UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.: 001-38471

Veoneer, Inc.

(Exact name of registrant as specified in its charter)


Delaware			82-3720890
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

Klarabergsviadukten 70, Section C6
Box 13089

Stockholm Sweden

(Address of principal executive offices)

SE- 103 02

(Zip Code)

+46 8 527 762 00

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $1.00 par value	VNE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐ No: ☒

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of July ~~17, 2020,~~16, 2021, there were ~~111,594,577~~111,959,234 shares of common stock of Veoneer, Inc., par value $1.00 per share, outstanding.

Exhibit index located on page 4240

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including without limitation, statements regarding management’s examination of historical operating trends and data, estimates of future sales (including estimates related to order intake), operating margin, cash flow, RD&E spend, taxes or other future operating performance or financial results, are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “would,” “should,” “could,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words. We have based these forward-looking statements on our current expectations and assumptions and/or data available from third parties about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs.

New risks and uncertainties arise from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Factors that could cause actual results to differ materially from these forward-looking statements include, without limitation, the following: general economic conditions; the impact of the coronavirus (COVID-19) on the Company’s financial condition, business operations and liquidity; the impact of COVID-19 on our customers and their production and product launch schedules; our ability to complete the divestiture of Veoneer Brake Systems ("VBS"), which is subject to the negotiation and documentation of a definitive agreement and closing; the cyclical nature of automotive sales and production; changes in general industry and market conditions or regional growth or decline; further decreases in light vehicle production; the impact of the coronavirus pandemic (COVID-19) on (i) the Company’s financial condition, business operations and liquidity, (ii) our customers and their production and product launch schedules, (iii) our suppliers and availability of components for our products, and (iv) the global economy; the development and commercial success of the software and integrated platform contemplated by the agreement with Qualcomm Technologies; our ability to achieve the intended benefits from our separation from our former parent; our ability to be awarded new business or loss of business from increased competition; higher than anticipated costs and use of resources related to developing new technologies; higher raw material, energy and commodity costs; supply chain disruptions and component ~~shortages;~~shortages impacting the Company or the automotive industry; changes in customer and consumer preferences for end products; market acceptance of our new products; dependence on and relationships with customers and suppliers; our ability to share RD&E costs with our customers; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; costs or difficulties related to the integration of any new or acquired businesses and technologies; successful integration of acquisitions and operations of joint ventures; successful implementation of strategic partnerships and collaborations; product liability, warranty and recall claims and investigations and other litigation and customer reactions thereto; higher expenses for our pension and other post-retirement benefits, including higher funding needs for our pension plans; work stoppages or other labor issues; possible adverse results of future litigation, regulatory actions or investigations or infringement claims; our ability to protect our intellectual property rights; tax assessments by governmental authorities and changes in our tax rate; dependence on key personnel; legislative or regulatory changes impacting or limiting our business; political conditions; and other risks and uncertainties identified in Part I Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A -“Risk Factors” and in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission ("SEC") on February ~~21, 2020.~~19, 2021.

For any forward-looking statements contained in this Quarterly Report on Form 10-Q or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Veoneer, Inc.

Table of Contents

Part I – Financial Information

Item 1 – Condensed Consolidated Financial Statements

Veoneer, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(U.S. DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)


			Three Months Ended June 30						Six Months Ended June 30								Three Months Ended June 30				Six Months Ended June 30
			2020		2019		2020		2019				2021		2020		2021		2020
Net sales	Net sales	Note 3	$	184	$	489	$	546	$	984	Net sales	Note 3	$	398	$	184	$	816	$	546
Cost of sales	Cost of sales		(181)		(412)		(490)		(822)		Cost of sales		(336)		(181)		(698)		(490)
Gross profit	Gross profit		3		77		56		162		Gross profit		62		3		118		56
Selling, general and administrative expenses	Selling, general and administrative expenses		(38)		(50)		(82)		(102)		Selling, general and administrative expenses		(41)		(38)		(81)		(82)
Research, development and engineering expenses, net	Research, development and engineering expenses, net		(44)		(159)		(175)		(315)		Research, development and engineering expenses, net		(108)		(44)		(224)		(175)
Amortization of intangibles	Amortization of intangibles		(1)		(6)		(3)		(11)		Amortization of intangibles		(2)		(1)		(4)		(3)
Other income, net	Other income, net		16		1		18		1		Other income, net		(3)		16		(5)		18
Operating loss	Operating loss		(64)		(137)		(186)		(265)		Operating loss		(92)		(64)		(196)		(186)
Loss on divestiture and assets held for sales, net		Note 4	—		—		(67)		—
Loss from equity method investment		Note 9	(19)		(18)		(38)		(35)
Loss on divestiture and assets impairment charge, net											Loss on divestiture and assets impairment charge, net	Note 5	0		0		0		(67)
Gain (loss) from equity method investment											Gain (loss) from equity method investment	Note 11	1		(19)		8		(38)
Interest income	Interest income		3		4		7		8		Interest income		1		3		1		7
Interest expense	Interest expense		(5)		(2)		(10)		(3)		Interest expense		(5)		(5)		(10)		(10)
Other non-operating items, net	Other non-operating items, net		(3)		1		(1)		1		Other non-operating items, net		(1)		(3)		1		(1)
Loss before income taxes	Loss before income taxes	Note 15	(88)		(152)		(295)		(294)		Loss before income taxes	Note 17	(96)		(88)		(196)		(295)
Income tax (expense) benefit		Note 7	(2)		10		(26)		4
Income tax expense											Income tax expense	Note 9	(4)		(2)		(9)		(26)
Net loss	Net loss		(90)		(142)		(321)		(290)		Net loss		(100)		(90)		(205)		(321)
Less: Net income (loss) attributable to non-controlling interest			—		(9)		1		(20)
Less: Net income attributable to non-controlling interest											Less: Net income attributable to non-controlling interest		0		0		0		1
Net loss attributable to controlling interest	Net loss attributable to controlling interest		$	(90)	$	(133)	$	(322)	$	(270)	Net loss attributable to controlling interest		$	(100)	$	(90)	$	(205)	$	(322)

Net loss per share - basic		Note 14	$	(0.80)	$	(1.39)	$	(2.89)	$	(2.94)
Net loss per share - diluted			$	(0.80)	$	(1.39)	$	(2.89)	$	(2.94)
Net loss per share - basic and diluted											Net loss per share - basic and diluted	Note 16	$	(0.89)	$	(0.80)	$	(1.83)	$	(2.89)

Weighted average number of shares outstanding, (in millions)			111.58		96.06		111.52		91.68

Weighted average number of shares outstanding (in millions)											Weighted average number of shares outstanding (in millions)		111.84		111.58		111.77		111.52
Weighted average number of shares outstanding, assuming dilution (in millions)	Weighted average number of shares outstanding, assuming dilution (in millions)		111.58		96.06		111.52		91.68		Weighted average number of shares outstanding, assuming dilution (in millions)		111.84		111.58		111.77		111.52

See notes to the unaudited condensed consolidated financial statements.

Veoneer, Inc.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(U.S. DOLLARS IN MILLIONS)

Three Months Ended June 30 Six Months Ended June 30
2020 2019 2020 2019
Net loss $ (90) $ (142) $ (321) $ (290)
Other comprehensive loss, before tax:
Change in cumulative translation adjustment 18 (2) (3) (13)
Pension liability — — 1 —
Other comprehensive income (loss), before tax 18 (2) (2) (13)
Expense for taxes — — — —
Other comprehensive income (loss), net of tax 18 (2) (2) (13)
Comprehensive loss (72) (144) (323) (303)
Less: Comprehensive income (loss) attributable to non-controlling interest — (7) 1 (18)
Comprehensive loss attributable to controlling interest $ (72) $ (137) $ (324) $ (285)


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Net loss	$	(100)	$	(90)	$	(205)	$	(321)
Other comprehensive loss, before tax:
Change in cumulative translation adjustment	5		18		(10)		(3)

Pension liability	0		0		0		1
Other comprehensive income (loss), before tax	5		18		(10)		(2)

Other comprehensive income (loss), net of tax	5		18		(10)		(2)
Comprehensive loss	(95)		(72)		(215)		(323)
Less: Comprehensive income attributable to non-controlling interest	0		0		0		1
Comprehensive loss attributable to controlling interest	$	(95)	$	(72)	$	(215)	$	(324)

See notes to the unaudited condensed consolidated financial statements.

Veoneer, Inc.

Condensed Consolidated Balance Sheets

(U.S. DOLLARS IN MILLIONS)

(unaudited)
June 30, 2020 December 31, 2019
Assets
Cash and cash equivalents $ 851 $ 859
Receivables, net 206 253
Inventories, net Note 8 132 144
Related party receivables Note 16 8 11
Prepaid expenses and other contract assets 29 47
Other current assets 17 18
Assets held for sale Note 4 17 317
Total current assets 1,260 1,649
Property, plant and equipment, net 406 473
Operating lease right-of-use assets 93 100
Equity method investment Note 9 74 87
Goodwill 290 290
Intangible assets, net 11 17
Deferred tax assets 6 7
Investments 9 9
Other non-current assets 28 111
Total assets $ 2,177 $ 2,743
Liabilities and equity
Accounts payable $ 131 $ 233
Related party payables Note 16 1 3
Accrued expenses Note 10 200 192
Income tax payable 28 7
Other current liabilities 63 38
Liabilities held for sale Note 4 6 118
Total current liabilities 429 591
4.00% Convertible Senior Notes due 2024 Note 5 165 160
Pension liability Note 11 17 17
Deferred tax liabilities 11 13
Operating lease non-current liabilities 75 82
Finance lease non-current liabilities 38 33
Other non-current liabilities 28 29
Total non-current liabilities 334 334
Equity
Common stock (par value $1.00, $325 million shares authorized, 111 million shares issued and outstanding as of June 30, 2020 and December 31, 2019) 111 111
Additional paid-in capital 2,347 2,343
Accumulated deficit (1003) (681)
Accumulated other comprehensive loss (41) (44)
Total equity 1,414 1,729
Non-controlling interest — 89
Total equity and non-controlling interest 1,414 1,818
Total liabilities, equity and non-controlling interest $ 2,177 $ 2,743


		(unaudited)
		June 30, 2021		December 31, 2020
Assets
Cash and cash equivalents		$	555	$	758

Restricted cash		1		0
Receivables, net		257		292
Inventories, net	Note 10	157		134
Related party receivables	Note 18	8		9
Prepaid expenses and other contract assets		44		36
Other current assets		13		15

Total current assets		1,035		1,244
Property, plant and equipment, net		403		431
Operating lease right-of-use assets		85		89
Equity method investment	Note 11	18		153
Goodwill		318		317
Intangible assets, net		18		21
Deferred tax assets		5		6


Other non-current assets		18		27
Total assets		$	1,900	$	2,288
Liabilities and equity
Accounts payable		$	262	$	257

Related party payables	Note 18	1		2
Accrued expenses	Note 12	200		232
Income tax payable		7		25
Related party short-term debt	Note 18	0		16
Other current liabilities		60		55

Total current liabilities		530		587
4.00% Convertible Senior Notes due 2024	Note 6	174		170
Related party long-term debt	Note 18	0		115
Pension liability	Note 13	20		20
Deferred tax liabilities		12		12
Operating lease non-current liabilities		69		71
Finance lease non-current liabilities		46		46
Other non-current liabilities		19		28
Total non-current liabilities		340		462
Equity
Common stock (par value $1.00, 325 million shares authorized, 111 million shares and 112 million shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)		112		111
Additional paid-in capital		2,354		2,349
Accumulated deficit		(1,431)		(1,226)

Accumulated other comprehensive income/ (loss)		(5)		5
Total equity		1,030		1,239


Total liabilities and equity		$	1,900	$	2,288

See notes to the unaudited condensed consolidated financial statements.

Veoneer, Inc.

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(U.S. DOLLARS IN MILLIONS)


	Six months ended June 30, 2021
	Equity attributable to
	Common Stock		Additional Paid In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
Balance at beginning of period	$	111	$	2,349	$	(1,226)	$	5	$	1,239

Net loss	—		—		(205)		—		(205)
Foreign currency translation	—		—		—		(10)		(10)





Stock based compensation expense	—		5		—		—		5
Issuance of common stock	1		—		—		—		1





Balance at end of period	$	112	$	2,354	$	(1,431)	$	(5)	$	1,030

Six months ended June 30, 2020
Equity attributable to
Common Stock Additional Paid In Capital Accumulated Deficit Accumulated Other
Comprehensive Loss Non-controlling
Interest Total
Balance at beginning of period $ 111 $ 2,343 $ (681) $ (44) $ 89 $ 1,818
Net loss — — (322) — 1 (321)
Foreign currency translation — — — — 1 1
Stock based compensation expense — 4 — — — 4
Business divestitures — — — 3 (91) (88)
Balance at end of period $ 111 $ 2,347 $ (1,003) $ (41) $ — $ 1,414


		Six months ended June 30, 2019																							Six months ended June 30, 2020
		Equity attributable to																							Equity attributable to
		Common Stock		Additional Paid In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total			Common Stock		Additional Paid In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Non-controlling Interest			Total
Balance at beginning of period	Balance at beginning of period	$	87	$	1,938	$	(181)	$	(19)	$	101	$	1,927	Balance at beginning of period	$	111	$	2,343	$	(681)	$	(44)	$	89		$	1,818
Comprehensive Income (Loss):

Net loss	Net loss	—		—		(270)		—		(20)		(290)		Net loss	—		—		(322)		—		1			(321)
Foreign currency translation	Foreign currency translation	—		—		—		(15)		2		(13)		Foreign currency translation	—		—		—		—		1			1

Stock based compensation expense	Stock based compensation expense	—		3		—		—		—		3		Stock based compensation expense	—		4		—		—		—			4
Issuance of common stock		24		379		—		—		—		403
Purchase of minority interest		—		(14)		—		—		14		—
Equity component of issuance of convertible notes, net (Note 5)		—		35		—		—		—		35

Business divestiture														Business divestiture	—		—		—		3		(91)			(88)
Balance at end of period	Balance at end of period	$	111	$	2,341	$	(451)	$	(34)	$	97	$	2,064	Balance at end of period	$	111	$	2,347	$	(1,003)	$	(41)	$	0		$	1,414

Veoneer, Inc.

Condensed Consolidated Statements of Cash Flow (Unaudited)

(U.S. DOLLARS IN MILLIONS)

Six Months Ended June 30
2020 2019
Operating activities
Net loss $ (321) $ (290)
Depreciation and amortization 46 60
Gain on divestitures (77) —
Assets impairment charge 144 —
Undistributed loss from equity method investments 38 35
Stock-based compensation 4 3
Deferred income taxes (1) (4)
Other, net (9) 5
Change in operating assets and liabilities:
Receivables, gross 50 49
Accrued expenses 22 15
Related party receivables and payables, net 2 44
Accounts payable (86) (65)
Prepaid expenses 29 (6)
Inventories, gross 14 9
Income taxes 21 —
Other current assets and liabilities, net 8 (15)
Net cash used in operating activities (116) (160)
Investing activities
Proceeds from divestitures 176 —
Capital expenditures (51) (109)
Equity method investment (25) (11)
Short-term investments mature into cash — 5
Long term investments (1) (4)
Net cash provided by (used in) investing activities 99 (119)
Financing activities
Issuance of common stock
— 405
Dividend paid to non-controlling interest (5) —
(Payments for) proceeds from long-term debt (1) 202
Proceeds from short-term debt 15 20
Net increase in related party short-term debt — 2
Net cash provided by financing activities 9 629
Effect of exchange rate changes on cash and cash equivalents — (10)
Increase (decrease) in cash and cash equivalents (8) 340
Cash and cash equivalents at beginning of period 859 864
Cash and cash equivalents at end of period $ 851 $ 1,204


	Six Months Ended June 30
	2021		2020
Operating activities
Net loss	$	(205)	$	(321)
Depreciation and amortization	57		46
Gain on divestitures	0		(77)
Assets impairment charge	0		144
Undistributed (gain) loss from equity method investments	(8)		38
Stock-based compensation	5		4
Deferred income taxes	0		(1)

Other, net	4		(9)
Change in operating assets and liabilities:
Receivables, gross	33		50
Accrued expenses	(22)		22
Related party receivables and payables, net	0		2
Accounts payable	9		(86)
Prepaid expenses and other contract assets	(9)		29
Inventories, gross	(32)		14
Income taxes	(15)		21
Other current assets and liabilities, net	4		8
Net cash used in operating activities	(179)		(116)

Investing activities
Proceeds from divestitures	0		176
Capital expenditures	(30)		(51)
Equity method investment	12		(26)






Net cash provided by investing activities	(18)		99

Financing activities

Dividend paid to non-controlling interest	0		(5)
(Payments for) proceeds from long-term debt	1		(1)
(Payments for) proceeds from short-term debt	(2)		15

Proceeds from exercise of stock options	1		0


Net cash (used in) provided by financing activities	0		9
Effect of exchange rate changes on cash and cash equivalents	(5)		0
Increase (decrease) in cash and cash equivalents and restricted cash	(202)		(8)
Cash and cash equivalents and restricted cash at beginning of period	758		859
Cash and cash equivalents and restricted cash at end of period	$	556	$	851

See notes to the unaudited condensed consolidated financial statements.

Veoneer, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(U.S. DOLLARS IN MILLIONS)

Note 1. Basis of Presentation

~~Spin-Off~~

~~On June 29, 2018 (the “Distribution Date”),~~The condensed consolidated financial statements of Veoneer, Inc. ~~(“Veoneer”~~(the "Company" or ~~“the Company”~~"Veoneer") ~~became an independent, publicly-traded company as a result of~~have been prepared in accordance with accounting principles generally accepted in the distribution by Autoliv, Inc. (“Autoliv” or “Former Parent”) of 100 percent of the outstanding common stock of Veoneer to the stockholders of Autoliv (the “Spin-Off”). Each Autoliv stockholder and holder of Autoliv’s Swedish Depository Receipts (SDRs) of record as of certain specified dates received 1 share of Veoneer common stock or 1 Veoneer SDR, respectively, for every 1 share of Autoliv common stock or Autoliv SDR. The Spin-Off was completed on June 29, 2018 in a tax free transaction pursuant to Section 355 of the United States ("U.S. ~~Internal Revenue Code.~~

~~On July 2, 2018, Veoneer common stock began regular trading on the New York Stock Exchange (“NYSE”~~GAAP") under the ticker symbol “VNE” and Veoneer SDRs began trading on Nasdaq Stockholm under the symbol “VNE-SDB”. Agreements entered into between Veoneer and Autoliv in connection with the Spin-Off govern the relationship between the parties following the Spin-Off and provide for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to be provided on a temporary basis between the parties.

The Company has 2 operating segments, Electronics and Brake Systems. Electronics includes all electronics resources and expertise, Restraint Control Systems and Active Safety products, and Brake Systems provides brake control and actuation systems. The Asian business of the Brake Systems segment was sold on February 3, 2020 and the majority of the Brake Systems business in North America was sold subsequent to June 30, 2020. We do not expect the remaining Brake Systems business to be a reportable segment due to immateriality.

~~The~~.The accompanying unaudited condensed consolidated financial statements for Veoneer do not include all of the information and notes required by ~~the accounting principles generally accepted in the~~ U.S. ~~(GAAP)~~GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to Veoneer’s Audited Consolidated Financial Statements for the year ended December 31, ~~2019~~2020 and corresponding notes in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~21, 2020.~~19, 2021.

Certain amounts in the unaudited condensed consolidated financial statements and associated notes may not reconcile due to rounding. All percentages have been calculated using unrounded amounts.

~~Follow-on Offerings~~

On May 28, 2019, the Company completed follow-on public offerings of 24,000,000 shares of common stock and $207 million aggregate principal amount of 4.00% Convertible Senior Notes due 2024 (the “Notes”) (including $27 million aggregate principal amount pursuant to the underwriters’ over-allotment option to purchase additional notes). The public offering price for the Company's common stock offering was $17.50 per share. The Company ~~received net proceeds~~has 1 operating segment, the Electronics segment. The Company previously had 2 operating segments, Electronics and Brake Systems. Electronics includes all electronics resources and expertise, Restraint Control Systems and Active Safety products, and Brake Systems provided brake control and actuation systems. The Asian business of ~~approximately $403 million from~~ the ~~common stock offering~~Brake Systems segment was sold on February 3, 2020 and ~~approximately $200 million from~~ the ~~Notes offering,~~majority of the Brake Systems business in ~~each case after deducting the underwriting discounts and issuance costs directly attributable~~North America was sold on August 10, 2020. The remaining Brake Systems business is no longer a reportable segment due to ~~each offering.~~immateriality.

Divestiture of Veoneer Nissin Brake System ("VNBS")

On October 30, 2019, Veoneer signed definitive agreements to sell its 51% ownership in Veoneer Nissin Brake Japan ("VNBJ") and Veoneer Nissin Brake China ("VNBZ"), entities that comprise VNBS to its joint venture partner Nissin-Kogyo Co., Ltd. (“Nissin Kogyo”), and Honda Motor Co., Ltd. The aggregate purchase price was $176 million. The divestiture of VNBJ and VNBZ was structured as 2 separate transactions each of which was completed on February 3, 2020, and the VNBS joint venture was terminated. See Note 45 "Divestiture and held for sale" for additional information.

Divestiture of Veoneer Brake Systems ("VBS")

On August 10, 2020, Veoneer signed a definitive agreement to sell the majority of the Brake Systems business in North America to ZF Friedrichshafen AG ("ZF"). The aggregate purchase price was $1. In connection with the transaction, the Company received approximately $22 million from ZF for VBS operational cost reimbursements. See Note 5 "Divestiture and held for sale" for additional information.

~~Assets held for sale Veoneer Brake Systems ("VBS")~~

Following the strategic review initially launched in April 2019, in March 2020, Veoneer decided to focus on its core Electronics business and exit the brake control business. See Note 4 "Divestiture and held for sale" for additional information.

Note 2. Summary of Significant Accounting Policies

A summary of significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~21, 2020.~~19, 2021.

~~Other Income, Net~~Restricted Cash

~~On March 30, 2020, Veoneer commenced arbitration against Nissin Kogyo regarding a dispute arising out~~Restricted cash represents amounts designated for uses other than current operations and $1 million of ~~a Share Purchase Agreement (“SPA”) dated September 2015. On June 30, 2020, Veoneer agreed~~Restricted cash related to ~~settle the proceedings, along with any and all legal claims arising out of or relating to the SPA dispute,~~cash collateral for ~~$20 million. The cash settlement was received by the Company on June 30, 2020 and is reported among Other income, net in the unaudited Condensed Consolidated Statements of Operations.~~

~~Research, development and engineering~~

In early 2019, as a result of multiple factors, including general market conditions, numerous customer change requests, and challenges involved in developing new technologies for various customer programs, Veoneer launched a broad initiative to have its customers contribute more to the cost of developing these programs. The Company began to approach customers to negotiate or renegotiate new or existing agreements to provide for more favorable cost sharing terms. As part of this initiative, Veoneer approached a certain customer to adjust the terms of existing award agreements. On May 20, 2020 the Company entered into an adjustment agreement with such customer and received a lump sum settlement of $65 million for past research, development and engineering costs and implementation of change requests, and $11 million for software specific future development.

During the second quarter of 2020 the Company received a total of $76 million from the adjustment agreement. According to the Company’s accounting policies, research, development and most engineering expenses are expensed as incurred. These expenses are reported net of expense reimbursements from contracts to further customize existing products for specific customers.

For the six months ended June 30, 2020, the Company recognized a total reimbursement from customers of $81 million for past completed engineering services as a reduction of research, development and engineering costs on the unaudited Condensed Consolidated Statement of Operations.

~~In addition,~~other corporate purposes as of June 30, 2020 the Company recognized $16 million from the adjustment agreement as deferred income reported among Other current liabilities in the unaudited Condensed Consolidated Balance Sheet. The deferred amount will be recognized in a systematic way and in proportion to the completion of the future engineering services related to the adjustment agreement as reimbursement from customers.

~~Accounting for credit losses~~

The Company has evaluated the available adoption options of common credit loss methods that are acceptable as per FASB Accounting Standards Codification Topic 326, Credit Losses. The Company adopted the available Loss-rate method where the impairment is calculated using an estimated loss rate and multiplying it by the asset’s amortized cost at the balance sheet date. This method appropriately reflects the Company´s risk pattern in relation to its accounts receivables.

~~The key components of the Company’s Loss-rate model are as follows:~~

•2021.~~A list of the Company's customers credit rating and credit default risk rate from Bloomberg.~~

•~~Actual write-offs or reversals of previous write-offs of accounts receivables.~~

•~~Evaluation of other unusual facts and circumstances which could impact the credit loss rate, such as risk of bankruptcy or potential collectability issues.~~

The Company’s credit loss model includes the Company’s customer list. The customer list captures the existing customers. The list is put into a Bloomberg data query to generate customers short-term credit rating. The credit default risk rate is used to calculate the credit loss rate or estimated loss rate.

For customers that do not have credit default risk rate, management uses the six-month LIBOR rate as a credit rating and a credit default risk rate. Management believes that the six-month LIBOR rate adequately reflects the short-term nature of the Company’s trade receivables and is also in line with the Company’s invoice payment terms.

Concentration of Credit Risk

A substantial majority of the Company’s trade receivables are derived from sales to ~~OEMs.~~Original Equipment Manufactures ("OEMs"). For the three and six months ended June 30, 2021, the Company’s four largest customers accounted for 44% and 46% of net sales, respectively, and for the three and six months ended June 30, 2020, the Company’s four largest customers accounted for 55% and 59% of net sales, ~~respectively and for the three and six months ended June 30, 2019, the Company’s four largest customers accounted for 60% and 59% of net sales,~~ respectively. Additionally, as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, these four largest customers accounted for ~~40%~~33% and ~~39%, respectively,~~40% of the Company’s accounts ~~receivables.~~receivables, respectively. The Company believes that the receivable balances from these largest customers do not represent a significant credit risk based on past collection experience. The Company has adopted credit policies and standards intended to accommodate industry growth and inherent risk. The Company believes that credit risks are moderated by the financial stability of the Company’s major customers.

New Accounting Standards

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of ~~accounting standards updates~~Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s unaudited condensed consolidated financial statements.

Adoption of New Accounting Standards

In ~~June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326~~), ~~Measurement of Credit Losses on Financial Instruments~~, which requires measurement and recognition of expected credit losses for financial assets held and requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. ASU 2016-13 is effective for public business entities for annual periods beginning after December 15, 2019, and earlier adoption is permitted for annual periods beginning after December 15, 2018. The Company adopted ASU 2016-13 effective January 1, 2020 and applied a loss rate model to compute the expected credit loss allowance. The adoption of ASU 2016-13 did not have a material impact on the Company's condensed consolidated financial statements.

~~In November 2018, the FASB issued ASU 2018-18~~ ~~Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606,~~ ~~which (1) clarifies that certain transactions between collaborative arrangement participants should be accounted for under ASC Topic 606,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, when the collaborative arrangement participant is a customer in the context of a unit of account, (2) adds unit-of-account guidance in Topic 808 to align with Topic 606 when an entity is assessing whether the collaborative arrangement, or a part of the arrangement, is within the scope of Topic 606, (3) precludes presenting transactions together with revenue when those transactions involve collaborative arrangement participants that are not directly related to third parties and are not customers. The Company is required to adopt ASU 2018-18 in the first quarter of 2020. The adoption of ASU 2018-18 did not have a material impact on the Company's condensed consolidated financial statements.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.~~ ASU 2018-13 removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. ASU 2018-13 requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is required to adopt ASU 2018-18 in the first quarter of 2020. The adoption of ASU 2018-13 did not have a material impact on the Company's condensed consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842),~~ to increase transparency and comparability among organizations by recognizing lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 affects any entity that enters into a lease, with some specified scope exceptions. For public business entities, the amendments in ASU 2016-02 are effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. The Company adopted ASU 2016-02 in the annual period beginning January 1, 2019. The Company applied the modified retrospective transition method and elected the transition option to use the effective date January 1, 2019,

as the date of initial application. The Company did not adjust its comparative period financial statements for effects of ASU 2016-02, and has not made the new required lease disclosures for periods before the effective date. The Company has recognized its cumulative effect transition adjustment as of the effective date. In addition, the Company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, have allowed the Company to carry forward the historical lease classification. The adoption of the new standard resulted in recording operating lease assets and lease liabilities of approximately $75 million as of January 1, 2019. The adoption of the new lease standard did not have a material impact on the Company's condensed consolidated financial statements.

~~Accounting Standards Issued But Not Yet Adopted~~

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes," which simplifies the accounting for income taxes. ASU 2019-12 is effective for public business entities for annual periods beginning after December 15, 2020, and early adoption is permitted. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company ~~plans to adopt~~adopted ASU 2019-12 asin the first quarter of ~~January 1,~~ 2021. The ~~Company has concluded that the pending~~ adoption of ASU 2019-12 ~~will~~did not have a material impact on the ~~Company’s~~Company's unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. ASU 2018-14 removes the requirements to disclose: amounts in accumulated other comprehensive income (loss) expected to be recognized as components of net periodic benefit cost over the next fiscal year; the amount and timing of plan assets expected to be returned to the employer; and the effects of a one-percentage point change in assumed health care cost trend rates. ASU 2018-14 requires disclosure of an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted for all entities and the amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company adopted ASU 2018-14 in the first quarter of 2021. The adoption of ASU 2018-14 did not have a material impact on the Company's unaudited condensed consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The guidance provides optional expedients and exceptions related to certain contract modifications and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another rate that is expected to be discontinued. The guidance was effective upon issuance and generally can be applied to applicable contract modifications and hedge relationships prospectively through December 31, 2022. Early adoption is permitted for all entities and the amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact on its disclosures.

In August 2020, the ~~Company's condensed consolidated~~FASB issued ASU 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)." The guidance provides simplifications of the accounting for convertible instruments and reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. In addition to further improve the decision usefulness and relevance of the information being provided to users of financial ~~statements.~~statements, information transparency has been increased by amending certain disclosure requirements. The guidance is effective for public business entities for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. In addition, an entity should adopt the guidance as of the beginning of its annual fiscal year. The amendments in this update are required to be applied through either a modified retrospective method of transition or a fully retrospective method of transition. In applying the modified retrospective method, entities should apply the guidance to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. The Company is currently evaluating this guidance to determine the impact on its disclosures.

Note 3. Revenue

Disaggregation of revenue

In the following tables, revenue is disaggregated by primary region and products.

Net Sales by Region

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
(Dollars in millions) Electronics Brake Systems Total Electronics Brake Systems Total
Asia $ 59 $ — $ 59 $ 89 $ 81 $ 170
Americas 43 5 48 145 15 160
Europe 77 — 77 159 — 159
Total net sales $ 179 $ 5 $ 184 $ 393 $ 96 $ 489


	Three Months Ended June 30, 2021						Three Months Ended June 30, 2020
(Dollars in millions)	Electronics		Brake Systems		Total		Electronics		Brake Systems		Total
Asia	$	100	$	0	$	100	$	59	$	0	$	59
Americas	114		13		127		43		5		48
Europe	171		0		171		77		0		77


Total net sales	$	385	$	13	$	398	$	179	$	5	$	184

Net Sales by Region

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
(Dollars in millions) Electronics Brake Systems Total Electronics Brake Systems Total
Asia $ 117 $ 24 $ 141 $ 179 $ 153 $ 332
Americas 160 19 179 299 31 330
Europe 226 — 226 322 — 322
Total net sales $ 503 $ 43 $ 546 $ 800 $ 184 $ 984


	Six Months Ended June 30, 2021						Six Months Ended June 30, 2020
(Dollars in millions)	Electronics		Brake Systems		Total		Electronics		Brake Systems		Total
Asia	$	198	$	0	$	198	$	117	$	24	$	141
Americas	245		24		$	269	160		19		$	179
Europe	349		0		349		226		0		226


Total net sales	$	792	$	24	$	816	$	503	$	43	$	546

Net Sales by Products


	Three Months Ended June 30, 2021						Three Months Ended June 30, 2020
(Dollars in millions)	Electronics		Brake Systems		Total		Electronics		Brake Systems		Total
Restraint Control Systems	$	175	$	0	$	175	$	100	$	0	$	100
Active Safety products	197		0		197		79		0		79
Brake Systems	0		13		13		0		5		5


Other	13		0		13		0		0		0
Total net sales	$	385	$	13	$	398	$	179	$	5	$	184

Net Sales by Products


	Six Months Ended June 30, 2021						Six Months Ended June 30, 2020
(Dollars in millions)	Electronics		Brake Systems		Total		Electronics		Brake Systems		Total
Restraint Control Systems	$	364	$	0	$	364	$	262	$	0	$	262
Active Safety products	402		0		402		241		0		241
Brake Systems	0		24		24		0		43		43
Other	26		0		26		0		0		0
Total net sales	$	792	$	24	$	816	$	503	$	43	$	546

Note 4. Business Combinations

Business combinations generally take place to either gain key technology or strengthen Veoneer’s position in a certain geographical area or with a certain customer. The results of operations and cash flows from the Company’s acquisitions have been included in the Company’s unaudited condensed consolidated financial statements prospectively from their date of acquisition.

Zenuity, Inc and Zenuity GmbH

Zenuity AB, a 50% ownership joint venture with Volvo Cars Corporation (VCC), was separated pursuant to definitive agreements between the Company and VCC, in order for each company to more effectively drive their respective strategies. As

1211

~~Net Sales by Products~~part of the transaction the Company paid approximately $37 million to Zenuity for 200 software engineers and 2 business units located in Germany and the US.

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
(Dollars in millions) Electronics Brake Systems Total Electronics Brake Systems Total
Restraint Control Systems $ 100 $ — $ 100 $ 209 $ — $ 209
Active Safety products 79 — 79 184 — 184
Brake Systems — 5 5 — 96 96
Total net sales $ 179 $ 5 $ 184 $ 393 $ 96 $ 489
The Company applied the acquisition method of accounting to the Zenuity, Inc and Zenuity GmbH entities, whereby the excess of the fair value of the business over the fair value of identifiable net assets was allocated to goodwill. The goodwill reflects the workforce. The recognized goodwill of $25 million recorded as part of this acquisition is not deductible for tax purposes. The opening balance sheet is based on final assessment of the fair values of certain acquired assets, principally intangibles, and certain assumed liabilities. The Company used discounted cash flow ("DCF") analyses, which represent Level 3 fair value measurements, to assess the purchase price allocation. As the Company finalizes the fair value of the acquired assets and assumed liabilities, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments occur.

Total Zenuity, Inc and Zenuity GmbH acquisition related costs were approximately $1 million for the period ended December 31, 2020.

The following table summarizes the estimated fair values of identifiable acquired assets and assumed liabilities:


Assets	As of July 1, 2020
Cash and cash equivalents	$	4
Receivable, net	12
Property, plant and equipment, net	3
Operating lease right-of-use assets	8
Goodwill	25
Total assets	$	52
Tax payable	2
Accrued liabilities	3
Operating lease non-current liabilities	10
Total liabilities	$	15
Net assets acquired	$	37

~~Net Sales by Products~~

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
(Dollars in millions) Electronics Brake Systems Total Electronics Brake Systems Total
Restraint Control Systems $ 262 $ — $ 262 $ 425 $ — $ 425
Active Safety products 241 — 241 375 — 375
Brake Systems — 43 43 — 184 184
Total net sales $ 503 $ 43 $ 546 $ 800 $ 184 $ 984

Note 4.5. Divestiture and held for sale

VBS

In 2019, the Company started exploring strategic options for its non-core business in the Brake Systems segment. In the first quarter of 2020, management committed and approved a plan to sell VBS. The ~~Company expects to sell the business within one year from management's approval of the plan. The~~ business and its associated assets and liabilities ~~meet~~met the criteria for presentation as held for sale as of June 30, 2020 and were required to be adjusted to the lower of fair value less cost to sell or carrying value. This resulted in an impairment charge of approximately $144 million which was recorded within ~~Gain/(loss)~~Loss on divestiture and assets ~~held for sales,~~impairment charges, net on the unaudited Condensed Consolidated Statements of Operations during the period ended June 30, 2020. The impairment was measured using third party sales pricing to determine fair values of the assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The assets and liabilities associated with the transaction ~~are~~were separately classified as held for sale ~~in the unaudited Condensed Consolidated Balance Sheet as of June 30,~~during 2020 and depreciation of these long-lived assets ceased ~~on June 30,~~during first half of 2020. The ~~planned~~ divestiture did not meet the criteria for presentation as a discontinued operation.

On August 10, 2020 Veoneer signed a definitive agreement to sell the majority of the Brake Systems business in North America to ZF. The ~~major classes of assets~~aggregate purchase price was $1. In connection with the transaction, the Company received approximately $22 million from ZF for VBS operational cost reimbursement. The transaction closed during third quarter 2020 and ~~liabilities held for sale were as follows:~~


~~(Dollars in millions)~~	~~As of~~
~~Assets held for sale~~	~~June 30, 2020~~
~~Prepaid exp/accrued income~~	$	1

~~Property, plant and equipment, net~~	79
~~Current deferred charges~~	81

~~Impairment of carrying value~~	~~(144)~~
~~Total assets held for sale~~	$	17
~~Liabilities held for sale~~
~~Accounts payable~~	~~(6)~~

~~Total liabilities held for sale~~	$	~~(6)~~

no additional gain or loss was recognized.

VNBS

In the fourth quarter of 2019, management approved a plan to sell VNBS. The business and its associated assets and liabilities met the criteria for presentation as held for sale as of December 31, 2019, and depreciation of long-lived assets ceased. The divestiture did not meet the criteria for presentation as a discontinued operation.

On October 30, 2019, the Company entered into definitive agreements with Nissin-Kogyo Co., Ltd. and Honda Motor Co., Ltd to divest VNBS. On February 3, 2020, the Company completed the sale of VNBS. The aggregate purchase price of the transaction was $176 million, subject to certain adjustments. The net cash proceeds after adjusting for closing costs was $175 million. The Company recognized a gain on the divestiture of $77 million, net of closing costs.

~~The major classes of assets and liabilities held for sale were as follows:~~


~~(Dollars in millions)~~	~~As of~~
~~Assets held for sale~~	~~December 31, 2019~~
~~Cash and cash equivalents~~	$	35
~~Receivables, net~~	58
~~Inventories, net~~	17
~~Property, plant and equipment, net~~	~~126~~
~~Intangible assets, net~~	66
~~Other current assets~~	15
~~Total assets held for sale~~	$	~~317~~
~~Liabilities held for sale~~
~~Accounts payable~~	50
~~Accrued expenses~~	20
~~Related party short-term debt~~	12
~~Pension liability~~	8
~~Other current liabilities~~	28
~~Total liabilities held for sale~~	$	~~118~~

Note 5.6. Debt

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


		As of							As of
(Dollars in millions)	(Dollars in millions)	June 30, 2020		December 31, 2019		(Dollars in millions)	June 30, 2021		December 31, 2020
Short-Term Debt:	Short-Term Debt:					Short-Term Debt:
Short-term borrowings	Short-term borrowings	$	20	$	3	Short-term borrowings	$	4	$	4
Long-Term Debt:	Long-Term Debt:					Long-Term Debt:
4.00% Convertible Senior Notes due 2024 (Carrying value)	4.00% Convertible Senior Notes due 2024 (Carrying value)	165		160		4.00% Convertible Senior Notes due 2024 (Carrying value)	174		170
Other long-term borrowings	Other long-term borrowings	6		8		Other long-term borrowings	7		7
Total Debt	Total Debt	$	191	$	171	Total Debt	$	185	$	181

Short-Term Debt:

On April 24, 2020, a wholly-owned subsidiary of the Company entered into a credit agreement with a customer pursuant to which it was entitled to borrow an aggregate amount of up to $17 million in the form of term loans. On June 25, 2020, the parties amended the credit agreement to extend the repayment period and to increase the aggregate amount available for borrowing to $26 million. The proceeds of any such term loans may only be used to fund costs and expenses incurred by the subsidiary for such customer’s projects. Obligations incurred under the credit agreement are guaranteed by the Company. As of June 30, 2020 the outstanding loan balance was $17 million andShort-term debt is included in Other current liabilities in the ~~unaudited~~ Condensed Consolidated Balance Sheet.

Long-Term Debt:

Other long-term borrowings

Other long-term borrowings are included in Other non-current liabilities in the Condensed Consolidated Balance Sheet.

4.00% Convertible Senior Notes

On May 28, 2019, the Company issued, in a registered public offering in the U.S., Convertible Senior Notes (the “Notes”) with an aggregate principal amount of $207 million. The Notes bear interest at a rate of 4.00% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning December 1, 2019. The Notes will mature on June 1, 2024, unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The net proceeds from the offering of the Notes were approximately $200 million, after deducting issuance costs of $7 million. The Company accounted for these issuance costs as a direct deduction from the carrying amount of the Notes. These costs are being amortized into interest expense for 5 years or through June 2024.

The conversion rate is 44.8179 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $22.3125 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if the Company ~~deliver~~delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event or notice of redemption, as the case may be. In no event will the conversion rate per $1,000 principal amount of notes as a result of this adjustment exceed 57.1428 shares of common stock, as stipulated in the indenture.

The Company may not redeem the Notes prior to June 1, 2022. On or after this date, the Company may redeem for cash, shares or both all or any portion of the Notes, at our option, if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

If the Company undergoes a fundamental change (as defined in the indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Notes are the Company's general unsecured obligations and rank senior in right of payment to all of the Company's indebtedness that is expressly subordinated in right of payment to the Notes, equal in right of payment with all of the Company's liabilities that are not so subordinated, effectively junior to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

Holders may convert their Notes at their option at any time prior to the close of business on the business day immediately preceding March 1, 2024 only under the following circumstances: (1) if the last reported sale price of the Company's common stock for at least 20 trading days, whether or not consecutive, during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the "trading price" (as defined in the indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

On or after March 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company's election, as stipulated in the indenture.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, which does not meet the criteria for separate accounting as a derivative as it is indexed to the Company's own stock, was determined by deducting the fair value of the liability component from the par value of the Notes. The difference between the principal amount

of the Notes and the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the unaudited Consolidated Condensed Balance Sheet and amortized to interest expense using the effective interest method over the term of the Notes. The effective interest rate on the Notes is 10%. The equity component of the Notes of approximately $46 million is included in additional paid-in capital in the unaudited Condensed Consolidated Balance Sheet and is not remeasured as long as it continues to meet the conditions for equity classification. The Company allocated transaction costs related to the Notes using the same proportions as the proceeds from the Notes. Transaction costs attributable to the liability component were recorded as a direct deduction from the related debt liability in the unaudited Condensed Consolidated Balance Sheet and amortized to interest expense over the term of the Notes, and transaction costs attributable to the equity component were netted with the equity component in shareholders’ equity.

The following table presents the outstanding principal amount and carrying value of the Notes:


4.00% Convertible Senior Notes due 2024	4.00% Convertible Senior Notes due 2024	As of						4.00% Convertible Senior Notes due 2024	As of
(Dollars in millions)	(Dollars in millions)	June 30, 2020		December 31, 2019		(Dollars in millions)	June 30, 2021		December 31, 2020
Principal amount (face value)	Principal amount (face value)	$	207	$	207	Principal amount (face value)	$	207	$	207
Unamortized issuance cost	Unamortized issuance cost	(4)		(5)		Unamortized issuance cost	(3)		(4)
Unamortized debt discount	Unamortized debt discount	(38)		(42)		Unamortized debt discount	(30)		(33)
Net Carrying value	Net Carrying value	$	165	$	160	Net Carrying value	$	174	$	170

The Company recognized total interest expense related to the Notes of $5 million and $4 million ~~and $1 million~~ for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and $8$9 million and $1$8 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, in the unaudited Condensed Consolidated Statements of Operations.

The estimated fair value of the Notes was ~~$174~~$263 million as of June 30, ~~2020.~~2021. The estimated fair value of the Notes was determined through consideration of quoted market prices. The fair value is classified as Level 2, as defined in Note 68 "Fair Value Measurements".

Note 7. Restructuring Activities

The Company is undertaking various restructuring activities related to its Market Adjustment Initiatives program to achieve its strategic and financial targets and plans. These restructuring activities include, but are not limited to, consolidation of available capacity and resources along with production, engineering and administrative cost structure realignments. The Company expects to finance restructuring activities through its cash on hand and cash generated from operations.

Restructuring costs are recorded as elements of a plan as they become finalized and approved where the timing of the activities and the amount of related costs are not expected to change materially. Such costs are estimated based on information available at the time such charges are recorded. In general, management anticipates that restructuring activities will be completed within a relatively short time frame such that changes to the plan are expected to be immaterial. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially estimated.

During the first quarter of 2021, the Company announced certain restructuring activities impacting certain engineering and administrative functions to further align the Company's resources with its core product technologies and customers. During the three and six month period ended June 30, 2021, the Company recorded restructuring expenses of $2 million and $3 million, respectively. The Company recorded 0 in restructuring expenses for the three and six month period ended June 30, 2020. The payback on such restructuring expenses is expected to be less than one year.

Note 6.8. 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.

Assets which are valued at net asset value per share ("NAV"), or its equivalent, as a practical expedient are reported outside the fair value hierarchy but are included in the total assets for reporting and reconciliation purposes.

Items Measured at Fair Value on a Recurring Basis

Derivative instruments - The Company uses derivative financial instruments, “derivatives”, to mitigate the market risk that occurs from its exposure to changes in interest and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial risk policy. The derivatives outstanding as of June 30, ~~2020~~2021 were foreign exchange swaps. All swaps principally match the terms and maturity of the underlying obligation and 0 swaps have a maturity beyond six months. All derivatives are recognized in the unaudited condensed consolidated financial statements at fair value. Certain derivatives are from time to time designated either as fair value hedges or cash flow hedges in line with the hedge accounting criteria. For certain other derivatives hedge accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest and foreign exchange rates. The Company’s derivatives are classified as Level 2 of the fair value hierarchy and there were no transfers between the levels during this or comparable periods.

Financial Statement Presentation

The Company enters into master netting agreements, International Swaps and Derivatives Association (ISDA) agreements with all derivative counterparties. The netting agreements allow for netting of exposures in the event of default or breach of the counterparty agreement. The fair values in the Condensed Consolidated Balance Sheets have been presented on a gross basis. Derivative financial instruments designated and non-designated as hedging instruments are included in the Company’s Condensed Consolidated Balance ~~Sheets.~~Sheet. The notional value of the derivatives not designated as hedging instruments was ~~$177~~$223 million as of June 30, ~~2020~~2021 and ~~$291~~$179 million as of December 31, ~~2019.~~2020. As of June 30, 2021, derivatives not designated as

hedging instruments was an asset of $3 million, and as of December 31, 2020, the derivatives not designated as hedging instruments was an asset of $1 ~~million, and as of December 31, 2019, the~~million. There were no derivatives ~~not~~ designated as hedging ~~instruments was a liability of $1 million.~~instruments.

Gains and losses on derivative financial instruments ~~recognized~~reported in Other non-operating items, net in the unaudited Condensed Consolidated Statements of Operations, for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020, were a ~~loss~~gain of ~~less than $1~~$2 million and a ~~gain~~loss of less than $1 million, respectively, and for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020, were a gain of $2$4 million and a gain of $1$2 million, respectively.

Items Measured at Fair Value on a Non-Recurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. The fair value measurements are generally determined using unobservable inputs and are classified within Level 3 of the fair value hierarchy. These assets include long-lived assets, intangible assets and investments in affiliates, which may be written down to fair value as a result of impairment. The Company has determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets and settlements of liabilities, as observable inputs are not available. The Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. To determine the fair value of long-lived assets, the Company utilizes the projected cash flows expected to be generated by the long-lived assets, then discounts the future cash flows over the expected life of the long-lived assets. VBS assets and liabilities classified as held for sale and the related impairment as of June 30, 2020 were measured using third party sales pricing to determine fair values of the assets. See Note 45 "Divestiture and held for sale" for additional information.

~~Investments~~

Note 9. Income Taxes

The ~~Company may, as a practical expedient, estimate~~income expense for the fair value of certain investments using NAV of the investment as of the reporting date. This practical expedient generally deals with investments that permit an investor to redeem its investment directly with, or receive distributions from, the investee at times specified in the investee’s governing documents. Examples of these investments (often referred to as alternative investments) may include ownership interests in real assets, certain credit strategies,three and hedging and diversifying strategies. They are commonly in the form of limited partnership interests. The Company uses NAV as a practical expedient when valuing investments in alternative asset classes and funds which are a limited partnership or similar investment vehicle.

On June 30, 2017, Veoneer committed to make a $15 million investment in Autotech Fund I, L.P. pursuant to a limited partnership agreement, and as a limited partner, periodically makes capital contributions toward this total commitment amount. As of June 30, 2020 and December 31, 2019, Veoneer contributed approximately $12 million and $10 million, respectively, to the investment in Autotech Fund I, L.P. For the periodsix month periods ended June 30, ~~2020 the Company has received distributions of $3~~2021 was $4 million ~~from the partnership.~~

~~The carrying amounts of~~and $9 million, reflected in the unaudited Condensed Consolidated Balance Sheet in Investments for AutoTech Fund I, L.P approximates its fair value as of March 31, 2020 as this is the most recent information available to the Company at this time.

~~Note 7. Income Taxes~~

respectively. The income expense for three and six month periods ended June 30, 2020 was $2 million and $26 million, respectively. ~~The income tax benefit for~~There were no discrete items in the three and six month periods ended June 30, ~~2019 was $10 million and $4 million, respectively.~~2021. Discrete items, net were a benefit of $1 million and expense of $20 million for the three and six month periods ended June 30, 2020, ~~respectively, and a benefit of $8 million and $5 million for the three and six month periods ended June 30, 2019,~~ respectively. The discrete item in the six month period ended June 30, 2020 was primarily related to the tax impact of the divestiture of VNBS. Veoneer's effective tax rate differs from an expected statutory rate primarily due to the discrete item and losses in certain jurisdictions that are not benefited.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company assesses all available evidence, both positive and negative, to determine the amount of any required valuation allowance. Valuation allowances have been established for the Company’s operations in United States, Sweden, France, Japan and China.

Note 8.10. Inventories

Inventories are stated at the lower of cost (according to first-in-first-out basis, "FIFO") and net realizable value. The components of inventories were as follows:

As of
(Dollars in millions) June 30, 2020 December 31, 2019
Raw materials $ 99 $ 99
Work in progress 9 8
Finished products 51 62
Inventories 159 169
Inventory valuation reserve (27) (25)
Total inventories, net of reserve $ 132 $ 144


	As of
(Dollars in millions)	June 30, 2021		December 31, 2020
Raw materials	$	128	$	105
Work in progress	18		14
Finished products	53		51
Inventories	199		170
Inventory valuation reserve	(42)		(36)
Total inventories, net of reserve	$	157	$	134

Note 9.11. Equity Method Investment

As of June 30, 2021, the Company has 2 equity method investments.

Zenuity

On April 2, 2020, the Company ~~had 1 equity method investment, which is~~entered into a non-binding agreement with VCC to separate Zenuity, a 50% ownership joint venture with ~~Volvo Cars.~~VCC in order for each company to drive their respective strategies more effectively. The parties entered into definitive agreements and effected the separation on July 1, 2020.

On July 1, 2020, the Company finalized the split of Zenuity. As part of the transaction the Company paid approximately $37 million to Zenuity for 200 software engineers and 2 business units located in Germany and the US. Veoneer acquired the right to use Zenuity's intellectual property for a total consideration of SEK 1,067 million (approximately $114 million) which was settled against dividend receivable of SEK 1,067 million (approximately $114 million). The remaining value of that equity investment is 0.

As the transaction was between the investor and investee, the Company did not recognize any gain from the transaction.

Following completion of the transaction, Veoneer and VCC continue to each own 50% of Zenuity AB. The joint venture was not dissolved as part of the transaction but continues as a holding company that owns the Zenuity's intellectual property.

During the ~~second~~first quarter of ~~2020, Veoneer contributed~~2021, the Company received a dividend of SEK 90108 million (approximately $9$13 million) in cash (representing 50% ~~of the total contribution,~~, with the remainder ~~made~~received by ~~Volvo Cars) into Zenuity~~VCC) from Zenuity. In addition, the Company received a dividend of SEK 1,067 million (approximately $127 million) which was settled net against Related party short-term and long-term debt related to ~~support its current operating cash flow needs.~~Zenuity's intellectual property that Veoneer acquired the right to use as part of the separation of Zenuity.

During the first quarter of 2020, Veoneer contributed SEK 150 million (approximately $16 million) in cash (representing 50% of the total contribution, with the remainder made by ~~Volvo Cars)~~VCC) into Zenuity to support its future operating cash flow needs.

AutotechFund I, L.P.

The Company has an investment interest with Autotech Fund I, L.P of less than 20% which is accounted for under the equity method as the Company’s beneficial ownership interest in Autotech is similar to partnership interest.

On June 30, 2017, Veoneer committed to make a $15 million investment in Autotech pursuant to a limited partnership agreement, and as a limited partner, will periodically make capital contributions toward this total commitment amount. As of June 30, 2021 and December 31, 2020, Veoneer has contributed a total of $13 million to the fund. As of June 30, 2021 the Company has received a distribution of $3 million from the fund.

The carrying amounts reflected in the Condensed Consolidated Balance Sheet as of June 30, 2021 in equity method for the AutoTech approximates its fair value as of March 31, 2021, as this is the most recent information available to the Company at this time.

The profit and loss attributed to the ~~investment~~investments is shown in the line item ~~Loss~~Gain (loss) from equity method investment in the ~~Unaudited~~unaudited Condensed Consolidated Statements of Operations. Veoneer’s share of ~~Zenuity’s loss~~Zenuity and AutoTech for the three and six month periods ended June 30, 2021 was a gain of $1 million and of $8 million, respectively. Veoneer’s share of Zenuity and AutoTech for the three and six month periods ended June 30, 2020 was a loss of $19 million and $38 million, respectively. ~~Veoneer's share of Zenuity's loss for the three and six month periods ended June 30, 2019 was $18 million and $35 million, respectively.~~

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company’s equity investment in Zenuity ~~was $74~~and Autotech amounted to $18 million and ~~$87~~$153 million, ~~respectively.~~

~~Certain unaudited summarized income statement information~~respectively, after consideration of foreign exchange rate movements. The value of Zenuity ~~for the three and six month periods ended~~investment as of June 30, ~~2020 and 2019,~~2021 is ~~shown below:~~0.

Three Months Ended June 30 Six Months Ended June 30
(Dollars in millions) 2020 2019 2020 2019
Net sales $ 1 $ — $ 2 $ 1
Gross profit — — — —
Operating loss (39) (35) (75) (69)
Loss before income taxes (39) (35) (75) (69)
Net loss (39) (36) (75) (69)

Note ~~10.~~12. Accrued ~~Expenses~~

As of
(Dollars in millions) June 30, 2020 December 31, 2019
Operating related accruals $ 69 $ 43
Employee related accruals 72 76
Customer pricing accruals 23 39
Product related liabilities¹
18 15
Other accruals 18 19
Total Accrued Expenses $ 200 $ 192

^{Expense
As of
(Dollars in millions) June 30, 2021 December 31, 2020
Operating related accruals $ 62 $ 70
Employee related accruals 81 102
Customer pricing accruals 17 20
Product related liabilities1 18 19
Other accruals 22 21
Total Accrued Expenses $ 200 $ 232 1} As of June 30, ~~2020~~2021 and December 31, ~~2019, $11~~2020, $9 million and $8$9 million, respectively, of product related liabilities were indemnifiable losses subject to indemnification by Autoliv and an indemnification asset is included in Other current assets.

Note ~~11.~~13. Retirement Plans

Defined Benefit Pension Plans

The Company’s net periodic benefit costs for plans for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended June 30						Six Months Ended June 30							Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	(Dollars in millions)	2020		2019		2020		2019		(Dollars in millions)	2021		2020		2021		2020
Service cost	Service cost	$	1	$	1	$	2	$	3	Service cost	$	1	$	1	$	2	$	2
Interest cost	Interest cost	1		—		1		1		Interest cost	1		1		1		1
Expected return on plan assets	Expected return on plan assets	(1)		(1)		(1)		(1)		Expected return on plan assets	(1)		(1)		(1)		(1)
Net periodic benefit cost	Net periodic benefit cost	$	1	$	—	$	2	$	3	Net periodic benefit cost	$	1	$	1	$	2	$	2

The service cost and amortization of prior service cost components are reported among employee compensation costs in the unaudited Condensed Consolidated Statements of Operations. The remaining components (interest cost, expected return on plan assets and amortization of actuarial loss) are reported in Other non-operating items, net in the unaudited Condensed Consolidated Statements of Operations.

Note ~~12.~~14. Stock Incentive Plan

The Veoneer, Inc. 2018 and 2021 Stock Incentive Plan was established and effective on June 29, 2018 and May 10, 2021, respectively, to govern the Company’s stock-based awards that will be granted in the future. The Veoneer, Inc. 2018 and 2021 Stock Incentive Plan authorizes the grant of 3 million and 13 million shares, respectively, of Veoneer common stock for future equity awards to Veoneer employees and non-employee directors and authorizes up to 1.5 million additional shares to be used for the conversion of outstanding Autoliv stock awards in connection with the ~~Spin-Off.~~spin-off of the Company by Autoliv, Inc. on June 29, 2018 (the “Spin-Off”). Approximately 1 million shares were used for the conversion of the outstanding grants. As of May 10, 2021, all future awards will be granted under the 2021 Stock Incentive Awards and no further awards may be granted under the 2018 Stock Incentive Plan.

During the six months ended June 30, ~~2020~~2021 under the Company’s 2018 long-term incentive (LTI) program, certain employees ~~and non-employee directors~~ received restricted stock units (RSUs) without dividend equivalent rights and performance shares (PSs) without dividend equivalent rights. The allocation between RSUs and PSs was ~~747,466~~203,439 RSUs and ~~415,381~~182,272 PSs at 100% target.

During the six months ended June 30, 2021 under the Company’s 2021 LTI program, certain non-employee directors received restricted stock units (RSUs) with dividend equivalent rights of 36,841.

The majority of the RSUs granted will vest on the third anniversary of the grant date, subject to the grantee’s continued employment with the Company on the vesting date and acceleration of vesting in certain circumstances. The fair value of RSUs and PSs granted in ~~2020~~2021 were calculated by using the closing stock price on the grant dates. The grant date fair value for the RSUs and PSs, granted in ~~2020~~2021 was ~~$11~~$14 million.

PSs granted in ~~2020 will earn out~~2021 may be earned during the first quarter of ~~2023,~~2024, upon the Compensation Committee’s certification of achievement of the applicable performance goals. The grantee may earn 0%-200% of the target number of PSs based on the Company’s achievement of specified ~~targets. The performance target is~~targets related to the Company’s gross margin for the applicable performance period. Each PS represents a promise to transfer a share of the Company’s common stock to the employee following completion of the performance period, provided that the performance goals mentioned above are met and provided, further, that the grantee remains employed through the performance period, subject to certain limited exceptions.

Veoneer recognized total stock (RSUs, ~~PSs~~PS and Stock Options) compensation cost of $2$3 million and $4$5 million for the three and six month periods ended June 30, ~~2020,~~2021, respectively. During the three and six month periods ended June 30, ~~2019,~~2020, the Company recorded $2 million and $3$4 million, respectively.

Note ~~13.~~15. Contingent Liabilities

Legal Proceedings

Various claims, lawsuits and proceedings are pending or threatened against the Company, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability and other matters. Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, it is the opinion of management that the various legal proceedings and investigations to which the Company currently is a party will not

have a material adverse impact on the condensed consolidated financial position of Veoneer, but the Company cannot provide assurance that Veoneer will not experience material litigation, product liability or other losses in the future.

Product Warranty, Recalls, and Intellectual Property

Veoneer is exposed to various claims for damages and compensation if its products fail to perform as expected. Such claims can be made, and result in costs and other losses to the Company, even where the product is eventually found to have functioned properly. Where a product (actually or allegedly) fails to perform as expected or is defective, the Company may face warranty and recall claims. Where such (actual or alleged) failure or defect results, or is alleged to result, in bodily injury and/or property damage, the Company may also face product liability and other claims. There can be no assurance that the Company will not experience material warranty, recall or product (or other) liability claims or losses in the future, or that the Company will not incur significant costs to defend against such claims. The Company may be required to participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. Government safety regulators may also play a role in warranty and recall practices. A warranty, recall or product-liability claim brought against the Company in excess of its insurance may have a material adverse effect on the Company’s business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the repair or replacement costs of products when the product supplied did not perform as represented by the Company or expected by the customer. Accordingly, the future costs of warranty claims by ~~the~~ customers may be material. However, the Company believes its established reserves are adequate. Veoneer’s warranty reserves are based upon the Company’s best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the adequacy of these reserves, and adjusts them when appropriate. However, the final amounts actually due related to these matters could differ materially from the Company’s recorded estimates.

In addition, as vehicle manufacturers increasingly use global platforms and procedures, quality performance evaluations are also conducted on a global basis. Any one or more quality, warranty or other recall issue(s) (including those affecting few units and/or having a small financial impact) may cause a vehicle manufacturer to implement measures such as a temporary or prolonged suspension of new orders, which may have a material impact on the Company’s results of operations.

The Company carries insurance for potential recall and product liability claims at coverage levels based on the Company’s prior claims experience. Veoneer cannot assure that the level of coverage will be sufficient to cover every possible claim that can arise in the Company’s businesses, now or in the future, or that such coverage always will be available should the Company, now or in the future, wish to extend, increase or otherwise adjust the Company’s insurance.

In its products, the Company utilizes technologies which may be subject to intellectual property rights of third parties. While the Company does seek to procure the necessary rights to utilize intellectual property rights associated with its products, it may fail to do so. Where the Company so fails, the Company may be exposed to material claims from the owners of such rights. Where the Company has sold products which infringe upon such rights, its customers may be entitled to be indemnified by the Company for the claims they suffer as a result thereof. Such claims could be material.

Product Related Liabilities

The Company records liabilities for product related risks when probable claims are identified and when it is possible to reasonably estimate costs. Provisions for warranty claims are estimated based on prior experience, likely changes in performance of newer products, and volume of the products sold. The provisions are recorded on an accrual basis.

The table below summarizes the change in product related liabilities in the unaudited Condensed Consolidated Balance ~~Sheets.~~Sheet.


		Three Months Ended June 30						Six Months Ended June 30							Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	(Dollars in millions)	2020		2019		2020		2019		(Dollars in millions)	2021		2020		2021		2020
Reserve at beginning of the period	Reserve at beginning of the period	$	18	$	14	$	15	$	16	Reserve at beginning of the period	$	18	$	18	$	19	$	15
Change in reserve	Change in reserve	1		2		6		1		Change in reserve	2		1		2		6
Cash payments	Cash payments	(1)		(1)		(3)		(3)		Cash payments	(2)		(1)		(3)		(3)

Reserve at end of the period	Reserve at end of the period	$	18	$	14	$	18	$	14	Reserve at end of the period	$	18	$	18	$	18	$	18

For the three and six month periods ended June 30, ~~2020~~2021 and ~~June 30, 2019,~~2020, cash paid primarily ~~relate~~relates to warranty related issues. ~~The increase in the reserve balance as of June 30, 2020 compared to the prior year was due to a recall related reserve liability.~~ Agreements entered into between Autoliv and Veoneer in connection with the Spin-Off provide for Autoliv to indemnify Veoneer for certain liabilities related to electronics products manufactured before April 1, 2018. As of June 30, ~~2020~~2021 and December 31, ~~2019, $11~~2020, $9 million ~~and $8 million, respectively,~~ of product related liabilities were indemnifiable losses subject to indemnification by Autoliv and an indemnification asset is included in Other current assets.

~~Guarantees~~

The Company provided lease guarantees to Zenuity of $15 million and $7 million as of June 30, 2020, and December 31, 2019, respectively. These represent the maximum potential amount of future (undiscounted) payments that Veoneer could be required to make under the guarantees in the event of default by the guaranteed parties. These guarantees will generally cease upon expiration of current lease agreements between 2020 and 2022. There are no liabilities recorded in the unaudited Condensed Consolidated Balance Sheet as of June 30, 2020 and December 31, 2019 related to these guarantees.

Note ~~14.~~16. Loss per share

Basic loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and equity incentive awards is reflected in diluted loss per share by application of the treasury stock method. The following table sets forth the computation of basic and diluted loss per share for the three ~~and six~~ month periods ended June 30, ~~2020~~2021 and ~~2019.~~2020.


		Three Months Ended June 30						Six Months Ended June 30							Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions, except per share amounts)	(Dollars in millions, except per share amounts)	2020		2019		2020		2019		(Dollars in millions, except per share amounts)	2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Basic and diluted:	Basic and diluted:									Basic and diluted:
Net loss attributable to Veoneer	Net loss attributable to Veoneer	$	(90)	$	(133)	$	(322)	$	(270)	Net loss attributable to Veoneer	$	(100)	$	(90)	$	(205)	$	(322)

Denominator:	Denominator:									Denominator:
Basic: Weighted average number of shares outstanding (in millions)	Basic: Weighted average number of shares outstanding (in millions)	111.58		96.06		111.52		91.68		Basic: Weighted average number of shares outstanding (in millions)	111.84		111.58		111.77		111.52
Diluted: Weighted-average number of shares outstanding, assuming dilution (in millions)¹	Diluted: Weighted-average number of shares outstanding, assuming dilution (in millions)¹	111.58		96.06		111.52		91.68		Diluted: Weighted-average number of shares outstanding, assuming dilution (in millions)1	111.84		111.58		111.77		111.52

Basic loss per share	Basic loss per share	$	(0.80)	$	(1.39)	$	(2.89)	$	(2.94)	Basic loss per share	$	(0.89)	$	(0.80)	$	(1.83)	$	(2.89)
Diluted loss per share	Diluted loss per share	$	(0.80)	$	(1.39)	$	(2.89)	$	(2.94)	Diluted loss per share	$	(0.89)	$	(0.80)	$	(1.83)	$	(2.89)

¹ Shares in the diluted loss per share calculation represent basic shares due to the net loss.

In periods when the Company has a net loss, equity incentive awards are excluded from the Company's calculation of earnings per share as their inclusion would have an ~~antidilutive~~anti-dilutive effect. The Company excluded equity incentive awards of ~~866,008~~762,418 and ~~649,349~~798,616 shares for the three and six month periods ended June 30, ~~2020,~~2021, respectively, and ~~290,483~~866,008 and ~~301,898~~649,349 for the three and six month periods ended June 30, ~~2019,~~2020, respectively, from the diluted loss per share calculations.

The Company may settle the ~~conversions~~conversion of the Notes in cash, shares of the Company's common stock or any combination thereof at its election. For the Notes, the number of shares of the Company's common stock issuable at the conversion price of $22.3125 per share would be 9,277,305 shares if the Company elected to settle the conversion wholly in shares. See Note 56 "Debt". for more information. Due to anti-dilutive effects, the Company excluded potential convertible shares due tounder the Notes of 9,277,305 for the three and six month periods ended June 30, ~~2020~~2021 and ~~3,364,297 and 1,691,442 for the three and six month periods ended June 30, 2019, respectively,~~2020 from the diluted loss per share calculations.

Note ~~15.~~17. Segment Information

Financial results for the Company's reportable ~~segments~~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 (CODM) in allocating resources and in assessing performance.

The Company has one reportable segment, which includes the Company’s electronics resources and expertise in passive safety electronics and active safety.

The Company previously had 2 operating segments - Electronics and Brake Systems. ~~Electronics includes all~~The Asian business of ~~electronics resources and expertise, restraint control systems and active safety products and~~the Brake Systems ~~provides brake control~~segment was sold on February 3, 2020 and ~~actuation systems. The operating results~~the majority of the ~~operating segments are regularly reviewed by the Company’s CODM, the Chief Executive Officer,~~Brake Systems business in North America was sold on August 10, 2020. The remaining Brake Systems business is no longer a reportable segment due to ~~assess the performance of the individual operating segments and to make decisions about resources to be allocated to the operating segments.~~immateriality.

The accounting policies for the reportable ~~segments~~segment are the same as those described in Note 2 "Summary of Significant Accounting Policies" included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~21, 2020.~~19, 2021.

2220


Loss Before Income Taxes	Loss Before Income Taxes	Three Months Ended June 30						Six Months Ended June 30							Loss Before Income Taxes	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	(Dollars in millions)	2020		2019		2020		2019		(Dollars in millions)	2021		2020			2021		2020
Electronics	Electronics	$	(29)	$	(101)	$	(123)	$	(191)	Electronics	$	(76)	$	(29)		$	(161)	$	(123)
Brake Systems	Brake Systems	(20)		(17)		(33)		(37)		Brake Systems	0		(20)			0		(33)
Segment operating loss	Segment operating loss	(49)		(118)		(156)		(228)		Segment operating loss	(76)		(49)			(161)		(156)
Corporate and other	Corporate and other	(15)		(19)		(30)		(37)		Corporate and other	(16)		(15)			(35)		(30)
Loss on divestiture and Assets held for sale		—		—		(67)		—
Loss on divestiture and assets impairment charge, net										Loss on divestiture and assets impairment charge, net	0		0			0		(67)
Interest and other non-operating items, net	Interest and other non-operating items, net	(5)		3		(4)		6		Interest and other non-operating items, net	(5)		(5)			(8)		(4)
Loss from equity method investment		(19)		(18)		(38)		(35)
Gain (loss) from equity method investment										Gain (loss) from equity method investment	1		(19)			8		(38)
Loss before income taxes	Loss before income taxes	$	(88)	$	(152)	$	(295)	$	(294)	Loss before income taxes	$	(96)	$	(88)		$	(196)	$	(295)

Note ~~16.~~18. Relationship with Former Parent and Related Entities

Transactions with Related Parties

Veoneer and Autoliv entered into ~~a Transition Services Agreement ("TSA")~~transition service agreements in connection with the Spin-Off under which certain services are provided by Autoliv to Veoneer and certain services are provided by Veoneer to Autoliv. ~~The Company recognized less~~ ~~than $1 million of~~ ~~expense under the TSA for~~For the three and six month periods ended June 30, ~~2020, and $1 million and $3 million~~2021, the Company recognized 0 of expense under the ~~TSA~~agreements and less than $1 million for the three and six month ~~periods~~period ended June 30, ~~2019 respectively. The~~2020. For the three and six month period ended June 30, 2021, the Company recognized zero of income under the TSA and less than $1 million of income ~~under the TSA~~ for the three and six month ~~periods~~period ended June 30, ~~2020 and 2019.~~2020.

Throughout the periods covered by the unaudited condensed consolidated financial statements, Veoneer sold finished goods to Autoliv and ~~Nissin Kogyo,~~Related Party sales amounted to $20 million and $41 million for the ~~49% owner in VNBS (a former 51% owned subsidiary). Related party sales amount to~~three and six month periods ended June 30, 2021, respectively, and $11 million and $30 million for the three and six month periods ended June 30, 2020, ~~respectively and $26 million and $52 million for the three and six month periods ended June 30, 2019,~~ respectively.

Related Party Balances

Amounts due to and due from related parties are summarized in the below table:

Related Party As of
(Dollars in millions) June 30, 2020 December 31, 2019
Related party receivable $ 8 $ 11
Related party payables 1 3
Related party short-term debt — 1


Related Party	As of
(Dollars in millions)	June 30, 2021		December 31, 2020
Related party receivable	$	8	$	9

Related party payables	1		2
Related party short-term debt	0		16
Related party long-term debt	0		115

Related party receivables are mainly driven by reseller agreements put in place in connection with the Spin-Off. The reseller agreements are between Autoliv and Veoneer and facilitate the temporary arrangement of the sale of Veoneer products manufactured for certain customers for a limited period after the Spin-Off. Autoliv ~~will collect~~collects the customer payments and ~~will remit~~remits the payments to Veoneer.

Note ~~17.~~19. Factoring

The Company receives bank notes generally maturing within six months from certain of its customers in China to settle trade accounts receivable. The Company may hold such bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third party financial institutions in exchange for cash.

For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company has entered into arrangements with financial institutions and sold ~~$23~~$117 million and ~~$36~~$23 million, respectively, of trade receivables without recourse and $6$31 million and ~~$23~~$6 million, respectively, of bank notes without recourse, which qualify as sales as all rights to the trade and notes receivable have passed to the financial institution.

As of June 30, ~~2020,~~2021, the Company ~~has $2~~had $1 million of trade notes receivables, which remain outstanding and will mature within the ~~third quarter~~second half of ~~2020.~~2021. The collections of such bank notes are included in operating cash flows based on the substance of the underlying transactions, which are operating in nature.

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Note ~~18.~~20. Subsequent Events

On ~~April 2, the Company~~July 22 2021, Magna International Inc. and Veoneer Inc. announced that they have entered into a ~~non-binding~~definitive merger agreement ~~with Volvo Cars~~under which Magna will acquire Veoneer, a leader in automotive safety technology. Pursuant to separate Zenuity, a 50% ownership joint venture with Volvo Cars in order for each company to more effectively drive their respective strategies. The parties entered into definitive agreements and effected the ~~separation on July 1, 2020. As part~~agreement, Magna will acquire all of the ~~split,~~issued and outstanding shares of Veoneer ~~received IP licenses~~for $31.25 per share in cash, representing an equity value of $3.8 billion, and ~~added around 200 software engineers, located in Germany, the US~~an enterprise value of $3.3 billion, inclusive of Veoneer’s cash, net of debt and ~~Sweden. The Company is evaluating the impact~~other debt-like items as of ~~the transaction and expects to recognize a gain, but is unable to reasonably estimate the amount of the gain at this time.~~

On April 24, 2020, a wholly-owned subsidiary of the Company entered into a credit agreement with a customer pursuant to which it was entitled to borrow an aggregate amount of up to $17 million in the form of term loans. On June 25, 2020, the parties amended the credit agreement to extend the repayment period and to increase the aggregate amount available for borrowing to $26 million. On July 2, 2020, the Company drew an additional $9 million in the form of a new term loan under the amended credit agreement. The proceeds of any such term loans may only be used to fund costs and expenses incurred by the subsidiary for such customer’s projects.March 31, 2021.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations, financial condition and cash flows of Veoneer, Inc. (“Veoneer,” the “Company,” “we,” or “our”). This MD&A should be read in conjunction with the financial statements and accompanying notes to the financial statements included elsewhere herein, as well as the risk factors and other disclosures made in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020, filed with the SEC on February ~~21, 2020.~~19, 2021.

Introduction

The following MD&A is intended to help you understand the business operations and financial condition of the Company. This MD&A is presented in the following sections:

•Executive Overview

•COVID-19 and Semiconductor Supply Commentary

•~~2020~~2021 Outlook

•Trends, Uncertainties and Opportunities

•Market Overview

•Results of Operations

•Non-U.S. GAAP Financial Measures

•Liquidity and Capital Resources

•Off-Balance Sheet Arrangements and Other Matters

•Contractual Obligations and Commitments

•Significant Accounting Policies and Critical Accounting Estimates

Veoneer is a Delaware corporation with its principal executive offices in Stockholm, Sweden. The Company functions as a holding corporation and owns two principal operating subsidiaries, Veoneer AB and Veoneer US, Inc. On June 29, 2018 the spin-off of Veoneer from Autoliv, Inc. ("Autoliv") was completed through the distribution by Autoliv of all the outstanding shares of common stock of Veoneer to Autoliv’s stockholders as of the close of business on June 12, 2018, the common stock record date for the distribution, in a tax-free, pro rata distribution (the "Spin-Off"). On July 2, 2018, the shares of Veoneer common stock commenced trading on the New York Stock Exchange under the symbol “VNE” and the Veoneer Swedish Depository Receipts representing shares of Veoneer common stock commenced trading on Nasdaq Stockholm under the symbol “VNE SDB.”

~~Veoneer is a~~ global leader in the design, development, manufacture, and sale of automotive safety electronics with a focus on innovation, quality and manufacturing excellence. Prior to the Spin-Off, Veoneer operated for almost four years as an operating segment within Autoliv. Veoneer's safety systems are designed to make driving safer and easier, more comfortable and convenient for the end consumer and to intervene before a collision to avoid a potentially hazardous situation. Veoneer endeavors to prevent vehicle accidents or reduce the severity of impact in the event a crash is unavoidable. Through our customer focus, and being an expert partner with our customers, we intend to develop human centric systems that benefit vehicle occupants.

~~Veoneer’s~~The Company’s current product offerings include automotive radars, mono and stereo vision cameras, night vision systems, positioning systems, advanced driver assist systems ("ADAS") electronic control units, passive safety electronics (airbag control units and crash sensors), brake control systems and a complete ADAS software offering towards highly automated driving ("HAD") and eventually autonomous ~~driving.~~driving, through its recently formed software unit and brand Arriver. In addition, we offer driver monitoring systems, LiDAR sensors, RoadScape positioning and other technologies critical for HAD and ADautomated driving ("AD") solutions by leveraging our partnership network and internally developed intellectual property.

In May 2021, we implemented an organizational refinement to drive Veoneer from a regional-based organization toward a product-based product organization. This refinement will allow the Company to better focus on execution, innovation and product development. This change did not affect Veoneer's financial reporting structure.

Executive Overview

On July 22, 2021 Veoneer entered into a definitive merger agreement under which Magna will acquire the Company. The Company's Board of Directors believes this is a compelling transaction for our shareholders and all of our stakeholders. It will deliver significant and immediate value to Veoneer stockholders and reflects an attractive premium to our trading price and provides new opportunities for our employees to join one of the most capable suppliers in the mobility space. The plan is to finalize the agreement in the coming months and we will provide timely updates as the process progresses.

For the quarter, we were pleased with the Company''s performance during a challenging period. Despite the uncertainty created by supply disruptions, the COVID-19 pandemic and sequentially lower light vehicle production leading to lower sales, the Company improved its gross profit and operating loss as well as its cash flow. These improvements were achieved through the progress of our on-going market adjustment initiatives, and we expect continuous progress throughout 2021 as sales increases and the results of the efficiency programs are expected to keep our costs at near planned levels.

Planned launches are on track, although the positive volume effects are somewhat held back by the short-term fluctuations in OEM demand. During the quarter we had five key launches, four out of which were Active Safety launches that will start to contribute to our expected strong organic sales growth in the quarters and years to come. The launch of the Geely EMA was especially significant for Veoneer as we are a full system and integration supplier to the vehicle. This is a flagship program for the Company, highlighting the strength of our vision, radar, ECU and software capabilities. It further highlights the current

2523

~~Executive Overview~~momentum the Company has in China where among other customer wins we signed yet another new customer for our vision technology.

The second quarter was very unusual. The light vehicle production declined by around 45%, the worst decline in recorded history. The many complexities in terms of regional differences, global supply chains, short delivery notices and several other factors, made it a very difficult environment for running effective and efficient operations. The health of our employees remained a continued focus, not least because of the additional challenges of safely ramping up our operations, as the COVID -19 pandemic is first and foremost a health crisis. Despite the extreme conditionsCompany's order intake developed better in the quarter ~~our market adjustment initiatives are having~~than what we expected, due in part to new opportunities that we were able to capture and partly due to orders expected in the ~~desired effects and we are currently on track to reach our efficiency targets for 2020. In the first and second~~third quarter ~~we have been particularly successful in customer negotiations which were reflected in our results~~materializing already in the second quarter. We won orders across most products areas, highlighting the strength of our current product portfolio. With this positive development we are ~~also continuing~~well on track to ~~deliver on-going improvements~~reach higher order levels in ~~RD&E~~2021 as compared to 2020.

The first Arriver perception and ~~other cost efficiencies according~~drive policy software running on the Qualcomm Snapdragon Ride platform has now been demonstrated in-vehicle to ~~plan.~~

potential customers with encouraging initial feedback, a true milestone. During the quarter the Volvo XC40 Recharge, which runs the current generation of Arriver software, was picked as "Top Safety Pick+" by the Insurance Institute for Highway Safety in the United States, another proof point that we ~~continued~~are on track to create a leading global challenger for Active Safety systems and software.

These developments are the ~~introduction~~result of the next generation of our Active Safety portfolio. Our fourth-generation vision system is now launched and the indications are that this system is performing very well, further strengthening our position as a leading challenger in the vision market. There have now also been a total of eleven launches of our next generation 77GHz radar product, including two recent launches of forward looking radar, a very important development as we see this generation of our radar product as highly competitive in the market for years to come.

~~The trend, focus and commercial opportunity for the next decade is in collaborative driving and active safety. The finalization~~strong execution of the ~~split of Zenuity~~entire Veoneer team.

COVID-19 and Semiconductor Supply Commentary

Veoneer is working to minimize the integration of more than 200 talented software engineers into our systems and software team fits right into that opportunity. These additions are focused on driving policy, which complements the team mainly focused on perception software and system design. Having this combined capability fully in-house further enhances our ability to develop full systems as well as individual products for all different types of OEMs and segmentsimpact of the ~~light vehicle market. We~~supply constraints in semiconductors. The supply constraints are also encouraged by the initial positive reviews of the Polestar 2. Most of the Active Safety system on the Polestar 2, including the entire system ADAS software stack, is delivered by Veoneer, a good reference for the next steps for our systems and software business. Further launches are being rolled out inlikely to remain into the second half of ~~2020 and beyond.~~

~~COVID-19 Commentary~~

~~The situation created by~~2021 although we do expect a gradual recovery to take place. Currently it is hard to predict the ~~COVID-19 pandemic has led~~pace of the recovery, but as underlying consumer demand continues to ~~an unprecedented economic global uncertainty. This includes~~look strong, we anticipate a strong if not full recovery during the ~~automotive industry and light vehicle production ("LVP") for 2020~~second half of the year, particularly in the fourth quarter, as vaccination programs eases the constraints from COVID-19 and the semiconductor industry starts to catch up with demand. These assumptions are taken into account in our full year 2021 outlook.

For 2021 and the upcoming years, ~~ahead. We have been more conservative with our contingency planning assumptions than~~ the ~~July industry estimate from IHS~~most important driver for Veoneer’s business is new customer and technology launches, which ~~assumes a year-over-year decline of approximately 22%.~~should drive significant out-performance as compared to the global LVP.

As noted in our 2020 ~~Outlook,~~full year results and first quarter 2021 results, in response to the pandemic, the Company ~~has additional market adjustment initiatives ("MAI") underway~~continues to ~~mitigate the impact of the pandemic on~~expand its strong cash position. Veoneer estimates the organic sales (non-U.S. GAAP financial measure) impact from the lower customer demand to be approximately $190 million for the second quarter. This, in combination with the first quarter, implies the first half 2020 negative organic sales impact on Veoneer from the lower customer volumes was approximately $220 million.

~~The Company intends to continue to extend its MAI program (which includes efficiency programs, strategic reviews and portfolio optimization)~~MAIs to further mitigate the impact of the pandemic on its cash flow and operating results. This includes reducing its annual RD&E, net by more than $100 million and other expenses with the intention of reducing the Company's operating loss and conserving cash in 2020 so as to enter 2021 in a stable cash position.

~~During the latter~~As part of the ~~second quarter customers in Europe and North America gradually started to ramp up their production after the majority of their factories were shut down~~MAIs, during the ~~latter part~~first half of 2021 the ~~first quarter continuing into~~Company undertook certain restructuring activities, recording restructuring expenses of approximately $5 million, impacting certain engineering and administrative functions.

The COVID-19 pandemic continues to cause significant uncertainty in the ~~early part~~global economy. This includes the automotive industry and the global LVP for 2021 and the upcoming years ahead, which are dependent on underlying consumer demand. Simultaneously and triggered by the COVID-19 pandemic, the automotive industry, like other industries dependent on semiconductors, is experiencing challenges in the supply of ~~the second quarter. The situation in China has stabilized and also the other Asian car producing countries are gradually returning~~semiconductors.

Our OEM customers continue to recover to more normal ~~production levels.~~

~~As our OEM customers return to production,~~volumes, or higher than normal volumes in certain countries, and in the first half of 2021, we ~~are returning~~have returned to higher production levels as well, taking additional precautions to ensure the safety of our associates in each of our facilities, in accordance with detailed developed protocols. It is still uncertain how quickly our customers will ramp-up as production volumes may continue to fluctuate depending on underlying consumer demand.

In 2020, the most important driver for Veoneer’s business is new customer and technology launches. For the top 15 launches we see no cancellations of projects, however approximately half have been postponed by up to one quarter while the rest remain on track, or actually even slightly ahead of schedule. The exact volumes and consumer take rates are hard to predict at this point in time.well. The health and safety of our associates continues to be our first priority, and we are taking the necessary actions to continue to protect our associates, safeguard our operations and meet our customers' needs while managing through these unprecedented circumstances.

~~2020~~2021 Outlook

~~Due~~The macro-economic environment remains very uncertain, mainly due to the ~~market uncertainty that has been~~global supply chain challenges created byas a result of the COVID-19 ~~pandemic it is becoming increasingly difficult~~pandemic. These global supply chain shortages have led multiple OEM customers to ~~provide updated sales indications and specific organic sales for FY'20. We currently expect some launch delays during 2020, however the Company expects to out-perform~~reduce their production schedules on short notice, which in turn makes the global LVP very difficult to forecast.

For the full year 2021, we expect our organic sales growth (non.U.S. GAAP measure) to exceed 25% and a currency translation, net increase of 4%, both as compared to 2020. Also for full year 2021, we estimate Active Safety organic sales growth to be in ~~2020, assuming no major additional launch delays.~~the range of 40-45%. We anticipate positive leverage on this organic sales growth (non.U.S. GAAP measure) during 2021 to improve our gross margin.

~~Veoneer continues~~The RD&E, net run rate is expected to ~~implement additional MAIs with~~be in the ~~underlying goal~~range of $110 to ~~off-set~~$120 million per quarter, while capital expenditures and depreciation are expected to be approximately $100 million and $115 million, respectively, for the ~~negative effects from lower sales and impact on cash flow.~~full year 2021. As a result of these ~~actions, the Company's outlook remains unchanged where Veoneer expects cash flow before financing activities (non-U.S. GAAP financial measure) to be approximately $(200) million~~underlying assumptions, we expect our operating loss for the ~~second half of 2020 and the operating loss~~full year 2021 to improve ~~in 2020~~ as compared to ~~2019, on a comparable basis.~~2020, and we expect our cash balance to be more than $400 million at 2021 year-end. We also expect our operating loss and cash flow performance to improve sequentially during 2021.

Veoneer expects ~~RD&E, net~~its order intake to increase in ~~FY'20 to improve by more than $100 million~~2021 as compared to ~~2019, on a comparable basis. Capital expenditures are now expected to be less than $125 million for FY'20.~~2020.

Trends, Uncertainties and Opportunities

Trend toward Collaborative Driving

The environment around us continues to bechange rapidly ~~changing~~ and we currently see a shift across the automotive and autotech industries. The industry developments during ~~2019~~2021 have further strengthened the trend toward advanced driver support - Collaborative Driving - and away from fully autonomous cars for the consumer based vehicle mass market.

New technologies, creating new levels of interaction and driver support are starting to revolutionize driving, but we also see the driver being actively involved for many years to come. While the industry refers to “Level 2+” or even "Level 2++" Veoneer calls this Collaborative Driving, and includes any SAE level of ~~automation.~~automation up to Level 4. Currently there are renewed initiatives in the industry for Level 3 conditional automation where the driver for certain periods of time can be out of loop, but has to be ready to take control of the vehicle at any time. At the same time there is a growing realization that the introduction of truly self-driving cars will likely take longer and be more expensive than previously anticipated. This fundamental insight opens up new opportunities for companies, including Veoneer, but it also requires adjusting the priorities of resources. As such, we believe that the market will stay mainly focused on Level 1-Level 2+ and Level 3 autonomous driving solutions for the next decade however, while we see a continued strong drive toward more automation and driver support, the ~~recent developments of~~ongoing impacts from the COVID-19 pandemic, ~~during the first half of 2020,~~ and perhaps ongoing impact, could affect the evolution of ADAS, Collaborative Driving and AD for consumer purchased light vehicles.

Global Regulatory and Test Rating Developments

Europe continues to take a proactive role in promoting or requiring Active Safety technologies. The European New Car Assessment Program (“NCAP”) continuously updates its test rating program to include more active safety technologies to help the European Union reach its target of cutting road fatalities by 50% by 2030, as compared to 2020. In ~~May 2020~~order to help our industry to overcome the situation with respect to the COVID-19 pandemic Euro NCAP ~~announced that is was postponing~~postponed the ~~roll-out~~rollout of upcoming road map updates by one year (from 2022 to 2023 and from 2024 to 2025). ~~This should help our industry to overcome the situation with respect to the COVID-19 pandemic, but it~~However, this should not change the overall trend towards introduction of new roadmap requirements, which are just delayed by one year. We anticipate strong global sensor adoption rate increases (forward, side and rear) due to the European NCAP's push for crash avoidance, increased adoption rates due to growing demand around ADAS software features, volume growth due to redundant sensing concepts needed for higher levels of autonomy, potential opportunities in relation to compliance with cyber-security and software updates and step-by-step increased demand for connectivity components as a result.

~~One~~On June 26, 2020, the UNECE’s World Forum for Harmonization of Vehicle Regulations, announced the first binding international regulation on ~~“level~~“Level 3” vehicle automation. The new regulation marks an important step towards the wider deployment of automated vehicles to help realize a vision of safer, more sustainable mobility for all. ~~Starting~~Beginning in January 2021 the regulation provides guidelines on the Automated Lane Keep System ("ALKS") feature, requires driver availability recognition systems, and a "black box" data storage system for AD. It also outlines requirements for emergency and minimal risk maneuvers and driver transition demand as well as cyber-security and software update protocols.

~~On May 17, 2018,~~We anticipate strong global sensor adoption rate increases (forward, side and rear) due to the ~~European Commission proposed a new mandate, as part of the European General Safety Regulation ("GSR") road-map through 2028,~~Euro NCAP's push for crash avoidance, increased adoption rates due to make certain Active Safety features compulsory in light vehicles by 2022. During March of 2019 the EU mandate was adopted as initially proposed by the European Commission. We believe that adoption of the mandate will significantly expandgrowing demand ~~for our Active Safety products. Indeed, with respect to sensors and~~around ADAS software features, ~~our order intake since the adoption~~volume growth due to redundant sensing concepts needed for higher levels of ~~the mandate seems~~autonomy, potential opportunities in relation to ~~reflect the anticipated increase in demand. However, during 2019 we have seen OEM delays in the sourcing of these technologies as customers reconsider how they want to architect~~compliance with cybersecurity and ~~design, in a scalable way to include these new standard technologies. In addition, we believe that the mandate~~software updates and ~~the European GSR generally will influence other market regulators as they evaluate their respective vehicle test rating programs and safety legislation.~~

~~In China, the Ministry of Industry and Information Technology issued the Key Working Points of Intelligent Connected Vehicle Standardization~~step-by-step increased demand for ~~2018 to promote and facilitate the development of the intelligent connected vehicles industry, and advance the development of fundamental standards and those that are in urgent demand.~~connectivity components. The ~~guideline has pointed out that more than 30 key standards~~ongoing 2020x-decade will be ~~defined~~characterized by ~~2020 to fund~~stepwise introduction of regulations which boost the ~~systems~~market of Active Safety and Automation, but also set obligatory thresholds for ~~ADAS and low-level autonomous driving, and a system of over 100 standards will be set up by 2025~~safety.

a.At first minimal requirements for higher level autonomous driving. During the third quarter of 2018, the Chinese government commenced testing of new vehicles according to the new China New Car Assessment Program where active safety features like Autonomous Emergency Braking ("AEB") are required to achieve the maximum safety rating.

On October 4, 2018, the U.S. Department of Transportation ("DoT") issued new voluntary guidelines on automated driving systems ("ADS") under its “Preparing for the Future of Transportation: Automated Vehicles 3.0” initiative, building on its “Vision for Safety 2.0” from September 2017, which prioritized aligning federal guidance around twelve safety design elements of interest to the auto industry. This initiative should have a positive impact on the adoption of ADAS and HAD on the road towards Autonomous Vehicles ("AV"). On April 2, 2020 the U.S DoT closed the comment period for the “Automated Vehicles 4.0” which seeks to ensure a consistent U.S. Government approach to AV technologies, and to detail the authorities, research, and investments being made across the United States so that the United States can continue to lead AV technology research, development, and integration.

In 2018 the UN Economic Commission for Europe created a new Working Party to deal with regulations for Automated/Autonomous and Connected Vehicles. In addition to the EU and Japan, which have both started to work closely together to develop ADAS regulations, in the last three years, the U.S. and China have both indicated a willingness to be active in several working groups towards harmonization of future regulations for ADAS and AV. This would create a common umbrella for countries which follow type-approval rules (EU, Japan, Australia) and countries which are outside of type-approval system, e.g., under self-certification regimes (U.S., Korea) or specific national rules (China).

~~Key future potential regulations are expected for (i)~~ safety critical ~~ADAS-features~~features (e.g. AEB)~~; (ii) Highway AV-features (Physical~~ will become mandatory.

b.Continued with a framework for advanced L1-L3 features in highway applications, extending conventional certification towards new assessment methods (including Physical Tests + Real World Test Drive + ~~Audit); (iii) Cyber-security~~Simulation, etc.).

c.Followed by regulations enabling use of higher level automation (e.g. L4 shuttles) and ~~Software updates;~~more complex environment (e.g. urban)

d.In parallel, we will face increasing regulatory requirements for cybersecurity and ~~(iv) Connected Vehicles. On one hand,~~software updates in order to reflect advancing digitalization and connectivity.

An example of a recent development that further strengthens the trend toward collaborative driving, is Intelligent Speed Assist (ISA) an item of updated EU General Safety Regulation roadmap, which was finalized on June 23, 2021. The ISA is a system that prompts and encourages drivers to slow down when they are over the speed limit. New regulation mandates motor vehicles to be equipped with ISA systems beginning July 6, 2022 for new vehicle types and beginning July 7, 2024 for all new vehicles.

In several regions legal approval of the introduction of new technologies happens as exceptional procedure on national level. However, we have recently observed an increasing willingness of legislators in the US and Asia to contribute to the global regulatory framework for AV-technologies. This means that, while the agreement on minimal common base requirements for

the industry will take a longer ~~time~~ and therefore may postpone the introduction of ~~regulations. On the other hand,~~new regulations, the harmonization with base requirements ~~would~~could help the industry ~~while~~and a more active position from China may help to pull forward some safety critical ADAS technologies ~~which~~that are not yet considered as relevant for passenger car regulation in EU and Japan (e.g. Blind Spot or Night Vision).

Market Overview

Millions (except where specified)
IHS as of July 16, 2020
Light Vehicle Production by Region - 2020
China Japan Rest of Asia Americas Europe Other Total
Second Quarter 2020 5.6 1.2 1.2 1.4 2.1 0.3 11.7
Change vs. 2019 7 % (47) % (61) % (72) % (62) % (48) % (46) %


Millions (except where specified) IHS Markit as of July 16, 2021	Light Vehicle Production by Region - 2021
	China		Japan		Rest of Asia		Americas		Europe		Other		Total
Second Quarter 2021	5.5		1.8		2.5		3.6		4.2		0.5		18.1
Change vs. 2020	(3.0)	%	52.5	%	102.8	%	152.0	%	86.5	%	64.2	%	50.0	%

For the second quarter of ~~2020,~~2021, the global light vehicle production (according to ~~IHS) declined~~IHS Markit) increased by approximately ~~46%~~50.0% mainly due to the global outbreak of the COVID-19 ~~pandemic. At the beginning of the quarter global LVP was expected to decline by approximately 45%. Major~~pandemic in 2020. Every major vehicle producing ~~geographies~~geography was still impacted by the pandemic ~~include:~~including: China (3.0)%, Europe ~~(62)%~~86.5%, South Korea ~~(24)%~~10.9%, North America ~~(70)%~~152.0% and Japan ~~(47)% while China increased 7%, as compared to 2019 for the second quarter..~~52.5%.

Millions (except where specified)
IHS as of July 16, 2020
Light Vehicle Production by Region - 2020
China Japan Rest of Asia Americas Europe Other Total
Full Year 2020 20.1 7.1 8.5 13.8 15.8 1.5 66.8
Change vs. 2019 (14) % (21) % (31) % (25) % (25) % (24) % (22) %


Millions (except where specified) IHS as of July 16, 2021	Light Vehicle Production by Region - 2021
	China		Japan		Rest of Asia		Americas		Europe		Other		Total
Full Year 2021	23.5		8.0		11.2		16.2		17.9		2.1		78.9
Change vs. 2020	6	%	5	%	17	%	14	%	9	%	19	%	10	%

For the ~~full~~first half year of ~~2020,~~2021, global light vehicle production (according to ~~IHS)~~IHS Markit) is expected to decline by approximately ~~22%~~10%, due the anticipated full year effects of the COVID-19 pandemic. ~~At the beginning of the quarter global LVP was expected to decline by approximately 21%. Every~~All major vehicle producing ~~geography is~~geographies are expected to be impacted by the pandemic including: China ~~(14)%~~6%, Europe ~~(25)%~~9%, South Korea ~~(16)%~~5%, North America ~~(23)%~~14% and Japan ~~(21)%~~5%.

The ~~expected decline~~global LVP of approximately 1978.9 million ~~light vehicles in 2020~~is at the same level as compared to 2019 is the highest light vehicle decline in a single year on record, and is the third consecutive annual decline in light vehicle production from 2017 when a record 92 million light vehicles were produced.2012.

Results of Operations

Three Months Ended June 30, ~~2020 Compared~~2021 as compared to Three Months Ended June 30, ~~2019~~2020

The following analysis illustrates Veoneer’s overall and by segment performance for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 along with components of change as compared to the prior year.

Net Sales by Product

The following tables illustrate Veoneer’s consolidated net sales by product for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 along with components of change as compared to the prior year.


Net Sales	Net Sales	Three Months Ended June 30																Components of Change vs. Prior Year																						Net Sales	Three Months Ended June 30							Components of Change vs. Prior Year
(Dollars in millions, except where specified)	(Dollars in millions, except where specified)	2020		2019		US GAAP Reported Change						Currency							Divestiture							Organic¹					(Dollars in millions, except where specified)	2021		2020				US GAAP Reported Change			Currency						Organic1
				$				$		$		%		$							$				%			$	%			$						%								$
Restraint Control Systems	Restraint Control Systems	100		209		(109)		(52)		(4)		(2)		—		—			(105)		(50)				175		100			75		75				7		7	%					68
Active Safety	Active Safety	79		184		(105)		(57)		(2)		(1)		—		—			(103)		(56)				197		79			118		149		8		9	%							110
Brake Systems	Brake Systems	5		96		(91)		(94)		—		—		(81)		(85)			(10)		(64)		Brake Systems	13			5			8		145		—		—						8		145	%
Other																							Other	$	13		$	—		$	13	—		$	—	—						$	13	—
Total	Total	$	184	$	489	$	(305)	(62)	%	$	(6)	(1)	%	$	(81)	(17)	%		$	(218)	(53)	%	Total	$	398		$	184		$	214	116	%	$	15	8	%					$	199	108	%

¹ Non-U.S. GAAP measure reconciliation for Organic Sales

Net Sales - Veoneer’s net sales for the quarter ~~declined~~of $398 million increased by ~~62% to $184 million as compared to 2019. Organic sales~~¹ ~~declined by 53%~~116% as compared to the ~~46% decline~~same quarter in ~~LVP for~~2020. The organic sales1 increased by 108% and the ~~quarter. The remainder of the decline was from~~ net currency translation effects ~~of 1% and~~were positive by 8%. Given that the ~~Veoneer Nissin Brake Systems ("VNBS")-Asia (defined below) divestiture of 17%. During the quarter, organic~~LVP growth expectations declined by around 10pp from IHS April to July reports, sales ~~developed in-line with~~were lower than our expectations from the beginning of the quarter. Veoneer outperformed the LVP in all regions, except rest of Asia which accounts for only around 5% of net sales.

~~Sequentially, from~~

According to IHS, the ~~first~~global LVP increased 50% for the quarter ~~in 2020 net sales decreased 49% or $178 million~~as compared to 2020. This increase was primarily ~~due to the impact of COVID-19 in~~driven by North America, Europe and ~~Europe. The negative impact of COVID-19 on organic sales is estimated~~Japan. It was a reversal from Q1 where growth was driven by China. These developments led to ~~be approximately $190 million during the second quarter.~~a sequentially significantly improved regional mix for Veoneer.

Restraint Control Systems - Net sales for the quarter of ~~$100~~$175 million ~~decreased~~increased by ~~52%~~75% as compared to ~~2019.~~2020. The organic sales ~~decline~~growth of ~~50%~~68%, was primarily ~~due to~~driven by North America and Europe, but all regions saw organic sales growth as a result of new program launches, primarily during the ~~reduction in LVP driving lower production volumes in Europe and North America.~~second half of 2020.

Active Safety - Net sales for the quarter of ~~$79~~$197 million ~~decreased~~increased by ~~57%~~149% as compared to ~~2019. This decline~~2020. The organic sales increase was 140%. The strong growth was primarily driven by an intense launch period which started in Q1 2020 and will continue throughout 2021. China saw the ~~organic sales decline~~strongest relative growth during the quarter, indicating the start of ~~56%. This under-performance versus the LVP was driven by our higher content per vehicle ("CPV") on premium brands in North America and Europe, where the LVP declined 70% and 62%, respectively.~~

~~The COVID-19 impact on lower underlying LVP in our major markets~~an industry wide ramp up phase for ~~our~~ Active Safety ~~products more than offset the strong~~in that region.

Strong volume demand for mono, stereo and thermal camera systems, radar and ADAS ECUs on several ~~models.~~models, and across multiple customers drove the increase in organic sales. The recovery in radar sales continues, this was the third consecutive growth quarter which indicates continued successful transition to 77GHz radars.

Brake Systems and Other - ~~Net~~The combined net sales for the quarter was $26 million. The Brake Systems sales of $5$13 million ~~decreased by 94% as compared~~are related to ~~2019. The VNBS-Asia divestiture accounted for a 85% decline or $81~~the Honda legacy business and $13 million ~~while the remaining organic~~of Other sales ~~decline was $10 million or approximately 64%.~~are Brake ECUs to ZF.


Electronics Segment	Electronics Segment	Three Months Ended June 30													Components of Change vs. Prior Year																					Electronics Segment	Three Months Ended June 30									Components of Change vs. Prior Year
(Dollars in millions, except where specified)	(Dollars in millions, except where specified)	2020				2019				US GAAP Reported Change			Currency										Organic¹						(Dollars in millions, except where specified)	2021		2020								US GAAP Reported Change	Currency					Organic1
			$	%			$	%			$	%	$	%				$		%			(Dollars in millions, except where specified)	$	%					%		%			$							$			%
Net Sales	Net Sales	179			393			(214)	(55)		(6)	(2)						(208)		(53)				Net Sales		385					179		$	206				$	15				$	191
Operating Loss / Margin	Operating Loss / Margin	(29)	(16.0)		(101)	(25.7)		72										Operating Loss / Margin	-76			(20)		-29			(16)	%		$	(47)
Segment EBITDA¹/ Margin	Segment EBITDA¹/ Margin	(6)	(3.2)		(81)	(20.5)		75								Segment EBITDA1 / Margin	-48		(12)		%			-6			(3)	%		$	(42)
Associates	Associates	6,705			7,763			(1,058)								Associates	7,170							6,705						465

¹ Non-U.S. GAAP measure reconciliation for Organic Sales and Segment EBITDA

Net Sales - ~~The net~~Net sales for the Electronics segment ~~decreased~~increased by ~~$214~~$206 million to ~~$179~~$385 million for the quarter as compared to ~~2019.~~2020. This sales ~~decline~~increase was mainly due to the organic sales¹ ~~decline~~increase in Restraint Control Systems and Active Safety of ~~$105~~$68 million and ~~$103~~$110 million, ~~respectively, along with the currency translation effects of $6 million.~~respectively.

Operating Loss - ~~The operating~~Operating loss for the Electronics segment of ~~$29~~$76 million for the quarter decreased by ~~$72~~$47 million as compared to ~~2019,~~2020. This decrease is mainly due to the ~~higher than normal engineering reimbursements and recovery from Nissin Kogyo, which mitigated the negative LVP impact from COVID-19, causing the~~RD&E, net underlying improvement related to lower ~~organic sales for the segment.~~gross costs.

EBITDA¹ - ~~The~~ EBITDA loss for the Electronics segment decreased by ~~$75~~$42 million to negative $6$48 million for the quarter as compared to ~~2019.~~2020. This change is mainly due to the operating loss improvement for the ~~segment while depreciation and amortization increased by $3 million.~~segment.

Associates - Associates, net in the Electronics segment ~~decreased~~increased by ~~1,058~~465, net to ~~6,705~~7,170 as compared to ~~2019,~~2020, mainly due to a ~~reduction~~net increase in ~~engineering~~direct associates of ~~approximately 550 and direct labor of approximately 500. Temporary associates decreased by approximately 450 reflecting the volume decline as compared to 2019.~~more than 358.

Deliveries - ~~The deliveries~~Deliveries during the quarter were ~~2.3~~3.5 million units for Restraint Controls Systems and ~~0.9~~2.3 million units for Active Safety.

Brake Systems Segment Three Months Ended June 30 Components of Change vs. Prior Year
(Dollars in millions, except where specified) 2020 2019 US GAAP Reported Change Currency Divestiture
Organic¹
$ % $ % $ % $ % $ % $ %
Net Sales 5 96 (91) (94) — — (81) (85) (10) (64)
Operating Loss / Margin (20) (372.3) (17) (18.3) (3)
Segment EBITDA¹/ Margin
(20) (365.2) (7) (7.4) (13)
Associates 350 1,415 (1,065)

¹ ~~Non-U.S. GAAP measure reconciliation for Organic Sales and Segment EBITDA~~

Net Sales - The net sales for the Brake Systems segment decreased by $91 million to $5 million for the quarter as compared to 2019. The sales decrease was mainly attributable to the VNBS-Asia divestiture of $81 million.

Operating Loss - The operating loss for the Brake Systems segment for the quarter increased $3 million to $20 million as compared to 2019. This change was mainly due to the divestiture of VNBS-Asia where the loss in 2019 was $2 million for the quarter and lower volumes in the remaining legacy Honda business.


Corporate and Other	Three Months Ended June 30
(Dollars in millions, except where specified)	2021				2020				US GAAP Reported Change
	$		%		$		%		$		%
Net Sales	$	13			$	—			$	13	—	%
Operating Loss / Margin	$	(16)	(115)	%	$	(15)	—	%	$	(1)
EBITDA1 / Margin	$	(15)	(111)	%	$	(15)	—	%	$	—
Associates	132				40				92

~~EBITDA~~1¹ - The EBITDA loss for Brake Systems segment increased by $13 million to negative $20 million for the quarter as compared to 2019. This change was mainly due to the net effect of the VNBS-Asia divestiture and lower amortization of intangibles related to Veoneer Brake Systems (VBS)-US.

~~Associates - The number of associates in the Brake Systems segment decreased by 1,065 to 350 net as compared to 2019, mainly due to the divestiture impact of 1,080 associates related to VNBS-Asia.~~

~~Deliveries - The deliveries during the quarter were 0.012 million units for the Brake Systems segment.~~

Corporate and Other Three Months Ended June 30
(Dollars in millions, except where specified) 2020 2019 US GAAP Reported Change
$ % $ % $ %
Net Sales $ — $ — $ —
Operating Loss / Margin $ (15) — % $ (19) — % $ 4
EBITDA¹/ Margin
$ (15) — % $ (18) — % $ 3
Associates 40 57 (17)

¹ Non-U.S. GAAP measure reconciliation for EBITDA

~~Operating Loss and EBITDA~~¹Net Sales - ~~The operating loss and EBITDA for Corporate and other~~Net Sales of $13 million for the first quarter ~~decreased to $15 million from an operating loss of $19 million and EBITDA of $(18) million in 2019. This decrease was primarily due to lower IT, consultancy and associate related costs.~~reflects the legacy Honda Brake Systems business after the VBS-US divestiture.

Associates - ~~The number of associates decreased~~Associates, net increased by 1792 to 40132 for the quarter as compared to ~~2019~~2020 due to ~~a reduction~~the associates now included in ~~temporary associates~~Corporate and Other related to ~~process improvements~~supporting the legacy Honda Brake Systems business.

Operating Loss and EBITDA1 - Operating and EBITDA loss of ~~being a standalone company.~~

~~The Veoneer associates and financial figures for the quarter are comparable~~$15 million is unchanged compared to ~~2019 as the second quarter of 2018 was the last quarter of carve-out reporting.~~2020.

Veoneer Performance


Income Statement	Income Statement	Three Months Ended June 30																									Income Statement	Three Months Ended June 30
(Dollars in millions, except per share data)	(Dollars in millions, except per share data)	2020							2019									(Dollars in millions, except per share data)		2021						2020
				$		%					$	%								Change	(Dollars in millions, except per share data)	$						$		Change
Net sales	Net sales	$	184				$	489				$	(305)	Net sales	$	398						$	184					$	214
Cost of sales	Cost of sales	(181)		(98.1)	%		(412)		(84.3)	%		231		Cost of sales	(336)		(84.4)		%			(181)		(98.1)	%			(155)
Gross profit	Gross profit	$	3	1.9	%		$	77	15.7	%		$	(74)	Gross profit	$	62	15.6		%			$	3	1.9	%			$	59
Selling, general & administrative expenses	Selling, general & administrative expenses	(38)		(20.6)	%		(50)		(10.3)	%		12		Selling, general & administrative expenses	(41)		(10.3)		%			(38)		(20.6)	%			(3)
Research, development & engineering expenses, net	Research, development & engineering expenses, net	(44)		(24.1)	%		(159)		(32.4)	%		115		Research, development & engineering expenses, net	(108)		(27.1)		%			(44)		(24.1)	%			(64)

Amortization of intangibles	Amortization of intangibles	(1)		(0.7)	%		(6)		(1.3)	%		5		Amortization of intangibles	(2)		(0.5)		%			(1)		(0.7)	%			(1)
Other income, net	Other income, net	16		8.7	%		1		0.2	%		15		Other income, net	(3)		(0.8)		%			16		8.7	%			(19)
Operating loss	Operating loss	$	(64)	(34.8)	%		$	(137)	(28.0)	%		$	73	Operating loss	$	(92)	(23.1)		%			$	(64)	(34.8)	%			$	(28)

Loss from equity method investments		(19)		(10.6)	%		(18)		(3.6)	%		(1)
Loss on divestiture and assets impairment charge, net														Loss on divestiture and assets impairment charge, net	—		0.0		%			—		0.0	%			—
Gain (loss) from equity method investments														Gain (loss) from equity method investments	1		0.4		%			(19)		(10.6)	%			20
Interest income	Interest income	3		1.4	%		4		0.9	%		(1)		Interest income	1		0.1		%			3		1.4	%			(2)
Interest expense	Interest expense	(5)		(2.8)	%		(2)		(0.4)	%		(3)		Interest expense	(5)		(1.3)		%			(5)		(2.8)	%			—

Other non-operating items, net	Other non-operating items, net	(3)		(1.4)	%		1		0.2	%		(4)		Other non-operating items, net	(1)		(0.1)		%			(3)		(1.4)	%			2
Loss before income taxes	Loss before income taxes	$	(88)	(47.6)	%		$	(152)	(31.1)	%		$	64	Loss before income taxes	$	(96)	(24.0)		%			$	(88)	(47.6)	%			$	(8)
Income tax benefit (expense)	Income tax benefit (expense)	(2)		(1.1)	%		10		2.0	%		(12)		Income tax benefit (expense)	(4)		(1.2)		%			(2)		(1.1)	%			(2)
Net loss¹	Net loss¹	$	(90)	(48.6)	%		$	(142)	(29.0)	%		52		Net loss1	$	(100)	(25.2)		%			$	(90)	(48.6)	%			$	(10)
Less: Net loss attributable to non-controlling interest		—		0.0	%		(9)		1.8	%		9
Less: Net gain (loss) attributable to non-controlling interest														Less: Net gain (loss) attributable to non-controlling interest	—		0.0		%			—		0.0	%			—
Net loss attributable to controlling interest	Net loss attributable to controlling interest	$	(90)	(48.6)	%		$	(133)	(27.2)	%		$	43	Net loss attributable to controlling interest	$	(100)	(25.2)		%			$	(90)	(48.6)	%			$	(10)
Net loss per share – basic²	Net loss per share – basic²	$	(0.80)				$	(1.39)				$	0.59	Net loss per share – basic2	$(0.89)							$(0.80)						$(0.09)
Weighted average number of shares outstanding ²	Weighted average number of shares outstanding ²	111.58					96.06					15.52		Weighted average number of shares outstanding 2	111.84							111.58						0.26

¹Including Corporate and other sales.

2 Basic number of shares in millions used to compute net loss per share. Participating share awards without right to receive dividend equivalents are (under the two-class method) excluded from EPS calculation.

Gross Profit - ~~The gross~~Gross profit for the quarter of $3$62 million was ~~$74~~$59 million ~~lower~~higher as compared to ~~2019, where~~2020. The YoY improvement was mainly driven by the ~~negative LVP~~volume improvements resulting from the impact of the COVID-19 pandemic in 2020, along with the continued benefits from the Market Adjustment Initiatives (MAI). These positive effects were partly mitigated by higher costs related to supply constraints of approximately $4 million. The currency impact was ~~the main contributor causing the lower organic sales. Net currency effects and the VNBS-Asia divestiture were $(2) million and $(13) million, respectively.~~$7 million.

~~The RD&E, net of $44 million~~Operating Loss - Operating loss for the quarter ~~decreased $115~~of $92 million increased by $28 million as compared to ~~2019,~~2020, this primarily related to the above normal engineering reimbursements in the second quarter of 2020. Sequentially the operating loss improved by $12 million mainly due to ~~lower gross costs and higher engineering reimbursements, where $81~~the MAIs. Net currency effects were $5 million ~~was related to work previously completed. The VNBS-Asia divestiture benefit was $7 million.~~favorable.

~~The SG&A expense~~RD&E, net of ~~$38~~$108 million ~~for the quarter decreased $12 million as compared to 2019, due to lower consultancy, IT and associate related costs. The VNBS-Asia divestiture benefit was $4 million.~~

~~Other income and amortization of intangibles combined improved $20~~increased by $64 million for the quarter as compared to ~~2019~~2020, mainly ~~due~~as a result of reimbursements of $81 million for previously completed work reflected in the 2020 results, which was partly offset by the effect from the brake system divestiture of $12 million. The underlying RD&E run rate improved as compared to ~~lower amortization~~2020.

The SG&A expense of ~~intangibles including~~$41 million for the quarter increased by around $3 million as compared to 2020 reflecting around $2 million in higher run rate and $1 million in temporary costs.

Other expense net of $3 million were related to restructuring costs during the ~~VNBS-Asia divestiture and the $20 million recovery from Nissin Kogyo.~~quarter.

~~Operating~~Net Loss - ~~The operating~~Net loss for the quarter of ~~$64~~$100 million ~~decreased~~increased by ~~$73~~$10 million as compared to ~~2019, despite the decline in organic sales. The VNBS-Asia divestiture benefit was $2 million while net currency effects were $1 million for the quarter.~~2020.

The interest, ~~expense,~~ net and other non-operating items, net combined for the quarter ~~was $4~~of $5 million, ~~higher~~remain unchanged as compared to ~~2019, due to interest expense related to the convertible debt while other operating items, net decreased $4 million due to a $2 million investment loss in 2020 and a $1 million currency gain in 2019.~~

Income tax expense of $2 million for the quarter was $12 million higher as compared to 2019 mainly due to a discrete tax benefit of $8 million and a $5 million tax benefit from the convertible debt issuance, both in 2019.2020.

3128

~~Net Loss - The net loss~~Income tax expense of $4 million for the quarter of $90 million decreased by $52 million as compared to 2019, primarily due to the operating loss improvement. The equity method investment loss increased $1 million as compared to 2019. The non-controlling interest was $9$2 million higher as compared to ~~2019 due to~~2020. There were no discrete tax items during the ~~VNBS-Asia divestiture in February 2020.~~quarter

Loss per Share - The loss per share of ~~$0.80 improved by $0.59~~$0.89 for the quarter increased by $0.09 per share as compared to ~~2019. This decline was mainly due~~a loss of $0.80 per share as compared to the ~~operating loss improvement~~same quarter of ~~$0.65 per share while the share count increase from the 2019 capital raise reduced the loss by $0.17.~~2020.

Six Months Ended June 30, ~~2020~~2021 Compared to Six Months Ended June 30, ~~2019~~2020

The following analysis illustrates Veoneer’s overall and by segment performance for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 along with components of change compared to the prior year.

Net Sales by Product

The following tables illustrate Veoneer’s consolidated net sales by product for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 along with components of change compared to the prior year.

Net Sales Six Months Ended June 30 Components of Change vs. Prior Year
(Dollars in millions, except where specified) 2020 2019 US GAAP
Reported Change Currency Divestiture
Organic¹
$ $ $ % $ % $ % $ %
Restraint Control Systems 262 425 (163) (38) (9) (2) — — (154) (36)
Active Safety 241 375 (134) (36) (7) (2) — — (127) (34)
Brake Systems 43 184 (141) (77) — — (128) (70) (13) (41)
Total $ 546 $ 984 $ (438) (44) % $ (16) (2) % $ (128) (13) % $ (294) (35) %

^{Net Sales Six Months Ended June 30 Components of Change vs. Prior Year
(Dollars in millions, except where specified) 2021 2020 US GAAP
Reported Change Currency Divestiture Organic1
$ $ $ % $ % $ % $ %
Restraint Control Systems 364 262 102 39 % 16 6 % — — % 86 33 %
Active Safety 402 241 161 67 % 20 9 % — — % 141 58 %
Brake Systems 24 43 (19) (43) % — — % (24) (57) % 5 32 %
Other 26 — 26 — % — — % — — % 26 N/A
Total $ 816 $ 546 $ 270 49 % $ 36 7 % $ (24) (4) % $ 258 49 %1} Non-U.S. GAAP measure reconciliation for Organic Sales

Net Sales - Veoneer’s net sales for the first half ~~declined~~increased by ~~44%~~49% to ~~$546~~$816 million as compared to ~~2019.~~2020. The organic ~~sales~~¹ ~~declined~~sales1 increased by ~~35%~~49%, as compared to the ~~34% reduction~~29% increase in LVP for the same period. The remainder of the ~~decline~~increase was from net currency translation effects of ~~2% and VNBS-Asia~~7%, the impact from the brake system divestiture ~~of 13%.~~was $(24)million.

During the first half, ~~excluding brake systems,~~ the organic sales ~~declined~~increased in North America ~~47%~~54%, Europe ~~27%~~41% and Asia ~~32%, primarily due to~~61%. The strong organic sales growth reflects the rebound from the negative ~~impact~~COVID-19 effects in 2020 which started to affect China in the first quarter and the rest of ~~COVID-19. These negative effects mostly impacted North America~~the world in the second quarter. This strong organic growth was further driven by Veoneer's intense launch period which started in the first quarter 2020 and ~~Europe from mid-March through May and Asia from February through mid-April.~~will continue throughout 2021.

Restraint Control Systems - Net sales for the first half of ~~$262~~$364 million ~~decreased~~increased by ~~38%~~39% as compared to ~~2019.~~2020. The organic sales ~~decline~~increase of ~~36%~~33% was primarily due to the LVP ~~decline~~increase driving ~~lower~~higher volumes in ~~North America and Europe.~~all regions.

Active Safety - Net sales for the first half ~~decreased~~increased by ~~36%~~67% to ~~$241~~$402 million as compared to ~~2019.~~2020. This ~~decline~~increase was primarily driven by the organic sales ~~decline~~growth of ~~34%~~58%. ~~This performance versus~~The strong outperformance compared to the LVP was driven by ~~our~~all regions. Notably Active Safety in China increased by more than 700% from a low base marking the start of the ramp up phase for Active Safety in that region.

As part of Veoneer's on-going strong launch phase as well as the rebound effect from COVID-19 all product ~~content on premium brands in Europe, where we have a relatively higher CPV than in other markets.~~

~~Strong demand for mono, stereo and thermal camera~~areas within Active Safety showed strong growth. Radar systems and vision contributed in particular, but also night vision and ADAS ~~ECUs~~ECU's experienced strong growth based on several models drove an increase in organic sales. This growth was more than offset by the volume effect from the product mix shift from our 24Ghz to 77Ghz radar technology and the phase-out of certain mono-vision programs with BMW, and lower underlying LVP mainly driven by the impact of COVID-19.new launches.

Brake Systems and other - Net sales for the first half ~~decreased~~increased by ~~77%~~16% to ~~$43~~$50 million as compared to ~~2019. The organic sales decline of 41% was $13 million, however the VNBS-Asia divestiture accounted for a year-over-year decline of $128 million or 70%.~~2020, mainly driven by brake ECU's to ZF.

3229

Electronics Segment Six Months Ended June 30 Components of Change vs. Prior Year
(Dollars in millions, except where specified) 2020 2019 US GAAP
Reported Change Currency
Organic¹
$ % $ % $ % $ % $ %
Net Sales 503 800 (297) (37) (16) (2) (281) (35)
Operating Loss / Margin (123) (24.4) (191) (23.9) 68
Segment EBITDA¹/ Margin
(78) (15.5) (151) (18.9) 73
Associates 6,705 7,763 (1,058)

^{Electronics Segment Six Months Ended June 30 Components of Change vs. Prior Year
(Dollars in millions, except where specified) 2021 2020 US GAAP
Reported Change Currency Organic1
$ % $ % $ % $ % $ %
Net Sales 792 503 289 57 % 37 7 252 50 %
Operating Loss / Margin (161) (20.3) % (123) (24.4) % (38)
Segment EBITDA1 / Margin (105) (13.2) % (78) (15.5) % (27)
Associates 7,170 6,705 465 1} Non-U.S. GAAP measure reconciliation for Organic Sales and Segment EBITDA

Net Sales - The net sales for the Electronics segment ~~decreased~~increased by ~~$297~~$289 million to ~~$503~~$792 million for the first half as compared to ~~2019.~~2020. This sales ~~decline~~increase was mainly due to the organic ~~sales1 decline~~sales1 increase in Active Safety and Restraint Control Systems of ~~$127~~$141 million and ~~$154~~$86 million, respectively, along with the currency translation effects of ~~$16~~$37 million.

Operating Loss - The operating loss for the Electronics segment of ~~$123~~$161 million for the first half decreased by ~~$68~~$38 million as compared to ~~2019,~~2020, primarily due to the higher than normal engineering reimbursements, lower RD&E costs and the recovery from Nissin Kogyo, which mitigated the negative LVP impact from COVID-19, and volume and product mix effects causing the lower organic sales for the segment.reimbursements. The underlying operating performance improved year over year.

EBITDA¹ - The EBITDA loss for Electronics segment ~~decreased~~increased by ~~$73~~$27 million to negative ~~$78~~$105 million for the first half as compared to ~~2019.~~2020. This change is mainly due to the ~~decrease~~increase in ~~operating loss for the segment while~~ depreciation and amortization ~~increased by $5 million.~~and increase in gain from equity method investment.

Associates - Associates in the Electronics segment ~~decreased~~increased by ~~473~~465 net to ~~6,705~~7,170 as compared to the ~~previous quarter,~~prior year, mainly due to a ~~reduction~~increase in ~~engineering of approximately 180 and direct labor of approximately 200.~~ Temporary associates ~~decreased by approximately 135~~due to sharp increase in organic growth reflecting the production volume ~~decline.~~increase during the second quarter.

Deliveries - The deliveries during the quarter were ~~6.0~~7.2 million units for Restraint Controls Systems and ~~2.7~~4.6 million units for ~~Active Safety.~~Active.

Brake Systems Segment Six Months Ended June 30 Components of Change vs. Prior Year
(Dollars in millions, except where specified) 2020 2019 US GAAP Reported Change Currency Divestiture
Organic¹
$ % $ % $ % $ % $ % $ %
Net Sales 43 184 (141) (77) — — % $ (128) (70) (13) (41)
Operating Loss / Margin (33) (78.1) (37) (20.1) 4
Segment EBITDA¹/ Margin
(32) (74.8) (17) (9.4) (15)
Associates 350 1,415 (1,065)

^{Corporate and Other Six Months Ended June 30
(Dollars in millions, except where specified) 2021 2020 US GAAP Reported Change
$ % $ % $ %
Net Sales $ 24 $ — $ 24 #DIV/0!
Operating Loss / Margin $ (35) (145) % $ (30) — % $ (5)
EBITDA1 / Margin $ (34) (141) % $ (30) — % $ (4)
Associates 132 40 92 1} ~~Non-U.S. GAAP measure reconciliation for Organic Sales and Segment EBITDA~~

Net Sales - The net sales for the Brake Systems segment decreased by $141 million to $43 million for the first half as compared to 2019. The sales decrease was mainly attributable to the VNBS-Asia divestiture of $128 million.

Operating Loss - The operating loss for the Brake Systems segment for the first half decreased to $33 million from $37 million as compared to 2019. This change was mainly due to the divestiture of VNBS-Asia where the loss in 2019 was $9 million for the first half.

EBITDA1 - The segment EBITDA loss for Brake Systems increased by $15 million to negative $32 million for the first half as compared to 2019. This change was mainly due to the net effect of the VNBS-Asia divestiture.

~~Associates - The number of associates in the Brake Systems segment of 350 net remained essentially unchanged from the previous quarter.~~

~~Deliveries - The deliveries during the first half were 0.2 million units for the Brake Systems.~~

Corporate and Other Six Months Ended June 30
(Dollars in millions, except where specified) 2020 2019 US GAAP Reported Change
$ % $ % $ %
Net Sales $ — $ — $ —
Operating Loss / Margin $ (30) — % $ (37) — % $ 7
EBITDA¹/ Margin
$ (30) — % $ (37) — % $ 7
Associates 40 57 (17)

¹ Non-U.S. GAAP measure reconciliation for EBITDA

Operating Loss and EBITDA¹ - The operating loss and EBITDA for Corporate and other for the first half ~~decreased~~increased by $7$9 million ~~from~~to an operating loss of ~~$37~~$35 million and EBITDA ~~$(37)~~$(34) million as compared to ~~2019.~~2020. This decrease was primarily due to ~~lower IT, consultancy and~~increase associate related costs.

Associates - The number of associates ~~decreased~~increased by 292 to 40132 from the ~~previous quarter~~prior year due to a ~~reduction~~increase in ~~SG&A related to process improvements of being a standalone company.~~Temporary associates.

~~The Veoneer associates and financial figures for the first half are comparable to 2019 as the second quarter of 2018 was the last quarter of carve-out reporting.~~

Veoneer Performance

Income Statement Six Months Ended June 30
(Dollars in millions, except per share data) 2020 2019
$ % $ % Change
Net sales $ 546 $ 984 $ (438)
Cost of sales (490) (89.7) % (822) (83.5) % 332
Gross profit $ 56 10.3 % $ 162 16.5 % $ (106)
Selling, general & administrative expenses (82) (14.9) % (102) (10.4) % 20
Research, development & engineering expenses, net (175) (32.0) % (315) (32.0) % 140
Amortization of intangibles (3) (0.5) % (11) (1.1) % 8
Other income, net 18 3.3 % 1 0.1 % 17
Operating loss $ (186) (34.1) % $ (265) (27.0) % $ 79
Loss on divestiture and assets held for sales, net (67) (12.3) % — 0.0 % (67)
Loss from equity method investments (38) (6.9) % (35) (3.5) % (3)
Interest income 7 1.2 % 8 0.8 % (1)
Interest expense (10) (1.8) % (3) (0.2) % (7)
Other non-operating items, net (1) (0.1) % 1 0.1 % (2)
Loss before income taxes $ (295) (54.0) % $ (294) (29.9) % $ (1)
Income tax benefit (expense) (26) (4.7) % 4 0.5 % (30)
Net loss¹
$ (321) (58.8) % $ (290) (29.5) % $ (31)
Less: Net Income (loss) attributable to non-controlling interest 1 (0.3) % (20) 2.0 % 21
Net loss attributable to controlling interest $ (322) (59.0) % $ (270) (27.4) % $ (52)
Net loss per share – basic²
$ (2.89) $ (2.94) $ 0.05
Weighted average number of shares outstanding ²
111.52 91.68 19.84

^{Income Statement Six Months Ended June 30
(Dollars in millions, except per share data) 2021 2020
$ % $ % Change
Net sales $ 816 $ 546 $ 270
Cost of sales (698) (85.6) % (490) (89.7) % (208)
Gross profit $ 118 14.4 % $ 56 10.3 % $ 62
Selling, general & administrative expenses (81) (9.9) % (82) (14.9) % 1
Research, development & engineering expenses, net (224) (27.5) % (175) (32.0) % (49)
Amortization of intangibles (4) (0.5) % (3) (0.5) % (1)
Other income, net (5) (0.6) % 18 3.3 % (23)
Operating loss $ (196) (24.0) % $ (186) (34.1) % $ (10)
Loss on divestiture and assets held for sales, net — 0.0 % (67) (12.3) % 67
Loss from equity method investments 8 1.0 % (38) (6.9) % 46
Interest income 1 0.2 % 7 1.2 % (6)
Interest expense (10) (1.3) % (10) (1.8) % —
Other non-operating items, net 1 0.1 % (1) (0.1) % 2
Loss before income taxes $ (196) (24.0) % $ (295) (54.0) % $ 99
Income tax benefit (expense) (9) (1.1) % (26) (4.7) % 17
Net loss1 $ (205) (25.1) % $ (321) (58.8) % $ 116
Less: Net Income (loss) attributable to non-controlling interest — 0.0 % 1 (0.3) % (1)
Net loss attributable to controlling interest $ (205) (25.1) % $ (322) (59.0) % $ 117
Net loss per share – basic2 $ (1.83) $ (2.89) $ 1.06
Weighted average number of shares outstanding 2 111.77 111.52 0.25 1}Including Corporate and other sales. ²Basic number of shares in millions used to compute net loss per share. Participating share awards without right to receive dividend equivalents are (under the two-class method) excluded from EPS calculation.

Gross Profit - The gross profit for the first half of ~~$56~~$118 million was ~~$106~~$62 million ~~lower~~higher as compared to ~~2019, where the negative LVP and volume and product mix effects that caused the lower~~2020. Higher organic sales as well as continued benefit from the MAIs were the ~~main contributors.~~key contributors, which more than offset the extra costs related to supply chain constraints. Net currency effects ~~and the VNBS-Asia~~were $10 million. The brake systems divestiture ~~were $(2) million and $(19) million, respectively.~~

~~The RD&E, net of $175 million decreased by $140 million as compared to 2019, due to higher than normal engineering reimbursements and lower gross costs. The VNBS-Asia divestiture benefit~~impact was ~~$15~~$(4) million.

The SG&A expense of $82 million for the first half decreased by $20 million as compared to 2019, due to lower consultancy, IT and associate related costs. The VNBS-Asia divestiture benefit was $7 million.

Other income and amortization of intangibles combined were $25 million higher for the first half as compared to 2019 mainly due to lower amortization of intangibles including $7 million related to VNBS-Asia divestiture and $20 million recovery from Nissin Kogyo.

Operating Loss - The operating loss for the first half of ~~$186~~$196 million was $10 million higher as compared to 2020, primarily related to the above normal engineering reimbursements in the second quarter of 2020. The underlying operating performance improved year over year. Net currency effects were $(2) million and the brake systems divestiture impact was $(1) million.

The RD&E, net of $224 million increased by ~~$79~~$49 million as compared to ~~2019, despite~~2020, due to $81 million higher than normal engineering reimbursements in the ~~drop~~second quarter of 2020, which was partly offset by the brake system divestiture impact of $27 million.

The SG&A expense of $81 million for the first half decreased by $1 million as compared to 2020 including a $1 million positive impact from the brake system divestiture.

Other income and amortization of intangibles combined were $24 million lower for the first half as compared to 2020 mainly due to the temporary positive effects from the divestiture of the brake systems joint venture in ~~organic sales. The VNBS-Asia divestiture benefit was $10 million while net currency effects were~~the first half of 2020 and restructuring related costs year to date of approximately $5 million.

Net Loss - The net loss for the first half of $205 million decreased by $116 million as compared to 2020, primarily due to the higher organic sales and lower net costs related to the Zenuity JV divestiture and non-cash net loss on the divestiture of the brake systems business in 2020.

The interest expense, net for the first half was $8$6 million ~~lower~~higher as compared to ~~2019,~~2020 due to lower interest ~~expense related to the convertible debt of $8 million.~~income. Other non-operating items, net of ~~$(1)~~$1 million ~~increased~~improved by $2 ~~million primarily due to an investment loss in 2020.~~million.

Income tax expense of ~~$26~~$9 million for the first half was ~~$30~~$17 million ~~higher~~lower as compared to ~~2019.~~2020. This is primarily due to a ~~$4 million discrete tax benefit and $5 million tax benefit from the convertible debt issuance in 2019 and~~ discrete tax expense of $22 million on the VNBS sale in 2020.

The non-controlling interest expense was ~~$21~~$1 million ~~unfavorable~~favorable as compared to ~~2019. This is~~2020, when it was $(1) million, due to the ~~exclusion of VBS-US from non-controlling interest and the divestiture of VNBS-Asia.~~

Net Loss - The net loss for the first half of $321 million increased by $31 million as compared to 2019, primarily due to the combined $67 million net loss, from the divestiture gain on VNBS-Asia of $77 million and the impairment of VBS-US assets held for sale of $(144) million, while the equity method investment loss increased by $3 million.brake systems divestiture.

Loss per Share - The loss per share of ~~$2.89~~$1.83 for the first half decreased by ~~$0.05~~$1.06 as compared to ~~2019. The lower operating loss more than off-setting~~2020, mainly due to the ~~combined~~ net loss ~~from the VNBS-Asia divestiture gain, and VBS-US impairment. The share count increase from the equity raise in 2019 reduced the loss by $0.70 per share.~~effect mentioned above.

Non-U.S. GAAP Financial Measures

Non-U.S. GAAP financial measures are reconciled throughout this report.

In this report we refer to organic sales or changes in organic sales growth, a non-U.S. GAAP financial measure that we, investors and analysts use to analyze the Company's sales trends and performance. We believe that this measure assists investors and management in analyzing trends in the Company's business because the Company generates approximately 68% of its sales in currencies other than in U.S. dollars (its reporting currency) and currency rates have been and can be rather volatile. Organic sales and organic sales growth represent the increase or decrease in the overall U.S. dollar net sales and percentage change on a comparable basis thereby excluding any structural impacts. This facilitates separate discussions of the impact of acquisitions and divestitures and exchange rates on the Company’s performance. The tables in this report present the $ reconciliation of the changes in the total U.S. GAAP net sales to changes in organic sales growth.

The Company uses in this report EBITDA, a non-U.S. GAAP financial measure, which represents the Company’s net income excluding interest expense, income taxes, depreciation and amortization and loss from equity method investment. The Company also uses Segment EBITDA, a non-U.S. GAAP financial measure, which represents the Company’s EBITDA which has been further adjusted on a segment basis to exclude certain corporate and other items. We believe that EBITDA and Segment EBITDA are useful measures for management, analysts and investors to evaluate operating performance on a consolidated and reportable segment basis, because it assists in comparing our performance on a consistent basis. The tables below provide reconciliations of net income (loss) to EBITDA and Segment EBITDA.

The Company uses in this report net working capital, a non-U.S. GAAP financial measure, which is defined as current assets (excluding cash and cash equivalents) minus current liabilities excluding short-term debt and net assets and liabilities held for sale. The Company also uses in this report cash flow before financing activities, a non-U.S. GAAP financial measure, which is defined as net cash used in operating activities plus net cash used in investing activities. Management uses these measures to improve its ability to assess operating performance at a point in time as well as the trends over time. The tables below provide a reconciliation of current assets and liabilities to net working capital and cash flow before financing activities.

Investors should not consider these non-U.S. GAAP measures as substitutes, but rather as additions, to financial reporting measures prepared in accordance with U.S. GAAP. These measures, as defined, may not be comparable to similarly titled measures used by other companies.

Forward-looking non-U.S. GAAP financial measures used in this report are provided on a non-U.S. GAAP basis. Veoneer has not provided a U.S. GAAP reconciliation of these measures because items that impact these measures, such as foreign currency

exchange rates and future investing activities, cannot be reasonably predicted or determined. As a result, such reconciliations are not available without unreasonable efforts and Veoneer is unable to determine the probable significance of the unavailable information.

Reconciliations of U.S. GAAP to Non-U.S. GAAP Financial Measures


Net Loss to EBITDA	Three Months Ended June 30				Six Months Ended June 30				Last 12 Months		Full Year 2020
Dollars in millions	2021		2020		2021		2020
Net Loss	$	(100)	$	(90)	$	(205)	$	(321)	$	(428)	$	(544)
Loss on divestiture and assets impairment charge, net	—		—		—		67		24		91
Depreciation and amortization	29		23		57		46		114		103
(Gain)/ loss from equity method investment	(1)		19		(8)		38		(7)		39
Interest and other non-operating items, net	5		5		8		4		20		16
Income tax expense (benefit)	4		2		9		26		15		32
EBITDA	$	(63)	$	(41)	$	(139)	$	(140)	$	(262)	$	(263)

Net Loss to EBITDA Three Months Ended June 30 Six Months Ended June 30 Last 12
Months Full Year
2019
Dollars in millions 2020 2019 2020 2019
Net Loss $ (90) $ (142) $ (321) $ (290) $ (552) $ (522)
Net loss on divestiture and assets held for sale — — 67 0 67 —
Depreciation and amortization 23 31 46 60 101 115
Loss from equity method investment 19 18 38 35 73 70
Interest and other non-operating items, net 5 (3) 4 (6) 2 (9)
Income tax expense (benefit) 2 (10) 26 (4) 30 1
EBITDA $ (41) $ (106) $ (140) $ (205) $ (279) $ (345)


Segment EBITDA to EBITDA	Three Months Ended June 30				Six Months Ended June 30				Last 12 Months		Full Year 2020
Dollars in millions	2021		2020		2021		2020
Electronics	$	(48)	$	(6)	$	(105)	$	(78)	$	(194)	$	(167)
Brake Systems	—		(20)		—		(32)		(3)		(35)
Segment EBITDA	$	(48)	$	(26)	$	(105)	$	(110)	$	(197)	$	(202)
Corporate and other	(15)		(15)		(34)		(30)		(65)		(61)
EBITDA	$	(63)	$	(41)	$	(139)	$	(140)	$	(262)	$	(263)


Working Capital to Net Working Capital	June 30, 2021		June 30, 2020		December 31, 2020		December 31, 2019
Dollars in millions
Total current assets	$	1,035	$	1,260	$	1,244	$	1,649
less Total current liabilities	530		429		587		591
Working Capital	$	505	$	831	$	657	$	1,058
less Cash and cash equivalents	(556)		(851)		(758)		(859)
less Short-term debt	4		20		4		3
less Net of Assets and Liabilities held for sale	—		(11)		—		(199)
Net Working Capital	$	(47)	$	(11)	$	(97)	$	3

Segment EBITDA to EBITDA Three Months Ended June 30 Six Months Ended June 30 Last 12
Months Full Year
2019
Dollars in millions 2020 2019 2020 2019
Electronics $ (6) $ (81) $ (78) $ (151) $ (169) $ (242)
Brake Systems (20) (7) (32) (17) (46) (32)
Segment EBITDA $ (26) $ (88) $ (110) $ (168) $ (215) $ (274)
Corporate and other (15) (18) (30) (37) (64) (71)
EBITDA $ (41) $ (106) $ (140) $ (205) $ (279) $ (345)

Working Capital to Net Working Capital June 30, 2020 June 30, 2019 March 31, 2020 March 31, 2019 December 31, 2019 December 31, 2018
Dollars in millions
Total current assets $ 1,260 $ 1,758 $ 1,407 $ 1,352 $ 1,649 $ 1,543
less Total current liabilities 429 572 507 593 591 636
Working Capital $ 831 $ 1,185 $ 900 $ 759 $ 1,058 $ 907
less Cash and cash equivalents (851) (1,204) (970) (715) (859) (864)
less Short-term debt 20 20 3 — 3 —
less Net of Assets and Liabilities held for sale (11) — (19) — (199) —
Net Working Capital $ (11) $ 1 $ (86) $ 44 $ 3 $ 42


Cash Flow before Financing Activities	Cash Flow before Financing Activities	Three Months Ended June 30								Six Months Ended June 30							Last 12 Months			Full Year 2019		Cash Flow before Financing Activities	Three Months Ended June 30								Six Months Ended June 30					Last 12 Months		Full Year 2020
Dollars in millions	Dollars in millions			2020			2019			2020		2019										Dollars in millions			2021		2020						2021						Full Year 2020
Net cash used in Operating Activities		$	(107)		$	(70)		$	(116)	$	(160)	$	(281)	$	(325)
Net cash provided by (used in) Operating Activities																Net cash provided by (used in) Operating Activities		$	(69)		$	(107)			$	(179)			$	(116)				$	(255)	$	(192)
Plus Net cash provided by (used in) Investing Activities	Plus Net cash provided by (used in) Investing Activities	(34)			(65)			99		(119)		(47)		(265)		Plus Net cash provided by (used in) Investing Activities		(19)			(34)		(18)				99				(32)			85
Cash flow before Financing Activities	Cash flow before Financing Activities	$	(141)		$	(135)		$	(17)	$	(279)	$	(328)	$	(590)	Cash flow before Financing Activities		$	(88)		$	(141)	$	(197)			$	(17)			$	(287)		$	(107)

Liquidity and Capital Resources

Liquidity

As of June 30, ~~2020,~~2021, the Company had cash and cash equivalents and restricted cash of ~~$851 million.~~$555 million and $1 million, respectively.

The Company's primary source of liquidity is its existing cash balance of ~~$851~~$555 million, which will primarily be used for ongoing working capital requirements and capital expenditures. The Company believes that its existing cash resources will be sufficient to support its current operations for at least the next twelve months.

The Company has no material obligations other than short-term obligations related to operations, inventory, services, tooling, and property, plant and equipment purchased in the ordinary course of business.

Autotech - On June 30, 2017, Veoneer committed to make a $15 million investment in Autotech Fund I, L.P. pursuant to a limited partnership agreement, and, as a limited partner, will periodically make capital contributions toward this total commitment amount. As of June 30, ~~2020,~~2021, Veoneer contributed a total of ~~$12~~$13 million to the fund. The initial term of the fund is set to expire on December 31, 2025. This fund focuses broadly on the automotive industry and complements the Company’s innovation strategy, particularly in the areas of active safety and autonomous driving. Under the limited partnership agreement, the general partner has the sole and exclusive right to manage, control, and conduct the affairs of the partnership.

Zenuity - ~~On April 2, 2020~~During the first half of 2021, the Company received a dividend of SEK 108 million (approximately $13 million) in cash (representing 50%, with the remainder received by VCC) from Zenuity. In addition, the Company received a dividend of SEK 1,067 million (approximately $127 million) which was settled net against Related party short-term and long-term debt related to Zenuity's intellectual property that Veoneer ~~and Volvo Cars announced a preliminary agreement~~acquired the right to ~~separate~~use during the Zenuity JV, allowing each company to focus on their strategic priorities. The parties entered into definitive agreements and effected the separation on July 1, 2020. Prior to the separation and during the second quarter the Company made a funding contribution to the joint venture of $9 million.split.

Capital Raise - On May 28, 2019, Veoneer closed its concurrent registered public offerings of common stock and convertible senior notes. The offerings, which were oversubscribed by approximately three times, resulted in gross proceeds of $627 million, consisting of $420 million from the common stock offering and $207 million from the convertible notes offering. 24 million shares of common stock were issued in the common stock offering.

VNBS - On October 30, 2019, Veoneer signed definitive agreements to sell its 51% ownership in Veoneer Nissin Brake Japan ("VNBJ") and Veoneer Nissin Brake China ("VNBZ"), the entities that comprised VNBS at the time of such agreements, referred to herein as “VNBS-Asia”, to its joint venture partner Nissin-Kogyo Co., Ltd., and Honda Motor Co., Ltd. The aggregate purchase price was $176 million. The divestiture was completed on February 3, 2020 under the definitive agreements, and the VNBS joint venture was terminated.

Cash Flows


Selected Cash flow items	Six Months Ended June 30
(Dollars in millions, except where specified)	2021		2020
Net working capital1	$	(47)	$	(11)
Net cash used in operating activities	$	(179)	$	(116)
Capital expenditures	$	(30)	$	(51)
Equity method investments	$	12	$	(26)
Net cash provided by (used in) investing activities	$	(18)	$	99
Cash flow before financing activities1	$	(197)	$	(17)
Net cash provided by (used in) financing activities	$	—	$	9

Selected Cash flow items Six Months Ended June 30
(Dollars in millions, except where specified) 2020 2019
Net working capital¹
$ (11) $ 1
Net cash used in operating activities $ (116) $ (160)
Capital expenditures $ (51) $ (109)
Equity method investments $ (25) $ (11)
Net cash provided by (used in) investing activities $ 99 $ (119)
Cash flow before financing activities ¹
$ (17) $ (279)
Net cash provided by (used in) financing activities $ 9 $ 629

¹ Non-U.S. GAAP measure, see reconciliation above

~~Net Working Capital~~¹ - The positive change in net working capital of $14 million for the first half was due to the $30 million reversal of timing effects at year-end and further improvements in receivables partially offset by the negative COVID-19 timing effects in the second quarter.

Days receivables outstanding, outstanding receivables relative to average daily sales was 9052 days for June 30, ~~2020,~~2021, as compared to 5490 days at June 30, ~~2019.~~2020. This ~~increase~~decrease is mainly due to ~~the majority of the~~sharp increase in organic sales ~~for~~in the second quarter ~~this year occurred during the second half~~ of ~~the quarter and remain uncollected at the end of the quarter.~~2021. Days inventory outstanding, outstanding inventory relative to average daily sales ~~increased to 66~~was 36 days ~~as of~~for June 30, ~~2020,~~2021, as compared to 2966 days at June 30, ~~2019.~~2020. This ratio ~~increased~~decreased due to the year-over-year ~~due the~~sales sharp ~~ramp-up~~increase of ~~production~~customer demand during the second ~~half of the quarter and the need to maintain minimum inventory stock to avoid customer shutdowns. Both of these ratio deteriorated during the~~ quarter due to the rebound from the negative COVID-19 ~~pandemic.~~effects in 2020.

Net cash used in operating activities - Net cash used in operating activities of ~~$116~~$179 million during the first half was ~~$44~~$63 million ~~favorable~~higher as compared to ~~2019.~~2020. The ~~improvement~~change was primarily driven by the net working capital ~~improvement and~~change, which was partly offset by the lower ~~operating~~net loss.

Net cash used in investing activities - Net cash used in investing activities of $18 million during the first half was $117 million lower as compared to 2020. This was mainly due to the proceeds from the VNBS divestiture of $176 million in 2020.

Cash flow before financing activities1 - The cash flow before financing activities of $(197) million for the first half was $180 million lower compared to 2020 mainly due to the VNBS divestiture.

Net Working Capital1 - The change in net working capital of negative $36 million for the first half as compared to 2020 was mainly due to the COVID-19 impact in 2020.

Capital Expenditures - Capital expenditures of ~~$51~~$30 million for the first half decreased by ~~$58~~$21 million as compared to ~~2019~~2020 mainly due to lower investments in VBS-US, facility expansions, and engineering related IT. The benefit of the VNBS-Asia divestiture was ~~$16~~$1 million.

~~Net~~Cash and cash ~~proceeds from investing activities~~equivalents - ~~Net cash proceeds from investing activities~~Shareholders equity, including non-controlling interest of ~~$99~~$1,030 million, decreased by $209 million during the first half ~~was $218 million higher as compared to 2019. This was due to lower capital expenditures of $58 million and the VNBS-Asia divestiture of $176 million.~~

~~Cash flow before financing activities~~¹ ~~- The cash flow before financing activities of $(17) million for the first half was $262 million better as compared to 2019~~ mainly due to ~~improved net working~~the operating loss and capital ~~lower capital expenditures and the VNBS-Asia divestiture.~~expenditure.

Number of Associates


		June 30, 2021	March 31, 2021	December 30, 2020	September 30, 2020	June 30, 2020
TOTAL		7,303	7,512	7,543	7,433	7,095
Whereof:	Direct Manufacturing	1,452	1,489	1,452	1,370	1,130
	RD&E	4,221	4,408	4,476	4,454	4,404
	Temporary	1,257	1,372	1,359	1,258	1,031

June 30,
2020 March 31,
2020 December 31,
2019 September 30,
2019 June 30,
2019
TOTAL 7,095 7,571 8,874 9,127 9,235
Whereof: Direct Manufacturing 1,130 1,326 2,002 2,116 2,153
RD&E 4,404 4,590 4,907 5,086 5,154
Temporary 1,031 1,166 1,396 1,630 1,659

~~The~~Associates, net ~~number of associates~~ decreased by ~~476~~209 to ~~7,095~~7,303 during the quarter as compared to ~~7,571~~7,512 in the previous quarter. The Company had close to 15% of its full-time equivalent workforce on furlough, layoff or short work weeks during the quarter while close to 4,500 associates have been working remotely since mid-March.

The decrease was mainly attributable to a decrease in RD&E associates and to a lesser extent in direct labor. The decreases were a result of ~~476~~the on-going MAIs.

Compared to June 30, 2020 the total number of associates increased by 208. In support of increased production volumes direct manufacturing associates increased by 322, while RD&E staff decreased by 183 as a part of our on-going MAI's. The increase in temporary associates was mainly ~~due~~related to ~~reductions~~an increase in ~~direct manufacturing and RD&E of 196 and 186, respectively. Temporary associates declined by 135 during~~production staff resulting from the ~~quarter. Overall, these reductions are primarily a result of our MAIs to mitigate the negative impact of COVID-19 on our business and engineering efficiency improvements.~~

~~The net number of associates decreased by 2,140 to 7,095 during the quarter from 9,235 as compared to~~reduced production in the second quarter ~~in 2019. The VNBS-Asia divestiture effect on the decline was 1,080 associates.~~

~~The underlying Veoneer decrease of 1,060 associates, as compared to the second quarter in 2019, was mainly~~2020 due to reductions in direct manufacturing and RD&E of 504 and 534, respectively, while temporary associates declined by 628 as compared to the second quarter in 2019. These reductions are primarily a result of our MAIs to mitigate the impact of the negative impact of COVID-19 on our business and engineering efficiency improvements.COVID-19.

Significant Legal Matters

For discussion of legal matters we are involved in, see Note 1315 "Contingent Liabilities", to the condensed consolidated financial statements included herein.

Off-Balance Sheet Arrangements and Other Matters

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on its financial position, results of operations or cash flows.

Contractual Obligations and Commitments

~~Except as set forth below, there~~There have been no significant changes to the contractual obligations and commitments disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~21, 2020.~~

On May 28, 2019, the Company issued, in a registered public offering in the U.S., the Notes with an aggregate principal amount of $207 million. The Notes bear interest at a rate of 4.00% per year payable semi-annually in arrears on June 1 and December 1 of each year. The Notes will mature on June 1, 2024, unless repurchased, redeemed or converted in accordance with their terms prior to such date.19, 2021.

Significant Accounting Policies and Critical Accounting Estimates

See Note 2 “Summary of Significant Accounting Policies” to the accompanying condensed consolidated financial statements included herein.

3835

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, ~~2020,~~2021, there have been no material changes to the information related to quantitative and qualitative disclosures about market risk that was provided in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~21, 2020.~~19, 2021.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, ~~2020,~~2021, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (a) reported within the time periods specified by SEC rules and regulations, and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3936

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Various claims, litigation and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability and other matters.

For a description of our material legal proceedings, see Note 1315 Contingent Liabilities – Legal Proceedings to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

Other than as set forth below, there have been no material changes in the risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors below and also those discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which could materially affect our business, financial condition or future results. The risks described below and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

~~Our business and financial condition may be materially and adversely affected by~~Risks Related to the ~~ongoing novel coronavirus (COVID-19) pandemic.~~Merger

The ~~impact of the COVID-19 pandemic, including widespread illness, market downturns, restrictions on business~~announcement and individual activities, changes in consumer behavior, and uncertainty regarding the future course of the pandemic, has created significant volatility in the global economy and led to a steep drop in economic activity. While we have taken numerous steps to mitigate the impact of the pandemic on our results of operations, there can be no assurance that these efforts will be successful, This COVID-19 pandemic has significantly disrupted, and may continue to disrupt, the automotive industry, light vehicle production (“LVP”) and automotive sales in markets around the world. Such disruptions include the manufacturing, delivery and overall supply chain of automobile manufacturers and suppliers. Global LVP has decreased significantly since early 2020 and during the second quarter some vehicle manufacturers temporarily ceased manufacturing operations in some countries and regions, including the United States and Europe As a result, we have experienced, and may continue to experience, declines in the production and distributionpendency of our ~~products and the loss of sales to our customers. As production resumes, production volumes have been and may continue~~agreement to be ~~volatile.~~

~~If the global economic effects caused~~acquired by ~~the pandemic continue or increase, overall customer demand~~Magna International Inc. may ~~continue to decline which would~~ have ~~a material and~~an adverse effect on our business, financial condition, operating results and cash flows.

On July 22, 2021, we entered into an Agreement and Plan of ~~operations~~Merger (the “Merger Agreement”) with Magna International Inc. (“Magna”) pursuant to which a wholly-owned subsidiary of Magna will, upon the terms and ~~financial condition.~~subject to the conditions set forth in the Merger Agreement, merge with and into us, and we will be the surviving corporation of the Merger and will become a wholly-owned subsidiary of Magna (the “Merger”). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of our common stock issued and outstanding immediately prior to the effective time of the Merger will be cancelled and automatically converted into the right to receive $31.25 in cash, without interest and subject to any applicable withholding taxes.

~~Given~~Uncertainty about the ~~high level~~effect of ~~research and development ("R&D") spend that is required to develop and launch our products, a sustained decline in LVP or vehicle sales may delay~~ the ~~return~~proposed Merger on our ~~investment in R&D~~employees, partners, customers and other third parties may disrupt our sales and marketing, collaborative technology development relationships and/or other key business activities and may have a ~~return~~material adverse effect on our business, financial condition, operating results and cash flows. Current and prospective employees may experience uncertainty about their roles following the ~~resources expended~~Merger. There can be no assurance we will be able to ~~ensure timely~~attract and ~~quality launches, which~~retain key talent, including senior leaders, to the same extent that we have previously been able to attract and retain employees. Any loss or distraction of such employees could have a material adverse effect on our business, financial condition and ~~results of operations. A prolonged downturn in regional and global economic conditions or LVP would likely result in us experiencing a significantly negative cash flow.~~

operating results. In addition, ifwe have diverted, and will continue to divert, significant management resources towards the ~~COVID-19 pandemic continues~~completion of the Merger, which could materially adversely affect our business, financial condition, operating results and cash flows. Parties with which we have business relationships may experience uncertainty as to the future of such relationships and may delay or ~~worsens~~defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.

The pursuit of the Merger and planning for the integration may place a significant ~~portion~~burden on management and other internal resources. The diversion of management’s attention away from day-to-day business concerns could adversely affect our workforce, our suppliers’ workforce, or our customers’ workforce are affected, either directly or due to new or extended government closures or otherwise, associated work stoppages or facility closures would halt or further delay production.

~~The full impact of the COVID-19 pandemic on our~~business, financial condition and ~~results of operations will depend on future developments, such as~~operating results.

The Merger Agreement generally requires us to operate our business in the ~~ultimate duration and scope~~ordinary course pending consummation of the ~~outbreak, its impact on~~proposed Merger and restricts us, without Magna’s consent, from taking certain specified actions until the Merger is completed. These restrictions may affect our ~~customers~~ability to execute our business strategies, to respond effectively to competitive pressures and ~~suppliers, how quickly,~~industry developments, and to what extent normal economic and operating conditions, and the demand for our products can resume and whether the pandemic leads to recessionary conditions in any of our key markets that may continue to impact customer demand and the financial instability or operating viability of our suppliers and customers. Accordingly, the ultimate impact of the COVID-19 pandemic onattain our financial and other goals and may otherwise harm our business, financial condition, operating results and ~~results of operations cannot be determined at this time. Despite the uncertainty of the COVID-19 situation, we expect our full year 2020 results of operations to be adversely affected.~~

In addition to the risks specifically described above, the impact of COVID-19 is likely to implicate and exacerbate other risks disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, including, but not limited to, our program launches, demand or market acceptance for our products, disruptions in our supply or delivery chain, shifting customer preferences, our employees and cyber-security threats.cash flows.

4037

The failure to complete the Merger with Magna in a timely manner or at all could negatively impact the market price of our common stock as well as adversely affect our business, financial condition, operating results and cash flows.

Completion of the Merger with Magna is subject to several conditions beyond our control that may prevent, delay or otherwise adversely affect its completion in a material way, including the approval of our stockholders, the expiration or termination of applicable waiting periods and the receipt of applicable approvals or consents under antitrust and competition laws and similar foreign investment laws in certain jurisdictions. The Merger cannot be completed until the conditions to closing are satisfied or (if permissible under applicable law) waived. We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied or, even if satisfied, that no event of termination will take place. In the event that the Merger is not completed for any reason, the holders of our common stock will not receive any payment for their shares of common stock in connection with the proposed Merger. Instead, we will remain an independent public company and the holders of our common stock will continue to own their shares of common stock.

If the Merger or a similar transaction is not completed, the share price of our common stock may drop to the extent that the current market price of our common stock reflects an assumption that a transaction will be completed. In addition, under circumstances specified in the Merger Agreement, we may be required to pay a termination fee of $110.0 million in the event the Merger is not consummated. Further, a failure to complete the Merger may result in negative publicity, negative impressions of us in the financial markets and investment community and negative responses from customers, partners and other third parties. Any disruption to our business resulting from the announcement and pendency of the Merger and from intensifying competition from our competitors, including any adverse changes in our relationships with our employees, partners, customers and other third parties, could continue or accelerate in the event of a failure to complete the Merger. There can be no assurance that our business, financial condition, operating results and cash flows will not be adversely affected, as compared to the condition prior to the announcement of the Merger, if the Merger is not consummated.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that cannot be met.

Before the Merger may be completed, various approvals, authorizations and declarations of non-objection must be obtained from certain regulatory and governmental authorities. Subject to the terms and conditions of the Merger Agreement, each party has agreed to use their reasonable best efforts to take all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws to consummate the Merger and the other transactions contemplated by the Merger Agreement as soon as practicable and no later than the termination date of the Merger Agreement, including obtaining any requisite approvals, subject to certain specified limitations under the Merger Agreement.

These regulatory and governmental entities may impose conditions on the granting of such approvals and if such regulatory and governmental entities seek to impose such conditions, lengthy negotiations may ensue among such regulatory or governmental entities, Magna and us. Such conditions and the process of obtaining regulatory approvals could have the effect of delaying completion of the Merger and such conditions may not be satisfied for an extended period of time.

We cannot assure you that these regulatory clearances and approvals will be obtained in a timely manner or obtained at all, or that the granting of these regulatory clearances and approvals will not involve the imposition of regulatory remedies on the completion of the Merger, including requiring changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the closing of the Merger not being satisfied. The special meeting of our stockholders at which the adoption and approval of the Merger Agreement will be considered may take place before all of the required regulatory approvals have been obtained and before regulatory remedies, if any, are known. In this event, if the stockholder approval is obtained, we and Magna may subsequently agree to regulatory remedies without further seeking stockholder approval, except as required by applicable law, even if such regulatory remedies could have an adverse effect on us, Magna or the combined company.

The Merger Agreement contains provisions that could discourage or deter a potential competing acquirer that might be willing to pay more to effect an alternative transaction with us.

Under the Merger Agreement, we are generally not permitted to solicit or discuss takeover proposals with third parties, subject to certain exceptions. Further, subject to limited exceptions, the Merger Agreement contains restrictions on our ability to pursue other alternatives to the Merger and, in specified circumstances, could require us to pay Magna a termination fee of $110.0 million. Such restrictions may discourage or deter a third party that may be willing to pay more than Magna for our common stock from considering or proposing an alternative transaction with us. Notwithstanding the foregoing, in no event will the termination fee be paid to Magna more than once. Additional information regarding these restrictions will be provided in a proxy statement on Schedule 14A (the “Proxy Statement”) that will be filed with the Securities and Exchange Commission.

We may be subject to litigation challenging the Merger.

Any litigation challenging the Merger may require significant management time and attention and significant legal expenses and may result in unfavorable outcomes, which could delay or prevent the Merger from being completed or have a material adverse effect on our business, financial condition, results of operations and cash flows.

The completion of the transaction contemplated by the Merger Agreement may trigger change in control or other similar provisions in certain agreements to which we are a party.

If we are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if we are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to us.

We will incur substantial transaction fees and costs in connection with the Merger.

We expect to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger. A material portion of these expenses are payable by us whether or not the Merger is completed. Further, while we have assumed that a certain amount of transaction expenses will be incurred, factors beyond our control could affect the total amount or the timing of these expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately. These expenses may exceed the costs historically borne by us. These costs could adversely affect our business, financial condition, operating results and cash flows.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~On July 20, 2021, the Compensation Committee of the Board of Directors of Veoneer, Inc. approved a special bonus arrangement Matthias Bieler, the Company’s Executive Vice President, Product Area Vision & DMS.Mr. Bieler received a $50,000 cash bonus in recognition of his exceptional efforts with respect to certain contract negotiations.

4139

ITEM 6. EXHIBITS


Exhibit No.						Description

3.1						Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K (filing date July 2, 2018).

3.2						Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K (filing date July 2, 2018).

4.1						General Terms and Conditions for Swedish Depository Receipts in Veoneer, Inc., incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 10 (filing date June 4, 2018).

4.2						Indenture, dated May 28, 2019, between Veoneer, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K (filing date May 29, 2019).

4.3						Form of 4.00% Convertible Senior Note due 2024 (included in Exhibit 4.2), incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K (filing date May 29, 2019).

10.1						Veoneer, Inc. 2021 Stock Incentive Plan, incorporated by reference to Annex B to the Company’s Definitive Proxy Statement on Schedule 14A filed on March 29, 2021.

10.2*+						Employment Agreement, ~~dated~~effective as of May 6,1, 2020, by and between Veoneer, Inc. and ~~Christer Lundström.~~Matthias Bieler.

10 .3*						Amendment, dated March 29, 2021, to Employment Agreement, effective as of May 1, 202 0 , by and between Veoneer, Inc. and Matthias Bieler.

10 .4*						Employment Agreement, effective as of May 1, 2021, by and between Veoneer, Inc. and Steven Jenkins .

10 .5*						Employment Agreement, effective as of May 1, 2021, by and between Veoneer, Inc. and Chris Van Dan Elzen.

10 .6*						Employment Agreement, effective as of May 10, 2021, by and between Veoneer, Inc. and Christoph Schmickler.

10 .7*						Form of Non-Employee Director restricted stock unit grant agreem ent to be used under the Veoneer, Inc. 2021 Stock Incentive Plan.

31.1*						Certification of the Chief Executive Officer of Veoneer, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*						Certification of the Chief Financial Officer of Veoneer, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1*						Certification of the Chief Executive Officer of Veoneer, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.232.2						Certification of the Chief Financial Officer of Veoneer, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*						The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, ~~2020,~~2021, formatted Inline XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Consolidated Statements of Operations (Unaudited); (ii) the Condensed Consolidated Statements of Comprehensive Loss (Unaudited); (iii) the Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Changes in Equity (Unaudited); (v) the Condensed Consolidated Statements of Cash Flows; and (vi) Notes to unaudited condensed consolidated financial statements.

104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


*			Filed herewith.
+			Management contract or compensatory plan.

4240

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: July ~~24, 2020~~23, 2021

VEONEER, INC.

(Registrant)


By:			/s/ ~~Mats Backman~~Ray Pekar
			~~Mats Backman~~Ray Pekar
			Chief Financial Officer
			(Duly Authorized Officer and Principal Financial Officer)

4341


						Page
Part I – Financial Information						4

Item 1 – Condensed Consolidated Financial Statements						4

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations						2523

Item 3 - Quantitative and Qualitative Disclosures about Market Risk						3936

Item 4 - Controls and Procedures						3936

Part II – Other Information						4037

Item 1 - Legal Proceedings						4037

Item 1A - Risk Factors						4037

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds						4139

Item 3 – Defaults Upon Senior Securities						4139

Item 4 – Mine Safety Disclosures						4139

Item 5 – Other Information						4139

Item 6 - Exhibits						4240

Signature						4341


	Three Months Ended June 30, 2020										Three Months Ended June 30, 2019
(Dollars in millions)	Electronics		Brake Systems		Total		Electronics		Brake Systems		Total
Asia	$	59	$	—	$	59	$	89	$	81	$	170
Americas	43		5		48		145		15		160
Europe	77		—		77		159		—		159


Total net sales	$	179	$	5	$	184	$	393	$	96	$	489


Brake Systems Segment	Three Months Ended June 30														Components of Change vs. Prior Year
(Dollars in millions, except where specified)	2020				2019				US GAAP Reported Change			Currency				Divestiture			Organic¹
		$	%			$	%			$	%	$	%			$	%	$	%
Net Sales	5			96			(91)	(94)		—	—	(81)	(85)	(10)	(64)
Operating Loss / Margin	(20)	(372.3)		(17)	(18.3)		(3)
Segment EBITDA¹/ Margin	(20)	(365.2)		(7)	(7.4)		(13)
Associates	350			1,415			(1,065)


Working Capital to Net Working Capital	June 30, 2020		June 30, 2019		March 31, 2020		March 31, 2019		December 31, 2019		December 31, 2018
Dollars in millions
Total current assets	$	1,260	$	1,758	$	1,407	$	1,352	$	1,649	$	1,543
less Total current liabilities	429		572		507		593		591		636
Working Capital	$	831	$	1,185	$	900	$	759	$	1,058	$	907
less Cash and cash equivalents	(851)		(1,204)		(970)		(715)		(859)		(864)
less Short-term debt	20		20		3		—		3		—
less Net of Assets and Liabilities held for sale	(11)		—		(19)		—		(199)		—
Net Working Capital	$	(11)	$	1	$	(86)	$	44	$	3	$	42


		June 30, 2020	March 31, 2020	December 31, 2019		September 30, 2019		June 30, 2019
TOTAL		7,095	7,571		8,874		9,127		9,235
Whereof:	Direct Manufacturing	1,130	1,326		2,002		2,116		2,153
	RD&E	4,404	4,590		4,907		5,086		5,154
	Temporary	1,031	1,166		1,396		1,630		1,659