Visteon(US:VC)2024-07-25 11:04Part I - Financial Information This section provides Visteon Corporation's interim financial statements and related disclosures Item 1 - Condensed Consolidated Financial Statements This section presents Visteon Corporation's unaudited condensed consolidated financial statements, including statements of comprehensive income (loss), balance sheets, cash flows, and changes in equity, along with detailed notes explaining significant accounting policies, investments, restructuring, and other financial details for the periods ended June 30, 2024, and December 31, 2023 Condensed Consolidated Statements of Comprehensive Income (Loss) This statement details Visteon Corporation's revenues, expenses, and net income (loss) over specified periods Condensed Consolidated Statements of Comprehensive Income (Loss) (In millions except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net sales | $1,014 | $983 | $1,947 | $1,950 | | Gross margin | $147 | $104 | $266 | $214 | | Income (loss) before income taxes | $100 | $36 | $163 | $88 | | Provision for income taxes | $(25) | $(13) | $(44) | $(27) | | Net income (loss) | $75 | $23 | $119 | $61 | | Net income (loss) attributable to Visteon Corporation | $71 | $20 | $113 | $54 | | Basic earnings (loss) per share | $2.57 | $0.71 | $4.09 | $1.91 | | Diluted earnings (loss) per share | $2.54 | $0.70 | $4.05 | $1.88 | Condensed Consolidated Balance Sheets This statement presents Visteon Corporation's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (In millions) | Metric | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | ASSETS | | | | Cash and equivalents | $505 | $515 | | Total current assets | $1,641 | $1,616 | | Total assets | $2,731 | $2,727 | | LIABILITIES AND EQUITY | | | | Short-term debt | $18 | $18 | | Total current liabilities | $887 | $931 | | Long-term debt, net | $309 | $318 | | Total Visteon Corporation stockholders' equity | $1,113 | $1,038 | | Total equity | $1,198 | $1,123 | | Total liabilities and equity | $2,731 | $2,727 | Condensed Consolidated Statements of Cash Flows This statement outlines Visteon Corporation's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In millions) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------------------------------|:-------------------------------|:-------------------------------| | Net income (loss) | $119 | $61 | | Net cash provided from (used by) operating activities | $126 | $42 | | Net cash used by investing activities | $(72) | $(49) | | Net cash used by financing activities | $(36) | $(57) | | Net decrease in cash, equivalents, and restricted cash | $(10) | $(64) | | Cash, equivalents, and restricted cash at end of the period | $508 | $459 | Condensed Consolidated Statements of Changes in Equity This statement tracks changes in Visteon Corporation's equity components, including common stock, retained earnings, and treasury stock Condensed Consolidated Statements of Changes in Equity (In millions) | Metric | December 31, 2023 | March 31, 2024 | June 30, 2024 | |:----------------------------------------|:------------------|:---------------|:--------------| | Common Stock | $1 | $1 | $1 | | Additional Paid-In Capital | $1,356 | $1,350 | $1,360 | | Retained Earnings | $2,274 | $2,316 | $2,387 | | Accumulated Other Comprehensive Income (Loss) | $(254) | $(268) | $(286) | | Treasury Stock | $(2,339) | $(2,350) | $(2,349) | | Total Visteon Corporation Stockholders' Equity | $1,038 | $1,049 | $1,113 | | NonControlling Interests | $85 | $85 | $85 | | Total Equity | $1,123 | $1,134 | $1,198 | - The company repurchased $20 million of common stock during the six months ended June 30, 202441 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The allowance for doubtful accounts was $8 million as of June 30, 2024, an increase from $7 million as of December 31, 202345 - The company is evaluating the impacts of new accounting pronouncements: ASU 2023-05 (Joint Venture Formation), ASU 2023-06 (Disclosure Improvements), ASU 2023-07 (Segment Reporting), and ASU 2023-09 (Enhanced Income Tax Disclosures)461947103 NOTE 2. Non-Consolidated Affiliates This note details the Company's investments in and financial relationships with non-consolidated entities Investments in Non-Consolidated Affiliates (In millions) | Affiliate | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Yanfeng Visteon Investment Co., Ltd. ("YFVIC") | $1 | $8 | | Limited partnerships | $15 | $15 | | Other | $9 | $12 | | Total investments | $25 | $35 | Exposure to Loss in YFVIC (In millions) | Metric | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Payables due to YFVIC | $18 | $24 | | Investment in YFVIC | $1 | $8 | | Receivables due from YFVIC, net | $13 | $19 | | Loan receivable from YFVIC | $5 | $0 | | Maximum exposure to loss in YFVIC | $19 | $27 | - The Company extended a $5 million loan to YFVIC during the second quarter of 202449 - As of June 30, 2024, the Company has contributed approximately $12 million towards a $15 million commitment in two limited partnerships focused on the automotive sector50 NOTE 3. Restructuring This note provides information on restructuring activities, including expenses and reserve balances Restructuring Reserves (In millions) | Metric | Amount | |:--------------------|:-------| | December 31, 2023 | $8 | | Expense (Q1 2024) | $2 | | Utilization (Q1 2024) | $(2) | | March 31, 2024 | $8 | | Expense (Q2 2024) | $1 | | Utilization (Q2 2024) | $(2) | | June 30, 2024 | $7 | - During the six months ended June 30, 2024, the Company recorded $3 million of net restructuring expense, primarily related to employee severance, compared to $2 million in the same period of 202352 - Current restructuring actions include $3 million of net expense globally to improve efficiencies and rationalize the Company's footprint, with $2 million remaining accrued as of June 30, 202453 NOTE 5. Goodwill and Other Intangible Assets This note details the Company's goodwill and other intangible assets, including their carrying values Intangible Assets, Net (In millions) | Category | June 30, 2024 Net Intangibles | December 31, 2023 Net Intangibles | |:-------------------------|:------------------------------|:----------------------------------| | Definite-Lived: | | | | Developed technology | $1 | $1 | | Customer related | $2 | $3 | | Capitalized software development | $26 | $28 | | Other | $12 | $14 | | Subtotal | $41 | $46 | | Indefinite-Lived: | | | | Goodwill | $43 | $44 | | Total | $84 | $90 | NOTE 6. Other Assets This note provides a breakdown of various current and non-current assets not separately classified Other Current Assets (In millions) | Component | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Recoverable taxes | $50 | $51 | | Contractually reimbursable engineering costs | $30 | $33 | | Joint venture receivables | $18 | $19 | | Prepaid assets and deposits | $18 | $24 | | Joint venture loan receivable | $5 | $0 | | Contractual payments | $2 | $3 | | Other | $4 | $4 | | Total | $127 | $134 | Other Non-Current Assets (In millions) | Component | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Contractual payments | $25 | $22 | | Contractually reimbursable engineering costs | $18 | $21 | | Recoverable taxes | $9 | $10 | | Derivative financial instruments | $9 | $1 | | Other | $22 | $21 | | Total | $83 | $75 | - The Company expects to receive cash reimbursement payments of $19 million during the remainder of 2024, $19 million in 2025, $8 million in 2026, $1 million in 2027, and $1 million in 2028 and beyond for contractually reimbursable engineering costs29 NOTE 7. Other Liabilities This note details various current and non-current liabilities not separately classified Other Current Liabilities (In millions) | Component | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Deferred income | $49 | $57 | | Product warranty and recall accruals | $47 | $48 | | Non-income taxes payable | $29 | $25 | | Income taxes payable | $27 | $25 | | Joint venture payable | $18 | $25 | | Royalty reserves | $16 | $16 | | Restructuring reserves | $4 | $5 | | Other | $38 | $32 | | Total | $228 | $233 | Other Non-Current Liabilities (In millions) | Component | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Product warranty and recall accruals | $23 | $23 | | Deferred income | $12 | $12 | | Income tax reserves | $12 | $12 | | Derivative financial instruments | $9 | $9 | | Restructuring reserves | $3 | $3 | | Other | $26 | $26 | | Total | $85 | $85 | NOTE 8. Debt This note outlines the Company's short-term and long-term debt obligations and credit facilities Company's Debt (In millions) | Category | June 30, 2024 | December 31, 2023 | |:----------------------|:--------------|:------------------| | Short-Term Debt: | | | | Current Portion of long-term debt | $18 | $18 | | Long-Term Debt: | | | | Term debt facility, net | $309 | $318 | - The Company has a $400 million Revolving Credit Facility with no outstanding borrowings as of June 30, 2024, and $147 million capacity under short-term credit facilities for its subsidiaries1956233 - The Credit Agreement requires compliance with a total net leverage ratio no greater than 3.50:1.00 and includes a sustainability-linked pricing provision for a 5 basis point decrease to the applicable margin based on GHG emissions reduction3482 NOTE 9. Employee Benefit Plans This note provides details on the Company's defined benefit pension plans and related costs Net Pension Benefit (Cost) (In millions) | Metric | Six Months Ended June 30, 2024 (U.S. Plans) | Six Months Ended June 30, 2023 (U.S. Plans) | Six Months Ended June 30, 2024 (Non-U.S. Plans) | Six Months Ended June 30, 2023 (Non-U.S. Plans) | |:----------------------------------------|:--------------------------------------------|:--------------------------------------------|:------------------------------------------------|:------------------------------------------------| | Service cost | $0 | $0 | $(1) | $(1) | | Total pension financing benefits | $6 | $5 | $0 | $0 | | Net pension benefit (cost) | $6 | $5 | $(1) | $(1) | - The Company estimates total cash contributions to its U.S. and non-U.S. defined benefit pension plans during 2024 will be $9 million and $7 million, respectively85 NOTE 10. Income Taxes This note explains the provision for income taxes, effective tax rates, and related tax positions - The provision for income taxes for the six months ended June 30, 2024, was $44 million, an increase of $17 million compared to $27 million in the same period of 2023, primarily due to increased net income and changes in the mix of earnings38171 - Pretax losses in jurisdictions with valuation allowances totaled $18 million for the six months ended June 30, 2024, contributing to an increase in the effective tax rate68 - The estimated annual effect of the OECD Pillar Two initiative (15% global minimum tax) on the Company's effective tax rate is not material87 NOTE 11. Stockholders' Equity and Non-controlling Interests This note details changes in stockholders' equity, non-controlling interests, and share repurchase programs Non-Controlling Interests (In millions) | Entity | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Shanghai Visteon Automotive Electronics, Co., Ltd. | $51 | $51 | | Yanfeng Visteon Automotive Electronics Co., Ltd. | $20 | $18 | | Changchun Visteon FAWAY Automotive Electronics, Co., Ltd. | $13 | $14 | | Other | $1 | $2 | | Total | $85 | $85 | Changes in Accumulated Other Comprehensive Income (Loss) (AOCI) (In millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Beginning balance | $(268) | $(197) | $(254) | $(213) | | Other comprehensive income (loss) before reclassification, net of tax | $(21) | $(19) | $(38) | $(4) | | Amounts reclassified from AOCI | $3 | $3 | $6 | $4 | | Ending balance | $(286) | $(213) | $(286) | $(213) | - The Company's board authorized a $300 million share repurchase program through December 31, 2026. As of June 30, 2024, 953,840 shares have been repurchased at an average price of $132.01, with no purchases made during the three months ended June 30, 202473213222 NOTE 12. Earnings Per Share This note presents the calculation of basic and diluted earnings per share for the Company Basic and Diluted Earnings Per Share Data (In millions, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net income (loss) attributable to Visteon | $71 | $20 | $113 | $54 | | Average common stock outstanding - basic | 27.6 | 28.3 | 27.6 | 28.3 | | Diluted shares | 27.9 | 28.7 | 27.9 | 28.7 | | Basic earnings (loss) per share | $2.57 | $0.71 | $4.09 | $1.91 | | Diluted earnings (loss) per share | $2.54 | $0.70 | $4.05 | $1.88 | NOTE 13. Fair Value Measurements and Financial Instruments This note describes the fair value of financial instruments and the Company's hedging activities - The fair value of the Company's debt was $327 million as of June 30, 2024, classified as Level 2 in the fair value hierarchy110 - The Company uses cross-currency swaps ($200 million notional) as net investment hedges and interest rate swaps ($250 million notional) as cash flow hedges to manage market risks248249 - A gain of approximately $4 million from net investment hedges and a loss of approximately $7 million from interest rate swaps are expected to be reclassified out of accumulated other comprehensive income into earnings within the next 12 months248249 NOTE 14. Commitments and Contingencies This note outlines the Company's various commitments, product warranty, recall claims, and legal contingencies Product Warranty and Recall Claims Liability (In millions) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:--------------------|:-------------------------------|:-------------------------------| | Beginning balance | $51 | $51 | | Provisions | $25 | $25 | | Changes in estimates | $(2) | $0 | | Currency/other | $(2) | $0 | | Settlements | $(10) | $(7) | | Ending balance | $69 | $69 | - The Company accrued $7 million for claims aggregating $47 million in Brazil as of June 30, 2024, related to highly complex labor, tax, and customs laws140 - Visteon paid $12 million to the Township of Van Buren to settle litigation, with the second equal installment paid on July 1, 2024116 NOTE 15. Revenue Recognition and Geographical Information This note provides a breakdown of net sales by geographical markets and product lines Net Sales by Geographical Markets (In millions) | Geographical Markets | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Americas | $364 | $292 | $660 | $568 | | Europe | $328 | $330 | $641 | $676 | | China Domestic | $119 | $152 | $233 | $280 | | China Export | $69 | $88 | $139 | $171 | | Other Asia-Pacific | $168 | $161 | $341 | $338 | | Eliminations | $(34) | $(40) | $(67) | $(83) | | Total | $1,014 | $983 | $1,947 | $1,950 | Net Sales by Product Lines (In millions) | Product Lines | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Instrument clusters | $448 | $477 | $888 | $951 | | Cockpit domain controller | $145 | $138 | $286 | $251 | | Body and electrification electronics | $152 | $72 | $261 | $143 | | Infotainment | $119 | $126 | $237 | $261 | | Information displays | $104 | $90 | $185 | $187 | | Other | $46 | $80 | $90 | $157 | | Total | $1,014 | $983 | $1,947 | $1,950 | Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Visteon's financial condition, results of operations, and cash flows, highlighting strategic priorities, market conditions, detailed financial performance for the three and six months ended June 30, 2024, liquidity, and forward-looking statements Executive Summary This summary introduces Visteon's business, strategic focus, and market positioning in the automotive industry - Visteon is a global automotive technology company focused on creating enjoyable, connected, and safe driving experiences through scalable hardware and software solutions146 - The automotive mobility market is expected to grow faster than underlying vehicle production volumes, driven by the shift towards digital, electric, and autonomous vehicles146 Strategic Priorities This section outlines the Company's key objectives for long-term growth, technology innovation, and capital allocation - Long-Term Growth: The Company aims for long-term growth by demonstrating product quality, technical and development capability, new product innovation, and overall customer service124 - Technology Innovation: Visteon is a global leader in cockpit electronics, positioned to provide solutions for the industry's transition to fully digital, connected, automated, learning, and voice-enabled cockpits, including wireless battery management systems and integrated ADAS safety technology147 - Balanced Capital Allocation: The Company maintains a strong balance sheet to support high-returning organic initiatives, pursue attractive inorganic opportunities, and return capital to shareholders, including a $300 million share repurchase program announced in March 2023148 Global Automotive Market Conditions and Production Levels This section discusses the current state and outlook of the global automotive market, including production volumes and challenges - The automotive industry has experienced turbulence from the COVID-19 pandemic, worldwide semiconductor and other supply shortages, a UAW strike, and increased geopolitical challenges152 - Industry production volumes are expected to decline by approximately 1 million units to 90 million units in 2024, which is below recent industry production levels that peaked in 2017152 - Ongoing uncertainties include vehicle affordability, economic uncertainty, potential geopolitical challenges, and customer market share changes152 Financial Results This section provides an overview of Visteon's financial performance, including sales breakdown by product and region - For the three months ended June 30, 2024, net sales breakdown by product was: Instrument Cluster (44%), Cockpit Domain Controller (15%), Body & Electrification Electronics (15%), Infotainment (12%), Information Display (12%), and Other (5%)150 - For the three months ended June 30, 2024, net sales breakdown by region was: Americas (35%), Europe (31%), Other Asia-Pacific (16%), China Domestic (11%), and China Export (7%)127 Results of Operations - Three Months Ended June 30, 2024 and 2023 This section analyzes Visteon's financial performance for the three-month periods ended June 30, 2024 and 2023 Consolidated Results of Operations (Three Months Ended June 30, In millions) | Metric | 2024 | 2023 | Change | |:------------------------------------------------|:-------|:-------|:-------| | Net sales | $1,014 | $983 | $31 | | Cost of sales | $(867) | $(879) | $12 | | Gross margin | $147 | $104 | $43 | | Selling, general and administrative expenses | $(49) | $(52) | $3 | | Restructuring, net | $(1) | $(1) | $0 | | Interest, net | $0 | $(3) | $3 | | Equity in net income of non-consolidated affiliates | $0 | $(2) | $2 | | Other income (expense), net | $3 | $(10) | $13 | | Provision for income taxes | $(25) | $(13) | $(12) | | Net income (loss) | $75 | $23 | $52 | | Net income (loss) attributable to Visteon Corporation | $71 | $20 | $51 | | Adjusted EBITDA | $136 | $90 | $46 | Net Sales, Cost of Sales and Gross Margin This section analyzes the drivers of changes in net sales, cost of sales, and gross margin for the quarter - Net sales increased by $31 million, driven by $102 million from volumes and net new business due to market outperformance and recent product launches, partially offset by $33 million decrease from customer pricing and $14 million decrease from currency131 - Cost of sales decreased by $12 million, primarily due to $71 million in favorable cost performance, design changes, and the non-recurrence of a $15 million prior year product recall charge, partially offset by $81 million increase from volume and new business154 Selling, General and Administrative Expenses This section details the changes in selling, general, and administrative expenses for the quarter - Selling, general, and administrative expenses decreased by $3 million to $49 million, primarily due to reduced bad debt expense156 Restructuring This section discusses restructuring expenses incurred during the three-month period - Restructuring expense remained consistent at $1 million, primarily related to employee severance157 Interest, Net This section explains the changes in net interest income or expense for the quarter - Interest, net, improved from an expense of $3 million in 2023 to zero in 2024, primarily due to higher interest income on cash balances182 Equity in Net Income of Non-Consolidated Affiliates This section details the Company's share of income or loss from non-consolidated affiliates for the quarter - Equity in net income of non-consolidated affiliates improved from a $2 million loss in 2023 to zero in 2024, primarily due to operational improvements at an affiliate134 Other Income (Expense), Net This section explains other non-operating income and expenses for the three-month period - Other income, net, was $3 million in 2024, a significant improvement from a $10 million expense in 2023, primarily due to net pension financing benefits and the non-recurrence of the 2023 Van Buren litigation settlement158135 Income Taxes This section analyzes the provision for income taxes and its drivers for the quarter - The provision for income taxes increased by $12 million to $25 million, primarily due to the overall increase in net income and changes in the mix of earnings, partially offset by a $3 million decrease related to uncertain tax positions159 Adjusted EBITDA This section details the components contributing to the change in Adjusted EBITDA for the quarter - Adjusted EBITDA increased by $46 million to $136 million, driven by $21 million from volume and new business, $12 million from improved net engineering costs, and $16 million from warranty (due to the non-recurrence of a $15 million prior year product recall charge)161 Results of Operations - Six Months Ended June 30, 2024 and 2023 This section analyzes Visteon's financial performance for the six-month periods ended June 30, 2024 and 2023 Consolidated Results of Operations (Six Months Ended June 30, In millions) | Metric | 2024 | 2023 | Change | |:------------------------------------------------|:-------|:-------|:-------| | Net sales | $1,947 | $1,950 | $(3) | | Cost of sales | $(1,681) | $(1,736) | $55 | | Gross margin | $266 | $214 | $52 | | Selling, general and administrative expenses | $(101) | $(104) | $3 | | Restructuring, net | $(3) | $(2) | $(1) | | Interest, net | $0 | $(6) | $6 | | Equity in net income of non-consolidated affiliates | $(4) | $(7) | $3 | | Other income (expense), net | $5 | $(7) | $12 | | Provision for income taxes | $(44) | $(27) | $(17) | | Net income (loss) | $119 | $61 | $58 | | Net income (loss) attributable to Visteon Corporation | $113 | $54 | $59 | | Adjusted EBITDA | $238 | $189 | $49 | Net Sales, Cost of Sales and Gross Margin This section analyzes the drivers of changes in net sales, cost of sales, and gross margin for the six-month period - Net sales decreased by $3 million, with $112 million increase from volumes and net new business offset by $72 million decrease from customer pricing and $19 million decrease from currency187 - Cost of sales decreased by $55 million, primarily due to $123 million in favorable cost performance, design changes, and the non-recurrence of a $15 million prior year product recall charge, partially offset by $88 million increase from volume and new business164 Selling, General and Administrative Expenses This section details the changes in selling, general, and administrative expenses for the six-month period - Selling, general, and administrative expenses decreased by $3 million to $101 million, primarily due to reduced bad debt expense166 Restructuring This section discusses restructuring expenses incurred during the six-month period - Restructuring expense increased by $1 million to $3 million, primarily related to employee severance167 Interest, Net This section explains the changes in net interest income or expense for the six-month period - Interest, net, improved from an expense of $6 million in 2023 to zero in 2024, primarily due to higher interest income on cash balances168 Equity in Net Income of Non-Consolidated Affiliates This section details the Company's share of income or loss from non-consolidated affiliates for the six-month period - Equity in net income of non-consolidated affiliates improved from a $7 million loss in 2023 to a $4 million loss in 2024, primarily due to the non-recurrence of certain operational and non-operational charges in 2023 and operational improvements in 2024169 Other Income (Expense), Net This section explains other non-operating income and expenses for the six-month period - Other income, net, was $5 million in 2024, a significant improvement from a $7 million expense in 2023, primarily due to net pension financing benefits and the non-recurrence of the 2023 Van Buren litigation settlement170190 Income Taxes This section analyzes the provision for income taxes and its drivers for the six-month period - The provision for income taxes increased by $17 million to $44 million, primarily due to the overall increase in net income and changes in the mix of earnings, partially offset by a $3 million decrease related to uncertain tax positions171 Adjusted EBITDA This section details the components contributing to the change in Adjusted EBITDA for the six-month period - Adjusted EBITDA increased by $49 million to $238 million, driven by $24 million from volume and new business, $8 million from improved net engineering costs, and $15 million from warranty (due to the non-recurrence of a $15 million prior year product recall charge)174 Liquidity This section assesses Visteon's ability to meet its short-term and long-term financial obligations Cash Balances This section provides details on the Company's cash and cash equivalents, including their location and repatriation considerations - As of June 30, 2024, the Company had total cash and cash equivalents of $508 million, including $3 million of restricted cash176 - Cash balances totaling $430 million were located outside the United States, with approximately $65 million considered permanently reinvested. Repatriation of these funds would not incur U.S. federal taxes but may accrue foreign withholding taxes176 Other Items Affecting Liquidity This section discusses various factors impacting the Company's liquidity, such as tax benefits and investment commitments - The Company expects a cash outlay of $14 million related to unrecognized tax benefits, including interest and penalties178 - Estimated total cash contributions to defined benefit plans for 2024 are $9 million for U.S. plans and $7 million for non-U.S. plans177 - As of June 30, 2024, the Company has contributed $12 million towards a $15 million investment commitment in two venture capital funds focused on the automotive sector197 Cash Flows This section analyzes the Company's cash flows from operating, investing, and financing activities - Operating activities generated $126 million in cash inflows during the six months ended June 30, 2024, an $84 million improvement year-over-year, driven by higher Adjusted EBITDA and improved working capital199 - Investing activities used $72 million in cash, an increase of $23 million in usage year-over-year, primarily due to increased capital expenditures of $17 million223 - Financing activities used $36 million in cash, a $21 million decrease in usage year-over-year, primarily due to lower dividends paid to non-controlling interests and reduced common stock repurchases179 Significant Accounting Policies and Critical Accounting Estimates This section refers to detailed notes on the Company's key accounting policies and estimates - Refer to Note 1, 'Summary of Significant Accounting Policies,' and Note 13, 'Fair Value Measurements and Financial Instruments,' for detailed information201180 Recent Accounting Pronouncements This section refers to detailed notes on recently issued accounting standards and their potential impact - Refer to Note 1, 'Summary of Significant Accounting Policies,' for information on recent accounting pronouncements225 Forward-Looking Statements This section highlights the inherent uncertainties and risks associated with the Company's future projections - The report contains 'Forward-Looking Statements' that reflect current expectations or forecasts of future events, which are subject to risks and uncertainties181 - Key risk factors include significant or prolonged shortages of critical components (e.g., semiconductors), impacts of geopolitical conflicts, failure of joint venture partners, changes in the competitive environment, and the Company's ability to satisfy capital and liquidity requirements203 - Other risks include changes in customer operations or vehicle production, increases in commodity costs, ability to generate cost savings, restrictions in labor contracts, legal proceedings, changes in economic conditions, IT system disruptions, and intellectual property rights203204 Item 3 - Quantitative and Qualitative Disclosures about Market Risk This section outlines Visteon's exposure to primary market risks, including foreign currency exchange rates, interest rates, and commodity prices, and describes the strategies employed to manage these risks through operating actions and derivative financial instruments - The Company's primary market risks are changes in currency exchange rates, interest rates, and certain commodity prices, managed through operating actions and derivative instruments for hedging purposes228 Foreign Currency Risk This section details the Company's exposure to foreign currency fluctuations and its hedging strategies - The Company's operating results are impacted by transactional exposure from foreign currency denominated sales, supplier payments, debt, and intercompany arrangements, as well as translation exposure of foreign operating income into U.S. dollars229206 - Derivative financial instruments, such as forward and option contracts, may be utilized to manage foreign currency exchange rate risks for transactional exposures, but not for translation exposure229206 - A hypothetical 10% favorable or adverse change in quoted currency exchange rates would result in a $20 million pre-tax gain or loss for currency derivative financial instruments as of June 30, 2024230 Interest Rate Risk This section refers to disclosures on the Company's exposure to interest rate changes and related financial instruments - Refer to Note 13, 'Fair Value Measurements and Financial Instruments,' for additional information on interest rate risk231 Commodity Risk This section describes how the Company manages risks associated with changes in commodity prices for production materials - The Company manages exposures to market risk from changes in production material prices primarily through negotiations with suppliers and customers232 - The Company may utilize derivatives in the future to manage select commodity risks if acceptable hedging instruments are identified232 Item 4 - Controls and Procedures This section confirms the effectiveness of Visteon's disclosure controls and procedures and internal control over financial reporting as of June 30, 2024, with no material changes reported during the quarter Disclosure Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures as evaluated by management - An evaluation of the effectiveness of the Company's disclosure controls and procedures was performed under the supervision of management, including the CEO and CFO, who concluded they were effective as of June 30, 2024208 Internal Control over Financial Reporting This section reports on any material changes to the Company's internal control over financial reporting during the quarter - There were no changes in the Company's internal control over financial reporting during the three months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting209 Part II - Other Information This section provides additional information not covered in the financial statements, including legal, risk, and equity matters Item 1 - Legal Proceedings This section refers to Note 14 of the condensed consolidated financial statements for detailed information regarding legal proceedings - Refer to Note 14, 'Commitments and Contingencies,' to the condensed consolidated financial statements for information regarding legal proceedings211 Item 1A - Risk Factors This section directs readers to the Company's Annual Report on Form 10-K for a comprehensive discussion of risk factors and to the 'Forward-Looking Statements' section within this Quarterly Report for additional context - For information regarding factors that could affect the Company's results of operations, financial condition, and liquidity, refer to the risk factors discussed in Part I, 'Item 1A. Risk Factors' in the Company's Annual Report on Form 10-K for the year ended December 31, 2023212 - Also, refer to 'Forward-Looking Statements' included in Part I, Item 2 of this Quarterly Report on Form 10-Q212 Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds This section states that no purchases of the Company's common stock were made by or on behalf of the Company during the second quarter of 2024 - There were no purchases made by or on behalf of the Company, or an affiliated purchaser, of shares of the Company's common stock during the second quarter of 2024213 Item 5 - Other Information This section reports that no Rule 10b5-1 plans trading arrangements were adopted, modified, or terminated by the Company's directors and officers during the quarter ended June 30, 2024 - During the quarter ended June 30, 2024, no Rule 10b5-1 plans or other arrangements for the purchase or sale of the Company's shares were adopted, modified, or terminated by its directors and officers214 Item 6 - Exhibits This section indicates that the exhibits listed in the 'Exhibit Index' are filed with this report or incorporated by reference - The exhibits listed on the 'Exhibit Index' on Page 38 are filed with this report or incorporated by reference215 Exhibit Index This index provides a list of all exhibits accompanying the Form 10-Q, including certifications from the CEO and CFO, and various XBRL taxonomy extension documents - The Exhibit Index includes Rule 13a-14a Certifications of the Chief Executive Officer and Senior Vice President, Chief Financial Officer, dated July 25, 2024239 - It also lists Section 1350 Certifications from the CEO and CFO, and various XBRL Taxonomy Extension Documents (INS, LAB, DEF, SCH, PRE, CAL)239236217 Signatures This section contains the signature of the authorized representative of Visteon Corporation, certifying the filing of the report - The report is signed on behalf of Visteon Corporation by Colleen E. Myers, Vice President and Chief Accounting Officer, on July 25, 2024218241