UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

________________

FORM 10-Q

(Mark One)


þ	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)~~ ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2019


¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)~~ ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 001-15827

VISTEON ~~CORPORATION~~CORPORATION

(Exact name of registrant as specified in its charter)



State of	Delaware		38-3519512
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
One Village Center Drive,	Van Buren Township,	Michigan	48111
(Address of principal executive offices)			(Zip code)

Registrant’s telephone number, including area code: ~~(800)-VISTEON~~(800)-VISTEON

~~Not applicable~~Securities registered pursuant to Section 12(b) of the Act:

~~(Former name, former address and former fiscal year, if changed since last report)~~



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $.01 Per Share	VC	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesü No__

Indicate by check mark whether the registrant: has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesü No __

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

Large accelerated filerü Accelerated filer __ Non-accelerated filer __ Smaller reporting company __☐

Emerging growth company __☐

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ü No__

As of ~~October 19, 2017,~~July 24, 2019, the registrant had outstanding ~~31,098,830~~24,954,249 shares of common stock.

Exhibit index located on page number ~~49.~~43.

~~Table of Contents~~

Visteon Corporation and Subsidiaries

Index

~~Table of Contents~~

Part I

Financial Information


Item 1.	Consolidated Financial Statements

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions Except Per Share Amounts)

(Unaudited)


	Three Months Ended September 30					Nine Months Ended September 30						Three Months Ended June 30						Six Months Ended June 30
	2017			2016		2017			2016			2019			2018			2019			2018
Sales	$	765		$	770	$	2,349		$	2,345		$	733		$	758		$	1,470		$	1,572
Cost of sales	649			665		1,990			2,010			(663		)	(654		)	(1,334		)	(1,339		)
Gross margin	116			105		359			335			70			104			136			233
Selling, general and administrative expenses	54			53		158			163			(58		)	(55		)	(115		)	(99		)
Restructuring expense	6			5		10			22			—			(5		)	(1		)	(10		)
Interest expense	4			6		15			14			(3		)	(3		)	(6		)	(7		)
Interest income	1			1		3			4			1			1			2			3
Equity in net income of non-consolidated affiliates	1			—		6			3			3			4			6			7
Other (income) expense, net	(1		)	12		(3		)	16
Other income, net												3			3			5			10
Income before income taxes	55			30		188			127			16			49			27			137
Provision for income taxes	8			5		34			27			(8		)	(12		)	(3		)	(33		)
Net income from continuing operations	47			25		154			100			8			37			24			104
Income (loss) from discontinued operations, net of tax	—			7		8			(15		)	—			(1		)	—			1
Net income	47			32		162			85			8			36			24			105
Net income attributable to non-controlling interests	4			4		11			12			(1		)	(1		)	(3		)	(5		)
Net income attributable to Visteon Corporation	$	43		$	28	$	151		$	73		$	7		$	35		$	21		$	100

Comprehensive income (loss)												$	4		$	(9	)	$	25		$	83
Comprehensive income (loss) attributable to Visteon Corporation												$	4		$	(3	)	$	22		$	79

Basic earnings (loss) per share:
Continuing operations	$	1.38		$	0.62	$	4.50		$	2.47		$	0.25		$	1.22		$	0.75		$	3.29
Discontinued operations	—			0.21		0.25			(0.42		)	—			(0.03		)	—			0.03
Basic earnings per share attributable to Visteon Corporation	$	1.38		$	0.83	$	4.75		$	2.05		$	0.25		$	1.19		$	0.75		$	3.32

Diluted earnings (loss) per share:
Continuing operations	$	1.35		$	0.61	$	4.43		$	2.44		$	0.25		$	1.20		$	0.74		$	3.26
Discontinued operations	—			0.20		0.25			(0.41		)	—			(0.03		)	—			0.03
Diluted earnings per share attributable to Visteon Corporation	$	1.35		$	0.81	$	4.68		$	2.03		$	0.25		$	1.17		$	0.74		$	3.29

Comprehensive income:
Comprehensive income	$	59		$	35	$	205		$	106
Comprehensive income attributable to Visteon Corporation	$	53		$	31	$	190		$	96

See accompanying notes to the consolidated financial statements.

~~Table of Contents~~

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Millions)


	(Unaudited)						(Unaudited)
	September 30			December 31			June 30			December 31
	2017			2016			2019			2018
ASSETS
Cash and equivalents	$	732		$	878		$	435		$	463
Restricted cash	3			4			3			4
Accounts receivable, net	506			505			468			486
Inventories, net	174			151			187			184
Other current assets	181			170			190			159
Total current assets	1,596			1,708			1,283			1,296

Property and equipment, net	361			345			414			397
Intangible assets, net	128			129			126			129
Right to use assets, net							164			—
Investments in non-consolidated affiliates	40			45			48			42
Other non-current assets	154			146			157			143
Total assets	$	2,279		$	2,373		$	2,192		$	2,007

LIABILITIES AND EQUITY
Short-term debt, including current portion of long-term debt	$	44		$	36
Short-term debt							$	54		$	57
Accounts payable	429			463			447			436
Accrued employee liabilities	102			103			71			67
Current lease liabilities							29			—
Other current liabilities	235			309			161			161
Total current liabilities	810			911			762			721

Long-term debt	347			346			348			348
Employee benefits	305			303			252			257
Non-current lease liabilities							139			—
Deferred tax liabilities	22			20			26			23
Other non-current liabilities	62			69			72			76

Stockholders’ equity:
Preferred stock (par value $0.01, 50 million shares authorized, none outstanding as of September 30, 2017 and December 31, 2016)	—			—
Common stock (par value $0.01, 250 million shares authorized, 55 million shares issued, 31 and 33 million shares outstanding as of September 30, 2017 and December 31, 2016, respectively)	1			1
Preferred stock (par value $0.01, 50 million shares authorized, none outstanding as of June 30, 2019 and December 31, 2018)							—			—
Common stock (par value $0.01, 250 million shares authorized, 55 million shares issued, 28 million shares outstanding as of June 30, 2019 and December 31, 2018)							1			1
Additional paid-in capital	1,333			1,327			1,338			1,335
Retained earnings	1,420			1,269			1,630			1,609
Accumulated other comprehensive loss	(194		)	(233		)	(215		)	(216		)
Treasury stock	(1,945		)	(1,778		)	(2,277		)	(2,264		)
Total Visteon Corporation stockholders’ equity	615			586			477			465
Non-controlling interests	118			138			116			117
Total equity	733			724			593			582
Total liabilities and equity	$	2,279		$	2,373		$	2,192		$	2,007

See accompanying notes to the consolidated financial statements.

~~Table of Contents~~

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS¹

(Dollars in Millions)

(Unaudited)


	Nine Months Ended September 30						Six Months Ended June 30
	2017			2016			2019			2018
Operating Activities
Net income	$	162		$	85		$	24		$	105
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization	62			62			49			45
Equity in net income of non-consolidated affiliates, net of dividends remitted	(6		)	(2		)	(6		)	(7		)
Non-cash stock-based compensation	9			6			11			—
Gain on India operations repurchase	(7		)	—
(Gains) losses on divestitures and impairments	(4		)	5
Gains on transactions							—			(3		)
Other non-cash items	2			15			5			2
Changes in assets and liabilities:
Accounts receivable	29			15			18			85
Inventories	(15		)	15			(3		)	(14		)
Accounts payable	(39		)	(45		)	20			(8		)
Other assets and other liabilities	(62		)	(118		)	(57		)	(79		)
Net cash provided from operating activities	131			38			61			126
Investing Activities
Capital expenditures, including intangibles	(69		)	(56		)	(71		)	(69		)
India operations repurchase	(47		)	—
Payments for acquisition and divestiture of businesses	(2		)	(15		)
Settlement of net investment hedge	5			—
Proceeds from asset sales and business divestitures	15			15
Climate Transaction withholding tax refund	—			356
Short-term investments	—			47
Loans to non-consolidated affiliates, net of repayments	—			(8		)
Loan repayments from non-consolidated affiliates							2			2
Other	1			—			2			1
Net cash (used by) provided from investing activities	(97		)	339
Net cash used by investing activities							(67		)	(66		)
Financing Activities
Short-term debt, net	8			(11		)	(3		)	(16		)
Principal payments on debt	(2		)	(2		)
Repurchase of common stock							(20		)	(200		)
Distribution payments	(1		)	(1,736		)	—			(14		)
Repurchase of common stock	(170		)	(500		)
Dividends paid to non-controlling interests	(29		)	—
Stock based compensation tax withholding payments	(1		)	(11		)
Other	(2		)	—			—			(3		)
Net cash used by financing activities	(197		)	(2,260		)	(23		)	(233		)
Effect of exchange rate changes on cash and equivalents	17			6
Net decrease in cash and equivalents	(146		)	(1,877		)
Cash and equivalents at beginning of the period	878			2,729
Cash and equivalents at end of the period	$	732		$	852
Effect of exchange rate changes on cash							—			(8		)
Net decrease in cash							(29		)	(181		)
Cash and restricted cash at beginning of the period							467			709
Cash and restricted cash at end of the period							$	438		$	528

¹The Company has combined cash flows from discontinued and continuing operations within the operating and financing categories.

See accompanying notes to the consolidated financial statements.

~~Table of Contents~~

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in Millions)

(Unaudited)



	Total Visteon Corporation Stockholders' Equity
	Common Stock		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Visteon Corporation Stockholders' Equity			Non-Controlling Interests			Total Equity
December 31, 2018	$	1	$	1,335		$	1,609	$	(216	)	$	(2,264	)	$	465		$	117		$	582
Net income	—		—			14		—			—			14			2			16
Other comprehensive income	—		—			—		4			—			4			1			5
Stock-based compensation, net	—		(5		)	—		—			7			2			—			2
Dividends payable	—		2			—		—			—			2			(2		)	—
March 31, 2019	$	1	$	1,332		$	1,623	$	(212	)	$	(2,257	)	$	487		$	118		$	605
Net income	—		—			7		—			—			7			1			8
Other comprehensive loss	—		—			—		(3		)	—			(3		)	(1		)	(4		)
Stock-based compensation, net	—		6			—		—			—			6			—			6
Repurchase of shares of common stock	—		—			—		—			(20		)	(20		)	—			(20		)
Dividends payable	—		—			—		—			—			—			(2		)	(2		)
June 30, 2019	$	1	$	1,338		$	1,630	$	(215	)	$	(2,277	)	$	477		$	116		$	593



	Total Visteon Corporation Stockholders' Equity
	Common Stock		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Visteon Corporation Stockholders' Equity			Non-Controlling Interests			Total Equity
December 31, 2017	$	1	$	1,339		$	1,445	$	(174	)	$	(1,974	)	$	637		$	124		$	761
Net income	—		—			65		—			—			65			4			69
Other comprehensive income	—		—			—		17			—			17			6			23
Stock-based compensation, net	—		(18		)	—		—			5			(13		)	—			(13		)
Repurchase of shares of common stock	—		(30		)	—		—			(170		)	(200		)	—			(200		)
Dividends payable	—		—			—		—			—			—			(25		)	(25		)
March 31, 2018	$	1	$	1,291		$	1,510	$	(157	)	$	(2,139	)	$	506		$	109		$	615
Net income	—		—			35		—			—			35			1			36
Other comprehensive loss	—		—			—		(38		)	—			(38		)	(7		)	(45		)
Stock-based compensation, net	—		11			—		—			2			13						13
Dividends payable	—		—			—		—			—			—			(3		)	(3		)
June 30, 2018	$	1	$	1,302		$	1,545	$	(195	)	$	(2,137	)	$	516		$	100		$	616

See accompanying notes to the consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~NOTE 1. Description of Business~~

Visteon Corporation (the "Company" or "Visteon") is a global automotive supplier that designs, engineers and manufactures innovative electronics products for nearly every original equipment vehicle manufacturer ("OEM") worldwide including Ford, Mazda, Nissan/Renault, General Motors, Honda, BMW and Daimler. Visteon is headquartered in Van Buren Township, Michigan and has an international network of manufacturing operations, technical centers and joint venture operations, supported by approximately 10,000 employees, dedicated to the design, development, manufacture and support of its product offerings and its global customers. The Company's manufacturing and engineering footprint is principally located outside of the United States. Visteon delivers value for its customers and stockholders through its technology-focused core vehicle cockpit electronics business. The Company's cockpit electronics product portfolio includes instrument clusters, information displays, infotainment systems, audio systems, telematics solutions, and head up displays. The Company's vehicle cockpit electronics business is comprised of and reported under the Electronics segment. In addition to the Electronics segment, the Company had operations in South America and Europe associated with the former Climate business, not subject to discontinued operations classification, that comprised Other, and were exited by December 31, 2016.

NOTE 2.1. Summary of Significant Accounting Policies

The unaudited consolidated financial statements of ~~the Company~~Visteon Corporation (the "Company" or "Visteon") have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange ~~Commission.~~Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. These interim consolidated financial statements include all adjustments (consisting of normal recurring adjustments, except as otherwise disclosed) that management believes are necessary for a fair presentation of the results of operations, financial position and cash flows of the Company for the interim periods presented. Interim results are not necessarily indicative of full-year results.

~~Reclassifications:~~ ~~Certain prior period amounts have been reclassified to conform to the current period presentation.~~

Other ~~(Income) Expense, Net:~~Income, net:



	Three Months Ended June 30				Six Months Ended June 30
	2019		2018		2019		2018
	(Dollars in Millions)
Pension financing benefits, net	$	3	$	3	$	5	$	6
Transformation initiatives	—		—		—		4
	$	3	$	3	$	5	$	10

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
(Dollars in Millions)
Transformation initiatives $ 1
$ —
$ 1
$ 3
Gain on non-consolidated affiliate transactions, net (2 ) (1 ) (4 ) (1 )
Foreign currency translation charge —
11
—
11
Loss on asset contribution —
2
—
2
Transaction exchange losses —
—
—
1
$ (1 ) $ 12
$ (3 ) $ 16

Pension financing benefits, net include return on assets net of interest costs and other amortization.

Transformation ~~initiative costs~~initiatives for the six months ended June 30, 2018 include ~~information technology separation costs, integration~~a $4 million benefit on settlement of ~~acquired business, and financial and advisory services incurred in connection~~litigation matters with the ~~Company's transformation into a pure play cockpit electronics business. The gain on non-consolidated affiliate transactions represents the Company's sale of three cost method investments~~Company’s former President and ~~an equity method investment during the nine months ended September 30, 2017~~Chief Executive Officer (“former CEO”) as further described in Note ~~5, "Non-Consolidated Affiliates.~~18, "Commitments and Contingencies."

During the three and nine months ended September 30, 2016, the Company recorded a charge of approximately $11 million related to foreign currency translation amounts recorded in accumulated other comprehensive loss associated with the agreement to sell the Company's South Africa climate operations. In connection with the closure of the Climate facility in Argentina, the Company entered into an agreement, during the third quarter of 2016, to contribute land and building with a net book value of $2 million to the local municipality.

~~Restricted Cash:~~ Restricted cash represents amounts designated for uses other than current operations and includes $2 million related to the Letter of Credit Facility, and $1 million related to cash collateral for other corporate purposes as of September 30, 2017.

~~Table of Contents~~

Recently ~~Issued~~Adopted Accounting Pronouncements:

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~No. 2014-9, "Revenue from Contracts with Customers," which~~2016-02, “Leases (Subtopic 842).” The standard increases the transparency and comparability of organizations by recognizing right-of-use (“ROU”) assets and lease liabilities on the consolidated balance sheets and disclosing key quantitative and qualitative information about leasing arrangements. In transition, the standard provides for certain practical expedients. Management elected certain practical expedients including the election not to reassess existing or expired contracts to determine if such contracts contain a lease or if the lease classification would differ, as well as the election not to separate lease and non-lease components for arrangements where the Company is ~~the new comprehensive revenue recognition standard that will supersede existing revenue recognition guidance under U.S. GAAP. The standard's core principle is that~~ a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. This ASU allows for both retrospective and prospective methods of adoption.lessee.

The Company ~~has, with other industry leaders, interacted with~~adopted the standard January 1, 2019, by applying the modified retrospective method without restatement of comparative periods' financial information, as permitted by the transition guidance. The standard had a material impact on the Company's consolidated balance sheets, but did not have an impact on its consolidated results of operations and cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while the Company's accounting for finance leases remained substantially unchanged. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $172 million and $176 million, respectively, as of January 1, 2019. For additional information, refer to Note 10, "Leases."

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)." This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income (loss) to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017 (the "Act"). The Company adopted the standard January 1, 2019 and elected to reclassify stranded amounts related to the Act from accumulated other comprehensive income (loss) to retained earnings. However, due to the U.S. valuation allowance, there were no stranded tax effects within accumulated other comprehensive income (loss) as of the enactment date, and thus, no amount to reclassify to retained earnings.

Accounting Pronouncements Not Yet Adopted:

In June 2016, the FASB issued ASU 2016-13, "Credit Losses - Measurement of Credit Losses on ~~certain interpretation issues~~Financial Instruments." The guidance requires that for most financial assets, losses be based on an expected loss approach which includes estimates of losses over the life of exposure that considers historical, current and forecasted information. Expanded disclosures related to the methods used to estimate the losses as well as ~~interacted~~a specific disaggregation of balances for financial assets are also required. The change is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with ~~non-authoritative industry groups with respect to the implementation of the standard~~early adoption permitted for fiscal years beginning after December 15, 2018, and ~~will continue to monitor the interactions between its industry group and the standard setters.~~interim periods within those fiscal years. The Company does not expect any changes to how it accounts for reimbursements of pre-production costs, currently accounted for as a cost reduction. In addition, the Company continues to evaluate its contracts with customers analyzing the impact, if any, on revenue from the sale of production parts, particularly in regards to material rights, variable consideration and the impact of termination clauses on the timing of revenue recognition. The Company will adopt this standard January 1, 2018 and has selected the modified retrospective transition method for any impacts that might arise. Under the modified retrospective method, the Company will recognize the cumulative effect of initially applying the standard as an adjustment to opening retained earnings at the date of initial application. While the Company continues to evaluate a significant number of contracts with customers, the Company does not expect the cumulative adjustment to be material. As policy elections, the Company plans to exclude from revenue all value added tax ("VAT"), a consumption tax placed on certain products in countries outside the U.S. In addition, the Company will elect not to identify shipping and handling as a separate performance obligation.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." The amendments in Topic 842 supersede current lease requirements in Topic 840 which require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, these amendments are not expected to significantly impact net income, earnings per share, and the statement of cash flows. This new guidance was effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company's adoptionapplication of this ~~standard did not~~accounting standards update to have a material impact on its consolidated financial statements.

NOTE 2. Revenue Recognition

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



	Three Months Ended June 30						Six Months Ended June 30
	2019			2018			2019			2018
	(Dollars in Millions)
Geographical Markets (a)
Europe	$	243		$	261		$	505		$	536
Americas	206			205			396			431
China Domestic	121			93			229			191
China Export	65			73			134			162
Other Asia-Pacific	142			174			299			353
Eliminations	(44		)	(48		)	(93		)	(101		)
	$	733		$	758		$	1,470		$	1,572
(a) Company sales based on geographic region where sale originates and not where customer is located.



	Three Months Ended June 30				Six Months Ended June 30
	2019		2018		2019		2018
	(Dollars in Millions)
Product Lines
Instrument clusters	$	323	$	307	$	637	$	633
Audio and infotainment	184		194		380		402
Information displays	122		126		245		266
Body and security	32		30		64		61
Climate controls	20		31		41		71
Telematics	11		16		22		34
Other	41		54		81		105
	$	733	$	758	$	1,470	$	1,572

During the three and six months ended June 30, 2019 and 2018, the Company recognized approximately $4 million and $11 million and $3 million and $11 million net increases in transaction price related to performance obligations satisfied in previous periods, respectively. The Company has ~~adopted an entity-wide accounting policy election to account for forfeitures in compensation cost when they occur.~~

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of certain cash receipts and cash payments." The ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU will be applied using a retrospective transition method to each period presented. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost." The ASU requires entities to present the service cost component of the net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Entities will present the other components separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, and disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement. The standard will be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, for the guidance limiting the capitalization of net periodic benefit cost inno material contract assets, to the service cost. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2017 and interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting." The ASU amends the scope of modification accounting for share-based payment arrangements, provides guidance

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on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. The new guidance will allow companies to make certain changes to awards without accounting for them as modifications. It does not change the accounting for modifications. The new guidance will be applied prospectively to awards modified on or after the adoption date. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260): Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for certain financial instruments with down round features, (Part II)Replacement of the indefinite deferral for mandatory redeemable financial instruments of certain Nonpublic entities and certain mandatory Non-controlling interests with a scope exception." The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified ascontract liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2018 and interim periods, with early adoption permitted. The Company is currently evaluating the impactcapitalized contract acquisition costs as of ~~adopting this standard on its consolidated financial statements.~~June 30, 2019.

In August 2017, the FASB issued ASU 2017-12, "Derivative and Hedging (Topic 815): Targeted improvements to accounting for hedging activities." The ASU was created to better align accounting rules with a company’s risk management activities to better reflect the economic results of hedging in the financial statements; and simplify hedge accounting treatment. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2018 and interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

NOTE 3. ~~Business Acquisition~~Segment Information

Financial results for the Company's reportable segment have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's chief operating decision maker in allocating resources and in assessing performance. The Company’s chief operating decision maker, the Chief Executive Officer, evaluates the performance of the Company’s segment primarily based on net sales, before elimination of inter-company shipments, Adjusted EBITDA (a non-GAAP financial measure, as defined below) and operating assets. As the Company has one reportable segment, net sales, total assets, depreciation, amortization and capital expenditures are equal to consolidated results.

~~On July~~

8 ~~2016 Visteon acquired AllGo Embedded Systems Private Limited,~~

The Company’s current reportable segment is Electronics, which provides vehicle cockpit electronics products to customers, including instrument clusters, information displays, infotainment systems, audio systems, telematics solutions and head-up displays.

Adjusted EBITDA

The Company defines Adjusted EBITDA as net income attributable to the Company adjusted to eliminate the impact of depreciation and amortization, restructuring expense, net interest expense, equity in net income of non-consolidated affiliates, gain and loss on divestiture, provision for income taxes, discontinued operations, net income attributable to non-controlling interests, non-cash stock-based compensation expense, and other gains and losses not reflective of the Company's ongoing operations.

Adjusted EBITDA is presented as a ~~leading developer~~supplemental measure of ~~embedded multimedia system solutions~~the Company's financial performance that management believes is useful to ~~global vehicle manufacturers,~~investors because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company's operating activities across reporting periods. Not all companies use identical calculations and, accordingly, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be a substitute for net income as an indicator of operating performance or cash flows from operating activities as a ~~purchase price~~measure of ~~$17 million ("AllGo Purchase") including $2 million~~liquidity. Adjusted EBITDA has limitations as an analytical tool and is not intended to be a measure of ~~contingent consideration payable upon completion of~~cash flow available for management's discretionary use, as it does not consider certain ~~technology milestones, achieved~~cash requirements such as interest payments, tax payments and ~~paid on July 6, 2017.~~debt service requirements. In addition, the ~~purchase agreement includes contingent payments~~Company uses Adjusted EBITDA (i) as a factor in incentive compensation decisions, (ii) to evaluate the effectiveness of ~~$5 million if key employees remain employed through July 2019. The AllGo Purchase was a strategic acquisition to add greater scale and depth to~~ the Company's ~~infotainment software capabilities.~~

~~The AllGo Purchase was accounted for as a~~ business ~~combination, with~~strategies and (iii) the ~~purchase price allocation reflecting the final valuation results, is shown below (dollars in millions):~~

Assets Acquired: Liabilities Assumed:
Accounts receivable $ 1
Deferred tax liabilities $ 2
Intangible assets 7
Total liabilities assumed 2
Goodwill 11

Total assets acquired $ 19
Purchase price $ 17

Assets acquired and liabilities assumed were recorded at estimated fair values based on management's estimates, available information, and reasonable and supportable assumptions. Additionally, the Company utilized a third-partyCompany's credit agreements use measures similar to ~~assist~~Adjusted EBITDA to measure compliance with certain ~~estimates~~covenants.

The reconciliation of ~~fair values. Fair values for intangible assets were based on the~~net income approach including excess earnings and relief from royalty methods. These fair value measurements are classified within level 3 of the fair value hierarchy. The purchase price allocation resulted in goodwill of $11 million, whichattributable to Visteon to Adjusted EBITDA is not deductible for income tax purposes; however, purchase accounting requires the establishment of deferred tax liabilities on the fair value increments related primarily to intangible assets that will be recognized as ~~a future income tax benefit as the related assets are amortized.~~follows:



	Three Months Ended June 30						Six Months Ended June 30
	2019			2018			2019			2018
	(Dollars in Millions)
Net income attributable to Visteon Corporation	$	7		$	35		$	21		$	100
Depreciation and amortization	24			23			49			45
Non-cash, stock-based compensation expense	6			6			11			—
Provision for income taxes	8			12			3			33
Interest expense, net	2			2			4			4
Net income attributable to non-controlling interests	1			1			3			5
Restructuring expense	—			5			1			10
Loss (income) from discontinued operations, net of tax	—			1			—			(1		)
Equity in net income of non-consolidated affiliates	(3		)	(4		)	(6		)	(7		)
Other	1			—			1			(4		)
Adjusted EBITDA	$	46		$	81		$	87		$	185

~~The pro forma effects of the AllGo acquisitions does not materially impact the Company's reported results for any period presented, and as a result no pro forma financial statements are presented.~~

~~NOTE 4. Discontinued Operations~~

During 2014 and 2015, the Company divested the majority of its global Interiors business (the "Interiors Divestiture") and completed the sale of its Argentina and Brazil interiors operations on December 1, 2016. Separately, the Company completed the sale of the majority of its global Climate business (the "Climate Transaction") during 2015. As the operations subject to the Interiors Divestiture and Climate Transaction met conditions required to qualify for discontinued operations reporting, the results of operations for the

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Interiors and Climate businesses have been reclassified to income (loss) from discontinued operations, net of tax in the consolidated statements of comprehensive income for the three and nine month periods ended September 30, 2017 and 2016.

~~Discontinued operations are summarized as follows:~~

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
(Dollars in Millions)
Sales $ —
$ 14
$ —
$ 34
Cost of sales —
20
—
48
Gross margin —
(6 ) —
(14 )
Selling, general and administrative expenses

—
2
—
4
(Gain) loss on Climate Transaction —
—
(7 ) 2
Loss and impairment on Interiors Divestiture —
—
—
2
Other expense, net —
1
—
2
(Loss) income from discontinued operations before income taxes —
(9 ) 7
(24 )
Benefit for income taxes —
(16 ) (1 ) (9 )
Net income (loss) from discontinued operations, net of tax, attributable to Visteon $ —
$ 7
$ 8
$ (15 )

In connection with the Climate Transaction, the Company completed the repurchase of the electronics operations located in India during the first quarter of 2017 for $47 million, recognizing a $7 million gain on settlement of purchase commitment contingencies. The Company had previously consolidated the India operations based on the Company's controlling financial interest as a result of the repurchase obligation, operating control, and the obligation to fund losses or benefit from earnings.

During the nine months ended September 30, 2016, the Company recorded currency impacts of $8 million in connection with the Korean capital gains withholding tax recovered during the first quarter of 2016. During the third quarter of 2016, the Company recorded a $17 million income tax benefit to reflect change in estimates associated with the filing of the Company’s U.S. tax returns that resulted in a reduction in U.S. income tax related to the 2015 Climate Transaction.

NOTE ~~5. Non-Consolidated Affiliates~~4. Earnings Per Share

~~Non-Consolidated Affiliate Transaction~~s

Basic earnings per share is calculated by dividing net income attributable to Visteon by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted average number of common and Yangfeng Automotive Trim Systems Co. Ltd. ("YF") each own 50% of a joint venture under the name of Yanfeng Visteon Investment Co., Ltd. ("YFVIC"). In October 2014, YFVIC completed the purchase of YF’s 49% direct ownership in Yanfeng Visteon Automotive Electronics Co., Ltd ("YFVE") a consolidated joint venture of the Company. The purchase by YFVIC was financed through a shareholder loan from YFpotentially dilutive common shares outstanding. Performance based share units are considered contingently issuable shares, and external borrowings which were guaranteed by Visteon, of which $15 million is outstanding as of September 30, 2017. The guarantee contains standard non-payment provisions to cover the borrowers in event of non-payment of principal, accrued interest, and other fees, and the loan is expected to be fully paid by September 2019.

~~During the first quarter of 2017, the Company completed the sale of its 50% interest in an equity method investment for proceeds of $7 million, consistent with its carrying value.~~

During 2017 the Company disposed of its remaining cost method investments. In the first half of of 2017, the Company sold two cost method investments for proceeds of approximately $6 million and recorded a net pretax gain of $2 million. On July 11, 2017, the Company sold a cost method investment for proceeds of approximately $2 million and recorded a pretax gain of $2 million. The gain on sale of the cost method investments are included in the ~~Company's consolidated statements~~computation of ~~comprehensive income as "Other (income) expense, net" for the three and nine months ended September 30, 2017.~~

During the third quarter of 2016, the Company agreed to sell a 50% interest in an equity investment for approximately $7 million. The Company recorded a loss in the investment of $5 million during the three and nine months ended September 30, 2016 related to this transaction. Also in the third quarter 2016, the Company sold a cost method investment to a third party for proceeds of approximately $11 million. The Company recorded a pre-tax gain of $6 million during the three and nine months ended September 30, 2016 related to this transaction. The net $1 million gaindiluted earnings per share based on the ~~sale~~number of ~~non-consolidated affiliates is included in~~shares that would be issuable if the ~~Company's consolidated statements~~reporting date were the end of ~~comprehensive income as "Other (income) expense, net" for~~ the ~~three~~contingency period and ~~nine months ended September 30, 2016.~~

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~~Investments in Affiliates~~

if the result would be dilutive.

The ~~Company recorded equity in net income~~table below provides details underlying the calculations of ~~affiliates of $1 million for the three month period ended September 30, 2017. For the nine month periods ended September 30, 2017~~basic and ~~2016, the Company recorded net income of affiliates of $6 million and $3 million, respectively.~~

Investments in affiliates were $40 million and $45 million as of September 30, 2017 and December 31, 2016, respectively. As of December 31, 2016, investments in affiliates accounted for under the cost method and equity method totaled $5 million and $40 million, respectively.

~~Variable Interest Entities~~

The Company determines whether joint ventures in which it has invested are Variable Interest Entities (“VIE”) at the start of each new venture and when a reconsideration event has occurred. An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company determined that YFVIC, is a VIE. The Company holds a variable interest in YFVIC primarily related to its ownership interests and subordinated financial support. The Company and YF each own 50% of YFVIC and neither entity has the power to control the operations of YFVIC, therefore the Company is not the primary beneficiary of YFVIC and does not consolidate the joint venture.

~~A summary of the Company's investments in YFVIC is provided below.~~diluted earnings per share:



	Three Months Ended June 30					Six Months Ended June 30
	2019		2018			2019		2018
	(In Millions, Except Per Share Amounts)
Numerator:
Net income from continuing operations attributable to Visteon	$	7	$	36		$	21	$	99
Net income (loss) from discontinued operations attributable to Visteon	—		(1		)	—		1
Net income attributable to Visteon	$	7	$	35		$	21	$	100
Denominator:
Average common stock outstanding - basic	28.1		29.6			28.1		30.1
Dilutive effect of performance based share units and other	0.1		0.3			0.1		0.3
Diluted shares	28.2		29.9			28.2		30.4
Basic and Diluted Per Share Data:
Basic earnings (loss) per share attributable to Visteon:
Continuing operations	$	0.25	$	1.22		$	0.75	$	3.29
Discontinued operations	—		(0.03		)	—		0.03
	$	0.25	$	1.19		$	0.75	$	3.32
Diluted earnings (loss) per share attributable to Visteon:
Continuing operations	$	0.25	$	1.20		$	0.74	$	3.26
Discontinued operations	—		(0.03		)	—		0.03
	$	0.25	$	1.17		$	0.74	$	3.29

September 30 December 31
2017 2016
(Dollars in Millions)
Payables due to YFVIC $ 9
$ 14
Exposure to loss in YFVIC
Investment in YFVIC $ 27
$ 22
Receivables due from YFVIC 28
15
Subordinated loan receivable 22
22
Loan guarantee 15
22
Maximum exposure to loss in YFVIC $ 92
$ 81

NOTE 6.5. Restructuring Activities

Given the economically-sensitive and highly competitive nature of the automotive electronics industry, the Company continues to closely monitor current market factors and industry trends, taking action as necessary which may include restructuring actions. However, there can be no assurance that any such actions will be sufficient to fully offset the impact of adverse factors on the Company or its results of operations, financial position and cash flows.

Electronics

During the ~~three and nine~~first quarter of 2019, the Company approved a restructuring program impacting two European manufacturing facilities due to the end of life of certain product lines. During the six months ended ~~September~~June 30, ~~2017,~~2019, the Company recorded ~~$6 million and $10~~approximately $2 million of restructuring expenses related to this program approximately $1 million remains accrued as of June 30, 2019.

During the third quarter of 2018, the Company approved a restructuring program impacting engineering and administrative functions to optimize operations. The Company has recorded approximately $18 million of net restructuring expenses since inception and expects to incur up to $25 million under this program. As of ~~reversals, respectively.~~June 30, 2019, approximately $7 million remains accrued.

During the second quarter of 2018, the Company approved restructuring programs impacting employee severance and termination benefit expenses of legacy employees at a South America facility and employees at North America manufacturing facilities due to the wind-down of certain products. During the six months ended June 30, 2018, the Company recorded approximately $5 million of restructuring expense under these programs and approximately $3 million remains accrued as of June 30, 2019.

~~Electronics~~

During the fourth quarter of 2016, the Company ~~announced~~approved a restructuring program impacting engineering and administrative functions to further align the Company's ~~engineering and related administrative~~ footprint with its core product technologies and customers. ~~Through September~~During the three and six months ended June 30, ~~2017,~~2018, the Company ~~has~~ recorded approximately ~~$37~~less than $1 million and $5 million of restructuring expenses, ~~net of reversals,~~respectively under this ~~program, and expects to incur up to $45 million~~program. As of ~~restructuring costs associated with~~June 30, 2019, approximately 250 employees. During the three and nine months ended September 30, 2017, the Company has recorded approximately $6 million and $10 million, respectively, of restructuring expenses under this program, and $18$1 million remains accrued ~~as of September 30, 2017. The Company expects to record additional~~for the restructuring ~~costs related to this~~ program as ~~the underlying plan is finalized.~~

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periods ended September 30, 2016, the Company recorded $1 million and $13 million, respectively, of restructuring expenses under this program, associated with approximately 100 employees. As of September 30, 2017 the planit is considered substantially complete.

Other and Discontinued Operations

During the ~~three and nine months ended September 30, 2016,~~first half of 2018, the Company recorded $4approximately $1 million ~~and $11 million, respectively,~~ of restructuring ~~expenses,~~expense associated with a former European Interiors facility related to settlement of employee severance ~~and termination benefits, in connection with the~~ ~~wind-down of certain operations in South America. As of September 30, 2017, the plan is considered substantially complete.~~

litigation.

As of ~~September~~June 30, ~~2017,~~2019, the Company has retained approximately $6$2 million of restructuring reserves as part of the Interiors Divestiture associated with previously announced programs for the fundamental reorganization of operations at facilities in Brazil and France.

Restructuring Reserves

Restructuring reserve balances of ~~$26~~$14 million and ~~$40~~$23 million as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, are classified as "Other current liabilities" on the consolidated balance sheets. The Company anticipates that the activities associated with the current restructuring reserve balance will be substantially complete within one year. The Company’s consolidated restructuring reserves and related activity are summarized below, including amounts associated with discontinued operations.



	Electronics			Other and Discontinued Operations			Total
	(Dollars in Millions)
December 31, 2018	$	20		$	3		$	23
Expense	2			—			2
Utilization	(3		)	—			(3		)
Change in estimate	(1		)	(1		)	(2		)
Foreign currency	(1		)	—			(1		)
March 31, 2019	$	17		$	2		$	19
Expense	2			—			2
Utilization	(5		)	—			(5		)
Change in estimate	(2		)	—			(2		)
June 30, 2019	$	12		$	2		$	14

NOTE 6. Non-Consolidated Affiliates

Variable Interest Entities

Visteon and Yangfeng Automotive Trim Systems Co. Ltd. ("YF") each own 50% of a joint venture under the name of Yanfeng Visteon Investment Co., Ltd. ("YFVIC"). In October 2014, YFVIC completed the purchase of YF’s 49% direct ownership in Yanfeng Visteon Automotive Electronics Co., Ltd ("YFVE") a consolidated joint venture of the Company. The purchase by YFVIC was financed through a shareholder loan from YF and external borrowings which were guaranteed by Visteon. The guarantee contains standard non-payment provisions to cover the borrowers in event of non-payment of principal, accrued interest, and other fees, and the loan is expected to be fully paid by September 2019.

The Company determined that YFVIC is a VIE. The Company holds a variable interest in YFVIC primarily related to its ownership interests and subordinated financial support. The Company and YF each own 50% of YFVIC and neither entity has the power to

Electronics Other Total
(Dollars in Millions)
December 31, 2016 $ 31
$ 9
$ 40
   Expense 1
—
1
   Utilization (8 ) (1 ) (9 )
March 31, 2017 24
8
32
   Expense 6
—
6
   Utilization (6 ) (1 ) (7 )
   Reversals (2 ) (1 ) (3 )
   Foreign currency 2
—
2
June 30, 2017 24
6
30
   Expense 7
—
7
   Utilization (11 ) —
(11 )
   Reversals (1 ) —
(1 )
   Foreign currency 1
—
1
September 30, 2017 $ 20
$ 6
$ 26

control the operations of YFVIC; therefore, the Company is not the primary beneficiary of YFVIC and does not consolidate the joint venture.

A summary of the Company's investments in YFVIC is provided below:



	June 30		December 31
	2019		2018
	(Dollars in Millions)
Payables due to YFVIC	$	18	$	17
Exposure to loss in YFVIC:
Investment in YFVIC	$	44	$	38
Receivables due from YFVIC	35		36
Subordinated loan receivable from YFVIC	18		20
Loan guarantee of YFVIC debt	11		11
Maximum exposure to loss in YFVIC	$	108	$	105

NOTE 7. Inventories

Inventories, net consist of the following components:



	June 30		December 31
	2019		2018
	(Dollars in Millions)
Raw materials	$	121	$	124
Work-in-process	23		26
Finished products	43		34
	$	187	$	184

September 30 December 31
2017 2016
(Dollars in Millions)
Raw materials $ 109
$ 83
Work-in-process 33
34
Finished products 32
34
$ 174
$ 151

1112

~~Table of Contents~~

~~NOTE 8. Other Assets~~

~~Other current assets are comprised of the following components:~~

September 30 December 31
2017 2016
(Dollars in Millions)
Recoverable taxes $ 61
$ 60
Joint venture receivables 37
39
Prepaid assets and deposits 36
35
Notes receivable 28
18
Contractually reimbursable engineering costs 15
7
Foreign currency hedges 1
6
Other 3
5
$ 181
$ 170

The Company receives bank notes 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. The Company has entered into arrangements with financial institutions to sell certain bank notes, generally maturing within nine months. Notes are sold with recourse, but qualify as a sale as all rights to the notes have passed to the financial institution. The Company sold $11 million during the nine months ended September 30, 2017 to financial institutions, $5 million of which occurred in the third quarter and will mature within the first half of 2018. The collection of such bank notes are included in operating cash flows based on the substance of the underlying transactions, which are operating in nature.

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

September 30 December 31
2017 2016
(Dollars in Millions)
Deferred tax assets $ 49
$ 48
Recoverable taxes 36
34
Joint venture receivables 26
25
Contractually reimbursable engineering costs 19
11
Long term notes receivable 10
10
Other 14
18
$ 154
$ 146

~~In conjunction with the Interiors Divestiture, the Company entered into a three year term loan with the buyer for $10 million, which matures on December 1, 2019.~~

Current and non-current contractually reimbursable engineering costs of $15 million and $19 million, respectively, as of September 30, 2017 and $7 million and $11 million, respectively, as of December 31, 2016, are related to pre-production design and development costs incurred pursuant to long-term supply arrangements that are contractually guaranteed for reimbursement by customers. The Company expects to receive cash reimbursement payments of approximately $8 million during the remainder of 2017, $10 million in 2018, $9 million in 2019, $2 million in 2020 and $5 million in 2021.

~~Table of Contents~~

~~NOTE 9. Intangible Assets, net~~

~~Intangible assets, net as of September 30, 2017 and December 31, 2016, are comprised of the following:~~

September 30, 2017 December 31, 2016
Estimated Weighted Average Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
(Dollars in Millions)
Definite-Lived:
Developed technology 10 $ 41
$ 28
$ 13
$ 40
$ 25
$ 15
Customer related 9 85
31
54
83
25
58
Capitalized software development 3 6
—
6
4
—
4
Other 32 10
1
9
8
1
7
Subtotal 142
60
82
135
51
84
Indefinite-Lived:
Goodwill 46
—
46
45
—
45
Total $ 188
$ 60
$ 128
$ 180
$ 51
$ 129

The Company recorded approximately $3 million and $9 million of amortization expense related to definite-lived intangible assets for the three and nine months ended September 30, 2017. The Company currently estimates annual amortization expense to be $13 million for 2017, $14 million for 2018 and 2019, $11 million for 2020, and $9 million for 2021. Indefinite-lived intangible assets are not amortized but are tested for impairment at least annually, or earlier when events and circumstances indicate that it is more likely than not that such assets have been impaired. There were no indicators of potential impairment during the nine months ended September 30, 2017.

During the three months ended September 30, 2017, the Company contributed $2 million to a non-profit corporation who is building a state of the art research and development facility. The contribution provides the Company certain rights regarding access to the facility for three years. The Company will use the facility for autonomous driving research and development activities for multiple products and therefore capitalized the contribution as an intangible asset. The Company expects to make a second contribution of $2 million during the first half of 2018 when the facility is substantially complete. The asset will be amortized over a 36 month period on a straight-line basis beginning in January 2018 when the term of the arrangement begins.

The Company capitalizes software development costs after the software product development reaches technological feasibility and until the software product becomes releasable to customers. During the nine months ended September 30, 2017, the Company capitalized $2 million related to software development cost intended for external use. The capitalized software development costs are amortized over the useful life of the technology on a straight-line basis.

~~A roll-forward of the carrying amounts of intangible assets is presented below:~~

Definite-lived intangibles Indefinite-lived intangibles
Developed Technology Customer Related Capitalized Software Development Other Goodwill Total
(Dollars in Millions)
December 31, 2016 $ 15
$ 58
$ 4
$ 7
$ 45
$ 129
Additions —
—
2
2
—
4
Foreign currency 1
2
—
—
1
4
Amortization (3 ) (6 ) —
—
—
(9 )
September 30, 2017 $ 13
$ 54
$ 6
$ 9
$ 46
$ 128

~~Table of Contents~~

NOTE ~~10.~~8. Intangible Assets, net

Intangible assets, net are comprised of the following:



		June 30, 2019
	Estimated Weighted Average Useful Life (years)	Gross Intangibles		Accumulated Amortization			Net Intangibles
		(Dollars in Millions)
Definite-Lived:
Developed technology	8	$	40	$	(33	)	$	7
Customer related	10	90		(46		)	44
Capitalized software development	4	21		(4		)	17
Other	21	14		(3		)	11
Subtotal		165		(86		)	79
Indefinite-Lived:
Goodwill		47		—			47
Total		$	212	$	(86	)	$	126

A roll-forward of the carrying amounts of intangible assets is presented below:



	December 31, 2018							June 30, 2019
	Gross Intangibles		Accumulated Amortization			Net Intangibles		Additions		Amortization Expense			Net Intangibles
	(Dollars in Millions)
Definite-Lived:
Developed technology	$	40	$	(31	)	$	9	$	—	$	(2	)	$	7
Customer related	90		(42		)	48		—		(4		)	$	44
Capitalized software development	16		(3		)	13		5		(1		)	$	17
Other	14		(2		)	12		—		(1		)	$	11
Subtotal	160		(78		)	82		5		(8		)	$	79
Indefinite-Lived:
Goodwill	47		—			47		—		—			$	47
Total	$	207	$	(78	)	$	129	$	5	$	(8	)	$	126

During the three and six months ended June 30, 2019 and 2018 the Company recorded approximately $4 million and $8 million, and $3 million and $7 million of amortization expense related to definite-lived intangible assets, respectively. The Company currently estimates annual amortization expense to be $18 million for 2019, $16 million for 2020, $11 million for 2021, $11 million for 2022, and $8 million for 2023. Indefinite-lived intangible assets are not amortized but are tested for impairment at least annually, or earlier when events and circumstances indicate that it is more likely than not that such assets have been impaired. There were no indicators of impairment during the six months ended June 30, 2019.

NOTE 9. Other ~~Liabilities~~

Assets

Other current ~~liabilities~~assets are ~~summarized~~comprised of the following components:



	June 30		December 31
	2019		2018
	(Dollars in Millions)
Recoverable taxes	$	65	$	46
Contractually reimbursable engineering costs	41		40
Joint venture receivables	40		37
Prepaid assets and deposits	24		20
China bank notes	15		12
Other	5		4
	$	190	$	159

The Company sold $36 million and $14 million of China bank notes during the six months ended June 30, 2019 and 2018 respectively. As of June 30, 2019, $10 million remains outstanding and will mature by the end of the fourth quarter of 2019. The collection of such bank notes are included in operating cash flows based on the substance of the underlying transactions, which are operating in nature.

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



	June 30		December 31
	2019		2018
	(Dollars in Millions)
Deferred tax assets	$	59	$	45
Recoverable taxes	31		33
Contractually reimbursable engineering costs	25		29
Joint venture receivables	18		20
Other	24		16
	$	157	$	143

Current and non-current contractually reimbursable engineering costs are related to pre-production design and development costs incurred pursuant to long-term supply arrangements that are contractually guaranteed for reimbursement by customers. The Company expects to receive cash reimbursement payments of approximately $19 million during the remainder of 2019, $34 million in 2020, $9 million in 2021, $1 million in 2022 and $3 million in 2023 and beyond.

NOTE 10. Leases

The Company has operating leases primarily for corporate offices, technical and engineering centers, customer centers, vehicles and certain equipment. As of June 30, 2019 assets and related accumulated depreciation recorded under finance leasing arrangements were not material.

The Company elected the package of practical expedients permitted under the transition guidance within the new lease standard, which among other things, allows the Company to carryforward the historical lease classification. The Company elected to combine lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) with non-lease components (e.g., fixed common-area maintenance costs). The Company also elected to apply the practical expedient related to land easements, allowing the Company to carry forward its current accounting treatment for land easements on existing agreements.

Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to 30 years or more, leases may also include options to purchase the leased property or to terminate the leases. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Certain of the Company's lease agreements include rental payments adjusted periodically primarily for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company subleases

certain real estate to third parties, which primarily consists of operating leases related to the Company’s principal executive offices in Van Buren Township, Michigan.

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. As most of the Company's leases do not provide an implicit rate, the Company is applying its incremental borrowing rate based on corporate rates. The incremental borrowing rate is applied to the tranches of leases based on lease term, regardless of the asset class. For the three and six months ended June 30, 2019, the weighted average remaining lease term and discount rate were 7 years and 4.5%, respectively.

The components of lease expense is as follows:

September 30 December 31
2017 2016
(Dollars in Millions)
Product warranty and recall accruals $ 39
$ 43
Contribution payable 35
31
Restructuring reserves 26
40
Rent and royalties 23
23
Foreign currency hedges 22
7
Deferred income 14
14
Distribution payable 14
15
Dividends payable 12
5
Income taxes payable 11
22
Joint venture payables 10
22
Non-income taxes payable 3
8
Electronics operations repurchase commitment —
50
Other 26
29
$ 235
$ 309



	Three Months Ended June 30			Six Months Ended June 30
	2019
	(Dollars in Millions)
Operating lease cost (includes immaterial variable lease costs)	$	(11	)	$	(21	)
Short-term lease cost	—			(1		)
Sublease income	1			2
Total lease cost	$	(10	)	$	(20	)

On December 1, 2015, Visteon completed the sale and transfer of its equity ownership in Visteon Deutschland GmbH, which operated the Berlin, Germany interiors plant ("Germany Interiors Divestiture"). The Company contributed cash, of approximately $141 million, assets of $27 million, and liabilities of $198 million including pension related liabilities. The Company will make a final contribution payment of approximately $35 million anticipated during 2017 upon fulfillment of buyer contractual commitments.

On January 22, 2016 the Company paid to shareholders a special distribution of $1.74 billion, an additional $14 million will be paid over a two-year period upon vesting and settlement of restricted stock units and performance-based share units previously granted to the Company's employees. The special cash distribution was funded from the Climate Transaction proceeds.

Following the initial sale as part of the Climate Transaction, the Company repurchased an Electronics operation located in India on March 27, 2017 as further described in Note 4, "Discontinued Operations."

Other ~~non-current liabilities are summarized~~information related to leases is as follows:

September 30 December 31
2017 2016
(Dollars in Millions)
Deferred income $ 16
$ 18
Product warranty and recall accruals 12
12
Income tax reserves 11
14
Non-income tax reserves 8
10
Other 15
15
$ 62
$ 69



	Six Months Ended June 30
	2019
	(Dollars in Millions)
Cash flows from operating leases	$	19
Right-of-use assets obtained in exchange for lease obligations	$	19

Future minimum lease payments under non-cancellable leases is as follows:



(Dollars in Millions)
2019 (excluding the six months ended June 30, 2019)	$	13
2020	33
2021	26
2022	24
2023	22
2024 and thereafter	71
Total future minimum lease payments	189
Less imputed interest	21
Total lease liabilities	$	168

~~Table of Contents~~

NOTE 11. Debt

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



	June 30		December 31
	2019		2018
	(Dollars in Millions)
Short-Term Debt:
Short-term borrowings	$	54	$	57

Long-Term Debt:
Term debt facility	$	348	$	348

September 30 December 31
2017 2016
(Dollars in Millions)
Short-Term Debt:
Current portion of long-term debt $ 1
$ 3
Short-term borrowings 43
33
$ 44
$ 36
Long-Term Debt:
Term debt facility $ 347
$ 346

Short-Term Debt

Short-term borrowings are primarily related to the Company's non-U.S. ~~consolidated~~ joint ventures and are payable ~~primarily~~ in ~~U.S. Dollars,~~ Chinese Renminbi and India Rupee, or Russian Ruble. The Company had short-term borrowings of $43 million and $33 million as of September 30, 2017 and December 31, 2016, respectively. Short-term borrowings increased in the third quarter of 2017 primarily due to changes in working capital needs.

Rupee. Available borrowings on outstanding affiliate credit facilities as of ~~September~~June 30, ~~2017~~2019, are approximately ~~$24~~$74 million and certain of these facilities have pledged assets as security.

Long-Term Debt

As of December 31, ~~2016,~~2018, the Company had an amended credit agreement (the ~~“Credit Agreement”~~"Credit Agreement") which included a $350 million Term Facility maturing ~~April 9, 2021~~March 24, 2024 and a Revolving Credit Facility with capacity of ~~$200~~$300 million maturing ~~April 9, 2019. Borrowings~~March 24, 2022.

The amended Credit Agreement interest shall accrue at a rate equal to the applicable annualized domestic rate plus an applicable margin of 0.75% or the LIBOR-based rate plus an applicable margin of 1.75% per annum. The Company is required to pay accrued interest on any outstanding principal balance under the ~~Term Facility accrued interest at~~credit facility with a frequency of the ~~greater~~lesser of ~~LIBOR or 0.75%, plus 2.75%, with an option by~~ the ~~Company to specify the~~elected LIBOR tenor ~~of either 1, 2, 3,~~ or 6every three months. Any outstanding principal under this facility will be due upon the maturity date. The Company may also terminate or reduce the borrowing commitments under this facility, in whole or in part, upon three business days’ notice.

Loans drawn under the Revolving Credit Facility ~~had~~accrue interest at an ~~interest~~annualized rate equal to LIBOR plus a margin ranging from ~~2.00%~~1.25% to ~~2.75%~~2.25% as specified by a ratings grid contained in the Credit Agreement. ~~As of December 31, 2016,~~Based on the Company’s current credit ratings, borrowings ~~under the Revolving Credit Facility~~ would accrue interest at LIBOR plus ~~2.50%. There were no outstanding borrowings at year-end.~~

On March 24, 2017, the Company entered into a second amendment to the Credit Agreement to, among other things, extend the maturity dates of both facilities by three years and increase the Revolving Credit Facility capacity to $300 million. The amended Revolving Credit Facility will mature on March 24, 2022 and the amended Term Facility will mature on March 24, 2024. The amendment reduced the LIBOR spread applicable to each of the Revolving Credit Facility and the Term Facility by 0.50% and reduced the LIBOR floor related to the Term Facility from 0.75% to 0.00%. The $350 million of borrowings under the amended Term Facility accrue interest at a rate of LIBOR plus 2.25%. In conjunction with the refinancing the Company received a credit rating upgrade from Standard & Poor's to BB from BB-. Pursuant to the ratings grid contained within the amended Revolving Credit Facility agreement, any borrowing thereunder shall accrue interest at LIBOR plus 1.75%~~. As of September 30, 2017, there were no outstanding borrowings under the amended Revolving Credit Facility.~~

per annum. The Revolving Credit Facility also provides $75 million availability for the issuance of letters of credit and a maximum of $20 million for swing line borrowing. Any amount of the facility utilized for letters of credit or swing line loans outstanding will reduce the amount available under the amended Revolving Credit Facility.

The Company may request increases in the limits under the amended Term Facility and the amended Revolving Credit Facility and may request the addition of one or more term loan facilities under the Credit Agreement. Outstanding borrowings may be prepaid without penalty (other than borrowings made for the purpose of reducing the effective interest rate margin or weighted average yield of the loans). There are mandatory prepayments of principal in connection with: (i) excess cash flow sweeps above certain leverage thresholds, (ii) certain asset sales or other dispositions, (iii) certain refinancing of indebtedness and (iv) over-advances under the Revolving Credit Facility. There are no excess cash flow sweeps required at the Company’s current leverage level.

The Credit Agreement requires the Company and its subsidiaries to comply with customary affirmative and negative covenants, and contains customary events of default. The Revolving Credit Facility also requires that the Company maintain a total net leverage ratio no greater than 3.00:1.00. During any period when the Company’s corporate and family ratings meet investment

~~Table of Contents~~

grade ratings, certain of the negative covenants ~~shall~~will be suspended. As of ~~September~~June 30, ~~2017,~~2019, the Company was in compliance with all its debt covenants.

All obligations under the Credit Agreement and obligations in respect of certain cash management services and swap agreements with the lenders and their affiliates are unconditionally guaranteed by certain of the Company’s subsidiaries. Under the terms of the Credit Agreement, all obligations under the Credit Agreement are secured by a first-priority perfected lien (subject to certain exceptions) on substantially all property of the Company and the subsidiaries party to the Security Agreement, subject to certain limitations.

In connection with ~~amending~~the second amendment both the Term Facility and Revolving Credit Facility during 2017, the Company recorded $1 million of interest expense and deferred $2 million of costs as a non-current asset. The deferred costs ~~will be~~are being amortized over the term of the debt facilities. As of ~~September~~June 30, ~~2017,~~2019, the amended Term Facility remains at $350 million of aggregate principal outstanding and there were no ~~outstanding~~ borrowings under the amended Revolving Credit Facility.

~~Other~~

~~On September 29, 2017 the~~

Other

The Company ~~amended certain terms of its~~has a $5 million letter of credit ~~facility. The amended agreement reduced the~~ facility, ~~amount from $15 million to $5 million and extended the expiration date by three years to September 30, 2020. Under the agreement~~whereby the Company is required to maintain a collateral account equal to 103% (110% for non-U.S. dollar denominated letters)of the aggregate stated amount of issued letters of credit ~~(or 110% for non-U.S. currencies)~~ and must reimburse any amounts drawn under issued letters of credit. The Company had $2 million of outstanding letters of credit issued under this facility secured by restricted cash, as of ~~September~~June 30, ~~2017.~~

2019. Additionally, the Company had ~~$18~~$14 million of locally issued letters of credit with less than $1 million of collateral as of ~~September~~June 30, ~~2017,~~2019, to support various tax appeals, customs arrangements and other obligations at its local affiliates.

NOTE 12. ~~Employee Benefit Plans~~Other Liabilities

~~Defined Benefit Plans~~

~~The Company's net periodic benefit costs for all defined benefit plans for the three month periods ended September 30, 2017 and 2016 were~~Other current liabilities are summarized as follows:



	June 30		December 31
	2019		2018
	(Dollars in Millions)
Product warranty and recall accruals	$	38	$	34
Rent and royalties	21		14
Deferred income	19		16
Joint venture payables	18		17
Non-income taxes payable	15		13
Restructuring reserves	14		23
Income taxes payable	9		15
Dividends payable to non-controlling interests	5		3
Other	22		26
	$	161	$	161

U.S. Plans Non-U.S. Plans
2017 2016 2017 2016
(Dollars in Millions)
Costs Recognized in Income:
Service cost $ —
$ —
$ 1
$ 1
Interest cost 7
7
2
3
Expected return on plan assets (10 ) (10 ) (2 ) (3 )
Net pension (income) expense $ (3 ) $ (3 ) $ 1
$ 1

~~The Company's net periodic benefit costs for all defined benefit plans for the nine month periods ended September 30, 2017 and 2016 were~~Other non-current liabilities are summarized as follows:



	June 30		December 31
	2019		2018
	(Dollars in Millions)
Derivative financial instruments	$	21	$	18
Product warranty and recall accruals	16		14
Deferred income	9		14
Income tax reserves	5		6
Non-income tax reserves	4		5
Other	17		19
	$	72	$	76

U.S. Plans Non-U.S. Plans
2017 2016 2017 2016
(Dollars in Millions)
Costs Recognized in Income:
Service cost $ —
$ —
$ 2
$ 2
Interest cost 21
21
7
9
Expected return on plan assets (30 ) (31 ) (7 ) (9 )
Settlements and curtailments —
—
—
1
Amortization of losses and other —
—
1
—
Net pension (income) expense $ (9 ) $ (10 ) $ 3
$ 3

~~Table of Contents~~

During the nine months ended September 30, 2017, cash contributions to the Company's defined benefit plans were less than a million for the U.S. plans and $5 million for the non-U.S. plans. The Company expects to make cash contributions to its defined benefit pension plans of $7 million in 2017.

On April 28, 2016, the Company purchased a non-participating annuity contract for all participants of the Canada non-represented plan. The annuity purchase covered 52 participants and resulted in the use of $5 million of plan assets for pension benefit obligation settlements of approximately $5 million. In connection with the annuity purchase, the Company recorded a settlement loss of approximately $1 million during the the three months ended September 30, 2016.

~~NOTE 13. Income Taxes~~

During the three and nine month periods ended September 30, 2017, the Company recorded a provision for income tax on continuing operations of $8 million and $34 million, respectively, which reflects income tax expense in countries where the Company is profitable; withholding taxes; changes in uncertain tax benefits; and the inability to record a tax benefit for pretax losses and/or recognize expense for pretax income in certain jurisdictions (including the U.S.) due to valuation allowances. Pretax losses from continuing operations in jurisdictions where valuation allowances are maintained and no income tax benefits are recognized totaled

~~$13 million and $38 million for the nine months ended September 30, 2017 and September 30, 2016, respectively, resulting in an increase in the Company's effective tax rate in those years.~~

During the nine month periods ended September 30, 2017 and 2016, the Company recognized expense primarily related to non-U.S. withholding taxes of $6 million and $3 million, respectively, reflecting the Company's forecasts which contemplate numerous financial and operational considerations that impact future repatriations.

The Company's provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against income before income taxes, excluding equity in net income of non-consolidated affiliates for the period. Effective tax rates vary from period to period as separate calculations are performed for those countries where the Company's operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are maintained. In determining the estimated annual effective tax rate, the Company analyzes various factors, including but not limited to, forecasts of projected annual earnings, taxing jurisdictions in which the pretax income and/or pretax losses will be generated and available tax planning strategies. The Company’s estimated annual effective tax rate is updated each quarter and may be significantly impacted by changes to the mix of forecasted earnings by tax jurisdiction. The tax impact of adjustments to the estimated annual effective tax rate are recorded in the period such estimates are revised. The Company is also required to record the tax impact of certain other non-recurring tax items, including changes in judgment about valuation allowances and uncertain tax positions, and changes in tax laws or rates, in the interim period in which they occur, rather than include them in the estimated annual effective tax rate.

~~Table of Contents~~

~~Unrecognized Tax Benefits~~

Gross unrecognized tax benefits as of September 30, 2017 and December 31, 2016, including amounts attributable to discontinued operations, were $17 million and $35 million, respectively. Of these amounts approximately $8 million and $12 million as of September 30, 2017 and December 31, 2016, respectively, represent the amount of unrecognized benefits that, if recognized, would impact the effective tax rate. The gross unrecognized tax benefit differs from that which would impact the effective tax rate due to uncertain tax positions embedded in other deferred tax attributes carrying a full valuation allowance. If the uncertainty is resolved while a full valuation allowance is maintained, these uncertain tax positions should not impact the effective tax rate in current or future periods. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense and related amounts accrued at September 30, 2017 and December 31, 2016 were $3 million and $4 million, respectively.

During the first quarter of 2017, the IRS completed the audit of the Company's U.S. tax returns for the 2012 and 2013 tax years. The closing of the audit did not have a material impact on the Company's effective tax rate due to the valuation allowances maintained against the Company's U.S. tax attributes resulting in a decrease in unrecognized tax benefits of $16 million. Also during the first quarter of 2017, the Company settled tax assessments from the Mexican tax authorities in the amount of $2 million related to certain transfer pricing-related issues. During the third quarter of 2017, the Company settled tax assessments in connection with the Company’s former operations in Spain and France in the amount of $1 million.

With few exceptions, the Company is no longer subject to U.S. federal tax examinations for years before 2014, or state, local or non-U.S. income tax examinations for years before 2003, although U.S. net operating losses carried forward into open tax years technically remain open to adjustment. During the second quarter of 2017, the IRS contacted the Company to begin the examination process of the Company’s U.S. tax returns for 2014 and 2015. Although it is not possible to predict the timing of the resolution of all ongoing tax audits with accuracy, it is reasonably possible that certain tax proceedings in Europe, Asia and Mexico could conclude within the next twelve months and result in a significant increase or decrease in the balance of gross unrecognized tax benefits. Given the number of years, jurisdictions and positions subject to examination, the Company is unable to estimate the full range of possible adjustments to the balance of unrecognized tax benefits. The long-term portion of uncertain income tax positions (including interest) in the amount of $11 million is included in Other non-current liabilities on the consolidated balance sheet.

~~A reconciliation of the beginning and ending amount of unrecognized tax benefits including amounts attributable to discontinued operations is as follows:~~

Nine Months Ended
September 30, 2017
(Dollars in Millions)
Beginning balance $ 35
Tax positions related to current period:
Additions 2
Tax positions related to prior periods:
Reductions (21 )
Effect of exchange rate changes 1
Ending balance $ 17

During 2012, Brazil tax authorities issued tax assessment notices to Visteon Sistemas Automotivos (“Sistemas”) related to the sale of its chassis business to a third party, which required a deposit in the amount of $15 million during 2013 necessary to open a judicial proceeding against the government in order to suspend the debt and allow Sistemas to operate regularly before the tax authorities after attempts to reopen an appeal of the administrative decision failed. Adjusted for currency impacts and accrued interest, the deposit amount is approximately $16 million, as of September 30, 2017. The Company believes that the risk of a negative outcome is remote once the matter is fully litigated at the highest judicial level. These appeal payments, as well as income tax refund claims associated with other jurisdictions, total $19 million as of September 30, 2017, and are included in "Other non-current assets" on the consolidated balance sheet.

~~Table of Contents~~

NOTE 13. Employee Benefit Plans

Defined Benefit Plans

The Company's net periodic benefit costs for all defined benefit plans for the three month periods ended June 30, 2019 and 2018 were as follows:



	U.S. Plans						Non-U.S. Plans
	2019			2018			2019			2018
	(Dollars in Millions)
Costs Recognized in Income:
Pension service cost:
Service cost	$	—		$	—		$	(1	)	$	(1	)
Pension financing benefit (cost):
Interest cost	(7		)	(7		)	(2		)	(2		)
Expected return on plan assets	10			10			3			3
Amortization of losses and other	—			—			(1		)	(1		)
Net pension benefit (cost)	$	3		$	3		$	(1	)	$	(1	)

The Company's net periodic benefit costs for all defined benefit plans for the six month periods ended June 30, 2019 and 2018 were as follows:



	U.S. Plans						Non-U.S. Plans
	2019			2018			2019			2018
	(Dollars in Millions)
Costs Recognized in Income:
Pension service cost:
Service cost	$	—		$	—		$	(1	)	$	(1	)
Pension financing benefit (cost):
Interest cost	(15		)	(14		)	(4		)	(4		)
Expected return on plan assets	20			20			5			5
Amortization of losses and other	—			—			(1		)	(1		)
Restructuring related pension cost:
Special termination benefits	—			(1		)	—			—
Net pension benefit (cost)	$	5		$	5		$	(1	)	$	(1	)

During the six months ended June 30, 2019, cash contributions to the Company's defined benefit plans were approximately less than $1 million for the U.S. plans and $3 million for the non-U.S. plans. The Company estimates that cash contributions to its defined benefit pension plans will be $7 million in 2019.

NOTE 14. Income Taxes

During the three and six month periods ended June 30, 2019, the Company recorded a provision for income tax on continuing operations of $8 million and $3 million, respectively, which reflects income tax expense in countries where the Company is profitable; accrued withholding taxes; ongoing assessments related to the recognition and measurement of uncertain tax benefits; the inability to record a tax benefit for pretax losses and/or recognize expense for pretax income in certain jurisdictions (including the U.S.) due to valuation allowances; and other non-recurring tax items, including changes in judgment about valuation allowances. Pretax losses from continuing operations in jurisdictions where valuation allowances are maintained and no income tax benefits are recognized totaled $33 million and $8 million for the six month periods ended June 30, 2019 and 2018, respectively, resulting in an increase in the Company's effective tax rate in those years.

The Company provides for U.S. and non-U.S. income taxes and non-U.S. withholding taxes on the projected future repatriations of the earnings from its non-U.S. operations that are not considered permanently reinvested at each tier of the legal entity structure. During the six month periods ended June 30, 2019 and 2018, the Company recognized expense primarily related to non-U.S. withholding taxes, including exchange impacts, of $3 million and $4 million, respectively, reflecting the Company's forecasts which contemplate numerous financial and operational considerations that impact future repatriations.

The Company's provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against income before income taxes, excluding equity in net income of non-consolidated affiliates for the period. Effective tax rates vary from period to period as separate calculations are performed for those countries where the Company's operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are maintained. In determining the estimated annual effective tax rate, the Company analyzes various factors, including but not limited to, forecasts of projected annual earnings, taxing jurisdictions in which the pretax income and/or pretax losses will be generated, available tax planning strategies and estimated impacts attributable to the Act. The Company’s estimated annual effective tax rate is updated each quarter and may be significantly impacted by changes to the mix of forecasted earnings by tax jurisdiction. The tax impact of adjustments to the estimated annual effective tax rate are recorded in the period such estimates are revised. The Company is also required to record the tax impact of certain other non-recurring tax items, including changes in judgment about valuation allowances and uncertain tax positions, and changes in tax laws or rates, in the interim period in which they occur, rather than include them in the estimated annual effective tax rate.

The need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will cause variability in the Company’s quarterly and annual effective tax rates. Full valuation allowances against deferred tax assets in the U.S. and applicable foreign countries will be maintained until sufficient positive evidence exists to reduce or eliminate them. The factors considered by management in its determination of the probability of the realization of the deferred tax assets include, but are not limited to, recent historical financial results, historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, tax planning strategies and projected future impacts attributable to the Act. If, based upon the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses, in particular, when there is a cumulative loss incurred over a three-year period. However, the three-year loss position is not solely determinative and, accordingly, management considers all other available positive and negative evidence in its analysis. In regards to the full valuation allowance recorded against the U.S. net deferred tax assets, despite recent improvement in the U.S. financial results, management concluded that the weight of negative evidence continues to outweigh the positive evidence, in part attributable to unfavorable volumes for the most recent period and overall relative uncertainty surrounding global production volumes in later years. Additionally, the Company has made a policy election to apply the incremental cash tax savings approach when analyzing the impact the Act's provisions for global intangible low-taxed income ("GILTI") could have on its U.S. valuation allowance assessment. As a result of future expected GILTI inclusions, and because of the Act’s ordering rules, U.S. companies may now expect to utilize tax attribute carryforwards (e.g. net operating losses and foreign tax credits) for which a valuation allowance has historically been recorded (this is referred to as the “tax law ordering approach”). However, due to the mechanics of the GILTI rules, companies that have a GILTI inclusion may realize a reduced (or no) cash tax savings from utilizing such tax attribute carryforwards (this view is referred to as the “incremental cash tax savings approach”). These positions, along with management’s analysis of all other available evidence, resulted in the conclusion that the Company maintain the valuation allowance against deferred tax assets in the U.S. Based on the Company’s current assessment, it is possible that within the next 6 to 18 months, the existing valuation allowance against the U.S. net deferred tax assets could be partially released. Any such release is dependent upon the sustained improvement in U.S. operating results, and, if such a release of the valuation allowance were to occur, it could have a significant impact on net income in the quarter in which it is deemed appropriate to partially release the reserve.

In March 2019, the closure of tax audits in Germany allowed the Company to initiate a tax planning strategy previously determined not to be prudent. This strategy provided the necessary positive evidence to support the future utilization of a portion of the Company's deferred tax assets in Germany resulting in a $12 million valuation allowance release during the three months ended March 31, 2019.

Unrecognized Tax Benefits

Gross unrecognized tax benefits as of June 30, 2019 and December 31, 2018, including amounts attributable to discontinued operations, were $10 million in both years. Of these amounts approximately $3 million and $4 million as of June 30, 2019 and December 31, 2018, respectively, represent the amount of unrecognized benefits that, if recognized, would impact the effective tax rate. The gross unrecognized tax benefit differs from that which would impact the effective tax rate due to uncertain tax positions embedded in other deferred tax attributes carrying a full valuation allowance. If the uncertainty is resolved while a full valuation allowance is maintained, these uncertain tax positions should not impact the effective tax rate in current or future periods. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense and related amounts accrued at June 30, 2019 and December 31, 2018 was $2 million in both years.

With few exceptions, the Company is no longer subject to U.S. federal tax examinations for years before 2014, or state, local or non-U.S. income tax examinations for years before 2003, although U.S. net operating losses carried forward into open tax years technically remain open to adjustment. Although it is not possible to predict the timing of the resolution of all ongoing tax audits with accuracy, it is reasonably possible that certain tax proceedings in the U.S., Europe, Asia and Mexico could conclude within the next twelve months and result in a significant increase or decrease in the balance of gross unrecognized tax benefits. Given the number of years, jurisdictions and positions subject to examination, the Company is unable to estimate the full range of possible adjustments to the balance of unrecognized tax benefits. The long-term portion of uncertain income tax positions (including interest) in the amount of $5 million is included in "Other non-current liabilities" on the consolidated balance sheet.

During 2012, Brazil tax authorities issued tax assessment notices to Visteon Sistemas Automotivos (“Sistemas”) related to the sale of its chassis business to a third party, which required a deposit in the amount of $15 million during 2013 necessary to open a judicial proceeding against the government in order to suspend the debt and allow Sistemas to operate regularly before the tax authorities after attempts to reopen an appeal of the administrative decision failed. Adjusted for currency impacts and accrued interest, the deposit amount is approximately $14 million, as of June 30, 2019. The Company believes that the risk of a negative outcome is remote once the matter is fully litigated at the highest judicial level. These appeal payments, as well as income tax refund claims associated with other jurisdictions, total $18 million as of June 30, 2019, and are included in "Other non-current assets" on the consolidated balance sheet.

NOTE 15. Stockholders’ Equity and Non-controlling Interests

~~Changes in equity for the three and nine months ended September 30, 2017 and 2016 are as follows:~~

2017 2016
Visteon NCI Total Visteon NCI Total
(Dollars in Millions)
Three Months Ended September 30
Beginning balance $ 569
$ 136
$ 705
$ 616
$ 148
$ 764
Net income from continuing operations 43
4
47
21
4
25
Net income from discontinued operations —
—
—
7
—
7
Net income 43
4
47
28
4
32
Other comprehensive income (loss)
    Foreign currency translation adjustments 17
2
19
7
—
7
    Net investment hedge (7 ) —
(7 ) (4 ) —
(4 )
    Benefit plans (1 ) —
(1 ) —
—
—
    Unrealized hedging gain 1
—
1
—
—
—
    Total other comprehensive income 10
2
12
3
—
3
Stock-based compensation, net 3
—
3
1
—
1
Share repurchase

(10 ) —
(10 ) —
—
—
Dividends to non-controlling interests —
(24 ) (24 ) —
(6 ) (6 )
Ending balance $ 615
$ 118
$ 733
$ 648
$ 146
$ 794

2017 2016
Visteon NCI Total Visteon NCI Total
(Dollars in Millions)
Nine Months Ended September 30
Beginning balance $ 586
$ 138
$ 724
$ 1,057
$ 142
$ 1,199
Net income from continuing operations 143
11
154
88
12
100
Net income (loss) from discontinued operations 8
—
8
(15 ) —
(15 )
Net income 151
11
162
73
12
85
Other comprehensive income (loss)
    Foreign currency translation adjustments 57
4
61
32
(2 ) 30
    Net investment hedge (20 ) —
(20 ) (6 ) —
(6 )
    Benefit plans (2 ) —
(2 ) 1
—
1
    Unrealized hedging gain (loss) 4
—
4
(4 ) —
(4 )
    Total other comprehensive income (loss) 39
4
43
23
(2 ) 21
Stock-based compensation, net 9
—
9
(5 ) —
(5 )
Share repurchase (170 ) —
(170 ) (500 ) —
(500 )
Dividends to non-controlling interests —
(35 ) (35 ) —
(6 ) (6 )
Ending balance $ 615
$ 118
$ 733
$ 648
$ 146
$ 794

Share Repurchase Program

During 2016, Visteon completed two stock buyback programs with a third-party financial institution to purchase shares of common stock for an aggregate purchase price of $500 million. Under these programs, Visteon purchased 7,190,506 shares at an average price of $69.48.

On January ~~10,~~9, 2017, the Company's ~~board~~Board of ~~directors~~Directors authorized $400 million of share ~~repurchase~~repurchases of common stock through March 2018. On January 15, 2018, the Company's Board of Directors authorized an additional $300 million of share repurchases, for a total authorization of $700 million, of its shares of common stock ~~through. On February 27, 2017~~through December 2020.

During 2018, the Company entered into ~~an accelerated share buyback ("ASB") program~~various programs with a third-party financial ~~institution~~institutions to purchase a total of approximately 2.8 million shares of Visteon common stock ~~for an aggregate purchase price of $125 million. On March 2, 2017, the Company received an initial delivery of 1,062,022 shares of common stock using a reference price of $94.16. The~~

~~Table of Contents~~

~~program was concluded in May 2017 and the Company received an additional 238,344 shares. In total, the Company purchased 1,300,366 shares~~ at an average price of ~~$96.13 under this ASB program.~~$106.92 for an aggregate purchase amount of $300 million.

During the ~~second quarter of 2017,~~six months ended June 30, 2019, the Company ~~entered into~~has purchased a ~~brokerage agreement with a third party financial institution to execute open market share purchases~~total of ~~the Company's~~322,120 shares of Visteon common ~~stock. The Company paid approximately $35 million to repurchase 359,100 shares~~stock at an average price of ~~$97.44.~~ $62.06 for an aggregate purchase amount of $20 million pursuant to various programs with third-party financial institutions.

As of June 30, 2019, the Company may execute up to $380 million additional share repurchases under the Board of Directors authorization which expires on December 31, 2020.

Stock-based Compensation

During the ~~third quarter~~six months ended June 30, 2018, equity increased $13 million due to the forfeiture of ~~2017,~~unvested shares for a litigation matter with the ~~Company paid approximately~~Company's former CEO as further described in Note 18, "Commitments and Contingencies," classified as a benefit of $10 million to ~~repurchase 82,513 shares on the open market at an average price of $121.25.~~ selling, general and administrative expenses and a $3 million benefit classified as discontinued operations.

The Company anticipates that additional repurchases of common stock, if any, would occur from time to time in open market transactions or in privately negotiated transactions depending on market and economic conditions, share price, trading volume, alternative uses of capital and other factors.

Non-Controlling Interests

~~Non-controlling~~The Company's non-controlling interests ~~in the Visteon Corporation economic entity~~ are as follows:


	September 30		December 31		June 30		December 31
	2017		2016		2019		2018
	(Dollars in Millions)				(Dollars in Millions)
Yanfeng Visteon Automotive Electronics Co., Ltd.	$	73	$	97	$	58	$	56
Shanghai Visteon Automotive Electronics, Co., Ltd.	43		39		41		43
Changchun Visteon FAWAY Electronics, Co., Ltd.					16		15
Other	2		2		1		3
	$	118	$	138	$	116	$	117

During the six months ended June 30, 2019, the Company paid less than a $1 million to purchase the remaining shares of a previous non-controlling interest.

~~Table of Contents~~

Accumulated Other Comprehensive ~~(Loss) Income~~Loss

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


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended June 30						Six Months Ended June 30
	2017			2016			2017			2016			2019			2018			2019			2018
	(Dollars in Millions)												(Dollars in Millions)
Changes in AOCI:
Beginning balance	$	(204	)	$	(170	)	$	(233	)	$	(190	)	$	(212	)	$	(157	)	$	(216	)	$	(174	)
Other comprehensive income (loss) before reclassification, net of tax	8			2			34			24
Other comprehensive (loss) income before reclassification, net of tax													(1		)	(39		)	4			(22		)
Amounts reclassified from AOCI	2			1			5			(1		)	(2		)	1			(3		)	1
Ending balance	$	(194	)	$	(167	)	$	(194	)	$	(167	)	$	(215	)	$	(195	)	$	(215	)	$	(195	)
Changes in AOCI by Component:	Changes in AOCI by Component:												Changes in AOCI by Component:
Foreign currency translation adjustments
Beginning balance	$	(123	)	$	(134	)	$	(163	)	$	(159	)	$	(142	)	$	(80	)	$	(142	)	$	(100	)
Other comprehensive income before reclassification, net of tax (a)	17			7			57			32
Other comprehensive income (loss) before reclassification, net of tax (a)													2			(49		)	2			(29		)
Ending balance	(106		)	(127		)	(106		)	(127		)	(140		)	(129		)	(140		)	(129		)
Net investment hedge
Beginning balance	(3		)	2			10			4			1			(18		)	(5		)	(12)
Other comprehensive loss before reclassification, net of tax (a)	(7		)	(4		)	(20		)	(6		)
Other comprehensive (loss) income before reclassification, net of tax (a)													—			8			7			2
Amounts reclassified from AOCI													(2		)	—			(3		)	—
Ending balance	(10		)	(2)			(10		)	(2)			(1		)	(10)			(1		)	(10)
Benefit plans
Beginning balance	(76		)	(35)			(75		)	(36)			(71		)	(63		)	(71		)	(63		)
Other comprehensive income before reclassification, net of tax (a)	(1		)	—			(2		)	—
Amounts reclassified from AOCI	—			—			—			1
Other comprehensive income before reclassification, net of tax (b)													1			1			1			1
Amounts reclassified from AOCI (c)													—			1			—			1
Ending balance	(77		)	(35		)	(77		)	(35		)	(70		)	(61		)	(70		)	(61		)
Unrealized hedging (loss) gain
Unrealized hedging gain (loss)
Beginning balance	(2		)	(3		)	(5		)	1			—			4			2			1
Other comprehensive income (loss) before reclassification, net of tax (b)	(1		)	(1		)	(1		)	(2		)
Amounts reclassified from AOCI	2			1			5			(2		)
Other comprehensive (loss) income before reclassification, net of tax (c)													(4		)	1			(6		)	4
Ending balance	(1		)	(3		)	(1		)	(3		)	(4		)	5			(4		)	5
Total AOCI	$	(194	)	$	(167	)	$	(194	)	$	(167	)	$	(215	)	$	(195	)	$	(215	)	$	(195	)

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

(b) Net tax expense was less than $1 million related to benefit plans for the ~~nine month period ending September~~three and six months ended June 30, ~~2017. Income~~2019 and 2018.

(c) For the three and six months ended June 30, 2019, there were no income tax effects ~~are zero for all other periods due to the recording of the valuation allowance.~~

~~(b) Net tax expense of less than $1 million and $1 million are~~ related to unrealized hedging gain ~~for~~(loss) due to the ~~three and nine month periods ended September 30, 2017, respectively.~~valuation allowance. Net tax ~~benefits of $1 million and~~benefit was less than $1 million ~~are~~ related to unrealized hedging gain (loss) for the three ~~and nine month periods~~months ended ~~September~~June 30, ~~2016, respectively.~~2018. Net tax expense was less than $1 million related to unrealized hedging gain (loss) for the six months ended June 30, 2018.

~~NOTE 15. Earnings Per Share~~

~~Table of Contents~~

~~The table below provides details underlying the calculations of basic and diluted earnings (loss) per share:~~

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
(In Millions, Except Per Share Amounts)
Numerator:
Net income from continuing operations attributable to Visteon $ 43
$ 21
$ 143
$ 88
Income (loss) from discontinued operations, net of tax —
7
8
(15 )
Net income attributable to Visteon $ 43
$ 28
$ 151
$ 73
Denominator:
Average common stock outstanding - basic 31.2
34.0
31.8
35.6
Dilutive effect of performance based share units and other 0.6
0.4
0.5
0.4
Diluted shares 31.8
34.4
32.3
36.0

Basic and Diluted Per Share Data:
Basic earnings (loss) per share attributable to Visteon:
Continuing operations $ 1.38
$ 0.62
$ 4.50
$ 2.47
Discontinued operations —
0.21
0.25
(0.42 )
$ 1.38
$ 0.83
$ 4.75
$ 2.05
Diluted earnings (loss) per share attributable to Visteon:
Continuing operations $ 1.35
$ 0.61
$ 4.43
$ 2.44
Discontinued operations —
0.20
0.25
(0.41 )
$ 1.35
$ 0.81
$ 4.68
$ 2.03

NOTE 16. Fair Value Measurements and Financial Instruments

Fair Value Measurements

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

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

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

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

Items Measured at Fair Value on a ~~Nonrecurring~~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. During the third quarter there were no items measured at fair value on a nonrecurring basis.

~~Items Not Carried at Fair Value~~

The Company's fair value of debt was approximately $397 million and $389 million as of September 30, 2017 and December 31, 2016, respectively. Fair value estimates were based on the current rates offered to the Company for debt of the same remaining maturities. Accordingly, the Company's debt fair value disclosures are classified as Level 2, "Other Observable Inputs" in the fair value hierarchy.

~~Table of Contents~~

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

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

~~Items Measured at Fair Value on a Recurring Basis~~

~~Foreign currency hedge~~Hedge instruments are measured at fair value on a recurring basis under an income approach using industry-standard models that consider various assumptions, including time value, volatility factors, current market and contractual prices for the underlying and non-performance risk. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument ~~can be~~or may derived from observable ~~data, or are supported by observable levels at which transactions are executed in the marketplace.~~data. Accordingly, the Company's ~~foreign~~ currency instruments are classified as Level 2, "Other Observable Inputs" in the fair value hierarchy.

~~Interest rate swaps are valued~~The Company presents its derivative positions and any related material collateral under ~~an income approach using industry-standard models~~master netting arrangements that ~~consider various assumptions, including time value, volatility factors, current market and contractual prices~~provide for the ~~underlying and non-performance risk. Substantially all~~net settlement of contracts, by counterparty, in the event of default or termination. Derivative financial instruments are included in the Company’s consolidated balance sheets. There is no cash collateral on any of these assumptions are observable in the marketplace throughout the full term of the instrument, and can be derived from observable data or supported by observable levels at which transactions are executed in the marketplace. Accordingly, the Company's interest rate swaps are classified as Level 2, "Other Observable Inputs" in the fair value hierarchy.derivatives.

~~Foreign~~Currency Exchange ~~Risk:~~ The Company’s net cash inflows and outflows exposed to the risk of changes in foreign currency exchange rates arise from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, subsidiary dividends and investments in subsidiaries. Rate Instruments: The Company primarily uses ~~foreign currency derivative instruments, including~~ forward contracts denominated in Euro, Japanese Yen, Thai Baht and ~~option contracts,~~Mexican Peso intended to mitigate the variability ~~of the value~~ of cash flows denominated in currency other than the hedging entity's functional currency. Foreign currency exposures are reviewed periodically and any natural offsets are considered prior to entering into a derivative financial instrument. The Company’s current hedged foreign currency exposures include the Euro, Japanese Yen, Thailand Bhat and Mexican Peso.

As of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, the Company had foreign currency derivative instruments with aggregate notional value of approximately ~~$133~~$13 million and ~~$169~~$23 million, respectively. At September 30, 2017, approximately $89 million of the hedge instruments have been designated as cash flow hedges. Accordingly, the effective portion of changes in the fair value of the transactions are initially recognized in other comprehensive income, a component of shareholders' equity. Upon settlement of the transactions, the accumulated gains and losses are reclassified to income in the same periods during which the hedged cash flows impact earnings. The ineffective portion of changes in the fair value of the transactions, if any, is recognized directly in income. There was no ineffectiveness associated with such derivatives as of September 30, 2017 and December 31, 2016 and the fair value of these derivatives ~~was a liability~~is an asset of $3$1 million, as of June 30, 2019, and ~~a liability of $6 million, respectively.~~December 31, 2018. The difference between the gross and net value of these derivatives after offset by counter party is not material.

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

As of June 30, 2019 the Company had cross currency swaps with an aggregate notional value of $250 million and aggregate fair value of these derivatives is a liability of $12 million and $16 million recorded in other non-current liabilities, net at June 30, 2019, and December 31, 2018, respectively. The amount of accumulated other income expected to be reclassified into earnings within the next 12 months is ~~an approximate loss~~a gain of $1approximately $7 million.

~~During 2015, the~~Interest Rate Swaps: The Company ~~entered into cross currency swaps~~utilizes interest rate swap instruments to manage its exposure and to mitigate the ~~variability~~impact of the value of the Company's investment in certain non-U.S. entities. In April 2017, the Company terminated the cross currency swaps and received $5 million of proceeds upon settlement. There was no ineffectiveness associated with such derivatives at the time of the termination. The Company subsequently entered into new cross currency swap transactions with an aggregate notional amount of $150 million. The transactions are designated as net investment hedges of certain of the Company's European affiliates. Accordingly, the effective portion of periodic changes in the fair value of the transactions is recognized in other comprehensive income, a component of shareholders' equity. There was no ineffectiveness associated with such derivatives as of September 30, 2017 and December 31, 2016 and the fair value of these derivatives was a liability of $19 million and an asset of $6 million, respectively.

~~Interest Rate Risk:~~ ~~The Company is subject to~~ interest rate risk principally in relation to variable-rate debt. The Company uses financial derivative instruments to manage exposure to fluctuations in interest rates in connection with its risk management policies.

~~Table of Contents~~

During 2015, the Company entered into interest rate swaps to manage interest rate risk associated with the Term Facility. In April 2017 the Company terminated the interest rate swaps and paid $1 million to settle the contracts.

During the second quarter of 2017, the Company entered into interest rate swap contracts with an aggregate notional value of $150 million to effectively convert designated interest payments related to the amended Term Facility from variable to fixed cash flows. The maturities of these swaps do not exceed the underlying obligations under the amended Term Facility.variability. The instruments ~~have been~~are designated as cash flow hedges, ~~and~~accordingly, the effective portion of the periodic changes in ~~the~~ fair value ~~of the swap transactions~~ is recognized in accumulated other comprehensive income, a component of shareholders' equity. Subsequently, the accumulated gains and losses recorded in equity are reclassified to income in the period during which the hedged cash ~~transaction~~flow impacts earnings.

As of June 30, 2019 and December 31, 2018, the Company had an aggregate notional value of interest rate swap transactions of $250 million. The ~~ineffective portion of changes in the~~aggregate fair value of ~~the swap~~these derivative transactions ~~if any, is recognized directly in income. As~~as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016, the fair value~~2018 was ~~an asset~~a non-current liability of approximately $8 million and $2 million, respectively. As of June 30, 2019, a gain of less than $1 million ~~and a liability of $1 million, respectively and there has been no ineffectiveness associated with these derivatives. AOCI~~is expected to be reclassified out of accumulated other comprehensive income into earnings within the next 12 ~~months is a loss of less than $1 million.~~months.

Financial Statement Presentation

Gains and losses on derivative financial instruments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 are as follows:



	Recorded Income (Loss) into AOCI, net of tax						Reclassified from AOCI into Income (Loss)				Recorded in Income (Loss)
	2019			2018			2019		2018		2019		2018
	(Dollars in Millions)
Three months ended June 30, 2019
Foreign currency risk - Sales:
Cash flow hedges	$	—		$	(1	)	$	—	$	—	$	—	$	—
Non-designated cash flow hedges	—			—			—		—		—		(1		)
Foreign currency risk - Cost of sales:
Cash flow hedges	—			1			—		—		—		—
Non-designated cash flow hedges	—			—			—		—		—		1
Interest rate risk - Interest expense, net:
Interest rate swap	(4		)	1			—		—		—		—
Net investment hedges	—			8			2		—		—		—
	$	(4	)	$	9		$	2	$	—	$	—	$	—
Six months ended June 30, 2019
Foreign currency risk - Sales:
Cash flow hedges	$	—		$	—		$	—	$	—	$	—	$	—
Non-designated cash flow hedges	—			—			—		—		—		—
Foreign currency risk - Cost of sales:
Cash flow hedges	—			2			—		—		—		—
Non-designated cash flow hedges	—			—			—		—		—		1
Interest rate risk - Interest expense, net:
Interest rate swap	(6		)	2			—		—		—		—
Net investment hedges	7			2			3		—		—		—
	$	1		$	6		$	3	$	—	$	—	$	1

Recorded (Loss) Income into AOCI, net of tax Reclassified from AOCI into (Income) Loss Recorded in (Income) Loss
2017 2016 2017 2016 2017 2016
(Dollars in Millions)
Three Months Ended September 30
Foreign currency risk - Cost of sales:
Cash flow hedges $ (1 ) $ (3 ) $ 2
$ —
$ —
$ —
Net investment hedges (7 ) (1 ) —
—
—
—
Non-designated cash flow hedges —
—
—
—
1
(2 )
Interest rate risk - Interest expense, net:
Interest rate swap —
2
—
1
—
—
$ (8 ) $ (2 ) $ 2
$ 1
$ 1
$ (2 )
Nine Months Ended September 30
Foreign currency risk - Cost of sales:
Cash flow hedges $ (1 ) $ —
$ 5
$ (3 ) $ —
$ —
Net investment hedges (20 ) (3 ) —
—
—
—
Non-designated cash flow hedges —
—
—
—
(2 ) (3 )
Interest rate risk - Interest expense, net:
Interest rate swap —
(2 ) 1
1
—
—
$ (21 ) $ (5 ) $ 6
$ (2 ) $ (2 ) $ (3 )
Items Not Carried at Fair Value

The Company's fair value of debt was approximately $393 million and $388 million as of June 30, 2019 and December 31, 2018, respectively. Fair value estimates were based on the current rates offered to the Company for debt of the same remaining maturities. Accordingly, the Company's debt fair value disclosures are classified as Level 2, "Other Observable Inputs" in the fair value hierarchy.

Concentrations of Credit Risk

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

amongst its multiple counterparties.

The Company's credit risk with any ~~individual~~single customer does not exceed ten percent of total accounts receivable except for Ford and its affiliates which represent 14% and 14%, and Renault/Nissan which represents ~~17%~~14% and ~~16%~~11%, of the balance as of ~~September~~June 30, ~~2017~~2019 and December 31, 2016, respectively, Mazda which represents 11% and 10% of the balance as of September 30, 2017 and December 31, 2016, and Nissan/Renault which represents 11% and 10% of the balance as of September 30, 2017 and December 31, 2016,2018, respectively.

~~Table of Contents~~

NOTE 17. ~~Commitments and Contingencies~~

~~Litigation and Claims~~

In 2003, the Local Development Finance Authority of the Charter Township of Van Buren, Michigan (the “Township”) issued, approximately $28 million in bonds finally maturing in 2032, the proceeds of which were used at least in part to assist in the development of the Company’s U.S. headquarters located in the Township. During January 2010, the Company and the Township entered into a settlement agreement (the “Settlement Agreement”) that, among other things, reduced the taxable value of the headquarters property to current market value and facilitated certain claims of the Township in the Company’s chapter 11 proceedings. The Settlement Agreement also provided that the Company would continue to negotiate in good faith with the Township in the event that property tax payments was inadequate to permit the Township to meet its payment obligations with respect to the bonds. In September 2013, the Township notified the Company in writing that it is estimating a shortfall in tax revenues of between $25 million and $36 million, which could render it unable to satisfy its payment obligations under the bonds. On May 12, 2015, the Township commenced a proceeding against the Company in the U. S. Bankruptcy Court for the District of Delaware in connection with the foregoing. Upon the Company’s motion to dismiss, the Township dismissed the proceeding before the Delaware Bankruptcy Court and re-commenced the proceeding against the Company in the Michigan Wayne County Circuit Court for the State of Michigan on July 2, 2015. The Township sought damages or, alternatively, declaratory judgment that, among other things, the Company is responsible under the Settlement Agreement for payment of any shortfall in the bond debt service payments. On February 2, 2016, the Wayne County Circuit Court dismissed the Township’s lawsuit without prejudice on the basis that the Township’s claims were not ripe for adjudication. The Township appealed the decision to the Michigan Court of Appeals, which affirmed the dismissal of the Township’s lawsuit. The Township has sought leave to appeal from the Michigan Supreme Court. The Company disputes the factual and legal assertions made by the Township and intends to vigorously defend the matter. The Company is not able to estimate the possible loss or range of loss in connection with this matter.

Discontinued Operations

The Company ~~is currently involved~~completed the sale of the majority of its global Climate business (the "Climate Transaction") during 2015 and completed the divestiture of its global Interiors business in ~~disputes~~2016 (the "Interiors Divestiture"). These transactions met the conditions required to qualify for discontinued operations reporting and accordingly the settlement of retained contingencies have been classified in income from discontinued operations, net of tax, in the consolidated statements of comprehensive income for the three and six months ended June 30, 2019 and 2018.

Discontinued operations are summarized as follows:



	Three Months Ended June 30					Six Months Ended June 30
	2019		2018			2019			2018
	(Dollars in Millions)
Cost of sales	$	—	$	—		$	(1	)	$	—
Selling, general and administrative expenses	—		(1		)	—			(1		)
Restructuring, net	—		—			1			(1		)
Gain on divestitures	—		—			—			3
Income (loss) from discontinued operations, net of tax	$	—	$	(1	)	$	—		$	1

During the first six months of 2018, the Company recognized a $3 million benefit on settlement of litigation matters with its former ~~President~~CEO as further described in Note 18, "Commitments and Chief Executive Officer, Timothy D. Leuliette. Mr. Leuliette filed an arbitration demand against the Company with the American Arbitration Association, alleging claims relating to the cessation of his employment. The Company subsequently filed a complaint against Mr. Leuliette in the U.S. District Court for the Eastern District of Michigan, seeking to enjoin the arbitration and asserting additional claims. The federal litigation is currently stayed pending a ruling in the arbitration. The Company disputes the factual and legal assertions made by Mr. Leuliette, has asserted counterclaims against him in the arbitration, and, although there can be no assurances, the Company does not currently believe that the resolution of these disputes will have a material adverse impact on its results of operations or financial condition.

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

The Company's operations in Brazil and Argentina are subject to highly complex labor, tax, customs and other laws. While the Company believes that it is in compliance with such laws, it is periodically engaged in litigation regarding the application of these laws. As of September 30, 2017, the Company maintained accruals of approximately $12 million and $4 million for claims aggregating approximately $57 million and $5 million in Brazil and Argentina, respectively. The amounts accrued represent claims that are deemed probable of loss and are reasonably estimable based on the Company's assessment of the claims and prior experience with similar matters.

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

~~Table of Contents~~

~~Guarantees and Commitments~~

The Company provided a $15 million loan guarantee to YFVIC. The guarantee contains standard non-payment provisions to cover the borrowers in event of non-payment of principal, accrued interest, and other fees, and the loan is expected to be fully paid by September 2019.

As part of the agreements of the Climate Transaction and Interiors Divestiture, the Company continues to provide lease guarantees to divested Climate and Interiors entities. At September 30, 2017 the Company has approximately $7 million of outstanding guarantees, related to each of the divested Climate and Interiors entities, respectively, totaling $14 million. These guarantees will generally cease upon expiration of current lease agreements.

~~Product Warranty and Recall~~

Amounts accrued for product warranty and recall claims are based on management’s best estimates of the amounts that will ultimately be required to settle such items. The Company’s estimates for product warranty and recall obligations are developed with support from its sales, engineering, quality and legal functions and include due consideration of contractual arrangements, past experience, current claims and related information, production changes, industry and regulatory developments and various other considerations. The following table provides a reconciliation of changes in the product warranty and recall claims liability:

Nine Months Ended September 30
2017 2016
(Dollars in Millions)
Beginning balance $ 55
$ 38
Accruals for products shipped 15
12
Changes in estimates 5
4
Specific cause actions 3
7
Recoverable warranty/recalls —
6
Foreign currency 2
1
Settlements (29 ) (13 )
Ending balance $ 51
$ 55

~~Other Contingent Matters~~

The Company is actively negotiating the possible exit of a European facility that would involve contributing cash, inventory, and fixed assets to a third party. The potential transaction is subject to governmental and legal approvals. While the terms have yet to be finalized, the potential contribution includes cash and working capital ranging from $15 million to $20 million and long term assets of approximately $10 million to $15 million. As of September 30, 2017, the Company did not meet the specific criteria necessary for the assets to be considered held for sale.

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

~~Table of Contents~~

~~from such matters would have a material effect on the Company’s financial condition, results of operations or cash flows, although such an outcome is possible.~~

Contingencies."

NOTE 18. ~~Segment Information~~Commitments and Contingencies

Litigation and Claims

~~Financial results for~~The dispute between the ~~Company's reportable segment have been prepared using~~Company and its former CEO was resolved in the first quarter of 2018. Pursuant to the resolution, the Company recognized $17 million of pre-tax income, representing the forfeiture of stock based awards and release of other liabilities accrued during prior periods. The benefit is classified as a ~~management approach, which is consistent~~reduction to selling, general and administrative expenses of $10 million, a benefit to "Other income, net" of $4 million, and a benefit to discontinued operations of $3 million during the six months ended June 30, 2018.

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

The Company's operations in Brazil are subject to highly complex labor, tax, customs and other laws. While the Company believes that it is in compliance with such laws, it is periodically engaged in litigation regarding the application of these laws. The Company maintained accruals of approximately $14 million for claims aggregating approximately $83 million in Brazil as of June 30, 2019. The amounts accrued represent claims that are deemed probable of loss and are reasonably estimable based on ~~net sales, before elimination~~the Company's assessment of ~~inter-company shipments, Adjusted EBITDA (a non-GAAP financial measure, as defined below)~~the claims and ~~operating assets.~~prior experience with similar matters.

The Company’s current reportable segment is Electronics. The Company's Electronics segment provides vehicle cockpit electronics products to customers, including audio systems, information displays, instrument clusters, head up displays, infotainment systems, and telematics solutions. Prior to 2017,While the Company ~~also had Other operations consisting primarily of South Africa~~believes its accruals for litigation and ~~South America climate operations substantially exited during~~claims are adequate, the ~~fourth quarter of 2016. As the Company ceased Other operations in 2016, future legacy impacts will be associated with~~final amounts required to resolve such matters could differ materially from recorded estimates and the Company's ~~continuing Electronics operations.~~results of operations and cash flows could be materially affected.

~~Segment Sales~~

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
(Dollars in Millions)
Electronics $ 765
$ 749
$ 2,349
$ 2,304
Other —
21
—
41
Total consolidated sales $ 765
$ 770
$ 2,349
$ 2,345

~~Segment Adjusted EBITDA~~

Guarantees and Commitments

The Company ~~defines Adjusted EBITDA as net income attributable~~has provided a $11 million loan guarantee to YFVIC. The guarantee contains standard non-payment provisions to cover the borrowers in event of non-payment of principal, accrued interest, and other fees, and the loan is expected to be fully paid by September 2019.

As part of the agreements of the Climate Transaction and Interiors Divestiture, the Company continues to provide lease guarantees to divested Climate and Interiors entities. As of June 30, 2019, the Company has approximately $5 million and $1 million of outstanding guarantees, related to the divested Climate and Interiors entities, respectively. These guarantees will generally cease upon expiration of current lease agreement which expire in 2026 and 2021 for the Climate and Interiors entities, respectively.

Product Warranty and Recall

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

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



	Six Months Ended June 30
	2019			2018
	(Dollars in Millions)
Beginning balance	$	48		$	49
Accruals for products shipped	10			9
Changes in estimates	1			(2		)
Specific cause actions	3			3
Recoverable warranty/recalls	—			2
Foreign currency	1			(1		)
Settlements	(9		)	(12		)
Ending balance	$	54		$	48

Other Contingent Matters

Contingencies are subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by the Company for matters discussed in the immediately foregoing paragraph where losses are deemed probable and reasonably estimable. It is possible, however, that some of the matters discussed in the foregoing paragraph could be decided unfavorably to the Company ~~adjusted~~and could require the Company to ~~eliminate the impact~~pay damages or make other expenditures in amounts, or a range of ~~depreciation~~amounts, that cannot be estimated as of June 30, 2019 and ~~amortization, restructuring expense, net interest expense, loss on debt extinguishment, equity~~that are in ~~net income~~excess of non-consolidated affiliates, loss on divestiture, gain on non-consolidated affiliate transactions, other net expense, provision for income taxes, discontinued operations, net income attributable to non-controlling interests, non-cash stock-based compensation expense, pension settlement gains, and other gains and losses not reflective of the Company's ongoing operations.

Adjusted EBITDA is presented as a supplemental measure of the Company's financial performance that management believes is useful to investors because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company's operating activities across reporting periods. Not all companies use identical calculations and, accordingly, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is not a recognized term under GAAP andestablished reserves. The Company does not ~~purport to be~~reasonably expect, except as otherwise described herein, based on its analysis, that any adverse outcome from such matters would have a ~~substitute for net income as an indicator~~material effect on the Company’s financial condition, results of ~~operating performance~~operations or cash flows, ~~from operating activities as a measure of liquidity. Adjusted EBITDA has limitations as~~although such an ~~analytical tool and~~outcome is not intended to be a measure of cash flow available for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. In addition, the Company uses Adjusted EBITDA (i) as a factor in incentive compensation decisions, (ii) to evaluate the effectiveness of the Company's business strategies and (iii) the Company's credit agreements use measures similar to Adjusted EBITDA to measure compliance with certain covenants.possible.

~~Segment Adjusted EBITDA is summarized below:~~

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
(Dollars in Millions)
Electronics $ 83
$ 75
$ 268
$ 248
Other —
—
—
(7 )
Adjusted EBITDA $ 83
$ 75
$ 268
$ 241

~~Table of Contents~~

~~The reconciliation of Adjusted EBITDA to net income attributable to Visteon is as follows:~~

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
(Dollars in Millions)
Adjusted EBITDA $ 83
$ 75
$ 268
$ 241
  Depreciation and amortization 21
21
62
62
  Restructuring expense 6
5
10
22
  Interest expense, net 3
5
12
10
  Equity in net income of non-consolidated affiliates (1 ) —
(6 ) (3 )
  Other (income) expense, net (1 ) 12
(3 ) 16
  Provision for income taxes 8
5
34
27
  (Income) loss from discontinued operations, net of tax —
(7 ) (8 ) 15
  Net income attributable to non-controlling interests 4
4
11
12
  Non-cash, stock-based compensation expense 3
2
9
6
  Other (3 ) —
(4 ) 1
Net income attributable to Visteon Corporation $ 43
$ 28
$ 151
$ 73

~~Table of Contents~~


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

Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations, financial condition and cash flows of Visteon Corporation (“Visteon” or the “Company”). MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2018 filed with the Securities and Exchange Commission on February ~~23, 2017,~~21, 2019, and the financial statements and accompanying notes to the financial statements included elsewhere herein.

Description of Business

Visteon Corporation (the "Company" or "Visteon") is a global ~~automotive supplier~~technology company that designs, engineers and manufactures innovative cockpit electronics ~~products~~and connected car solutions for ~~nearly every original equipment~~the world’s major vehicle ~~manufacturer ("OEM") worldwide~~manufacturers including Ford, Mazda, Renault/Nissan, General Motors, Volkswagen, Jaguar/Land Rover, Daimler, Honda ~~BMW~~ and ~~Daimler.~~BMW. Visteon is headquartered in Van Buren Township, Michigan, and has an international network of manufacturing operations, technical centers and joint venture operations, supported by approximately 10,000 employees, dedicated to the design, development, manufacture and support of its product offerings and its global customers. The Company's manufacturing and engineering footprint is principally located outside of the ~~United States.~~U.S., primarily in Mexico, Bulgaria, Portugal, Germany, India and China.

Visteon ~~provides value for its customers and stockholders through its technology-focused vehicle~~is driving the smart, learning, digital cockpit ~~electronics business, by delivering a rich, connected cockpit experience for every car from luxury to entry. The Company's cockpit electronics business is one~~ of the ~~broadest portfolios~~future, to improve safety and the user experience. Visteon is a global leader in ~~the industry and includes~~cockpit electronic products including digital instrument clusters, information displays, infotainment, ~~systems, audio systems,~~head-up displays, telematics, ~~solutions,~~SmartCore™ cockpit domain controllers, and ~~head up displays. The Company's vehicle cockpit electronics business comprises~~the DriveCore™ autonomous driving platform. Visteon also delivers artificial intelligence based technologies, connected car, cybersecurity, interior sensing, embedded multimedia and is reported under the Electronics segment. In addition to the Electronics segment, the Company had residual operations in South America and South Africa previously associated with the Climate business, sold or exited by December 31, 2016, but not subject to discontinued operations classification that comprised Other.smartphone connectivity software solutions.

Strategic ~~Initiatives~~Priorities

Visteon is a technology-focused, pure-play supplier of automotive cockpit electronics. The cockpit electronics business is growing faster than underlying vehicle production, expected to grow by more than 1.5 times over the next five years. The industry is shifting from analog to digital, towards device and ~~connected car solutions.~~ cloud connectivity, electric vehicles and advanced safety and autonomous.

The Company has laid out the following strategic ~~initiatives for 2017 and beyond:~~priorities:

•

Transformation of the Automotive Cockpit as a Smart Mobile Digital Assistant - The Company is an established global leader in cockpit electronics and is positioned to provide solutions as the industry transitions to the next generation automotive cockpit experience. The cockpit is becoming fully digital, connected, automated, learning, and voice enabled. Visteon's broad portfolio of cockpit electronics technology and the development of the DriveCore advanced safety platform positions Visteon to support these macro trends in automotive.


•	Long-Term Growth and Margin Expansion - Visteon has continued to win an increasing level of business by demonstrating product quality, technical and development capability, new product innovation, reliability and timeliness, product design and manufacturing capability and flexibility, as well as overall customer service.


•	Enhance Shareholder Returns - The Company has returned approximately $3.3 billion to shareholders since 2015 through a combination of share repurchases and a one-time special distribution of $1.75 billion in 2016. As of June 30, 2019 the Company’s Board of Directors has authorized the repurchase of an additional $380 million of the Company’s shares through December 31, 2020.

~~Strengthen the Core~~ - Visteon offers technology and related manufacturing operations for audio, head-up displays, information displays, infotainment, instrument clusters and telematics products. During the first nine months of 2017, the Company won $4.6 billion in new business, $0.5 billion higher than the first nine months of 2016. The third quarter 2017 new business wins includes the first award of Phoenix™ infotainment technology, designed to unlock innovation by enabling third-party developers to create apps easily, while delivering built-in cybersecurity and over-the-air ("OTA") updates. Earlier in the year, awards included the third and fourth awards of SmartCore™ cockpit technology which represents the industry-first automotive grade cockpit domain controller, consolidating separate cockpit electronics products on a single, multi-core chip, accessible through integrated human machine interface ("HMI") technology. The Company's backlog, defined as cumulative remaining life of program booked sales, is approximately $18.0 billion as of September 30, 2017, or 5.7 times the last twelve months of sales, reflecting a strong booked sales base on which to launch future growth.

Core business financial results continue to improve with Adjusted EBITDA margin for electronics of 10.8% in third quarter 2017 compared with 10.0% in the same period of 2016. The Company expects to deliver cost efficiencies by streamlining selling, general and administration costs and engineering costs, improving free cash flow, optimizing the capital structure and driving savings benefits as revenue grows.

During 2016, the Company initiated a restructuring of its engineering and administration organization to focus on technology and execution and also to align the engineering and administrative footprint with its core technologies and customers. The organization will be comprised of customer regional engineering, product management and advanced technologies, and global centers of competence.

~~Move Selectively to Adjacent Products~~ - As consumer demand continues to evolve with an increase in electronics content per vehicle, the Company is advancing its expertise in the areas of cockpit domain controllers, next generation safety applications, and vehicle cybersecurity. Each of these areas require careful assessments of shifting consumer needs and how these new products complement Visteon's core products.

~~Expand into Autonomous Driving~~ - The Company's approach to autonomous driving is to feature fail-safe centralized domain hardware, designed for algorithmic developers, and applying artificial intelligence for object detection and other functions.

~~Table of Contents~~

~~The Company is developing a secure autonomous driving domain controller platform with an open framework based on neural networks. The Company projects a launch of the technology in 2018.~~

During the third quarter of 2017, the Company entered into a contribution agreement with a non-profit corporation who is building a state of the art research and development facility for testing and validating connected and automated vehicles, the acceleration of standards, and the education of the workforce and public. The Company will use the future facility for the Company's autonomous driving research and development activities.

~~Accelerate China Business~~ - The Company plans to accelerate its China business as China’s economic environment offers significant growth opportunities in sales and new technology launches. Visteon will continue to leverage joint venture relationships to drive adoption of new offerings. Approximately 37% of the Company's $18 billion of backlog is expected to be manufactured in China and other countries in Asia.

~~Enhance Shareholder Returns~~ - On January 10, 2017, the Company's board of directors authorized management to purchase $400 million of Visteon common stock. On February 27, 2017, the Company entered into an accelerated share buyback ("ASB") program with a third-party financial institution to purchase shares of Visteon common stock for an aggregate purchase price of $125 million. Through conclusion of the program on May 8, 2017, the Company acquired 1,300,366 shares at an average price of $96.13 per share. In addition to the ASB program, the Company has purchased of 441,613 shares in the open market. Through the end of the third quarter, the Company has purchased 1,741,979 shares at an average price of $97.59 per share for a total of $170 million in share repurchases during 2017.

The Company anticipates that additional share repurchases, if any, would occur from time to time in open market transactions or in privately negotiated transactions depending on market and economic conditions, share price, trading volume, alternative uses of capital and other factors.

Executive Summary

The ~~Company's Electronics sales for the three months ended September 30, 2017 totaled $765 million, the~~ pie charts below highlight the sales breakdown for Visteon's Electronics segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

2019.

Three Months Ended ~~September~~June 30, ~~2017~~2019

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019

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

~~Table of Contents~~

~~Third~~Second quarter ~~2017~~2019 global light vehicle production ~~increased 2.1%~~decreased 7.5% over the same period last year. ~~Production increased~~Most regions have declined year over year ~~in all regions during~~with China showing an above average decrease of 16.2% from the ~~third~~same quarter ~~except for North America which was down (9.7%) as manufacturers cut production to reduce higher than optimal levels~~ of ~~unsold inventory.~~

2018.

Light vehicle production levels ~~for the three and nine months ended September 30, 2017 and 2016,~~ by geographic region for the six months ended June 30, 2019 and 2018 are provided below:


	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended June 30				Six Months Ended June 30
	2017	2016	Change		2017	2016	Change		2019	2018	Change		2019	2018	Change
	(Units in Millions)								(Units in Millions)
Global	22.4	22.0	2.1	%	69.8	68.0	2.6	%	22.3	24.1	(7.5	)%	45.2	48.4	(6.7	)%
Asia Pacific	11.9	11.5	3.5	%	36.0	34.7	3.6	%
China									5.6	6.7	(16.2	)%	11.7	13.5	(13.5	)%
Other Asia Pacific									5.5	5.5	0.1	%	11.1	11.2	(0.2	)%
Europe	5.0	4.8	5.2	%	16.5	16.1	2.4	%	5.6	6.0	(6.6	)%	11.2	11.9	(5.6	)%
North America	4.0	4.4	(9.7	)%	13.0	13.5	(3.7	)%
South America	0.9	0.7	26.1	%	2.4	2.0	20.9	%
Americas									5.1	5.2	(2.0	)%	10.2	10.4	(2.6	)%
Other	0.6	0.6	11.6	%	1.9	1.7	12.9	%	0.5	0.7	(32.4	)%	1.0	1.4	(31.6	)%
Source: IHS Automotive	Source: IHS Automotive								Source: IHS Automotive

Production volumes for key Visteon customers decreased in all regions in the first half of 2019 compared to prior year. In North America, production volumes decreased for key customers as a result of lower consumer demand for sedans and higher average selling prices of vehicles. In Europe, China, and Other Asia Pacific production volumes have decreased as a result of increased macroeconomic uncertainties and increased regulations. These market dynamics are expected to persist throughout the remainder of 2019.

Significant aspects of the Company's financial results during the three and ~~nine~~six months periods ended ~~September~~June 30, ~~2017~~2019 include the following:

The Company recorded sales of ~~$765~~$733 million and $1,470 million for the three ~~months~~and six month periods ended ~~September~~June 30, ~~2017,~~2019, representing a decrease of $5$25 million and $102 million when compared with the same ~~period~~periods of 2016. The decrease is attributable to the exit of other climate operations in 2016, representing a decrease of $21 million. Electronics sales increased by $16 million, primarily due to new business, favorable volumes, product mix, and currency, partially offset by customer pricing net of design changes.

The Company recorded sales of $2,349 million for the nine months ended September 30, 2017, representing an increase of $4 million when compared with the same period of 2016. The increase was primarily due to new business, favorable volumes, and product mix, partially offset by customer pricing net of design changes, unfavorable currency, and the exit of other climate operations in 2016.2018.

Gross margin was ~~$116~~$70 million or ~~15.2%~~9.5% of sales and $136 million or 9.3% of sales for the three ~~months~~and six month periods ended ~~September~~June 30, ~~2017, compared to $105~~2019, representing a decrease of $34 million or ~~13.6%~~4.2% of sales ~~for~~and $97 million or 5.5% of sales compared to the same period of 2016. The increase was primarily attributable to improved cost performance including higher engineering recoveries and favorable volumes and currency, partially offset by customer pricing and product mix.

Gross margin was $359 million or 15.3% of sales for the nine months ended September 30, 2017, compared to $335 million or 14.3% of sales for the same period of 2016. The increase was primarily attributable to the exit of the Company's other climate operations in 2016, favorable volumes, net new business and improved cost performance including higher engineering recoveries, partially offset by customer pricing, currency impacts, and product mix.2018.

Net income attributable to Visteon was ~~$43~~$7 million and $21 million for the three ~~months~~and six month periods ended ~~September~~June 30, ~~2017,~~2019, compared to net income of ~~$28~~$35 million and $100 million for the same ~~period~~periods of ~~2016. The increase~~2018.

As of $15 million includes improved gross margin of $11 million and the non-recurrence of charges associated with the 2016 South Africa climate disposition of $11 million. These increases were partially offset by an increase in the provision for income taxes of $3 million and the non-recurrence of 2016 discontinued operations net income of $7 million.

~~Net income attributable to Visteon was $151 million for the nine months ended September~~June 30, 2017, compared to net income of $73 million for the same period of 2016. The increase of $78 million includes higher net income due to the non-recurrence of 2016 losses from discontinued operations of $15 million, 2017 income from discontinued operations of $8 million, lower restructuring charges of $12 million, the non-recurrence of charges associated with the 2016 South Africa climate disposition of $11 million, lower selling, general and administrative expenses of $5 million, higher equity in net income of non-consolidated affiliates of $3 million and gains on the sale of non-consolidated affiliates of $3 million. Gross margin improved $24 million including $17 million for electronics operations and $7 million related to the 2016 exit of the climate operations. These improvements were partially offset by higher income taxes of $7 million.

Including discontinued operations, the Company generated $131 million of cash in operating activities during the nine months ended September 30, 2017, compared to cash provided by operations of $38 million during the same period of 2016 representing a $93 million improvement. The increase in operating cash flows is attributable to higher net income of $77 million and lower cash tax payments, net of expense of $67 million primarily due to the non-recurrence of

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transaction related taxes incurred in 2016, partially offset by higher warranty payments net of expense of $21 million, higher working capital use of approximately $10 million and an increase in China bank notes of $11 million.

~~Total~~2019, total cash was ~~$735~~$438 million, including $3 million of restricted cash, representing a $29 million decrease as ~~of September 30, 2017, $147 million lower than $882~~compared to $467 million as of December 31, ~~2016, primarily attributable to share repurchases of $170 million, $69~~2018.

The Company generated $61 million of ~~capital expenditures, and the repurchase of the India electronics operations sold in connection with the Climate Transaction of $47 million, partially offset by the change in~~ cash ~~provided by~~from operating activities during the six months ended June 30, 2019, compared to cash generated by operations of ~~$93~~$126 million ~~and $15~~during the same period of 2018, representing a $65 million ~~proceeds from business divestiture.~~decrease.

3228

~~Table~~

Results of ~~Contents~~

Operations - Three Months Ended June 30, 2019 and 2018

The Company's consolidated results of operations for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were as follows:



	Three Months Ended June 30
	2019			2018			Change
	(Dollars in Millions)
Sales	$	733		$	758		$	(25	)
Cost of sales	(663		)	(654		)	(9		)
Gross margin	70			104			(34		)
Selling, general and administrative expenses	(58		)	(55		)	(3		)
Restructuring expense	—			(5		)	5
Interest expense, net	(2		)	(2		)	—
Equity in net income of non-consolidated affiliates	3			4			(1		)
Other income, net	3			3			—
Provision for income taxes	(8		)	(12		)	4
Net income from continuing operations	8			37			(29		)
Income (loss) from discontinued operations	—			(1		)	1
Net income	8			36			(28		)
Net income attributable to non-controlling interests	(1		)	(1		)	—
Net income attributable to Visteon Corporation	$	7		$	35		$	(28	)
Adjusted EBITDA*	$	46		$	81		$	(35	)
* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.

Sales, Cost of Sales and Gross Margin

Three Months Ended September 30
2017 2016 Change
(Dollars in Millions)
Sales $ 765
$ 770
$ (5 )
Cost of sales 649
665
(16 )
Gross margin 116
105
11
Selling, general and administrative expenses 54
53
1
Restructuring expense 6
5
1
Interest expense, net 3
5
(2 )
Equity in net income of non-consolidated affiliates 1
—
1
Other (income) expense, net (1 ) 12
(13 )
Provision for income taxes 8
5
3
Net income from continuing operations 47
25
22
Income from discontinued operations —
7
(7 )
Net income 47
32
15
Net income attributable to non-controlling interests 4
4
—
Net income attributable to Visteon Corporation $ 43
$ 28
$ 15
Adjusted EBITDA* $ 83
$ 75
$ 8

* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.

~~Results of Operations - Three Months Ended September 30, 2017 and 2016~~

~~Prior to 2017, the Company also had Other operations consisting primarily of the South Africa and the South America climate operations exited during the fourth quarter of 2016.~~

~~Sales~~


	Electronics			Other			Total			Sales			Cost of Sales
	(Dollars in Millions)									(Dollars in Millions)
Three months ended September 30, 2016	$	749		$	21		$	770
Three months ended June 30, 2018										$	758		$	(654	)
Volume, mix, and net new business	26			—			26			(3		)	(13		)
Currency	9			—			9			(21		)	20
VFAE consolidation										14			(12		)
Customer pricing and other	(19		)	—			(19		)	(15		)	—
Exit and wind-down	—			(21		)	(21		)
Three months ended September 30, 2017	$	765		$	—		$	765
Engineering costs, net										—			(11		)
Net cost performance										—			7
Three months ended June 30, 2019										$	733		$	(663	)

Sales for the three months ended ~~September~~June 30, ~~2017~~2019 totaled ~~$765~~$733 million, which represents ana decrease of $5$25 million compared with the same period of ~~2016. Favorable~~2018. Unfavorable volumes and product mix, ~~and~~partially offset by net new business ~~increased~~and a software license, decreased sales by ~~$26~~$3 million. ~~Product mix reflects the Company specific content across product lines. Favorable~~Unfavorable currency ~~increased~~decreased sales by $9$21 million, primarily attributable to the Euro, Chinese Renminbi, Brazilian Real and Indian Rupee. ~~The exit of other climate operations in 2016 decreased sales by $21 million.~~ Other reductions, ~~were~~primarily associated with customer pricing, ~~net~~decreased sales by $15 million. The consolidation of ~~design savings.~~

~~Table~~a previously non-consolidated affiliate, Changchun Visteon FAWAY Auto Electronics Co., Ltd, ("VFAE"), during the third quarter of ~~Contents~~

~~Cost of Sales~~

Electronics Other Total
(Dollars in Millions)
Three months ended September 30, 2016 $ 644
$ 21
$ 665
Currency 7
—
7
Volume, mix, and net new business 30
—
30
Exit and wind-down —
(21 ) (21 )
Net cost performance (32 ) —
(32 )
Three months ended September 30, 2017 $ 649
$ —
$ 649

2018 increased sales $14 million.

Cost of sales ~~decreased $16~~increased by $9 million for the three months ended ~~September~~June 30, ~~2017 when~~2019 compared with the same period in ~~2016. Increased volumes,~~2018. Volumes, product mix, and net new business, increased cost of sales by ~~$30~~$13 million. Foreign currency ~~increased~~decreased cost of sales by $7$20 million primarily attributable to the Euro, Chinese Renminbi, Brazilian Real, Indian Rupee and ~~Brazilian Real. The exit and wind down~~Bulgarian Lev. Engineering costs, net increased cost of ~~other climate operations decreased costs by $21~~sales $11 million. Net ~~efficiencies,~~cost performance, including material, design and usage economics, ~~and higher engineering recoveries,~~ partially offset by ~~increased manufacturing expense,~~launch challenges associated with a curved center information display, decreased cost of sales by ~~$29~~$7 million. ~~Cost~~The consolidation of VFAE during the third quarter of 2018 increased cost of sales ~~also included a $3 million benefit related to legacy South America climate operations for freight recoveries and a favorable ruling on a litigation matter.~~$12 million.

~~Cost~~

A summary of ~~sales includes~~ net engineering costs ~~comprised of gross~~is shown below:



	Three Months Ended June 30
	2019			2018
	(Dollars in Millions)
Gross engineering costs	$	(113	)	$	(104	)
Engineering recoveries	26			25
Engineering costs, net	$	(87	)	$	(79	)

Gross engineering ~~expenses related~~costs relate to forward model program development and advanced engineering activities ~~partially offset by~~and exclude contractually reimbursable engineering ~~cost recoveries from customers. Electronics gross~~costs. Net engineering ~~expenses were $99 million~~costs, including the impacts of currency, for the three months ended ~~September~~June 30, ~~2017, consistent with the same period~~2019 of ~~2016. Engineering recoveries~~$87 million, were ~~$33 million for the three months ended September 30, 2017, $9~~$8 million higher than the same period of ~~2016. Engineering cost recoveries can fluctuate period~~2018, primarily related to ~~period depending on underlying contractual terms and conditions and achievement of related development milestones.~~costs to support the Company's new business wins.

~~Gross Margin~~



	Three Months Ended June 30
	2019					2018
	(Dollars in Millions)
				Percent of Sales					Percent of Sales
Sales	$	733				$	758
Cost of sales, excluding engineering costs	(576		)	78.6	%	(575		)	75.9	%
Engineering costs, net	(87		)	11.9	%	(79		)	10.4	%
Gross margin	$	70		9.5	%	$	104		13.7	%

Gross margin was ~~$116~~$70 million or ~~15.2%~~9.5% of sales for the three months ended ~~September~~June 30, ~~2017~~2019 compared to ~~$105~~$104 million or ~~13.6%~~13.7% of sales for the same period of ~~2016. The increase in~~2018. Gross margin was impacted by $16 million from unfavorable volumes and product mix, partially offset by a software license. Unfavorable currency of $1 million reflected the Euro, partially offset by the Brazilian Real, Indian Rupee and Bulgarian Lev. Higher net engineering costs, excluding currency, decreased gross margin ~~of $10 million included $9 million of favorable~~by $11 million. Gross margin was impacted by unfavorable net cost performance ~~reflecting material cost efficiencies and higher engineering recoveries~~of $8 million which ~~more than offset~~includes customer pricing reductions and ~~higher manufacturing costs. Favorable currency of $2 million reflected the impact of the Indian Rupee and Brazilian Real. Favorable volumes and net new business~~launch challenges associated with a curved center information display, which were partially offset by ~~product mix reducing~~material, design and usage economics. The consolidation of VFAE, during the third quarter of 2018 increased gross margin by $4$2 million. ~~The year-over-year change in gross margin also included a $3 million benefit related to legacy South America climate operations for freight recoveries and a favorable ruling on a litigation matter.~~

Selling, General and Administrative Expenses

Selling, general, and administrative expenses were ~~$54~~$58 million or ~~7.1%~~7.9% and ~~$53~~$55 million or ~~6.9%~~7.3% of sales, during the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The increase ~~is related to~~includes higher intangibles amortization, incentive compensation, ~~costs~~bad debt expense and ~~economics~~the consolidation of VFAE, partially offset by ~~cost efficiencies.~~

favorable currency.

Restructuring Expense

During the ~~fourth~~second quarter of ~~2016,~~2018, the Company ~~announced~~approved restructuring programs impacting employee severance and termination benefit expenses of legacy employees at a ~~restructuring program impacting~~South America facility and employees at North America manufacturing facilities due to the ~~engineering and administrative functions to further align the Company's engineering and related administrative footprint with its core product technologies and customers.~~wind-down of certain products. During the three months ended ~~September~~June 30, ~~2017, the Company recorded $6 million of restructuring expenses, net of reversals, under this program. Through September 30, 2017,~~2018, the Company recorded approximately ~~$37~~$5 million of restructuring expenses under this ~~program, and expects to incur up to $45 million of restructuring costs associated with approximately 250 employees.~~

During the three months ended September 30, 2016, the Company recorded $4 million of restructuring expenses primarily related to severance and termination benefits, in connection with the wind-down of certain operations in South America.

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program.

Interest Expense, Net

Interest expense, net, was ~~$3 million and $5~~$2 million for the three months ended ~~September~~June 30, ~~2017~~2019 and 2016, respectively. Interest expense for the three months ended September 30, 2017 includes termination impacts of the Company's interest rate swap as further described in Note 16, "Fair Value Measurements and Financial Instruments."2018.

Equity in Net Income of Non-Consolidated Affiliates

Equity in net income of non-consolidated affiliates was $1$3 million and $4 million for the three month ~~period~~periods ending ~~September~~June 30, ~~2017.~~

2019 and 2018, respectively, which is primarily attributable to the Company's equity interest in Yanfeng Visteon Investment Company.

Other ~~(Income) Expense,~~Income, Net

Other ~~(income) expense,~~income, net ~~consists~~ of ~~the following:~~

Three Months Ended
September 30
2017 2016
(Dollars in Millions)
Transformation initiatives $ 1
$ —
Gain on non-consolidated affiliate transactions, net (2 ) (1 )
Foreign currency translation charge —
11
Loss on asset contribution —
2
$ (1 ) $ 12

Transformation initiative costs include information technology separation costs, integration of acquired business, and financial and advisory services incurred in connection with the Company's transformation into a pure play cockpit electronics business. The gain on non-consolidated affiliate transactions, net are described in Note 5, "Non-Consolidated Affiliates."

~~The Company recorded an impairment charge of $11~~$3 million ~~during~~for the three months ended ~~September~~June 30, ~~2016, related~~2019 and 2018 is attributable to ~~foreign currency translation amounts recorded in accumulated~~pension financing benefits, net. Pension financing benefits, net include return on assets net of interest costs and other comprehensive loss associated with the agreement to sell the Company's South Africa climate operations. In connection with the closure of the Climate facility in Argentina, the Company entered an agreement to contribute land and building with a net book value of $2 million to the local municipality.amortization.

Income Taxes

The Company's provision for income taxes of $8 million for the three months ended ~~September~~June 30, ~~2017,~~2019, represents ~~an increase~~a decrease of $3$4 million, when compared ~~with $5~~to a provision for income taxes of $12 million in the same period of ~~2016.~~2018. The ~~increase~~decrease in tax expense is primarily attributable to the overall decrease in year-over-year earnings, including changes in the mix of earnings and differing tax rates between ~~jurisdictions. In this regard, during the three months ended September 30, 2016, the Company reflected favorable adjustments due to incorporating certain transfer pricing adjustments between the U.S.~~jurisdictions, and Japan consistent with the anticipated transfer pricing methodology expected to be agreed upon in connection with the pursuit of a bilateral advance pricing agreement (“APA”) with the U.S. and Japan tax authorities.

~~Discontinued Operations~~

withholding taxes.

Net Income

Net income attributable to Visteon was ~~$43~~$7 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to net income of ~~$28~~$35 million for the same period of ~~2016.~~2018. The ~~increase~~decrease of ~~$15~~$28 million ~~includes improved~~is primarily attributable to the decrease in gross margin ~~of $11 million~~including unfavorable volumes, customer pricing and ~~the non-recurrence of charges~~product mix, higher net engineering costs, and launch challenges associated with ~~the 2016 South Africa climate disposition of $11 million. These increases~~a curved center information display, which were partially offset by ~~an increase in the provision for income taxes of $3 million~~material, design and ~~the non-recurrence of 2016 discontinued operations net income of $7 million.~~

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usage economics and a software license, and increased selling, general, and administrative expenses.

Adjusted EBITDA

Adjusted EBITDA (a non-GAAP financial measure, as defined in Note ~~18)~~3, "Segment Information") was ~~$83~~$46 million for the three months ended ~~September~~June 30, ~~2017,~~2019, representing ~~an increase~~a decrease of $8$35 million when compared ~~with Adjusted~~to adjusted EBITDA of ~~$75~~$81 million for the same period of ~~2016. The increase includes favorable net cost performance of $10 million reflecting material cost efficiencies~~2018. Unfavorable volumes and ~~higher engineering recoveries which more than~~product mix, partially offset ~~customer pricing and higher manufacturing costs.~~by a software license, reduced adjusted EBITDA by $16 million. Foreign currency increased ~~Adjusted~~adjusted EBITDA by $2$1 million attributable to the Chinese Renminbi, Brazilian Real, Indian Rupee, and ~~Indian Rupee. Favorable volumes and net new business were~~Bulgarian Lev, partially offset by ~~product mix, reducing~~the Euro. Higher net engineering costs decreased adjusted EBITDA by $4$11 million.

Unfavorable net cost performance decreased adjusted EBITDA by $11 million reflecting customer pricing, and launch challenges associated with a curved center information display, which were partially offset by material, design and usage economics. The consolidation of VFAE, during the third quarter of 2018 increased adjusted EBITDA by $2 million.

The reconciliation of ~~Adjusted EBITDA to~~ net income attributable to Visteon to adjusted EBITDA for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, is as follows:


	Three Months Ended September 30									Three Months Ended June 30
	2017			2016			Change			2019			2018			Change
	(Dollars in Millions)									(Dollars in Millions)
Net income attributable to Visteon Corporation										$	7		$	35		$	(28	)
Depreciation and amortization										24			23			1
Provision for income taxes										8			12			(4		)
Non-cash, stock-based compensation expense										6			6			—
Interest expense, net										2			2			—
Net income attributable to non-controlling interests										1			1			—
Restructuring expense										—			5			(5		)
(Income) loss from discontinued operations, net of tax										—			1			(1		)
Equity in net income of non-consolidated affiliates										(3		)	(4		)	1
Other										1			—			1
Adjusted EBITDA	$	83		$	75		$	8		$	46		$	81		$	(35	)
Depreciation and amortization	21			21			—
Restructuring expense	6			5			1
Interest expense, net	3			5			(2		)
Equity income of non-consolidated affiliates	(1		)	—			(1		)
Other (income) expense, net	(1		)	12			(13		)
Provision for income taxes	8			5			3
Income from discontinued operations, net of tax	—			(7		)	7
Net income attributable to non-controlling interests	4			4			—
Non-cash, stock-based compensation	3			2			1
Other	(3		)	—			(3		)
Net income attributable to Visteon Corporation	$	43		$	28		$	15

Results of Operations - Six Months Ended June 30, 2019 and 2018

The Company's consolidated results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were as follows:



	Six Months Ended June 30
	2019			2018			Change
	(Dollars in Millions)
Sales	$	1,470		$	1,572		$	(102	)
Cost of sales	(1,334		)	(1,339		)	5
Gross margin	136			233			(97		)
Selling, general and administrative expenses	(115		)	(99		)	(16		)
Restructuring expense	(1		)	(10		)	9
Interest expense, net	(4		)	(4		)	—
Equity in net income of non-consolidated affiliates	6			7			(1		)
Other income, net	5			10			(5		)
Provision for income taxes	(3		)	(33		)	30
Net income from continuing operations	24			104			(80		)
Income from discontinued operations	—			1			(1		)
Net income	24			105			(81		)
Net income attributable to non-controlling interests	(3		)	(5		)	2
Net income attributable to Visteon Corporation	$	21		$	100		$	(79	)
Adjusted EBITDA*	$	87		$	185		$	(98	)

* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.

Sales, Cost of Sales and Gross Margin

Nine Months Ended September 30
2017 2016 Change
(Dollars in Millions)
Sales $ 2,349
$ 2,345
$ 4
Cost of sales 1,990
2,010
(20 )
Gross margin 359
335
24
Selling, general and administrative expenses 158
163
(5 )
Restructuring expense 10
22
(12 )
Interest expense, net 12
10
2
Equity in net income of non-consolidated affiliates 6
3
3
Other (income) expense, net (3 ) 16
(19 )
Provision for income taxes 34
27
7
Net income from continuing operations 154
100
54
Income (loss) from discontinued operations 8
(15 ) 23
Net income 162
85
77
Net income attributable to non-controlling interests 11
12
(1 )
Net income attributable to Visteon Corporation $ 151
$ 73
$ 78
Adjusted EBITDA* $ 268
$ 241
$ 27

* Adjusted EBITDA is a Non-GAAP financial measure, as further discussed below.

~~Table of Contents~~

~~Results of Operations - Nine Months Ended September 30, 2017 and 2016~~

~~Prior to 2017, the Company also had Other operations consisting of the South Africa and the South America climate operations exited during the fourth quarter of 2016.~~

~~Sales~~


	Electronics			Other			Total			Sales			Cost of Sales
	(Dollars in Millions)									(Dollars in Millions)
Nine months ended September 30, 2016	$	2,304		$	41		$	2,345
Six months ended June 30, 2018										$	1,572		$	(1,339	)
Volume, mix, and net new business	117			—			117			(53		)	6
Currency	(14		)	—			(14		)	(45		)	37
VFAE consolidation										26			(22		)
Customer pricing and other	(58		)	—			(58		)	(30		)	—
Exit and wind-down	—			(41		)	(41		)
Nine months ended September 30, 2017	$	2,349		$	—		$	2,349
Engineering costs, net										—			(32		)
Net cost performance										—			16
Six months ended June 30, 2019										$	1,470		$	(1,334	)

Sales for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 totaled ~~$2,349~~$1,470 million, which represents ~~an increase~~a decrease of $4$102 million compared with the same period of ~~2016. Favorable~~2018. Unfavorable currency decreased sales by $45 million, primarily attributable to the Euro, Chinese Renminbi, Brazilian Real, Indian Rupee and Japanese Yen. Unfavorable volumes, and product mix, ~~and~~partially offset by net new business ~~increased~~and a software license, decreased sales by ~~$117~~$53 million. Product mix reflects the Company specific content across product lines. Unfavorable currency decreased sales by $14 million, primarily attributable to the Chinese Renminbi and Euro partially offset by the Brazilian Real and Indian Rupee. The exit of other climate operations in 2016 decreased sales by $41 million. Other reductions, ~~were~~primarily associated with customer pricing, ~~net~~decreased sales by $30 million. The consolidation of ~~design savings.~~

~~Cost~~VFAE during the third quarter of ~~Sales~~

Electronics Other Total
(Dollars in Millions)
Nine months ended September 30, 2016 $ 1,962
$ 48
$ 2,010
Currency (12 ) —
(12 )
Volume, mix, and net new business 112
—
112
Exit and wind-down —
(48 ) (48 )
Net cost performance (72 ) —
(72 )
Nine months ended September 30, 2017 $ 1,990
$ —
$ 1,990

2018 increased sales $26 million.

Cost of sales decreased ~~$20~~by $5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 when compared with the same period in ~~2016. Increased volumes,~~2018. Volume and product mix, ~~and~~partially offset by net new business ~~increased~~decreased cost of sales ~~by $112~~$6 million. Foreign currency decreased cost of sales by ~~$12~~$37 million primarily attributable to the Euro, Chinese Renminbi, ~~Japanese Yen, and~~Indian Rupee, Brazilian Real, Mexican Peso ~~partially offset by the Euro, Brazilian Real,~~ and ~~Thai Bhat. The exit and wind down of other climate operations decreased~~Bulgarian Lev. Engineering costs, net increased cost of sales ~~by $48~~$32 million. Net ~~efficiencies,~~cost performance, including material, design and usage economics ~~and higher engineering recoveries,~~ partially offset by ~~higher manufacturing~~inefficiencies associated with a plant transfer in Mexico and ~~warranty costs,~~launch challenges associated with a curved center information display decreased cost of sales by ~~$68~~$16 million. ~~Cost~~The consolidation of VFAE during the third quarter of 2018 increased cost of sales ~~during the nine months ended September 30, 2017 also includes a $4 million benefit related to legacy South America climate operations for freight recoveries and a favorable litigation matter ruling.~~$22 million.

~~Cost~~

A summary of ~~sales includes~~ net engineering costs ~~comprised of gross~~is shown below:



	Six Months Ended June 30
	2019			2018
	(Dollars in Millions)
Gross engineering costs	$	(221	)	$	(199	)
Engineering recoveries	49			52
Engineering costs, net	$	(172	)	$	(147	)

Gross engineering ~~expenses related~~costs relate to forward model program development and advanced engineering activities, ~~partially offset by~~and exclude contractually reimbursable engineering ~~cost recoveries from customers. Electronics gross~~costs. Net engineering ~~expenses were $288 million~~costs, including the impacts of currency, for the ~~nine~~six months ended ~~September~~June 30, ~~2017, a decrease~~2019 of $3$172 million, ~~compared to~~were $25 million higher than the same period of ~~2016. Engineering recoveries were $79 million for~~2018, primarily related to costs to support the nine months ended September 30, 2017, $19 million higher than the recoveries recorded in the same period of 2016. Engineering cost recoveries can fluctuate period to period depending on underlying contractual terms and conditions and achievement of related development milestones.Company's new business wins.

~~Gross Margin~~



	Six Months Ended June 30
	2019					2018
	(Dollars in Millions)
				Percent of Sales					Percent of Sales
Sales	$	1,470				$	1,572
Cost of sales, excluding engineering costs	(1,162		)	79.0	%	(1,192		)	75.8	%
Engineering costs, net	(172		)	11.7	%	(147		)	9.4	%
Gross margin	$	136		9.3	%	$	233		14.8	%

Gross margin was ~~$359~~$136 million or ~~15.3%~~9.3% of sales for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 compared to ~~$335~~$233 million or ~~14.3%~~14.8% of sales for the same period of ~~2016. The $24 million increase in gross~~2018. Gross margin ~~included $5~~was impacted by $47 million from ~~favorable~~unfavorable volumes and ~~net new business,~~product mix, partially offset by ~~product mix~~a software license. Unfavorable currency of $8 million reflected the Euro, Chinese Renminbi, Brazilian Real, and ~~$7 million related to~~Japanese Yen, partially offset by the ~~exit of climate operations. Currency~~Mexican Peso and Bulgarian Lev. Higher engineering costs, excluding currency, decreased gross margin by ~~$2 million as the impact of the Chinese Renminbi and Euro more than offset the impact of the Japanese Yen, Mexican Peso, and Brazilian Real.~~$32 million. Gross margin also included unfavorable net cost ~~efficiencies~~performance of ~~$10~~$14 million, ~~including favorable material~~

~~Table of Contents~~

~~cost efficiencies~~which includes customer pricing reductions, inefficiencies associated with a plant transfer in Mexico and ~~higher engineering recoveries~~launch challenges associated with a curved center information display, partially offset by ~~customer pricing reductions, and higher manufacturing costs.~~favorable material cost efficiencies. The ~~year-over-year change in~~consolidation of VFAE, during the third quarter of 2018 increased gross margin ~~also included a~~by $4 ~~million benefit related to legacy South America climate operations.~~million.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses were ~~$158~~$115 million or ~~6.7%~~7.8% of sales and ~~$163~~$99 million or ~~7.0%~~6.3% of sales during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The ~~decrease~~increase is primarily related to ~~net efficiencies including lower~~higher stock compensation expense due to the non-recurrance of the resolution of a legal matter in 2018 as further described in Note 18, "Commitments and Contingencies," higher intangibles amortization, incentive compensation, bad debt expense and ~~impacts~~the consolidation of ~~restructuring actions.~~VFAE, partially offset by favorable currency.

Restructuring Expense

During the first quarter of 2019, the Company approved a restructuring program impacting two European manufacturing facilities due to the end of life of certain product lines. The Company recorded approximately $2 million of restructuring expenses related to this program during the six months ended June 30, 2019.

During the second quarter of 2018, the Company approved restructuring programs impacting employee severance and termination

benefit expenses of legacy employees at a South America facility and employees at North America manufacturing facilities due to the wind-down of certain products. During the six months ended June 30, 2018, the Company recorded approximately $5 million of restructuring expenses under this program.

During the fourth quarter of 2016, the Company ~~announced~~approved a restructuring program impacting engineering and administrative functions to further align the Company's ~~engineering and related administrative~~ footprint with its core product technologies and customers. ~~Through September~~During the six months ended June 30, ~~2017,~~2018, the Company ~~has~~ recorded approximately ~~$37~~$5 million of restructuring expenses net of reversals, under this program, associated with approximately 250 employees, and expects to incur up to $45 million of restructuring costs for this program. During the nine months ended September 30, 2017, the Company has recorded approximately $10 million of restructuring expenses, net of reversals, under this program.

During the first quarter of 2016, the Company announced a restructuring program to transform the Company's engineering organization and supporting functional areas to focus on execution and technology. The organization will be comprised of regional engineering, product management and advanced technologies, and global centers of competence. Through the first nine months of 2016, the Company recorded approximately $13 million of restructuring expenses, net of reversals, under this program, associated with approximately 100 employees.

During the nine months ended September 30, 2016, the Company recorded $11 million of restructuring expenses, related to severance and termination benefits, in connection with the wind-down of certain operations in South America.

Interest Expense, Net

Interest expense, net ~~was $12 million and $10~~at $4 million for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, respectively. The increase in net interest expense results from lower interest income due to lower cash balances, financing fees for the Amended Credit Facilities as further described in Note 11, "Debt" and termination impacts of the Company's interest rate swap as further described in Note 16, "Fair Value Measurements and Financial Instruments."2019, was consistent year over year.

Equity in Net Income of Non-Consolidated Affiliates

Equity in net income of non-consolidated affiliates was $6 million and $3$7 million for the ~~nine~~six month periods ~~ended September~~ending June 30, ~~2017~~2019 and ~~2016 respectively. The income~~2018, respectively, which is primarily attributable to the Company's equity interest in Yanfeng Visteon Investment ~~Company and increased primarily related to the timing of engineering recoveries.~~Company.

Other ~~(Income) Expense,~~Income, Net

Other ~~(income) expense,~~income, net consists of the following:

Nine Months Ended
September 30
2017 2016
(Dollars in Millions)
Transformation initiatives $ 1
$ 3
Gain on non-consolidated affiliate transactions, net (4 ) (1 )
Foreign currency translation charge —
11
Loss on asset contribution —
2
Transaction exchange losses

—
1
$ (3 ) $ 16



	Six Months Ended June 30
	2019		2018
Pension financing benefits, net	$	5	$	6
Transformation initiatives	—		4
	$	5	$	10

Pension financing benefits, net include return on assets net of interest costs and other amortization.

Transformation ~~initiative costs~~initiatives during the six months ended June 30, 2018 include ~~information technology separation costs, integration~~a $4 million benefit related to the resolution of ~~acquired business, and financial and advisory services incurred in connection with the Company's transformation into~~ a ~~pure play cockpit electronics business. The gain on non-consolidated affiliate transactions, net are~~legal matter as further described in Note ~~5, "Non-Consolidated Affiliates.~~18, "Commitments and Contingencies."

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During the nine months ended September 30, 2016, the Company recorded an impairment charge of $11 million related to foreign currency translation amounts recorded in accumulated other comprehensive loss associated with the agreement to sell the Company's South Africa climate operations. In connection with the closure of the Climate facility in Argentina, the Company entered an agreement to contribute land and building with a net book value of $2 million to the local municipality.

Income Taxes

The Company's provision for income taxes of ~~$34~~$3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 represents ~~an increase~~a decrease of $7$30 million when compared with ~~$27~~$33 million in the same period of ~~2016.~~2018. The ~~increase~~decrease in tax expense isincludes approximately $18 million attributable to ~~several items~~the overall decrease in year-over-year earnings, including ~~the year-over-year increase in earnings, as well as~~ changes in the mix of earnings and differing tax rates between jurisdictions, and withholding ~~taxes,~~taxes. During the ~~non-recurrence~~first quarter of 2019, the closure of tax audits in Germany allowed the Company to initiate a tax planning strategy previously determined not to be prudent. This strategy provided the necessary positive evidence to support the future utilization of a $3portion of the Company's deferred tax assets in Germany resulting in a $12 million discrete income tax benefit ~~in connection with certain income tax incentives formally approved by the Portuguese tax authorities~~ during the first quarter of 2016, and $2 million resulting from changes in assessments regarding the potential realization of deferred tax assets. These increases were partially offset by the year-over-year decrease for uncertain tax positions, including interest, of approximately $3 million.

~~Discontinued Operations~~

The operations subject to the Interiors Divestiture and Climate Transaction met conditions required to qualify for discontinued operations reporting. Accordingly, the results of operations for the Interiors and Climate businesses have been reclassified to income (loss) from discontinued operations, net of tax in the consolidated statements of comprehensive income for the nine month periodssix months ended ~~September~~June 30, 2017 and 2016. The nine months ending September 30, 2017 included a $7 million gain on the repurchase of the India electronics operations associated with the 2015 Climate Transaction. The nine months ending September 30, 2016 primarily included results of the South America interiors operations divested on December 1, 2016 and a tax benefit related to previously divested climate operations.

2019.

Net Income

Net income attributable to Visteon was ~~$151~~$21 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to net income of ~~$73~~$100 million for the same period of ~~2016.~~2018. The ~~increase~~decrease of ~~$78~~$79 million includes ~~discontinued operations impacts~~a decrease in gross margin of ~~$23~~$97 million ~~lower restructuring charges of $12 million, the non-recurrence of charges~~including unfavorable volumes, customer pricing and product mix, unfavorable currency, higher engineering costs, inefficiencies associated with ~~the 2016 South Africa climate disposition of $11 million, lower~~a plant transfer in Mexico and launch challenges associated with a curved center information display, which were partially offset by material, design and usage economics and a software license, and an increase in selling, general and administrative expenses of $5$16 million higher equity in net income of non-consolidated affiliates of $3 million and gains on the sale of non-consolidated affiliates of $3 million. Gross margin improved $24 million including $17 million for electronics operations and $7 million related to the 2016 exit of the climate operations. These improvements were partially offset by ~~higher~~a decrease in restructuring expense of $9 million and provision for income taxes of $7$30 million.

Adjusted EBITDA

Adjusted EBITDA (a non-GAAP financial measure, as defined in Note ~~18)~~3, "Segment Information") was ~~$268~~$87 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, representing ~~an increase~~a decrease of ~~$27~~$98 million when compared ~~with Adjusted~~to adjusted EBITDA of ~~$241~~$185 million for the same period of ~~2016. The increase includes $5 million from favorable~~2018. Unfavorable volumes and ~~net new business~~product mix partially offset by ~~product mix and $7 million related to other climate operations exited in 2016 .~~a software license reduced adjusted EBITDA by $47 million. Foreign currency decreased ~~Adjusted~~adjusted EBITDA by $1$4 million attributable to the Euro, Brazilian Real, Chinese Renminbi and ~~Euro~~Japanese Yen, partially offset by the ~~Japanese Yen,~~ Mexican Peso and ~~Brazilian Real. Net~~Bulgarian Lev. Higher net engineering costs decreased adjusted EBITDA by $32 million. Unfavorable net cost performance ~~of $16~~decreased adjusted EBITDA by $18 million ~~includes material cost efficiencies, higher engineering recoveries,~~reflecting customer pricing, inefficiencies associated with a plant transfer in Mexico and ~~lower selling, general and administrative costs,~~launch challenges associated with a curved center information display, which were partially offset by ~~unfavorable customer pricing reductions, higher manufacturing costs,~~material, design and usage economics. The consolidation of VFAE, during the third quarter of 2018 increased ~~warranty costs.~~adjusted EBITDA by $3 million.

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The reconciliation of ~~Adjusted EBITDA to~~ net income attributable to Visteon to adjusted EBITDA for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, is as follows:


	Nine Months Ended September 30									Six Months Ended June 30
	2017			2016			Change			2019			2018			Change
	(Dollars in Millions)									(Dollars in Millions)
Net income attributable to Visteon Corporation										$	21		$	100		$	(79	)
Depreciation and amortization										49			45			4
Non-cash, stock-based compensation expense										11			—			11
Provision for income taxes										3			33			(30		)
Interest expense, net										4			4			—
Net income attributable to non-controlling interests										3			5			(2		)
Restructuring expense										1			10			(9		)
Income from discontinued operations, net of tax										—			(1		)	1
Equity in net income of non-consolidated affiliates										(6		)	(7		)	1
Other										1			(4		)	5
Adjusted EBITDA	$	268		$	241		$	27		$	87		$	185		$	(98	)
Depreciation and amortization	62			62			—
Restructuring expense	10			22			(12		)
Interest expense, net	12			10			2
Equity in net income of non-consolidated affiliates	(6		)	(3		)	(3		)
Other (income) expense, net	(3		)	16			(19		)
Provision for income taxes	34			27			7
(Income) loss from discontinued operations, net of tax	(8		)	15			(23		)
Net income attributable to non-controlling interests	11			12			(1		)
Non-cash, stock-based compensation expense	9			6			3
Other	(4		)	1			(5		)
Net income attributable to Visteon Corporation	$	151		$	73		$	78

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Liquidity

The Company's primary sources of liquidity are cash flows from operations, existing cash balances, and borrowings under available credit facilities, if necessary. The Company believes that funds generated from these sources will be adequate to fund its liquidity for current business requirements.

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

The Company's ability to generate operating cash flow is dependent on the level, variability and timing of its customers' worldwide vehicle production, which may be affected by many factors including, but not limited to, general economic conditions, specific industry conditions, financial markets, competitive factors and legislative and regulatory changes. The Company monitors the macroeconomic environment and its impact on vehicle production volumes in relation to the Company's specific cash needs. The Company's intra-year needs are impacted by seasonal effects in the industry, such as mid-year shutdowns, the subsequent ramp-up of new model production and year-end shutdowns at key customers.

In the event that the Company's funding requirements exceed cash provided by its operating activities, the Company will meet such requirements by ~~reduction of~~reducing existing cash balances, by drawing on its $300 million Revolving Credit Facility or other affiliate working capital lines, by seeking additional capital through debt or equity markets, or some combination thereof.

Access to additional capital through the debt or equity markets is influenced by the Company's credit ratings. ~~On March 7, 2017,~~As of June 30, 2019, the Company’s corporate credit rating is Ba2 and BB by Moody’s and Standard & ~~Poor's Ratings Services upgraded the Company to 'BB', from 'BB-', with stable outlook. Moody's has reaffirmed the Company's credit rating of Ba3.~~Poor’s, respectively. See Note 11, "Debt" to the accompanying consolidated financial statements for a more comprehensive discussion of the Company's debt facilities. Incremental funding requirements of the Company's consolidated foreign entities are primarily accommodated by intercompany cash pooling structures. Affiliate working capital lines which are ~~primarily used~~utilized by the Company's consolidated joint ~~ventures. As of September 30, 2017, these lines~~ventures, had availability of ~~approximately $18 million.~~

$74 million as of June 30, 2019.

Cash Balances

As of ~~September~~June 30, ~~2017,~~2019, the Company had total cash of ~~$735~~$438 million, including $3 million of restricted cash. Cash balances totaling ~~$467~~$332 million were located in jurisdictions outside of the United States, of which approximately ~~$195~~$155 million is considered permanently reinvested for funding ongoing operations outside of the U.S. If such permanently reinvested funds ~~are~~were repatriated to ~~operations in~~ the U.S., no U.S. federal taxes would be imposed on the distribution of such foreign earnings due to U.S. tax reform enacted in December 2017, but the Company would be required to accrue additional tax expense, primarily related to foreign withholding taxes.

Other Items Affecting Liquidity

~~During 2017,~~As of June 30, 2019, the Company ~~expects~~may execute up to ~~make remaining payments~~$380 million additional share repurchases under the Board of ~~approximately $35 million related to the Germany interiors divestiture that closed~~Directors authorization which expires on December ~~1, 2015. Also, as announced during the fourth quarter of 2016, the Company expects to incur restructuring costs to further align~~31, 2020. Additional discussion regarding the Company's engineering and related administrative footprint with its core product technologies and customers. The Company estimates that it may incur up to $45 million in cumulative expenses to complete these actions of which $37 million has been expensed and $14 million has been paid since inception to date through September 30, 2017.

The Company is actively negotiating the possible exit of a European facility that may involve contributing cash working capital to the purchaser. The estimated contribution includes cash and working capital ranging from $15 million to $20 million .

~~Management continually seeks to streamline the Company's operations and may incur additional restructuring charges in the future.~~

~~The Company is authorized to spend an additional $230 million to repurchase Visteon common stock pursuant to the $400 million~~ share repurchase ~~authorization, as discussed~~activity is provided in Note ~~14,~~15, "Stockholders' Equity and Non-Controlling ~~Interests" of the consolidated financial statements under Item 1.~~Interests."

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, cash contributions to the Company's ~~U.S. and non-U.S.~~ defined benefit ~~pension plan~~plans were ~~$5 million.~~approximately less than $1 million for the U.S. plans and $3 million for the non-U.S. plans. The Company ~~expects to make~~estimates that cash contributions to its defined benefit pension plans ofwill be $7 million in ~~2017.~~2019.

During the six months ended June 30, 2019, the Company paid $8 million related to restructuring activities. Management’s ongoing efforts to drive further operational improvements may cause the Company to incur additional restructuring charges.

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~~Estimated cash contributions for 2018 through 2020, under current regulations and market assumptions are approximately $29 million.~~

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Cash Flows

Operating Activities

~~Including discontinued operations, the~~The Company generated ~~$131~~$61 million of cash infrom operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, representing a $65 million decrease as compared to cash ~~provided~~generated by operations of ~~$38~~$126 million during the same period of ~~2016, representing a $93 million improvement.~~2018. The ~~increase~~decrease in operating cash flows is ~~attributable~~primarily due to ~~higher~~lower net income of ~~$77~~$81 million and ~~lower~~ cash ~~tax payments, net~~provided by trade working capital of ~~expense~~$35 million during the six months ended June 30, 2019 as compared to $63 million during the same period last year, representing a decrease of ~~$67 million primarily due to the non-recurrence of transaction related taxes incurred in 2016,~~$28. These items are partially offset by ~~higher working capital~~$22 million lower use of ~~approximately $10 million, higher warranty payments~~cash related to changes in other assets and liabilities primarily related to net recoveries of ~~expense of $21 million and an increase in China bank notes of $11 million.~~ guaranteed reimbursable engineering costs.

Investing Activities

Cash used ~~from~~by investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 totaled ~~$97~~$67 million, compared to net cash ~~provided~~used by investing activities of ~~$339~~$66 million for the same period in ~~2016, representing a decrease of $436 million.~~2018. Net cash used by investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017, includes the purchase of the India electronics operations associated with the Climate Transaction for $47 million and~~2019, included capital expenditures of ~~$69 million. These outflows were~~$71 million, partially offset by proceeds ~~for divestitures of equity and cost based investments in China and Europe of $15 million and net investment hedge settlement proceeds of $5 million.~~

Net cash flow provided by investing activities for the nine months ended September 30, 2016 includes the Climate Transaction withholding tax refund of $356 million, liquidation of investments of short-term securities of $47 million and proceeds from ~~asset sales of $15 million, partially offset by capital expenditures of $56 million, the acquisition of AllGo Embedded Systems Private Limited of $15 million and an $8 million shareholder~~non-consolidated affiliate loan ~~to a non-consolidated affiliate.~~

repayments.

Financing Activities

Cash used by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, totaled ~~$197~~$23 million, compared to ~~$2,260~~a use of cash of $233 million ~~used by financing activities for~~during the same period in ~~2016,~~2018, for a decrease inof cash used by financing activities of ~~$2,063~~$210 million. ~~Cash used by financing activities~~The reduction in cash is primarily attributable to a decrease in share repurchases during the ~~nine~~six months ended ~~September~~June 30, ~~2017 included share repurchases~~2019 of ~~$170 million and dividends paid to non-controlling interests of $29~~$180 million.

Cash used by financing activities during the nine months ended September 30, 2016 of $2,260 million included a distribution payment of $1,736 million, share repurchases of $500 million, stock based compensation tax withholding payments of $11 million and net payments on debt of $13 million.

Debt and Capital Structure

See Note 11, “Debt” to the consolidated financial statements included in Item 1.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

arrangements.

Fair Value Measurement

See Note 16, “Fair Value Measurements and Financial Instruments” to the consolidated financial statements included in Item 1.

Recent Accounting Pronouncements

See Note 21, “Summary of Significant Accounting Policies” to the accompanying consolidated financial statements in Item 1.

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Forward-Looking Statements

Certain statements contained or incorporated in this Quarterly Report on Form 10-Q which are not statements of historical fact constitute “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward-looking statements give current expectations or forecasts of future events. Words such as “anticipate”, “expect”, “intend”, “plan”, “believe”, “seek”, “estimate” and other words and terms of similar meaning in connection with discussions of future operating or financial performance signify forward-looking statements. These statements reflect the Company’s current views with respect to future events and are based on assumptions and estimates, which are subject to risks and ~~uncertainties including those discussed in Item 1A under the heading “Risk Factors” and elsewhere in this report.~~uncertainties. Accordingly, undue reliance should not be placed on these forward-looking statements. Also, these forward-looking statements represent the Company’s estimates and assumptions only as of the date of this report. The Company does not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made and qualifies all of its forward-looking statements by these cautionary statements.

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

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

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

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

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

Changes in vehicle production volume of Visteon’s customers in the markets where it ~~operates, and in particular changes in Ford’s vehicle production volumes and platform mix.~~operates.

Increases in ~~our vendor's~~ commodity costs or disruptions in the supply of commodities, including ~~aluminum,~~resins, copper, fuel and natural gas.

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

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

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

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

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

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

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

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

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

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

The cyclical and seasonal nature of the automotive industry.

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

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

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

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

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

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Item 3.	Quantitative and Qualitative Disclosures About Market Risk

The primary market risks to which the Company is exposed ~~includes~~include changes in ~~foreign~~ currency exchange rates, interest rates and certain commodity prices. The Company manages these risks through ~~derivative instruments and various~~ operating actions including fixed price contracts with suppliers and cost sourcing arrangements with ~~customers.~~customers and through various derivative instruments. The Company's use of derivative instruments is ~~limited~~strictly intended for hedging purposes to ~~mitigation of~~mitigate market risks ~~including hedging activities. However,~~pursuant to written risk management policies. Accordingly, derivative instruments are not used for speculative or trading ~~purposes, as per clearly defined risk management policies.~~purposes. The Company's use of derivative instruments ~~may entail risk of~~creates exposure to credit loss in the event of non-performance ~~of a~~by the counter-party to athe derivative financial ~~derivative contract.~~instruments. The Company limits ~~its counterparty~~this exposure by entering into agreements directly with a variety of major financial institutions with high credit ~~profiles~~standards and that are expected to ~~support an expectation that the counterparty is capable of meeting the~~fully satisfy their obligations under the contracts. ~~In addition,~~Additionally, the Company's ability to utilize derivatives to manage market risk is dependent on credit conditions and market conditions given the current economic environment.

Foreign Currency Risk

The Company's ~~net~~ cash ~~inflows and outflows that~~flows are exposed to the risk of adverse changes in exchange rates as related to the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, ~~subsidiary~~ dividends, investments in subsidiaries and anticipated foreign currency denominated transaction proceeds. ~~The~~Where possible, the Company utilizes derivative financial instruments to manage foreign currency exchange rate risks. Forward and option contracts may be utilized to ~~reduce~~mitigate the impact toexchange rate variability on the Company's cash ~~flows from adverse movements in exchange rates.~~flows. Foreign currency exposures are reviewed periodically and any natural offsets are considered prior to entering into a derivative financial ~~derivative~~ instrument. The Company’s current primary hedged ~~foreign~~ currency exposures include ~~Euro,~~the Japanese Yen, ~~Thailand Bhat~~Euro, Thai Baht, and Mexican Peso. The Company utilizes a strategy of partial coverage for transactions in these currencies. The Company's policy requires that hedge transactions relate to a specific portion of the exposure not to exceed the aggregate amount of the underlying transaction. As of September 30, 2017, and December 31, 2016, the net fair value of foreign currency forward and option contracts was a net liability of $4 million and less than $1 million, respectively. Maturities of these instruments generally do not exceed eighteen months.

In addition to the transactional exposure described above, the Company's operating results are impacted by the translation of its foreign operating income into U.S. dollars.

~~During 2015, the~~ The Company ~~entered~~does not enter into ~~cross~~ currency ~~swap transactions~~exchange rate contracts to mitigate the variability of the value of the Company's investment in certain non-U.S. entities. In April 2017, the Company terminated and received $5 million of proceeds upon settlement. There was no ineffectiveness associated with such derivatives at the time of the termination. The Company subsequently entered into new cross currency swap transactions with an aggregate notional amount of $150 million. The transactions are designated as net investment hedges of certain of the Company's European affiliates. Accordingly, the effective portion of changes in the fair value of the transactions are recognized in other comprehensive income, a component of shareholders' equity. There was no ineffectiveness associated with such derivatives as of September 30, 2017 and December 31, 2016 and the fair value of these derivatives was a liability of $19 million and an asset of $6 million, respectively.

this exposure.

The hypothetical pre-tax gain or loss in fair value from a 10% favorable or adverse change in quoted currency exchange rates would be approximately ~~$30~~$33 million and ~~$31~~$32 million for ~~foreign~~ currency derivative financial instruments as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. These estimated changes assume a parallel shift in all currency exchange rates and include the gain or loss on financial instruments used to hedge ~~loans to~~investments in subsidiaries. AsBecause exchange rates typically do not all move in the same direction, the estimate may overstate the impact of changing exchange rates on the net fair value of the Company's financial derivatives. It is also important to note that gains and losses indicated in the sensitivity analysis would generally be offset by gains and losses on the underlying exposures being hedged.

Interest Rate Risk

The Company is subject to interest rate risk principally in relation to variable-rate debt. The Company uses financial derivative instruments to manage exposure to fluctuations in interest rates in accordance with its risk management policies. During 2015, the Company entered into interest rate swaps to manage interest rate risk relatedSee Note 16, "Fair Value Measurements and Financial Instruments" to the ~~variable rate interest payments of the Term Facility. In April 2017, the Company terminated these swaps and paid $1 million to settle the contracts.~~

During the second quarter of 2017, the Company entered into new interest rate swap contracts with an aggregate notional value of $150 million to effectively convert designated interest payments related to the amended Term Facility from variable to fixed cash flows. The maturities of these swaps do not exceed the underlying amended Term Facility. The instruments have been designated as cash flow hedges and accordingly, the effective portion of the changesconsolidated financial statements included in ~~the fair value of the swap transactions are initially recognized in other comprehensive income. Subsequently, the accumulated gains and losses recorded in equity are~~

~~Table of Contents~~

reclassified to income in the period during which the hedged transaction impacts earnings. The ineffective portion of changes in the fair value of the swap transactions, if any, are recognized directly in income. As of September 30, 2017 and December 31, 2016, the fair value of the Company's interest rate swaps was an asset of less than $1 million and a liability of $1 million, respectively. There has been no ineffectiveness associated with these derivatives.

The Company significantly reduced interest rate exposure after entering the swap transactions in 2015. The variable rate basis of debt is approximately 60% and 59% as of September 30, 2017 and December 31, 2016, respectively.

Item 1 for additional information.

Commodity Risk

The Company's exposures to market risk ~~arising~~ from changes in the price of production material are managed primarily through negotiations with suppliers and customers, although there can be no assurance that the Company will recover all such costs. The Company continues to evaluate derivatives available in the marketplace and may ~~determine~~decide to utilize derivatives in the ~~future.~~

future to manage select commodity risks if an acceptable hedging instrument is identified for the Company's exposure level at that time, as well as the effectiveness of the financial hedge among other factors.


Item 4.	Controls and Procedures

Disclosure Controls and Procedures

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

As of ~~September~~June 30, ~~2017,~~2019, an evaluation was performed under the supervision and with the participation of the Company’s management, including its Chief Executive and Chief Financial Officer, of the effectiveness of the design and operation of disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Executive Vice President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~

2019.

Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the three months ended ~~September~~June 30, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

4741

~~Table of Contents~~

Part II

Other Information


Item 1.	Legal Proceedings

See the information above under Note ~~17,~~18, "Commitments and Contingencies," to the consolidated financial statements which is incorporated herein by reference.


Item 1A.	Risk Factors

~~For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see~~Certain risks described below update 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, ~~2016. See also, "Forward-Looking Statements" included~~2018.

Changes in ~~Part I, Item 2~~the United Kingdom's economic and other relationships with the European Union could adversely affect the Company.

In June 2016, a majority of ~~this Quarterly Report~~voters in the United Kingdom elected to withdraw from the European Union ("Brexit"). In March 2017, the United Kingdom formally notified the European Union of its intention to withdraw thereby triggering a two-year negotiation period which has now been extended to October 31, 2019, unless further extension is agreed to by the parties. There remains significant uncertainty about the future relationship between the United Kingdom and the European Union, including the possibility of the United Kingdom leaving the European Union without a negotiated and bilaterally approved withdrawal plan. The Company does not have manufacturing operations in the United Kingdom but does have significant sales in the United Kingdom from manufacturing facilities in the European Union. In 2018, those sales were approximately $90 million. In addition, our supply chain and that of our customers are highly integrated across the United Kingdom and the European Union, and we are highly dependent on ~~Form 10-Q.~~the free flow of goods in those regions. The ongoing uncertainty and potential re-imposition of border controls and customs duties on trade between the United Kingdom and European Union nations could negatively impact our competitive position, supplier and customer relationships and financial performance. The ultimate effects of Brexit on us will depend on the specific terms of any agreement the United Kingdom and the European Union reach to provide access to each other’s respective markets.


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

~~Period~~

~~The following table summarizes information relating to~~There were no purchases made by or on behalf of the Company, or an affiliated purchaser, of shares of the Company’s common stock during the ~~third~~second quarter of ~~2017.~~2019.

Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (3) (in millions)
Jul. 1, 2017 to Sep. 30, 2017 82,780
$121.24 82,513
$230
Total 82,780
$121.24 82,513
$230


~~(1)~~	Includes 267 shares surrendered to the Company by employees to satisfy tax withholding obligations in connection with the vesting of restricted share and stock unit awards made pursuant to the Visteon Corporation 2010 Incentive Plan.


~~(2)~~	~~During the third quarter 2017 the Company acquired 82,513 shares from the open market share repurchases.~~


~~(3)~~	On January 10, 2017, the Company's board of directors authorized $400 million of share repurchase of its shares of common stock. As of September 30, 2017, there is $230 million remaining on the authorization. Additional repurchases of common stock, if any, may occur at the discretion of the Company.


Item 6.	Exhibits

The exhibits listed on the "Exhibit Index" on Page 4943 hereof are filed with this report or incorporated by reference as set forth therein.

4842

~~Table of Contents~~

Exhibit Index



Exhibit No.		Description
31.1		Rule 13a-14(a) Certification of Chief Executive Officer dated ~~October 26, 2017.~~July 25, 2019.
31.2		Rule 13a-14(a) Certification of Executive Vice President, Chief Financial Officer dated ~~October 26, 2017.~~July 25, 2019.
32.1		Section 1350 Certification of Chief Executive Officer dated ~~October 26, 2017.~~July 25, 2019.
32.2		Section 1350 Certification of Executive Vice President, Chief Financial Officer dated ~~October 26, 2017.~~July 25, 2019.
101.INS		XBRL Instance Document.**
101.SCH		XBRL Taxonomy Extension Schema Document.**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.**
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.**
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.**


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

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files as Exhibit 101 hereto are deemed not filed or part of a registration


**	Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files as Exhibit 101 hereto are deemed not filed or part of a registration

statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes

of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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

Signatures

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



	VISTEON CORPORATION

	By:	/s/ ~~Stephanie S. Marianos~~Christian A. Garcia
		~~Stephanie S. Marianos~~Christian A. Garcia
		Executive Vice President and Chief ~~Accounting~~Financial Officer

Date: July 25, 2019

~~Date: October 26, 2017~~

4943



Part I - Financial Information		Page
	Item 1 - Consolidated Financial Statements	3
	Consolidated Statements of Comprehensive Income (Unaudited)	3
	Consolidated Balance Sheets (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	~~Notes to~~ Consolidated ~~Financial~~ Statements of Changes in Equity (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7
	Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	2926
	Item 3 - Quantitative and Qualitative Disclosures about Market Risk	4640
	Item 4 - Controls and Procedures	4740
Part II - Other Information		4842
	Item 1 - Legal Proceedings	4842
	Item 1A - Risk Factors	4842
	~~Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds~~	48
	Item 6 - Exhibits	4842
Exhibit Index		4943
Signatures		4943



Assets Acquired:			Liabilities Assumed:
Accounts receivable	$	1	Deferred tax liabilities	$	2
Intangible assets	7		Total liabilities assumed	2
Goodwill	11
Total assets acquired	$	19	Purchase price	$	17



		September 30, 2017						December 31, 2016
	Estimated Weighted Average Useful Life (years)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
		(Dollars in Millions)
Definite-Lived:
Developed technology	10	$	41	$	28	$	13	$	40	$	25	$	15
Customer related	9	85		31		54		83		25		58
Capitalized software development	3	6		—		6		4		—		4
Other	32	10		1		9		8		1		7
Subtotal		142		60		82		135		51		84
Indefinite-Lived:
Goodwill		46		—		46		45		—		45
Total		$	188	$	60	$	128	$	180	$	51	$	129



	Definite-lived intangibles										Indefinite-lived intangibles
	Developed Technology			Customer Related			Capitalized Software Development		Other		Goodwill		Total
	(Dollars in Millions)
December 31, 2016	$	15		$	58		$	4	$	7	$	45	$	129
Additions	—			—			2		2		—		4
Foreign currency	1			2			—		—		1		4
Amortization	(3		)	(6		)	—		—		—		(9		)
September 30, 2017	$	13		$	54		$	6	$	9	$	46	$	128



	Nine Months Ended September 30, 2017
	(Dollars in Millions)
Beginning balance	$	35
Tax positions related to current period:
Additions	2
Tax positions related to prior periods:
Reductions	(21		)
Effect of exchange rate changes	1
Ending balance	$	17



	2017									2016
	Visteon			NCI			Total			Visteon			NCI			Total
	(Dollars in Millions)
Three Months Ended September 30
Beginning balance	$	569		$	136		$	705		$	616		$	148		$	764
Net income from continuing operations	43			4			47			21			4			25
Net income from discontinued operations	—			—			—			7			—			7
Net income	43			4			47			28			4			32
Other comprehensive income (loss)
Foreign currency translation adjustments	17			2			19			7			—			7
Net investment hedge	(7		)	—			(7		)	(4		)	—			(4		)
Benefit plans	(1		)	—			(1		)	—			—			—
Unrealized hedging gain	1			—			1			—			—			—
Total other comprehensive income	10			2			12			3			—			3
Stock-based compensation, net	3			—			3			1			—			1
Share repurchase	(10		)	—			(10		)	—			—			—
Dividends to non-controlling interests	—			(24		)	(24		)	—			(6		)	(6		)
Ending balance	$	615		$	118		$	733		$	648		$	146		$	794



	Recorded (Loss) Income into AOCI, net of tax						Reclassified from AOCI into (Income) Loss					Recorded in (Income) Loss
	2017			2016			2017		2016			2017			2016
	(Dollars in Millions)
Three Months Ended September 30
Foreign currency risk - Cost of sales:
Cash flow hedges	$	(1	)	$	(3	)	$	2	$	—		$	—		$	—
Net investment hedges	(7		)	(1		)	—		—			—			—
Non-designated cash flow hedges	—			—			—		—			1			(2		)
Interest rate risk - Interest expense, net:
Interest rate swap	—			2			—		1			—			—
	$	(8	)	$	(2	)	$	2	$	1		$	1		$	(2	)
Nine Months Ended September 30
Foreign currency risk - Cost of sales:
Cash flow hedges	$	(1	)	$	—		$	5	$	(3	)	$	—		$	—
Net investment hedges	(20		)	(3		)	—		—			—			—
Non-designated cash flow hedges	—			—			—		—			(2		)	(3		)
Interest rate risk - Interest expense, net:
Interest rate swap	—			(2		)	1		1			—			—
	$	(21	)	$	(5	)	$	6	$	(2	)	$	(2	)	$	(3	)



Period	Total Number of Shares (or Units) Purchased (1)	Average Price Paid per Share (or Unit)	Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (3) (in millions)
Jul. 1, 2017 to Sep. 30, 2017	82,780	$121.24	82,513	$230
Total	82,780	$121.24	82,513	$230