. These decreases were partially offset by a reassessment of the valuation allowances in connection with the realization of deferred tax assets in Germany resulting in recording a $4 million discrete income tax expense adjustment during the three months ended September 30, 2020.

~~Adjusted EBITDA~~

Adjusted EBITDA (a non-GAAP financial measure, as defined in Note 15, "Segment Information") was $87 million for the three months ended September 30, 2020, representing an increase of $25 million when compared to Adjusted EBITDA of $62 million for the same period of 2019. Increased volumes offset by unfavorable product mix decreased Adjusted EBITDA by $12 million. Lower net engineering costs, excluding currency, increased Adjusted EBITDA by $24 million. Favorable cost performance of $30 million, including material, design and usage economics, lower manufacturing costs, lower selling, general, and administrative expenses, and the non-recurrence of prior year operational challenges, more than offset annual customer pricing of $17 million.

~~The reconciliation of net income (loss) attributable to Visteon to Adjusted EBITDA for the three months ended September 30, 2020 and 2019, is as follows:~~

Three Months Ended September 30,
(In millions) 2020 2019 Change
Net income (loss) attributable to Visteon Corporation $ 6 $ 14 $ (8)
  Depreciation and amortization 25 25 —
  Provision for income taxes 12 13 (1)
  Non-cash, stock-based compensation expense 4 3 1
  Interest expense, net 5 3 2
  Net income attributable to non-controlling interests 4 4 —
  Restructuring expense, net 32 1 31
  Equity in net income of non-consolidated affiliates (2) (1) (1)
  Other 1 — 1
Adjusted EBITDA $ 87 $ 62 $ 25

~~Results of Operations - Nine Months Ended September 30, 2020 and 2019~~

~~The Company's consolidated results of operations for the nine months ended September 30, 2020 and 2019 were as follows:~~

Nine Months Ended September 30,
(In millions) 2020 2019 Change
Net sales $ 1,761 $ 2,201 $ (440)
Cost of sales (1,605) (1,981) 376
Gross margin 156 220 (64)
Selling, general and administrative expenses (140) (167) 27
Restructuring expense, net (69) (2) (67)
Interest expense, net (10) (7) (3)
Equity in net income of non-consolidated affiliates 4 7 (3)
Other income, net 10 7 3
Provision for income taxes (19) (16) (3)
Net income (loss) (68) 42 (110)
Net income attributable to non-controlling interests (6) (7) 1
Net income (loss) attributable to Visteon Corporation $ (74) $ 35 $ (109)
Adjusted EBITDA* $ 117 $ 149 $ (32)
* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.

~~Net Sales, Cost of Sales and Gross Margin~~

(In millions) Net Sales Cost of Sales Gross Margin
Nine months ended September 30, 2019 $ 2,201 $ (1,981) $ 220
Volume, mix, and net new business (383) 209 (174)
Currency (21) 15 (6)
Customer pricing (40) — (40)
Engineering costs, net* — 74 74
Cost performance 4 78 82
Nine months ended September 30, 2020 $ 1,761 $ (1,605) $ 156
*Excludes the impact of currency.

Net sales for the nine months ended September 30, 2020 totaled $1,761 million, which represents a decrease of $440 million compared with the same period of 2019. Unfavorable volumes, primarily driven by COVID-19, decreased net sales by $383 million. Unfavorable currency decreased net sales by $21 million, primarily attributable to the euro, Chinese renminbi, and Brazilian real. Customer pricing decreased net sales by $40 million. Cost performance, design changes and other revenue claims increased net sales by $4 million.

Cost of sales decreased by $376 million for the nine months ended September 30, 2020 when compared with the same period in 2019. Unfavorable volumes and product mix decreased cost of sales by $209 million. Foreign currency decreased cost of sales by $15 million primarily attributable to the euro, Chinese renminbi, and Mexican peso. Engineering costs, net, excluding currency, decreased cost of sales by $74 million. Favorable cost performance, including material, design and usage economics, lower manufacturing costs, and the non-recurrence of prior year operational challenges, decreased cost of sales by $78 million.

3026

A summary of net engineering costs is shown below:


		Nine Months Ended September 30,				Three Months Ended June 30,
(In millions)	(In millions)	2020		2019			(In millions)	2021		2020
Gross engineering costs	Gross engineering costs	$	(257)	$	(326)		Gross engineering costs	$	(86)	$	(78)
Engineering recoveries	Engineering recoveries	91		81			Engineering recoveries	39		33
Engineering costs, net	Engineering costs, net	$	(166)	$	(245)		Engineering costs, net	$	(47)	$	(45)

Gross engineering costs relate to forward model program development and advanced engineering activities and exclude contractually reimbursable engineering costs. Net engineering costs of ~~$166~~$47 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020,~~2021, including the impacts of currency, were ~~$79~~$2 million ~~lower~~higher than the same period of ~~2019,~~2020. The increase is primarily related to ~~short-term~~the reclassification of certain program expenses from selling, general and ~~long-term cost reduction initiatives including~~administrative expenses to align with the Company's optimized structure partially offset by benefits of previously announced restructuring actions ~~implemented to optimize structure while supporting future growth.~~and ongoing cost reduction efforts.

~~Gross~~The Company's gross margin was ~~$156~~$35 million or ~~8.9%~~5.7% of net sales for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$220~~$4 million or ~~10.0 %~~1.1% of net sales for the same period of ~~2019. Gross margin was impacted by $174~~2020. Favorable volumes of $56 million ~~by unfavorable volumes and product mix. Unfavorable currency of $6 million reflected the Brazilian real and Indian rupee,~~were partially offset by ~~the Japanese yen, Chinese renminbi, and Mexican peso. Lower engineering costs, excluding~~annual customer pricing of $13 million. Favorable foreign currency impacts increased gross margin by ~~$74 million. Favorable~~$4 million, primarily attributable to the euro, Mexican peso and Chinese renminbi. Unfavorable cost performance decreased gross margin by $17 million primarily due to one-time logistics and additional material and freight costs associated with shortage of ~~$82 million, which includes material, design and usage economics, lower manufacturing costs,~~semiconductor microchips and the non-recurrence of ~~prior year operational challenges more than offset annual customer pricing of $40 million.~~

certain 2020 temporary cost control measures.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses were ~~$140~~$44 million or ~~8.0%~~7.2% of net sales and ~~$167~~$41 million or ~~7.6%~~11.1% of net sales, during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~decrease~~increase is primarily due to unfavorable impact of currency and the non-recurrence of certain 2020 temporary cost control measures.

Restructuring, Net

During the second quarter of 2021, the Company approved various restructuring actions, primarily related to ~~temporary salary reductions, previously announced restructuring actions and other cost reduction initiatives.~~

~~Restructuring Expense,~~Brazil. Net

~~Restructuring actions initiated during 2020 include the following :~~

•In March, the Company approved a global restructuring plan impacting engineering, administrative and manufacturing functions to improve the Company’s efficiency and rationalize its footprint. The Company incurred $16 million of net restructuring expense for ~~cash severance, retention, and termination costs~~the second quarter 2021, including a change in estimate related to ~~this plan.~~

•~~During the nine months ended September 30, 2020, the Company incurred~~previous actions, totaled $1 million, ~~of restructuring expense for cash severance payments at two North American manufacturing facilities.~~

During the third quarter of 2018, the Company approved a restructuring program impacting engineering and administrative functions to optimize operations. During the nine months ended September 30, 2019, the Company recorded net restructuring expense of approximately $1 million.net.

Interest Expense, Net

Interest expense, net, ~~was $10~~of $2 million and $7$3 million for the ~~nine~~three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019 respectively. The increase in net interest expense~~respectively, is primarily ~~due~~related to ~~interest on~~ the ~~$400 million revolving credit facility.~~

Company's Term Loan Facility.

Equity in Net Income of Non-Consolidated Affiliates

Equity in net income of non-consolidated affiliates was $4less than $1 million and $7$1 million for ~~the nine month periods ending September~~three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The decrease in ~~equity~~ income is primarily attributable to due to increased engineering ~~services revenue~~expenses at the Company's equity investment in Yanfeng Visteon Investment ~~Company.~~Co., Ltd.

Other Income, Net

Other income, net ~~consists~~ of ~~$10~~$5 million and $7$3 million for the ~~nine months ended September~~three-month periods ending June 30, ~~2020~~2021 and ~~2019, respectively,~~2020 is primarily due to net pension financing benefits.

Income Taxes

The Company's provision for income taxes of ~~$19~~$4 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020 represents~~2021, an increase of $3$2 million ~~when~~ compared with ~~$16~~$2 million in the same period of ~~2019.~~2020. The increase in tax expense ~~is primarily~~includes approximately $4 million attributable to ~~a reassessment of~~ the ~~2020 valuation allowances~~overall increase in connection with the realization of deferred tax assets in Germany as well as the non-recurrence of a 2019 discrete income tax valuation allowance release in Germany, resulting in a year-over-year income tax expense increase of $16 million. This increase was partially offset by approximately $13 million decrease in income tax expense primarily due topretax earnings, including changes in the mix of earnings and differing tax rates between jurisdictions, ~~which reflects the overall decrease in year-over-year earnings in jurisdictions where the Company is profitable~~ and withholding taxes. These increases were offset by $2 million year-over-year decreases related to enacted tax law changes in the U.K. resulting in the remeasurement of net deferred tax assets and uncertain tax positions.

Adjusted EBITDA

Adjusted EBITDA (a non-GAAP financial measure, as defined in Note 15, "Segment Information") was ~~$117~~$30 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020,~~2021, representing ~~a decrease~~an increase of ~~$32~~$33 million when compared to ~~Adjusted EBITDA~~a loss of ~~$149~~$3 million for the same period of ~~2019. Decreased volumes and unfavorable product mix reduced Adjusted EBITDA by $174 million.~~2020. Foreign currency decreased Adjusted EBITDA by $4 million attributable to the Brazilian real and Indian rupee, partially offset by the euro, Japense yen, Chinese renminbi, and Mexican peso. Lower net engineering costs, excluding currency increased Adjusted EBITDA by ~~$74~~$2 million, primarily attributable to the euro, Mexican peso, and Chinese renminbi. Favorable volumes increased Adjusted EBITDA by $56 million. ~~Favorable cost performance~~Other changes include annual customer pricing of ~~$112~~$13 million ~~which includes material, design~~ and ~~usage economics, lower manufacturing~~other one-time costs ~~lower selling, general, and administrative expenses,~~associated with the semiconductor supply shortage and the non-recurrence of ~~prior year operational challenges, more than offset annual customer pricing of $40 million.~~certain 2020 temporary cost control measures.

The reconciliation of net income (loss) attributable to Visteon to Adjusted EBITDA for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, is as follows:

Nine Months Ended September 30,
(In millions) 2020 2019 Change
Net income (loss) attributable to Visteon Corporation $ (74) $ 35 $ (109)
  Depreciation and amortization 75 74 1
  Non-cash, stock-based compensation expense 13 14 (1)
  Provision for income taxes 19 16 3
  Interest expense, net 10 7 3
  Net income attributable to non-controlling interests 6 7 (1)
  Restructuring expense, net 69 2 67
  Equity in net income of non-consolidated affiliates (4) (7) 3
  Other 3 1 2
Adjusted EBITDA $ 117 $ 149 $ (32)


	Three Months Ended June 30,
(In millions)	2021		2020		Change
Net income (loss) attributable to Visteon Corporation	$	(11)	$	(45)	$	34
Depreciation and amortization	28		25		3
Provision for income taxes	4		2		2
Non-cash, stock-based compensation expense	5		4		1
Interest expense, net	2		3		(1)
Net income (loss) attributable to non-controlling interests	—		3		(3)
Restructuring expense, net	1		4		(3)

Equity in net income of non-consolidated affiliates	—		(1)		1
Other	1		2		(1)
Adjusted EBITDA	$	30	$	(3)	$	33

3228

Results of Operations - Six Months Ended June 30, 2021 and 2020

The Company's consolidated results of operations for the six months ended June 30, 2021 and 2020 were as follows:


	Six Months Ended June 30,
(In millions)	2021		2020		Change
Net sales	$	1,356	$	1,014	$	342
Cost of sales	(1,248)		(957)		(291)
Gross margin	108		57		51
Selling, general and administrative expenses	(89)		(95)		6
Restructuring, net	—		(37)		37
Interest expense, net	(4)		(5)		1
Equity in net income of non-consolidated affiliates	—		2		(2)
Other income, net	9		7		2
Provision for income taxes	(16)		(7)		(9)


Net income (loss)	8		(78)		86
Less: Net (income) loss attributable to non-controlling interests	(3)		(2)		(1)
Net income (loss) attributable to Visteon Corporation	$	5	$	(80)	$	85
Adjusted EBITDA*	$	94	$	30	$	64
* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.

Net Sales, Cost of Sales and Gross Margin


(In millions)	Net Sales		Cost of Sales		Gross Margin
Six months ended June 30, 2020	$	1,014	$	(957)	$	57
Volume, mix, and net new business	338		(269)		69
Currency	36		(26)		10
Customer pricing	(32)		—		(32)
Engineering costs, net *	—		17		17
Cost performance, design changes and other	—		(13)		(13)
Six months ended June 30, 2021	$	1,356	$	(1,248)	$	108
*Excludes the impact of currency.

Net sales for the six months ended June 30, 2021 totaled $1,356 million, representing an increase of $342 million compared with the same period of 2020. Volume, mix, and net new business increased net sales by $338 million. Favorable currency increased net sales by $36 million, primarily attributable to the euro, Japanese yen and Chinese renminbi. Customer pricing decreased net sales by $32 million.

Cost of sales increased by $291 million for the six months ended June 30, 2021 compared with the same period in 2020. Volume, mix and net new business increased cost of sales by $269 million. Foreign currency increased cost of sales by $26 million, primarily attributable to the euro, Mexican peso and Chinese renminbi. Net engineering costs, excluding currency, decreased cost of sales by $17 million. Unfavorable cost performance of $13 million was due to increased one-time logistics and material costs associated with the semiconductor supply shortage and the non-recurrence of certain 2020 temporary cost control measures.

A summary of net engineering costs is shown below:


	Six Months Ended June 30,
(In millions)	2021		2020
Gross engineering costs	$	(166)	$	(178)
Engineering recoveries	60		60
Engineering costs, net	$	(106)	$	(118)

Gross engineering costs relate to forward model program development and advanced engineering activities and exclude contractually reimbursable engineering costs. Net engineering costs of $106 million for the six months ended June 30, 2021, including the impacts of currency, were $12 million lower than the same period of 2020. The decrease is primarily related to the benefits of previously announced restructuring actions and ongoing cost reduction efforts partially offset by the reclassification of certain program expenses from selling, general and administrative expenses to align with the Company's optimized structure.

The Company's gross margin was $108 million or 8.0% of net sales for the six months ended June 30, 2021 compared to $57 million or 5.6% of net sales for the same period of 2020. Favorable volumes of $69 million partially offset annual customer pricing of $32 million. Lower net engineering costs excluding currency, increased gross margin by $17 million. Unfavorable cost performance increased cost of sales $13 million due to increased one-time logistics and material costs associated with the semiconductor supply shortage and the non-recurrence of certain 2020 austerity measures.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses were $89 million or 6.6% of net sales and $95 million or 9.4% of net sales, during the six months ended June 30, 2021 and 2020, respectively. The decrease is primarily related to previously announced restructuring actions and the reclassification of certain program expenses to gross engineering costs to align with the Company's optimized structure partially offset by the non-recurrence of certain 2020 temporary cost control measures.

Restructuring, Net

During the first half of 2021, the Company approved and recorded $2 million of net restructuring expense for various restructuring actions, primarily related to Brazil. This increase was partially offset by changes in estimates related to previous actions.

Interest Expense, Net

Interest expense, net, of $4 million and $5 million for the six months ended June 30, 2021 and 2020, respectively, is primarily related to the Company's Term Loan Facility.

Equity in Net Income of Non-Consolidated Affiliates

Equity in net income of non-consolidated affiliates was less than $1 million and $2 million for the six month periods ending June 30, 2021 and 2020. The decrease in income is primarily attributable due to increased engineering expenses at the Company's equity investment in Yanfeng Visteon Investment Co., Ltd.

Other Income, Net

Other income, net of $9 million and $7 million for the six-month periods ending June 30, 2021 and 2020 is primarily due to net pension financing benefits.

Income Taxes

The Company's provision for income taxes of $16 million for the six months ended June 30, 2021, represents an increase of $9 million, when compared with $7 million in the same period of 2020. The increase in tax expense includes approximately $7 million attributable to the overall increase in pretax earnings, including changes in the mix of earnings and differing tax rates between jurisdictions, and withholding taxes. Other year-over-year increases include $1 million related to uncertain tax positions attributable to certain related party transactions and $2 million related to enacted tax law changes in India, partially offset by $1 million related to enacted tax law changes in the UK resulting in the remeasurement of net deferred tax assets.

Adjusted EBITDA

Adjusted EBITDA (a non-GAAP financial measure, as defined in Note 15, "Segment Information") was $94 million for the six months ended June 30, 2021, representing an increase of $64 million when compared to Adjusted EBITDA of $30 million for the same period of 2020. Favorable volumes increased Adjusted EBITDA by $69 million. Foreign currency increased Adjusted EBITDA by $7 million, primarily attributable to the euro, Mexican peso, and Chinese renminbi. Lower net engineering costs, excluding currency, increased Adjusted EBITDA by $17 million. Other changes include annual customer pricing of $32 million partially offset by cost performance, design and usage economics and the non-recurrence of certain 2020 temporary cost control measures.

The reconciliation of net income (loss) attributable to Visteon to Adjusted EBITDA for the six months ended June 30, 2021 and 2020, is as follows:


	Six Months Ended June 30,
(In millions)	2021		2020		Change
Net income (loss) attributable to Visteon Corporation	$	5	$	(80)	$	85
Depreciation and amortization	55		50		5
Provision for income taxes	16		7		9
Non-cash, stock-based compensation expense	9		9		—
Interest expense, net	4		5		(1)
Net income (loss) attributable to non-controlling interests	3		2		1
Restructuring expense, net	—		37		(37)

Equity in net income of non-consolidated affiliates	—		(2)		2
Other	2		2		—
Adjusted EBITDA	$	94	$	30	$	64

Liquidity

The Company's primary sources of liquidity are cash flows from operations, existing cash balances, and borrowings under available credit facilities. As we continue to ~~confront~~evaluate ongoing impacts of the ~~many challenges caused by~~COVID-19 pandemic including the ~~impact of COVID-19, including governmental actions to mitigate the pandemic,~~semiconductor supply shortage and other supply chain impacts, the Company believes ~~that~~ funds generated from these sources will ~~be sufficient~~continue to sufficiently sustain ongoing operations and support investment in differentiating technologies. The Company will continue to closely monitor ~~and preserve~~ its available liquidity and maintain access to additional liquidity to weather these challenging conditions. The Company's intra-year needs are normally impacted by seasonal effects in the industry, such as mid-year shutdowns, the ramp-up of new model production, and year-end shutdowns at key customers. The ongoing COVID-19 pandemic and related semiconductor supply shortage may ~~significantly~~ exacerbate the intra-year requirements.

A substantial portion of the Company's cash flows from operations are generated by operations located outside of the United States. Accordingly, the Company utilizes a combination of cash repatriation strategies, including dividends and distributions, royalties, and other intercompany arrangements to provide the funds necessary to meet obligations globally. The Company’s ability to access funds from its subsidiaries is subject to, among other things, customary regulatory and statutory requirements and contractual arrangements including joint venture agreements and local credit facilities. Moreover, repatriation efforts may be modified by the Company according to prevailing circumstances.

On March 19, 2020, the Company borrowed, the entire $400 million amount available under the revolving credit facility. On September 24, 2020, the Company fully repaid the amount borrowed under the Revolving Credit Facility following stronger than expected industry recovery and improved Company performance in the third quarter of 2020.

Access to additional capital through the debt or equity markets is influenced by the Company's credit ratings. As of ~~September~~June 30, ~~2020,~~2021, the Company’s corporate credit rating is Ba3 and BB- by Moody’s and Standard & Poor’s, respectively. See Note 8, "Debt" for a comprehensive discussion of the Company's debt facilities. Incremental funding requirements of the Company's consolidated foreign entities are primarily accommodated by intercompany cash pooling structures. Affiliate working capital lines, which ~~are~~may be utilized by the Company's local subsidiaries and consolidated joint ventures, had availability of ~~$153~~$179 million and the Company had $400 million of available credit under the revolving credit facility, as of ~~September~~June 30, ~~2020.~~2021.

Cash Balances

As of ~~September~~June 30, ~~2020,~~2021, the Company had total cash and cash equivalents of ~~$435~~$470 million, including $4 million of restricted cash. Cash balances totaling ~~$351~~$407 million were located in jurisdictions outside of the United States, of which ~~$135~~approximately $195 million is considered permanently reinvested for funding ongoing operations outside of the U.S. If such permanently reinvested funds were repatriated to the U.S., no U.S. federal taxes would be imposed on the distribution of such foreign earnings due to U.S. tax reform enacted in December 2017. However, the Company would be required to accrue additional tax expense, primarily related to foreign withholding taxes.

Other Items Affecting Liquidity

~~As of September~~During the six months ended June 30, ~~2020,~~2021, cash contributions to the Company has $364 million available for additional share repurchases under the Board of Directors authorization which expires on December 31, 2020. The Company currently does not intend to repurchase additional shares under this authorization.

~~The Company has deferred approximately $17 million of contributions related to its~~Company's defined benefit ~~U.S. pension~~ plans ~~pursuant to COVID-19 relief measures. The Company intends to make contributions related to such~~were approximately $8 million for U.S. plans ~~by year end 2020.~~and $3 million for non-U.S. plans. The Company estimates that total cash contributions ~~related~~ to its ~~non-U.S. defined benefit~~pension plans during 2021 will ~~approximate $1 million for the remainder of 2020. Contributions of $3 million have been made and~~be approximately ~~$2 million deferred until 2024, due to COVID-19 relief measures, for these non-U.S. plans.~~$25 million.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company paid ~~$23~~$25 million related to restructuring activities. Additional discussion regarding the Company's restructuring activities is ~~provided~~included in Note 3, "Restructuring Activities."

The Company committed to make a $15 million investment in two ~~entities~~funds managed by venture capital firms principally focused on the automotive sector pursuant to limited partnership agreements. As of ~~September~~June 30, ~~2020,~~2021, the Company contributed $3$7 million toward the aggregate investment commitments. As a limited partner in each entity, the Company will periodically make capital contributions toward this total commitment amount.

3332

Cash Flows

Operating Activities

The Company generated ~~$97~~$1 million of cash from operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, representing a ~~$21~~$14 million ~~decrease~~improvement as compared to cash ~~generated~~used by operations of ~~$118~~$13 million during the same period of ~~2019. Although the Company generated lower~~2020. The increase in cash from ~~operating activities, the Company's implemented significant actions~~operations is primarily attributable to preserve cash and liquidity during the nine months ended September 30, 2020 that substantially mitigated the impact that COVID-19 might have otherwise had on the Company's results. Notwithstanding these successful efforts, operating cash flows declined by $32 million, due to lowerhigher Adjusted EBITDA (a non-GAAP financial measure, as discussed in Note 15, "Segment Information"). of $64 million partially offset by an increase in the use of cash by working capital, primarily as a result of the semiconductor supply shortage.

Investing Activities

~~Cash used by investing activities during the nine months ended September 30, 2020 totaled $77 million.~~ Net cash used by investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020 included capital expenditures~~2021 totaled $31 million, representing a $26 million decrease as compared to $57 million use of ~~$83 million, primarily to support new business, partially offset by proceeds~~cash from ~~the settlement of net investment hedging transactions and loan repayments received from non-consolidated affiliate.~~

~~Cash used by~~ investing activities during the ~~nine~~same period in 2020. Lower cash used from investing activities is primarily attributable to a $32 million reduction in capital expenditures during the six months ended ~~September~~June 30, ~~2019 totaled $96 million, including capital expenditures of $109 million which was partially offset by proceeds from non-consolidated affiliate loan repayments.~~2021 as compared to the same period in 2020.

Financing Activities

Cash ~~used~~provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020 totaled $60~~2021 was $6 million, as compared to ~~a use of~~$363 million cash ~~of $35 million~~provided by financing activities during the same period in ~~2019,~~2020, representing ~~an increase~~a decrease of cash used by financing activities of ~~$25~~$357 million. Net cash ~~used~~provided during the six months ended June 30, 2021 is attributable to local working capital borrowings in Russia and Brazil of $1 million and $5 million, respectively.

Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, 2020 is primarily attributable to the ~~repayment of $37~~Company's $400 million borrowings under its corporate revolving loan facility, which is partially offset by $16 million for share repurchases, $7 million of ~~short-term~~dividends paid to non-controlling interests and net reduction of affiliate debt primarily at the Company's Chinese joint venture ~~operations, $16 million of share repurchases, and $7 million of dividends paid to non-controlling interests.~~

Net cash used by financing activities during the nine months ended September 30, 2019 is attributable to $20 million of share repurchases, the repayment of $8 million of short-term debt primarily at the Company's Chinese joint venture operations, and $7 million of dividends paid to non-controlling interests.operations.

Debt and Capital Structure

See Note 8, “Debt” to the condensed consolidated financial statements included in Item 1.

Significant Accounting Policies and Critical Accounting Estimates

See Note 1, “Summary of Significant Accounting Policies” to the accompanying condensed consolidated financial statements in Item 1.

Fair Value Measurements

See Note 13, “Fair Value Measurements and Financial Instruments” to the condensed consolidated financial statements included in Item 1.

Recent Accounting Pronouncements

See Note 1, “Summary of Significant Accounting Policies” to the accompanying condensed consolidated financial statements in Item 1.

3433

Forward-Looking Statements

Certain statements contained or incorporated in this Quarterly Report on Form 10-Q which are not statements of historical fact constitute “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward-looking statements give current expectations or forecasts of future events. Words such as “anticipate”, “expect”, “intend”, “plan”, “believe”, “seek”, “estimate” and other words and terms of similar meaning in connection with discussions of future operating or financial performance signify forward-looking statements. These statements reflect the Company’s current views with respect to future events and are based on assumptions and estimates, which are subject to risks and uncertainties. Accordingly, undue reliance should not be placed on these forward-looking statements. Also, these forward-looking statements represent the Company’s estimates and assumptions only as of the date of this report. The Company does not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made and qualifies all of its forward-looking statements by these cautionary statements.

You should understand that various factors, in addition to those discussed elsewhere in this document, could affect the Company’s future results and could cause results to differ materially from those expressed in such forward-looking statements, including:

•Continued and future impacts of the ~~COVID-19~~coronavirus ("COVID-19") pandemic on ~~our~~the Visteon’s financial condition and business operations including global supply chain disruptions, market downturns, reduced consumer demand, and new government actions or restrictions.

•Significant or prolonged shortage of critical components from Visteon’s suppliers including, but not limited to semiconductors, and particularly those components from suppliers who are sole or primary sources.

•Significant changes in the competitive environment in the major markets where Visteon procures materials, components, or supplies or where its products are manufactured, distributed, or sold.

•Visteon’s ability to satisfy its future capital and liquidity requirements; Visteon’s ability to access the credit and capital markets at the times and in the amounts needed and on terms acceptable to Visteon; Visteon’s ability to comply with covenants applicable to it; and the continuation of acceptable supplier payment terms.

•Visteon’s ability to satisfy its pension and other postretirement employee benefit obligations; and to retire outstanding debt and satisfy other contractual commitments at the levels and times planned by management.

•Visteon’s ability to access funds generated by its foreign subsidiaries and joint ventures on a timely and cost-effective basis.

•Changes in the operations (including products, product planning and part sourcing), financial condition, results of operations, or market share of Visteon’s customers.

•Changes in vehicle production volume of Visteon’s customers in the markets where it operates.

•Increases in commodity costs or disruptions in the supply of commodities, including resins, copper, fuel, and natural gas.

•Visteon’s ability to generate cost savings to offset or exceed agreed-upon price reductions or price reductions to win additional business and, in general, improve its operating performance; to achieve the benefits of its restructuring actions; and to recover engineering and tooling costs and capital investments.

•Visteon’s ability to compete favorably with automotive parts suppliers with lower cost structures and greater ability to rationalize ~~operations~~operations; and to exit non-performing businesses on satisfactory terms, particularly due to limited flexibility under existing labor agreements.

•Restrictions in labor contracts with unions that restrict Visteon’s ability to close plants, divest unprofitable, noncompetitive businesses, change local work rules and practices at a number of facilities and implement cost-saving measures.

•The costs and timing of facility closures or dispositions, business or product realignments, or similar restructuring actions, including potential asset impairment or other charges related to the implementation of these actions or other adverse industry conditions and contingent liabilities.

•~~Significant changes in the competitive environment in the major markets where Visteon procures materials, components or supplies or where its products are manufactured, distributed or sold.~~

3534

•Legal and administrative proceedings, investigations and claims, including shareholder class actions, inquiries by regulatory agencies, product liability, warranty, employee-related, environmental and safety claims and any recalls of products manufactured or sold by Visteon.

•Changes in economic conditions, currency exchange rates, changes in foreign laws, regulations or trade policies or political stability in foreign countries where Visteon procures materials, components or supplies or where its products are manufactured, distributed, or sold.

•Shortages of materials or interruptions in transportation systems, labor strikes, work stoppages or other interruptions to or difficulties in the employment of labor in the major markets where Visteon purchases materials, components or supplies to manufacture its products or where its products are manufactured, distributed or sold.

•Visteon’s ability to satisfy its pension and other postretirement employee benefit obligations, and to retire outstanding debt and satisfy other contractual commitments, all at the levels and times planned by management.

•Changes in laws, regulations, policies or other activities of governments, agencies and similar organizations, domestic and foreign, that may tax or otherwise increase the cost of, or otherwise affect, the manufacture, licensing, distribution, sale, ownership, or use of Visteon’s products or assets.

•Possible terrorist attacks or acts of war, which could exacerbate other risks such as slowed vehicle production, interruptions in the transportation system, orchanges in fuel prices, and disruptions of supply.

•The cyclical and seasonal nature of the automotive industry.

•Visteon’s ability to comply with environmental, safety, and other regulations applicable to it and any increase in the requirements, responsibilities and associated expenses and expenditures of these regulations.

•Visteon’s ability to protect its intellectual property rights and to respond to changes in technology and technological risks and to ~~respond to~~ claims by others that Visteon infringes their intellectual property rights.

•Visteon’s ability to quickly and adequately remediate control deficiencies in its internal control over financial reporting.

•Other factors, risks and uncertainties detailed from time to time in Visteon’s Securities and Exchange Commission filings.

•Caution should be taken not to place undue reliance on our forward-looking statements, which represent our view only as of the date of this presentation, and which we assume no obligation to update. Backlog does not represent firm orders or firm commitments from customers, but are based on various assumptions, including the timing and duration of product launches, vehicle production levels, customer cancellations, installation rates, customer price reductions, and currency exchange rates.

3635

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The primary market risks to which the Company is exposed include changes in currency exchange rates, interest rates and certain commodity prices. The Company manages these risks through operating actions including fixed price contracts with suppliers and cost sourcing arrangements with customers and through various derivative instruments. The Company's use of derivative instruments is strictly intended for hedging purposes to mitigate market risks pursuant to written risk management policies. Accordingly, derivative instruments are not used for speculative or trading purposes. The Company's use of derivative instruments creates exposure to credit loss in the event of non-performance by the counter-party to the derivative financial instruments. The Company limits this exposure by entering into agreements directly with a variety of major financial institutions with high credit standards and that are expected to fully satisfy their obligations under the contracts. Additionally, the Company's ability to utilize derivatives to manage market risk is dependent on credit conditions, market conditions, and prevailing economic environment.

Foreign Currency Risk

The Company's cash flows are exposed to the risk of adverse changes in exchange rates as related to the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, dividends, investments in subsidiaries, and anticipated foreign currency denominated transaction proceeds. Where possible, the Company utilizes derivative financial instruments to manage foreign currency exchange rate risks. Forward and option contracts may be utilized to mitigate the impact exchange rate variability on the Company's cash flows. Foreign currency exposures are reviewed periodically and any natural offsets are considered prior to entering into a derivative financial instrument. The Company’s current primary hedged currency exposures include the Japanese yen, euro, Thai baht, and Mexican peso. The Company utilizes a strategy of partial coverage for transactions in these currencies. The Company's policy requires that hedge transactions relate to a specific portion of the exposure not to exceed the aggregate amount of the underlying transaction.

In addition to the transactional exposure described above, the Company's operating results are impacted by the translation of its foreign operating income into U.S. dollars. The Company does not enter into currency exchange rate contracts to mitigate this exposure.

The hypothetical pre-tax gain or loss in fair value from a 10% favorable or adverse change in quoted currency exchange rates would be ~~$36~~$29 million and ~~$32~~$31 million for currency derivative financial instruments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These estimated changes assume a parallel shift in all currency exchange rates and include the gain or loss on financial instruments used to hedge investments in subsidiaries. Because exchange rates typically do not all move in the same direction, the estimate may overstate the impact of changing exchange rates on the net fair value of the Company's financial derivatives. It is also important to note that gains and losses indicated in the sensitivity analysis would generally be offset by gains and losses on the underlying exposures being hedged.

Interest Rate Risk

See Note 13, "Fair Value Measurements and Financial Instruments" to the condensed consolidated financial statements included in Item 1 for additional information.

Commodity Risk

The Company's exposures to market risk from changes in the price of production material are managed primarily through negotiations with suppliers and customers, although there can be no assurance that the Company will recover all such costs. The Company continues to evaluate derivatives available in the marketplace and may decide to utilize derivatives in the future to manage select commodity risks if an acceptable hedging instrument is identified for the Company's exposure level at that time, as well as the effectiveness of the financial hedge among other factors.

3736

Item 4.Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in periodic reports filed with the SEC under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Senior Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of ~~September~~June 30, ~~2020,~~2021, an evaluation was performed under the supervision and with the participation of the Company’s management, including its Chief Executive and Senior Vice President and Chief Financial Officer, of the effectiveness of the design and operation of disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020.~~2021.

Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the three months ended ~~September~~June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

3837

Part II

Other Information

Item 1. Legal Proceedings

See the information above under Note 14, "Commitments and Contingencies," to the condensed consolidated financial statements which is incorporated herein by reference.

Item 1A.Risk Factors

~~The Company is supplementing~~For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors ~~described under “Item~~discussed in Part I, "Item 1A. Risk ~~Factors” in its Annual Report on Form 10-K for the year ended~~ ~~December 31, 2019,~~ ~~with the additional risk factors set forth below, which supplement, and to the extent inconsistent, supersedes such risk factors.~~

~~The Company’s business, results of operations and financial condition have been, and may continue to be, adversely affected by the recent COVID-19 pandemic.~~

The COVID-19 pandemic poses the risk that the Company or its affiliates and joint ventures, employees, suppliers, customers and others may be restricted or prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions and other actions and restrictions that may be requested or mandated by governmental authorities. In addition, the Company has experienced, and may continue to experience, disruptions or delays in our supply chain as a result of such actions, which is likely to result in higher supply chain costs to us in order to maintain the supply of materials and components for our products. While the Company has implemented measures to mitigate the impact on its results of operations, there can be no assurance that these measures will be successful. The Company cannot predict the degree to, or the period over, which its net sales and operations will be affected by this outbreak and preventative measures, and the effects could be material.

The Company may also experience impacts from market downturns and changes in consumer behavior related to pandemic fears and impacts on its workforce as a result of COVID-19. The Company has experienced a significant decline in demand from its customers as a result of the impact of efforts to contain the spread of COVID-19. In addition, some customers may choose to delay or abandon projects on which the Company provides products and/or services in response to the adverse impact of the COVID-19 pandemic.

The extent to which the COVID-19 outbreak continues to impact the Company’s financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity of COVID-19, the longevity of COVID-19, and the impact of COVID-19 on economic activity. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts on its business and financial performance as a result of its global economic impact, including a recession that has occurred or may occurFactors" in the future. To the extent the COVID-19 pandemic materially adversely affects the Company’s business and financial results, it may also have the effect of significantly heightening many of the other risks associated with the Company’s business, liquidity and indebtedness, including those described in its most recentCompany's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. See also, "Forward-Looking Statements" included in Part I, Item 2 of this Quarterly Report on Form 10-Q.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

There were no purchases made by or on behalf of the Company, or an affiliated purchaser, of shares of the Company’s common stock during the ~~third~~second quarter of ~~2020.~~2021.

Item 6.Exhibits

The exhibits listed on the "Exhibit Index" on Page 40 hereof are filed with this report or incorporated by reference as set forth therein.

3938

Exhibit Index


Exhibit No.						Description
31.1						Rule 13a-14(a)~~Rule 13a-14(a)~~ Certification of Chief Executive Officer dated ~~October~~July 29, ~~2020.~~2021.
31.2						Rule 13a-14(a) Certification of Senior Vice President, Chief Financial Officer dated ~~October~~July 29, ~~2020.~~2021.
32.1						Section 1350 Certification of Chief Executive Officer dated ~~October~~July 29, ~~2020.~~2021.
32.2						Section 1350 Certification of Senior Vice President, Chief Financial Officer dated ~~October~~July 29, ~~2020.~~2021.
101.INS						XBRL Instance Document.**
101.SCH						XBRL Taxonomy Extension Schema Document.**
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.**
101.LAB						XBRL Taxonomy Extension Label Linkbase Document.**
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.**
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.**

* Indicates that exhibit is a management contract or compensatory plan or arrangement.

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

In lieu of filing certain instruments with respect to long-term debt of the kind described in Item 601(b)(4) of Regulation S-K, Visteon agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.

Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Visteon Corporation has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


			VISTEON CORPORATION

			By:			/s/ ~~Abigail~~ABIGAIL S. ~~Fleming~~FLEMING
						Abigail S. Fleming
						Vice President and Chief Accounting Officer

Date: ~~October~~July 29, ~~2020~~2021

4039


Part I - Financial Information		Page
	Item 1 - Condensed Consolidated Financial Statements	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Condensed Consolidated Statements of Changes in Equity (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	2524
	Item 3 - Quantitative and Qualitative Disclosures about Market Risk	3736
	Item 4 - Controls and Procedures	3837
Part II - Other Information		3938
	Item 1 - Legal Proceedings	3938
	Item 1A - Risk Factors	3938
	Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	38
	Item 6 - Exhibits	3938
Exhibit Index		4039
Signatures		4039


(Units in millions)	Three Months Ended September 30,				Nine Months Ended September 30,
	2020	2019	Change		2020	2019	Change
China	6.4	5.8	10.6	%	15.8	17.3	(8.8)	%
Other Asia Pacific	4.5	5.2	(14.7)	%	11.9	16.3	(27.3)	%
Europe	4.3	4.7	(7.7)	%	11.2	16.0	(29.5)	%
Americas	4.7	4.9	(3.4)	%	10.7	15.0	(28.9)	%
Other	0.4	0.4	—	%	1.2	1.5	(19.4)	%
Global	20.3	21.0	(3.4)	%	50.8	66.1	(23.2)	%
Source: IHS Automotive, October 2020