Visteon(VC) - 2020 Q3 - Quarterly Report

Part I - Financial Information Item 1 - Condensed Consolidated Financial Statements Visteon's unaudited condensed consolidated financial statements and detailed notes for Q3 2020 and FY 2019 are presented Condensed Consolidated Statements of Comprehensive Income (Loss) This statement details Visteon's comprehensive income and loss, including net sales, gross margin, and earnings per share Condensed Consolidated Statements of Comprehensive Income (Loss) (in millions) | Metric (in millions) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $747 | $731 | $1,761 | $2,201 | | Gross margin | $99 | $84 | $156 | $220 | | Net income (loss) attributable to Visteon Corporation | $6 | $14 | $(74) | $35 | | Basic earnings (loss) per share | $0.22 | $0.50 | $(2.65) | $1.25 | | Diluted earnings (loss) per share | $0.21 | $0.50 | $(2.65) | $1.24 | - For the three months ended September 30, 2020, net sales increased by $16 million, and gross margin improved by $15 million compared to the same period in 2019. However, net income attributable to Visteon Corporation decreased by $8 million, and basic EPS declined from $0.50 to $0.22[10] - For the nine months ended September 30, 2020, net sales decreased by $440 million, and gross margin declined by $64 million compared to the same period in 2019. The company reported a net loss of $74 million attributable to Visteon Corporation, a significant decrease from the $35 million net income in the prior year, resulting in a basic loss per share of $(2.65)[10] Condensed Consolidated Balance Sheets This statement provides Visteon's financial position, detailing assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (in millions) | Metric (in millions) | September 30, 2020 | December 31, 2019 | | :------------------- | :----------------- | :---------------- | | Cash and equivalents | $431 | $466 | | Total current assets | $1,268 | $1,345 | | Total assets | $2,164 | $2,271 | | Short-term debt | $— | $37 | | Total current liabilities | $788 | $798 | | Long-term debt, net | $348 | $348 | | Total equity | $502 | $595 | - As of September 30, 2020, total assets decreased to $2,164 million from $2,271 million at December 31, 2019. Cash and equivalents decreased by $35 million, and total equity decreased by $93 million[13] - Short-term debt was fully repaid by September 30, 2020, down from $37 million at year-end 2019, while long-term debt remained stable at $348 million[13] Condensed Consolidated Statements of Cash Flows This statement outlines Visteon's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in millions) | Activity (in millions) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--------------------- | :----------------------------- | :----------------------------- | | Net cash provided from operating activities | $97 | $118 | | Net cash used by investing activities | $(77) | $(96) | | Net cash used by financing activities | $(60) | $(35) | | Net decrease in cash | $(34) | $(21) | - Net cash provided from operating activities decreased by $21 million to $97 million for the nine months ended September 30, 2020, compared to $118 million in the prior year[15] - Net cash used by financing activities increased to $60 million in 2020 from $35 million in 2019, primarily due to short-term debt repayments and share repurchases[15] Condensed Consolidated Statements of Changes in Equity This statement tracks changes in Visteon's total equity, including stockholders' equity and non-controlling interests Condensed Consolidated Statements of Changes in Equity (in millions) | Equity Component (in millions) | December 31, 2019 | September 30, 2020 | | :----------------------------- | :---------------- | :----------------- | | Total Visteon Corporation Stockholders' Equity | $480 | $385 | | Non-controlling interests | $115 | $117 | | Total Equity | $595 | $502 | - Total Visteon Corporation stockholders' equity decreased by $95 million from $480 million at December 31, 2019, to $385 million at September 30, 2020, primarily due to net loss and accumulated other comprehensive loss[18] - Accumulated other comprehensive loss increased from $(267) million to $(282) million during the nine-month period[18] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of Visteon's accounting policies, financial instruments, and other financial disclosures NOTE 1. Summary of Significant Accounting Policies This note outlines Visteon's significant accounting policies, including GAAP compliance and recent accounting pronouncement adoptions - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with certain information condensed or omitted per SEC rules. Interim results are not necessarily indicative of full-year results[20] - The Company adopted ASU 2016-13 (Credit Losses) and ASU 2019-12 (Income Taxes) effective January 1, 2020, neither of which had a material impact on the financial statements[23][24][25] - The Company is evaluating the impacts of ASU 2020-04 (Reference Rate Reform) and does not expect ASU 2018-14 (Defined Benefit Plans Disclosure) to have a material impact[25][26] Allowance for Doubtful Accounts (in millions) | Metric | Nine Months Ended Sep 30, 2020 | | :----- | :----------------------------- | | Beginning balance | $10 | | Provision | $2 | | Recoveries | $(3) | | Write-offs | $(4) | | Ending balance | $5 | NOTE 2. Non-Consolidated Affiliates This note details Visteon's investments in non-consolidated affiliates and exposure to variable interest entities - Equity in net income of non-consolidated affiliates was $4 million for the nine months ended September 30, 2020, down from $7 million in 2019[27] - Visteon and Yangfeng Automotive Trim Systems Co. Ltd. (YF) each own 50% of Yanfeng Visteon Investment Co., Ltd. (YFVIC), which is considered a Variable Interest Entity (VIE) but not consolidated as neither entity has control[28][31] Investments in Non-Consolidated Affiliates (in millions) | Affiliate | September 30, 2020 | December 31, 2019 | | :-------- | :----------------- | :---------------- | | YFVIC (50%) | $46 | $43 | | PT Astra Visteon Indonesia (50%) | $5 | $5 | | Total | $51 | $48 | Maximum Exposure to Loss in YFVIC (in millions) | Metric | September 30, 2020 | December 31, 2019 | | :----- | :----------------- | :---------------- | | Investment in YFVIC | $46 | $43 | | Receivables due from YFVIC | $52 | $41 | | Subordinated loan receivable from YFVIC | $6 | $8 | | Total Maximum Exposure to Loss | $104 | $92 | NOTE 3. Restructuring Activities This note describes Visteon's restructuring activities, including plans initiated and changes in restructuring reserves - The Company initiated several restructuring actions in 2020, including a $31 million plan in September in response to COVID-19, a $16 million global plan in March, and a $22 million European plan in January, all aimed at improving efficiency and rationalizing its footprint[35] - Restructuring reserves increased significantly to $52 million as of September 30, 2020, from $10 million at December 31, 2019, with activities expected to be substantially complete by the end of 2021[38][39] Restructuring Reserves Rollforward (in millions) | Period | Balance | | :----- | :------ | | December 31, 2019 | $10 | | Expense | $33 | | Utilization | $(6) | | Foreign currency | $(1) | | March 31, 2020 | $36 | | Expense | $1 | | Change in estimate | $3 | | Utilization | $(9) | | Foreign currency | $1 | | June 30, 2020 | $32 | | Expense | $31 | | Change in estimate | $1 | | Utilization | $(12) | | September 30, 2020 | $52 | NOTE 4. Inventories This note provides a breakdown of Visteon's inventories, including raw materials, work-in-process, and finished products Inventories, Net (in millions) | Component | September 30, 2020 | December 31, 2019 | | :-------- | :----------------- | :---------------- | | Raw materials | $102 | $100 | | Work-in-process | $25 | $28 | | Finished products | $37 | $41 | | Total | $164 | $169 | - Total inventories, net, decreased slightly to $164 million as of September 30, 2020, from $169 million at December 31, 2019, with a minor increase in raw materials offset by decreases in work-in-process and finished products[40] NOTE 5. Goodwill and Other Intangible Assets This note details Visteon's goodwill and other intangible assets, including definite-lived and indefinite-lived categories Intangible Assets, Net (in millions) | Category | September 30, 2020 | December 31, 2019 | | :------- | :----------------- | :---------------- | | Definite-Lived | $79 | $81 | | Indefinite-Lived (Goodwill) | $47 | $46 | | Total | $126 | $127 | - Total intangible assets, net, remained relatively stable at $126 million as of September 30, 2020, compared to $127 million at December 31, 2019. Goodwill increased by $1 million due to foreign currency adjustments[42] - Capitalized software development increased by $9 million during the nine months ended September 30, 2020, reflecting ongoing investments[42] NOTE 6. Other Assets This note presents Visteon's other current and non-current assets, including recoverable taxes and engineering costs Other Current Assets (in millions) | Component | September 30, 2020 | December 31, 2019 | | :-------- | :----------------- | :---------------- | | Recoverable taxes | $68 | $64 | | Joint venture receivables | $52 | $41 | | Contractually reimbursable engineering costs | $32 | $29 | | China bank notes | $11 | $16 | | Total | $193 | $193 | Other Non-Current Assets (in millions) | Component | September 30, 2020 | December 31, 2019 | | :-------- | :----------------- | :---------------- | | Deferred tax assets | $55 | $59 | | Contractually reimbursable engineering costs | $30 | $24 | | Recoverable taxes | $19 | $28 | | Total | $133 | $150 | - Contractually reimbursable engineering costs are expected to generate $12 million in cash reimbursement payments during the remainder of 2020, $24 million in 2021, and $46 million from 2022 onwards[45] NOTE 7. Other Liabilities This note details Visteon's other current and non-current liabilities, including restructuring and warranty accruals Other Current Liabilities (in millions) | Component | September 30, 2020 | December 31, 2019 | | :-------- | :----------------- | :---------------- | | Restructuring reserves | $52 | $10 | | Product warranty and recall accruals | $37 | $34 | | Joint venture payables | $11 | $9 | | Total | $189 | $147 | Other Non-Current Liabilities (in millions) | Component | September 30, 2020 | December 31, 2019 | | :-------- | :----------------- | :---------------- | | Derivative financial instruments | $27 | $14 | | Product warranty and recall accruals | $13 | $15 | | Total | $72 | $72 | - Other current liabilities increased by $42 million, primarily driven by a significant increase in restructuring reserves from $10 million to $52 million[46] NOTE 8. Debt This note provides details on Visteon's debt structure, including short-term borrowings, term debt, and credit facilities Debt (in millions) | Category | September 30, 2020 | December 31, 2019 | | :------- | :----------------- | :---------------- | | Short-term borrowings | $— | $37 | | Term debt facility, net | $348 | $348 | - Short-term borrowings, primarily from non-U.S. joint ventures, were fully repaid during the third quarter of 2020[48] - The Company borrowed the entire $400 million from its Revolving Credit Facility on March 19, 2020, due to COVID-19 uncertainty, but fully repaid it on September 24, 2020, following improved industry recovery and company performance[50] - As of September 30, 2020, the Company was in compliance with all debt covenants, including maintaining a total net leverage ratio no greater than 3.50:1.00[52] NOTE 9. Employee Benefit Plans This note outlines Visteon's employee benefit plans, including pension costs and deferred contributions due to COVID-19 Net Pension Benefit (Cost) (in millions) | Period | U.S. Plans (2020) | U.S. Plans (2019) | Non-U.S. Plans (2020) | Non-U.S. Plans (2019) | | :----- | :---------------- | :---------------- | :-------------------- | :-------------------- | | Three Months Ended Sep 30 | $3 | $2 | $(1) | $(1) | | Nine Months Ended Sep 30 | $8 | $7 | $(3) | $(2) | - The Company deferred approximately $17 million in U.S. defined benefit pension plan contributions and $2 million in non-U.S. plan contributions until 2024, both due to COVID-19 relief measures[58][59] - Net pension financing benefits are classified as Other income, net, contributing $3 million and $10 million for the three and nine months ended September 30, 2020, respectively[56][57] NOTE 10. Income Taxes This note details Visteon's income tax provision, effective tax rate impacts, and unrecognized tax benefits - The provision for income tax was $12 million for the three months and $19 million for the nine months ended September 30, 2020, reflecting profitability in certain countries, withholding taxes, and valuation allowances[60] - Pretax losses in jurisdictions with valuation allowances totaled $106 million for the nine months ended September 30, 2020, increasing the effective tax rate[60] - A $4 million discrete income tax expense adjustment was recorded in Q3 2020 due to a reassessment of deferred tax asset utilization in Germany, following restructuring programs[64] - Gross unrecognized tax benefits remained at $13 million as of September 30, 2020, with $6 million impacting the effective tax rate if recognized[65] NOTE 11. Stockholders' Equity and Non-controlling Interests This note describes Visteon's stockholders' equity, non-controlling interests, and changes in accumulated other comprehensive income - The Company repurchased 233,769 shares of common stock for $16 million during Q1 2020. As of September 30, 2020, $364 million remained available under the share repurchase authorization, but the Company does not intend to repurchase additional shares under this authorization[68][69] Non-Controlling Interests (in millions) | Entity | September 30, 2020 | December 31, 2019 | | :----- | :----------------- | :---------------- | | Yanfeng Visteon Automotive Electronics Co., Ltd. | $53 | $56 | | Shanghai Visteon Automotive Electronics, Co., Ltd. | $43 | $41 | | Changchun Visteon FAWAY Electronics, Co., Ltd. | $19 | $17 | | Other | $2 | $1 | | Total | $117 | $115 | Changes in Accumulated Other Comprehensive Income (Loss) (in millions) | Metric | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2020 | | :----- | :------------------------------ | :----------------------------- | | Beginning balance | $(299) | $(267) | | Other comprehensive income (loss) before reclassification, net of tax | $18 | $(13) | | Amounts reclassified from AOCI | $(1) | $(2) | | Ending balance | $(282) | $(282) | NOTE 12. Earnings Per Share This note details Visteon's earnings per share calculations, including basic and diluted figures and anti-dilutive items Earnings Per Share Calculation (in millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Visteon | $6 | $14 | $(74) | $35 | | Average common stock outstanding - basic | 27.8 | 28.0 | 27.9 | 28.1 | | Diluted shares | 28.0 | 28.1 | 27.9 | 28.2 | | Basic earnings (loss) per share | $0.22 | $0.50 | $(2.65) | $1.25 | | Diluted earnings (loss) per share | $0.21 | $0.50 | $(2.65) | $1.24 | - Basic and diluted EPS decreased significantly for both the three and nine months ended September 30, 2020, compared to the prior year, reflecting lower net income attributable to Visteon Corporation[74] - Approximately 181,000 performance-based share units were excluded from the diluted loss per share calculation for the nine months ended September 30, 2020, as their inclusion would have been anti-dilutive[74] NOTE 13. Fair Value Measurements and Financial Instruments This note describes Visteon's fair value measurements for financial instruments, including derivatives and debt - The Company uses derivative financial instruments (forward contracts, cross-currency swaps, interest rate swaps) to manage exposure to currency exchange rates and interest rate variability, classifying them as Level 2 in the fair value hierarchy[76][77][78] - As of September 30, 2020, the Company had foreign currency derivative instruments with gross notional values of $78 million, cross-currency swaps with an aggregate notional value of $250 million, and interest rate swaps with an aggregate notional value of $300 million[81][83][85] - The fair value of debt was $342 million as of September 30, 2020, based on current market rates, classified as Level 2[87] - The Company's credit risk concentration with any single customer does not exceed 10% of total accounts receivable, except for Ford and its affiliates (14%) and Renault/Nissan (12%) as of September 30, 2020[89] NOTE 14. Commitments and Contingencies This note outlines Visteon's commitments and contingencies, including legal proceedings, investigations, and warranty liabilities - The Company is involved in litigation with Van Buren Township for $28 million related to bond payment obligations for its U.S. headquarters, which the Company intends to vigorously defend[90][91] - An OFAC investigation is ongoing regarding past sales of automotive HVAC components into Iran by a Chinese joint venture, with potential civil penalties that could be material[92] - Accruals for claims in Brazil totaled $8 million for claims aggregating $52 million as of September 30, 2020[93] Product Warranty and Recall Claims Liability Rollforward (in millions) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----- | :----------------------------- | :----------------------------- | | Beginning balance | $49 | $48 | | Accruals for products shipped | $11 | $15 | | Changes in estimates | $(2) | $2 | | Specific cause actions | $5 | $3 | | Settlements | $(14) | $(16) | | Foreign currency translation | $1 | $(1) | | Ending balance | $50 | $51 | NOTE 15. Segment Information This note provides Visteon's segment information, including Adjusted EBITDA and disaggregated revenue by geography and product - Visteon operates as a single reportable segment, Electronics, providing vehicle cockpit electronics products such as instrument clusters, information displays, and infotainment systems[102] - Adjusted EBITDA, a non-GAAP measure, is used by management to evaluate financial performance and for incentive compensation decisions. It increased to $87 million for the three months ended September 30, 2020, from $62 million in 2019, but decreased to $117 million for the nine months ended September 30, 2020, from $149 million in 2019[103][104][105] Disaggregated Revenue by Geographical Markets (in millions) | Market | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Europe | $281 | $221 | $667 | $726 | | Americas | $192 | $201 | $446 | $597 | | China Domestic | $140 | $143 | $323 | $372 | | China Export | $58 | $70 | $145 | $204 | | Other Asia-Pacific | $107 | $141 | $261 | $440 | | Total | $747 | $731 | $1,761 | $2,201 | Disaggregated Revenue by Product Lines (in millions) | Product Line | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Instrument clusters | $388 | $322 | $901 | $959 | | Audio and infotainment | $134 | $182 | $333 | $562 | | Information displays | $135 | $120 | $298 | $365 | | Telematics | $14 | $29 | $43 | $51 | | Total | $747 | $731 | $1,761 | $2,201 | Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Visteon's financial condition, operations, and cash flows, highlighting strategic priorities and market impacts for Q3 2020 Executive Summary This summary introduces Visteon as a global automotive supplier and outlines its strategic priorities for growth and shareholder returns - Visteon is a global automotive supplier specializing in cockpit electronics and connected car solutions, aiming to capitalize on the industry's shift to digital, connected, automated, and voice-enabled cockpits[110] - Strategic priorities include Technology Innovation (e.g., DriveCore™ advanced safety platform), Long-Term Growth and Margin Expansion through new business wins, and Enhancing Shareholder Returns, having returned approximately $3.3 billion to shareholders since 2015[111] Financial Results This section highlights Visteon's net sales breakdown for the Electronics segment by geographic region - The section highlights net sales breakdown for Visteon's Electronics segment for the three and nine months ended September 30, 2020, based on the geographic region where the sale originates[112][115] Global Automotive Market Conditions and Production Levels This section analyzes global light vehicle production trends, noting decreases and regional variations for the periods presented - Global light vehicle production decreased by 3.4% for the three months ended September 30, 2020, and by 23.2% for the nine months ended September 30, 2020, compared to the same periods in 2019[115] Global Light Vehicle Production (Units in millions) | Region | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Change (%) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | Change (%) | | :----- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | China | 6.4 | 5.8 | 10.6% | 15.8 | 17.3 | (8.8)% | | Other Asia Pacific | 4.5 | 5.2 | (14.7)% | 11.9 | 16.3 | (27.3)% | | Europe | 4.3 | 4.7 | (7.7)% | 11.2 | 16.0 | (29.5)% | | Americas | 4.7 | 4.9 | (3.4)% | 10.7 | 15.0 | (28.9)% | | Global | 20.3 | 21.0 | (3.4)% | 50.8 | 66.1 | (23.2)% | - China experienced a 10.6% increase in light vehicle production in Q3 2020, while other regions like Other Asia Pacific, Europe, and Americas saw declines of 14.7%, 7.7%, and 3.4% respectively[115] Results of Operations - Three Months Ended September 30, 2020 and 2019 This section analyzes Visteon's consolidated results for the three months ended September 30, 2020, compared to 2019 Consolidated Results of Operations (in millions) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Change | | :----- | :------------------------------ | :------------------------------ | :----- | | Net sales | $747 | $731 | $16 | | Gross margin | $99 | $84 | $15 | | Net income (loss) attributable to Visteon Corporation | $6 | $14 | $(8) | | Adjusted EBITDA | $87 | $62 | $25 | - Net sales increased by $16 million to $747 million, driven by $38 million in volume, mix, and net new business, partially offset by $17 million in customer pricing and $3 million in unfavorable currency[118] - Gross margin improved by $15 million to $99 million, or 13.3% of net sales, primarily due to $24 million lower net engineering costs and $20 million favorable cost performance, which more than offset $17 million in annual customer pricing[122] - Adjusted EBITDA increased by $25 million to $87 million, benefiting from lower net engineering costs and favorable cost performance, despite decreased volumes and unfavorable product mix[129] Results of Operations - Nine Months Ended September 30, 2020 and 2019 This section analyzes Visteon's consolidated results for the nine months ended September 30, 2020, compared to 2019 Consolidated Results of Operations (in millions) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | Change | | :----- | :----------------------------- | :----------------------------- | :----- | | Net sales | $1,761 | $2,201 | $(440) | | Gross margin | $156 | $220 | $(64) | | Net income (loss) attributable to Visteon Corporation | $(74) | $35 | $(109) | | Adjusted EBITDA | $117 | $149 | $(32) | - Net sales decreased by $440 million to $1,761 million, primarily due to $383 million from unfavorable volumes (driven by COVID-19) and $40 million from customer pricing[134] - Gross margin decreased by $64 million to $156 million, or 8.9% of net sales, significantly impacted by $174 million from unfavorable volumes and product mix, partially offset by $74 million lower engineering costs and $82 million favorable cost performance[137] - Adjusted EBITDA decreased by $32 million to $117 million, mainly due to decreased volumes and unfavorable product mix, despite benefits from lower engineering costs and favorable cost performance[145] Liquidity This section discusses Visteon's liquidity sources, including cash flows, credit facilities, and cash balances - Primary liquidity sources are cash flows from operations, existing cash balances, and available credit facilities. The Company believes these are sufficient to sustain operations and support investments, while closely monitoring and preserving liquidity amidst COVID-19 impacts[147] - The Company fully repaid the $400 million revolving credit facility on September 24, 2020, after borrowing it on March 19, 2020, demonstrating improved financial flexibility[149] - As of September 30, 2020, total cash was $435 million, with $351 million located outside the U.S. Of this, $135 million is considered permanently reinvested, and repatriation would incur foreign withholding taxes but no U.S. federal taxes[151] - The Company has $364 million available for share repurchases under Board authorization expiring December 31, 2020, but currently does not intend to repurchase additional shares[152] Cash Flows This section details Visteon's cash flows from operating, investing, and financing activities for the nine-month period - Operating activities generated $97 million in cash for the nine months ended September 30, 2020, a $21 million decrease from 2019, primarily due to lower Adjusted EBITDA, despite significant cash preservation efforts[155] - Investing activities used $77 million, mainly for $83 million in capital expenditures to support new business, partially offset by proceeds from hedging transactions and affiliate loan repayments[156] - Financing activities used $60 million, an increase of $25 million from 2019, primarily due to $37 million in short-term debt repayments and $16 million in share repurchases[158] Debt and Capital Structure This section refers to Note 8 for a comprehensive discussion of Visteon's debt facilities and capital structure - Refer to Note 8, 'Debt,' for a comprehensive discussion of the Company's debt facilities and capital structure[160] Significant Accounting Policies and Critical Accounting Estimates This section refers to Note 1 for details on Visteon's significant accounting policies and critical accounting estimates - Refer to Note 1, 'Summary of Significant Accounting Policies,' for details on the Company's significant accounting policies and critical accounting estimates[161] Fair Value Measurements This section refers to Note 13 for additional information on Visteon's fair value measurements - Refer to Note 13, 'Fair Value Measurements and Financial Instruments,' for additional information on the Company's fair value measurements[162] Recent Accounting Pronouncements This section refers to Note 1 for information on recently adopted and not yet adopted accounting pronouncements - Refer to Note 1, 'Summary of Significant Accounting Policies,' for information on recently adopted and not yet adopted accounting pronouncements[163] Forward-Looking Statements This section highlights forward-looking statements, emphasizing risks and uncertainties, particularly related to COVID-19 impacts - The report contains forward-looking statements subject to risks and uncertainties, and undue reliance should not be placed on them. The Company does not intend to update these statements[164] - Key factors that could affect future results include the continued impacts of the COVID-19 pandemic (supply chain disruptions, reduced demand), Visteon's ability to meet capital and liquidity requirements, changes in customer operations and vehicle production, increases in commodity costs, and legal/administrative proceedings[165][166] Item 3 - Quantitative and Qualitative Disclosures about Market Risk This section outlines Visteon's exposure to market risks, including currency, interest rates, and commodities, and risk management strategies Foreign Currency Risk This section details Visteon's foreign currency risk exposure and the use of derivative instruments for mitigation - The Company is exposed to foreign currency risk from product sales, supplier payments, debt, dividends, and investments in subsidiaries. Derivative financial instruments like forward and option contracts are used to mitigate cash flow variability[168] - Primary hedged currency exposures include the Japanese yen, euro, Thai baht, and Mexican peso, with a strategy of partial coverage for transactions[168] - A hypothetical 10% change in exchange rates would result in a pre-tax gain or loss of $36 million for currency derivative financial instruments as of September 30, 2020[170] Interest Rate Risk This section refers to Note 13 for additional information on Visteon's interest rate risk management - Refer to Note 13, 'Fair Value Measurements and Financial Instruments,' for additional information on the Company's interest rate risk management[171] Commodity Risk This section describes Visteon's commodity price risk management through negotiations and potential future derivative use - Exposure to commodity price changes is managed primarily through negotiations with suppliers and customers. The Company may use derivatives in the future if suitable hedging instruments are identified[172] Item 4 - Controls and Procedures This section confirms the effectiveness of Visteon's disclosure controls and procedures and reports no material changes in internal control - As of September 30, 2020, the Company's Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that the disclosure controls and procedures were effective[174] - There were no changes in the Company's internal control over financial reporting during the three months ended September 30, 2020, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[175] Part II - Other Information Item 1 - Legal Proceedings This section refers to Note 14 for detailed information on Visteon's legal proceedings and claims - Information regarding legal proceedings is incorporated by reference from Note 14, 'Commitments and Contingencies,' to the condensed consolidated financial statements[178] Item 1A - Risk Factors This section supplements risk factors, emphasizing the adverse impacts of the COVID-19 pandemic on Visteon's business and finances - The COVID-19 pandemic has adversely affected, and may continue to affect, the Company's business, results of operations, and financial condition, leading to supply chain disruptions, market downturns, and reduced consumer demand[180] - The extent of future impacts from COVID-19 is highly uncertain and depends on developments like new government actions, severity of the virus, and its global economic effects, which could materially affect the Company's financial condition[182] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities or common stock repurchases during Q3 2020 - No purchases of the Company's common stock were made by or on behalf of the Company or an affiliated purchaser during the third quarter of 2020[183] Item 6 - Exhibits This section lists the exhibits filed with the report, including certifications and XBRL documents Exhibit Index | Exhibit No. | Description | | :---------- | :---------- | | 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer dated October 29, 2020. | | 31.2 | Rule 13a-14(a) Certification of Senior Vice President, Chief Financial Officer dated October 29, 2020. | | 32.1 | Section 1350 Certification of Chief Executive Officer dated October 29, 2020. | | 32.2 | Section 1350 Certification of Senior Vice President, Chief Financial Officer dated October 29, 2020. | | 101.INS | XBRL Instance Document.** | | 101.SCH | XBRL Taxonomy Extension Schema Document.** | | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document.** | | 101.LAB | XBRL Taxonomy Extension Label Linkbase Document.** | | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document.** | | 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document.** | - The Company agrees to furnish copies of certain long-term debt instruments to the SEC upon request[187]