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



	Three Months Ended September 30				Nine Months Ended September 30
	2019		2018		2019		2018
	(Dollars in Millions)
Product Lines
Instrument clusters	$	322	$	275	$	959	$	908
Audio and infotainment	182		176		562		578
Information displays	120		116		365		382
Body and security	27		25		91		86
Climate controls	18		27		59		98
Telematics	29		17		51		51
Other	33		45		114		150
	$	731	$	681	$	2,201	$	2,253

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-party to assist with certain estimates of fair values. Fair values for intangible assets were based on the 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, which 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.

~~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

~~Table of Contents~~

~~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,~~2019 and 2018, the Company ~~recorded currency impacts of~~recognized approximately $8 million and $19 million and $10 million and $22 million net increases in ~~connection~~transaction price related to performance obligations satisfied in previous periods, respectively. The Company has no material contract assets, contract liabilities or capitalized contract acquisition costs as of September 30, 2019.

NOTE 3. Segment Information

Financial results for the Company's reportable segment have been prepared using a management approach, which is consistent with the ~~Korean capital gains withholding tax recovered during~~basis and manner in which financial information is evaluated by the ~~first quarter of 2016. During~~Company's chief operating decision maker in allocating resources and in assessing performance. The Company’s chief operating decision maker, the ~~third quarter of 2016,~~Chief Executive Officer, evaluates the ~~Company recorded a $17 million income tax benefit to reflect change in estimates associated with the filing~~performance of the Company’s ~~U.S. tax returns that resulted in a reduction in U.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.

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 ~~tax related~~attributable to the ~~2015 Climate Transaction.~~ Company adjusted to eliminate the impact of depreciation and amortization, restructuring expense, net interest expense, equity in net income of non-consolidated affiliates, gain and loss on divestiture, provision for income taxes, discontinued operations, net income attributable to non-controlling interests, non-cash stock-based compensation expense, and other gains and losses not reflective of the Company's ongoing operations.

Adjusted EBITDA is presented as a supplemental measure of the Company's financial performance that management believes is useful to investors because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company's operating activities across reporting periods. Not all companies use identical calculations and, accordingly, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be a substitute for net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and is not intended to be a measure of cash flow available for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. 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.

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



	Three Months Ended September 30						Nine Months Ended September 30
	2019			2018			2019			2018
	(Dollars in Millions)
Net income attributable to Visteon Corporation	$	14		$	21		$	35		$	121
Depreciation and amortization	25			22			74			67
Non-cash, stock-based compensation expense	3			4			14			4
Provision for income taxes	13			9			16			42
Interest expense, net	3			2			7			6
Net income attributable to non-controlling interests	4			3			7			8
Restructuring expense, net	1			18			2			28
Income from discontinued operations, net of tax	—			(1		)	—			(2		)
Equity in net income of non-consolidated affiliates	(1		)	(3		)	(7		)	(10		)
Other	—			(4		)	1			(8		)
Adjusted EBITDA	$	62		$	71		$	149		$	256

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 September 30				Nine Months Ended September 30
	2019		2018		2019		2018
	(In Millions, Except Per Share Amounts)
Numerator:
Net income from continuing operations attributable to Visteon	$	14	$	20	$	35	$	119
Net income from discontinued operations attributable to Visteon	—		1		—		2
Net income attributable to Visteon	$	14	$	21	$	35	$	121
Denominator:
Average common stock outstanding - basic	28.0		29.3		28.1		29.8
Dilutive effect of performance based share units and other	0.1		0.2		0.1		0.3
Diluted shares	28.1		29.5		28.2		30.1
Basic and Diluted Per Share Data:
Basic earnings per share attributable to Visteon:
Continuing operations	$	0.50	$	0.68	$	1.25	$	3.99
Discontinued operations	—		0.03		—		0.07
	$	0.50	$	0.71	$	1.25	$	4.06
Diluted earnings per share attributable to Visteon:
Continuing operations	$	0.50	$	0.68	$	1.24	$	3.95
Discontinued operations	—		0.03		—		0.07
	$	0.50	$	0.71	$	1.24	$	4.02

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~~first quarter of 2019, the Company approved a restructuring program impacting two European manufacturing facilities due to the end of life of certain product lines. During the nine months ended September 30, ~~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 September 30, 2019.

During the third quarter of 2018, the Company approved a restructuring program impacting engineering and administrative functions to optimize operations. During the nine months ended September 30, 2019 and 2018, the Company has recorded approximately $1 million and $18 million of net restructuring expenses, respectively. As of ~~reversals, respectively.~~September 30, 2019, approximately $5 million remains accrued.

~~Electronics~~

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 nine months ended September 30, 2018, the Company recorded approximately $5 million of restructuring expense under these programs and approximately $3 million remains accrued as of September 30, 2019.

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 30, 2017, the Company has recorded approximately $37 million of restructuring expenses, net of reversals, under this program, and expects to incur up to $45 million of restructuring costs associated with approximately 250 employees. During the ~~three and~~ nine months ended September 30, ~~2017,~~2018, the Company ~~has~~ recorded approximately $6$5 million ~~and $10 million, respectively,~~ of restructuring expenses under this ~~program, and $18 million remains accrued as of September 30, 2017. The Company expects to record additional restructuring costs related to this program as the underlying plan is finalized.~~

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. For the three and nine month

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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.~~program. As of September 30, ~~2017~~2019, the ~~plan~~restructuring program is considered substantially complete.

Other and Discontinued Operations

During the ~~three and~~ nine months ended September 30, ~~2016,~~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 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~~$11 million and ~~$40~~$23 million as of September 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
Expense	1			—			1
Utilization	(4		)	—			(4		)
September 30, 2019	$	9		$	2		$	11

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

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 YFVIC Transaction"). The purchase by YFVIC was financed through a shareholder loan from YF and external borrowings, guaranteed by Visteon, have been paid as of September 30, 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 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:



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Payables due to YFVIC	$	13	$	17
Exposure to loss in YFVIC:
Investment in YFVIC	$	43	$	38
Receivables due from YFVIC	45		36
Subordinated loan receivable from YFVIC	8		20
Loan guarantee of YFVIC debt	—		11
Maximum exposure to loss in YFVIC	$	96	$	105

NOTE 7. Inventories

Inventories, net consist of the following components:



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Raw materials	$	122	$	124
Work-in-process	25		26
Finished products	45		34
	$	192	$	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:



		September 30, 2019
	Estimated Weighted Average Useful Life (years)	Gross Intangibles		Accumulated Amortization			Net Intangibles
		(Dollars in Millions)
Definite-Lived:
Developed technology	8	$	40	$	(34	)	$	6
Customer related	10	87		(48		)	39
Capitalized software development	4	27		(4		)	23
Other	21	14		(4		)	10
Subtotal		168		(90		)	78
Indefinite-Lived:
Goodwill		46		—			46
Total		$	214	$	(90	)	$	124

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



	December 31, 2018							September 30, 2019
	Gross Intangibles		Accumulated Amortization			Net Intangibles		Additions		Foreign Currency			Amortization Expense			Net Intangibles
	(Dollars in Millions)
Definite-Lived:
Developed technology	$	40	$	(31	)	$	9	$	—	$	—		$	(3	)	$	6
Customer related	90		(42		)	48		—		(2		)	(7		)	39
Capitalized software development	16		(3		)	13		11		—			(1		)	23
Other	14		(2		)	12		—		(1		)	(1		)	10
Subtotal	160		(78		)	82		11		(3		)	(12		)	78
Indefinite-Lived:
Goodwill	47		—			47		—		(1		)	—			46
Total	$	207	$	(78	)	$	129	$	11	$	(4	)	$	(12	)	$	124

During the three and nine months ended September 30, 2019 and 2018 the Company recorded approximately $4 million and $12 million, and $4 million and $11 million of amortization expense related to definite-lived intangible assets, respectively. The Company currently estimates annual amortization expense to be $18 million for 2019, $15 million for 2020, $11 million for 2021, $11 million for 2022, $8 million for 2023, and $27 million cumulatively thereafter. 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 nine months ended September 30, 2019.

NOTE 9. Other ~~Liabilities~~

Assets

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



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Recoverable taxes	$	51	$	46
Joint venture receivables	45		37
Contractually reimbursable engineering costs	42		40
China bank notes	23		12
Prepaid assets and deposits	21		20
Other	10		4
	$	192	$	159

The Company sold $59 million and $27 million of China bank notes during the nine months ended September 30, 2019 and 2018 respectively. 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. As of September 30, 2019, $13 million remains outstanding and will mature by the end of the first quarter of 2020.

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



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Deferred tax assets	$	58	$	45
Recoverable taxes	28		33
Contractually reimbursable engineering costs	21		29
Joint venture notes receivables	8		20
Derivative financial instruments	4		—
Other	20		16
	$	139	$	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 $14 million during the remainder of 2019, $35 million in 2020, $6 million in 2021, $3 million in 2022 and $5 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 September 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 nine months ended September 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 September 30			Nine Months Ended September 30
	2019			2019
	(Dollars in Millions)
Operating lease cost (includes immaterial variable lease costs)	$	(10	)	$	(31	)
Short-term lease cost	—			(1		)
Sublease income	2			4
Total lease cost	$	(8	)	$	(28	)

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



	Nine Months Ended September 30
	2019
	(Dollars in Millions)
Cash out flows from operating leases	$	28
Right-of-use assets obtained in exchange for lease obligations	$	20

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



(Dollars in Millions)
2019 (excluding the nine months ended September 30, 2019)	$	9
2020	34
2021	27
2022	24
2023	23
2024 and thereafter	71
Total future minimum lease payments	188
Less imputed interest	28
Total lease liabilities	$	160

~~Table of Contents~~

NOTE 11. Debt

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



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Short-Term Debt:
Short-term borrowings	$	47	$	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 30, ~~2017~~2019, are approximately ~~$24~~$68 million and certain of these facilities have pledged assets as security.

Long-Term Debt

As of ~~December 31, 2016,~~September 30, 2019, 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 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 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 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 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 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:



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Product warranty and recall accruals	$	36	$	34
Rent and royalties	22		14
Deferred income	18		16
Non-income taxes payable	15		13
Joint venture payables	13		17
Restructuring reserves	11		23
Income taxes payable	8		15
Dividends payable to non-controlling interests	5		3
Other	22		26
	$	150	$	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:



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Product warranty and recall accruals	$	15	$	14
Derivative financial instruments	14		18
Deferred income	9		14
Income tax reserves	6		6
Non-income tax reserves	4		5
Other	16		19
	$	64	$	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 September 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 financing benefit (cost):
Interest cost	$	(8	)	$	(6	)	$	(2	)	$	(3	)
Expected return on plan assets	10			10			2			2
Restructuring related pension cost:
Special termination benefits	—			—			(1		)	—
Net pension benefit (cost)	$	2		$	4		$	(1	)	$	(1	)

The Company's net periodic benefit costs for all defined benefit plans for the nine month periods ended September 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	(23		)	(20		)	(6		)	(7		)
Expected return on plan assets	30			30			7			7
Amortization of losses and other	—			—			(1		)	(1		)
Restructuring related pension cost:
Special termination benefits	—			(1		)	(1		)	—
Net pension benefit (cost)	$	7		$	9		$	(2	)	$	(2	)

During the nine months ended September 30, 2019, cash contributions to the Company's defined benefit plans were approximately $1 million for the U.S. plans and $4 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 nine month periods ended September 30, 2019, the Company recorded a provision for income tax on continuing operations of $13 million and $16 million, respectively, which reflects income tax expense in countries where the Company is profitable; accrued withholding taxes; ongoing assessments related to the recognition and measurement of uncertain tax benefits; the inability to record a tax benefit for pretax losses and/or recognize expense for pretax income in certain jurisdictions (including the U.S.) due to valuation allowances; and other non-recurring tax items, including changes in judgment about valuation allowances. Pretax losses from continuing operations in jurisdictions where valuation allowances are maintained and no income tax benefits are recognized totaled $46 million and $10 million for the nine month periods ended September 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 nine month periods ended September 30, 2019 and 2018, the Company recognized expense primarily related to non-U.S. withholding taxes, including exchange impacts, of $5 million and $6 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 3 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 September 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 September 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 September 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 $6 million is included in "Other non-current liabilities" on the consolidated balance sheets.

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 $13 million, as of September 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 $16 million as of September 30, 2019, and are included in "Other non-current assets" on the consolidated balance sheets.

NOTE 15. Stockholders’ Equity and Non-controlling Interests

Share Repurchase Program

On January 9, 2017, the Company's Board of Directors authorized $400 million of share 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 December 2020.

During 2018, the Company entered into various programs with third-party financial institutions to purchase a total of approximately 2.8 million shares of Visteon common stock at an average price of $106.92 for an aggregate purchase amount of $300 million.

During the nine months ended September 30, 2019, the Company has purchased a total of 322,120 shares of Visteon common stock at an average price of $62.06 for an aggregate purchase amount of $20 million pursuant to various programs with third-party financial institutions.

As of September 30, 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 nine months ended September 30, 2018, equity increased $13 million due to the forfeiture of unvested shares for a litigation matter with the Company's former CEO as further described in Note 19, "Commitments and Contingencies," classified as a benefit of $10 million to selling, general and administrative expenses and a $3 million benefit classified as discontinued operations.

Non-Controlling Interests

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



	September 30		December 31
	2019		2018
	(Dollars in Millions)
Yanfeng Visteon Automotive Electronics Co., Ltd.	$	52	$	56
Shanghai Visteon Automotive Electronics, Co., Ltd.	41		43
Changchun Visteon FAWAY Electronics, Co., Ltd.	16		15
Other	1		3
	$	110	$	117

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

Accumulated Other Comprehensive Loss

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



	Three Months Ended September 30						Nine Months Ended September 30
	2019			2018			2019			2018
	(Dollars in Millions)
Changes in AOCI:
Beginning balance	$	(215	)	$	(195	)	$	(216	)	$	(174	)
Other comprehensive loss before reclassification, net of tax	(17		)	(11		)	(14		)	(33		)
Amounts reclassified from AOCI	(2		)	(2		)	(4		)	(1		)
Ending balance	$	(234	)	$	(208	)	$	(234	)	$	(208	)
Changes in AOCI by Component:
Foreign currency translation adjustments
Beginning balance	$	(140	)	$	(129	)	$	(142	)	$	(100	)
Other comprehensive loss before reclassification, net of tax (a)	(28		)	(14		)	(26		)	(43		)
Ending balance	(168		)	(143		)	(168		)	(143		)
Net investment hedge
Beginning balance	(1		)	(10		)	(5		)	(12)
Other comprehensive income before reclassification, net of tax (a)	13			1			20			3
Amounts reclassified from AOCI	(2		)	(1		)	(5		)	(1		)
Ending balance	10			(10)			10			(10)
Benefit plans
Beginning balance	(70		)	(61		)	(71		)	(63		)
Other comprehensive income before reclassification, net of tax (b)	—			—			—			1
Amounts reclassified from AOCI (c)	—			—			1			1
Ending balance	(70		)	(61		)	(70		)	(61		)
Unrealized hedging gain (loss)
Beginning balance	(4		)	5			2			1
Other comprehensive income (loss) before reclassification, net of tax (c)	(2		)	2			(8		)	6
Amounts reclassified from AOCI	—			(1		)	—			(1		)
Ending balance	(6		)	6			(6		)	6
Total AOCI	$	(234	)	$	(208	)	$	(234	)	$	(208	)

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

(b) Net tax expense was less than $1 million related to benefit plans for the three and nine months ended September 30, ~~2017~~2019 and ~~2016 are as follows:~~2018.

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~~(c) For the three and nine months ended September 30, 2019, there were no income tax effects related to ~~purchase shares of common stock~~unrealized hedging gain (loss) due to the valuation allowance. Net tax benefit was less than $1 million related to unrealized hedging gain (loss) 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, 2017,~~ the Company's board of directors authorized $400 million of share repurchase of its shares of common stock through. 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. 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.~~

During the second quarter of 2017, the Company entered into a brokerage agreement with a third party financial institution to execute open market share purchases of the Company's common stock. The Company paid approximately $35 million to repurchase 359,100 shares at an average price of $97.44.

~~During the third quarter of 2017, the Company paid approximately $10 million to repurchase 82,513 shares on the open market at an average price of $121.25.~~

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 interests in the Visteon Corporation economic entity are as follows:~~

September 30 December 31
2017 2016
(Dollars in Millions)
Yanfeng Visteon Automotive Electronics Co., Ltd. $ 73
$ 97
Shanghai Visteon Automotive Electronics, Co., Ltd. 43
39
Other 2
2
$ 118
$ 138

~~Table of Contents~~

~~Accumulated Other Comprehensive (Loss) Income~~

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

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
(Dollars in Millions)
Changes in AOCI:
Beginning balance $ (204 ) $ (170 ) $ (233 ) $ (190 )
Other comprehensive income (loss) before reclassification, net of tax 8
2
34
24
Amounts reclassified from AOCI 2
1
5
(1 )
Ending balance $ (194 ) $ (167 ) $ (194 ) $ (167 )
Changes in AOCI by Component:
Foreign currency translation adjustments
  Beginning balance $ (123 ) $ (134 ) $ (163 ) $ (159 )
Other comprehensive income before reclassification, net of tax (a) 17
7
57
32
  Ending balance (106 ) (127 ) (106 ) (127 )
Net investment hedge
  Beginning balance (3 ) 2
10
4
  Other comprehensive loss before reclassification, net of tax (a) (7 ) (4 ) (20 ) (6 )
  Ending balance (10 ) (2)
(10 ) (2)
Benefit plans
  Beginning balance (76 ) (35)
(75 ) (36)
  Other comprehensive income before reclassification, net of tax (a) (1 ) —
(2 ) —
  Amounts reclassified from AOCI —
—
—
1
  Ending balance (77 ) (35 ) (77 ) (35 )
Unrealized hedging (loss) gain
  Beginning balance (2 ) (3 ) (5 ) 1
  Other comprehensive income (loss) before reclassification, net of tax (b) (1 ) (1 ) (1 ) (2 )
  Amounts reclassified from AOCI 2
1
5
(2 )
  Ending balance (1 ) (3 ) (1 ) (3 )
Total AOCI $ (194 ) $ (167 ) $ (194 ) $ (167 )

~~(a)~~three months ended September 30, 2018. Net tax expense was less than $1 million ~~for the nine month period ending September 30, 2017. 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 (loss) for the ~~three and~~ nine ~~month periods~~months ended September 30, ~~2017, respectively. Net tax benefits of $1 million and less than $1 million are related to unrealized hedging gain for the three and nine month periods ended September 30, 2016, respectively.~~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 countries 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 30, ~~2017,~~2019 and December 31, ~~2016,~~2018, the Company had foreign currency derivative instruments with aggregate notional value of approximately ~~$133~~$9 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~~is a liability of $3less than $1 million and ~~a liability~~an asset of $6$1 million, as of September 30, 2019 and December 31, 2018, respectively. 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 September 30, 2019 and December 31, 2018, the Company had cross currency swaps with an aggregate notional value of $250 million. The aggregate fair value of these derivatives is a non-current liability of $1 million and $16 million at September 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. ~~The ineffective portion of changes in the fair value of the swap transactions, if any, is recognized directly in income.~~

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had an aggregate notional value of interest rate swap transactions of $250 million. The aggregate fair value of these derivative transactions as of September 30, 2019 and December 31, 2018 was ~~an asset~~a non-current liability of ~~less than $1~~approximately $9 million and a ~~liability~~non-current asset of $1$2 million, ~~respectively and there has been no ineffectiveness associated with these derivatives. AOCI~~respectively. As of September 30, 2019, a gain of approximately $2 million 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 months ended September 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 September 30, 2019
Foreign currency risk - Cost of sales:
Cash flow hedges	$	—		$	—	$	—	$	1	$	—	$	—
Interest rate risk - Interest expense, net:
Interest rate swap	(2		)	2		—		—		—		—
Net investment hedges	13			1		2		1		—		—
	$	11		$	3	$	2	$	2	$	—	$	—
Nine months ended September 30, 2019
Foreign currency risk - Cost of sales:
Cash flow hedges	$	—		$	2	$	—	$	1	$	—	$	—
Non-designated cash flow hedges	—			—		—		—		—		1
Interest rate risk - Interest expense, net:
Interest rate swap	(8		)	4		—		—		—		—
Net investment hedges	20			3		5		1		—		—
	$	12		$	9	$	5	$	2	$	—	$	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 September 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.

Investments

In 2018, the Company committed to make a $15 million investment in two entities principally focused on the automotive sector pursuant to limited partnership agreements. As a limited partner in each entity, the Company will periodically make capital contributions toward this total commitment amount. As of September 30, 2019 and December 31, 2018, the Company contributed approximately $2 million and $1 million, respectively. The Company does not have significant influence in either partnership. These investments are carried at cost and evaluated for impairment on an annual basis.

The carrying amount of these investments reflected on the consolidated balance sheets approximates their fair values.

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 15% and 14%, and Renault/Nissan which represents ~~17%~~13% and ~~16%~~11%, of the balance as of September 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~~Acquisitions

On September 1, 2018, the Company invested approximately $300,000 and ~~Contingencies~~

~~Litigation~~acquired an additional 1% ownership in VFAE, a Chinese automotive electronic applications manufacturer in which the Company had previously been an equity investor. The Company's ownership interest increased to 51% and, ~~Claims~~

~~In 2003, the Local Development Finance Authority~~because of the ~~Charter Township~~change in control, the assets and liabilities of ~~Van Buren, Michigan (the “Township”) issued, approximately $28 million~~VFAE were consolidated from the date of the transaction. The Company made this additional investment as part of its long-term strategic plan for VFAE. The investment will contribute to the business growth and enhanced economic performance of VFAE by leveraging Visteon’s manufacturing technology and engineering capabilities.

The VFAE acquisition has been accounted for as a purchase transaction. The total consideration, including the $300,000 paid and the fair value of the original 50% interest, has been allocated to the assets acquired, liabilities assumed and non-controlling shareholder interest based on their representative value at September 1, 2018. The excess consideration over the estimated fair value of the net assets acquired has been allocated to goodwill. The operating results of VFAE have been included in ~~bonds finally maturing~~the consolidated financial statements of the Company since the date of the transaction.

A summary of the fair value of the assets acquired and liabilities assumed, translated in ~~2032,~~U.S. dollars, in conjunction with the ~~proceeds of which were used at least in part~~transaction is shown below (in millions):



Assets Acquired			Liabilities Assumed
Cash and equivalents	$	16	Payable to Visteon Corporation	$	9
Accounts receivable, net	12		Accounts payable	6
Inventories, net	4		Other current liabilities	5
Other current assets	6		Income taxes payable	1
Property and equipment, net	5		Other non-current liabilities	2
Intangible assets including goodwill	9		Total liabilities assumed	23
Other non-current assets	1		Non-controlling interest	15
Total assets acquired	$	53	Visteon Corporation Consideration	$	15

The Company utilized a third party to assist in the ~~development~~fair value determination of certain components of the purchase price allocation, primarily intangible assets and non-controlling interest, as well as the fair value of the Company’s ~~U.S. headquarters located in~~original 50% equity investment.

Fair values of equity investment and non-controlling interest, as of the ~~Township. During January 2010,~~acquisition date were estimated using the discounted cash flow technique of the income approach. Fair values of intangible assets were based on the excess earning method of the income approach. The income approach requires the Company to project related future cash inflows and ~~the Township entered into a settlement agreement (the “Settlement Agreement”) that, among other things, reduced the taxable value of the headquarters property~~outflows and apply an appropriate discount rate. The estimates used in determining fair values are based on assumptions believed 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,be reasonable but 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.are inherently uncertain.

The Company previously recorded its investment in VFAE of $10 million as an Investment in non-consolidated affiliates on its consolidated balance sheets. In connection with its increased investment in VFAE, the Company recorded a gain of approximately $4 million on its original investment, classified as "Other income, net" in the consolidated income statement.

The acquisition does not meet the thresholds for a significant acquisition and therefore no pro forma financial information is ~~currently involved~~presented.

NOTE 18. Discontinued Operations

The Company 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 nine months ended September 30, 2019 and 2018.

Discontinued operations are summarized as follows:



	Three Months Ended September 30				Nine Months Ended September 30
	2019		2018		2019			2018
	(Dollars in Millions)
Cost of sales	$	—	$	—	$	(1	)	$	—
Selling, general and administrative expenses	—		—		—			(1		)
Restructuring, net	—		—		1			(1		)
Gain on divestitures	—		1		—			4
Income from discontinued operations, net of tax	$	—	$	1	$	—		$	2

During the first nine 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 19, "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.

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 and could require the Company to pay damages or make other expenditures in amounts, or a range of amounts, that cannot be estimated as of September 30, 2017 and that are in excess of established reserves. The Company does not reasonably expect, except as otherwise described herein, based on its analysis, that any adverse outcome

~~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~~19. 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 nine months ended September 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 $11 million for claims aggregating approximately $73 million in Brazil as of September 30, 2019. The amounts accrued represent claims that are deemed probable of loss and are reasonably estimable based on ~~net~~the Company's assessment of the claims and prior experience with similar matters.

Guarantees and Commitments

During 2014, as part of the YFVIC Transaction, the Company guaranteed certain standard non-payment provisions to cover the lenders in event of non-payment of principal, accrued interest, and other fees due. The loan was fully payed by the borrower and the guarantee concurrently relieved during the quarter ended September 30, 2019.

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, ~~before elimination~~engineering, quality and legal functions and include due consideration of ~~inter-company shipments, Adjusted EBITDA (a non-GAAP financial measure, as defined below)~~contractual arrangements, past experience, current claims and ~~operating assets.~~

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 ~~Company’s current reportable segment is Electronics. The Company's Electronics segment~~following table provides ~~vehicle cockpit electronics products to customers, including audio systems, information displays, instrument clusters, head up displays, infotainment systems,~~a reconciliation of changes in the product warranty and ~~telematics solutions. Prior to 2017,~~recall claims liability:



	Nine Months Ended September 30
	2019			2018
	(Dollars in Millions)
Beginning balance	$	48		$	49
Accruals for products shipped	15			14
Changes in estimates	2			(1		)
Specific cause actions	3			5
Recoverable warranty/recalls	—			2
Foreign currency	(1		)	(1		)
VFAE Consolidation	—			1
Settlements	(16		)	(18		)
Ending balance	$	51		$	51

Other Contingent Matters

Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against the Company, ~~also had Other operations consisting primarily~~including those arising out of ~~South Africa~~alleged defects in the Company’s products; governmental regulations relating to safety; employment-related matters; customer, supplier and ~~South America climate operations substantially exited during~~other contractual relationships; intellectual property rights; product warranties; product recalls; and environmental matters. Some of the ~~fourth quarter~~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 ~~2016. As~~business for which the risks are considered nominal and impracticable to estimate.

Contingencies are subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by the Company ~~ceased Other operations~~for matters discussed in ~~2016, future legacy impacts will~~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 ~~associated with the Company's continuing Electronics operations.~~

~~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~~

~~The Company defines Adjusted EBITDA as net income attributable~~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 September 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, Volkswagen, General Motors, ~~Honda,~~ BMW, Jaguar/Land Rover, Daimler and ~~Daimler.~~Honda. 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 September 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 months ended September 30, ~~2017.~~

2019.

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

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

~~Table of Contents~~

Third quarter ~~2017~~2019 global light vehicle production ~~increased 2.1%~~decreased 3.2% 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 5.3% and Europe increasing 0.7% 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 by geographic region for the ~~three and~~ nine months ended September 30, ~~2017~~2019 and ~~2016, by geographic region~~2018 are provided below:


	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30				Nine Months Ended September 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	%	21.2	21.9	(3.2	)%	66.2	70.3	(5.9	)%
Asia Pacific	11.9	11.5	3.5	%	36.0	34.7	3.6	%
China									5.9	6.2	(5.3	)%	17.5	19.7	(11.5	)%
Other Asia Pacific									5.3	5.5	(3.7	)%	16.4	16.6	(1.6	)%
Europe	5.0	4.8	5.2	%	16.5	16.1	2.4	%	4.7	4.6	0.7	%	15.9	16.6	(3.8	)%
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									4.9	5.0	(1.2	)%	15.0	15.4	(2.4	)%
Other	0.6	0.6	11.6	%	1.9	1.7	12.9	%	0.4	0.6	(23.4	)%	1.4	2.0	(28.5	)%
Source: IHS Automotive	Source: IHS Automotive								Source: IHS Automotive



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)



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



Part I - Financial Information		Page
	Item 1 - Consolidated Financial Statements	3
	Consolidated Statements of Comprehensive Income (Loss) (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	4641
	Item 4 - Controls and Procedures	4741
Part II - Other Information		4843
	Item 1 - Legal Proceedings	4843
	Item 1A - Risk Factors	4843
	~~Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds~~	48
	Item 6 - Exhibits	4843
Exhibit Index		4944
Signatures		4944


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


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


	(Unaudited)						(Unaudited)
	September 30			December 31			September 30			December 31
	2017			2016			2019			2018
ASSETS
Cash and equivalents	$	732		$	878		$	443		$	463
Restricted cash	3			4			3			4
Accounts receivable, net	506			505			457			486
Inventories, net	174			151			192			184
Other current assets	181			170			192			159
Total current assets	1,596			1,708			1,287			1,296

Property and equipment, net	361			345			410			397
Intangible assets, net	128			129			124			129
Right to use assets, net							156			—
Investments in non-consolidated affiliates	40			45			48			42
Other non-current assets	154			146			139			143
Total assets	$	2,279		$	2,373		$	2,164		$	2,007

LIABILITIES AND EQUITY
Short-term debt, including current portion of long-term debt	$	44		$	36
Short-term debt							$	47		$	57
Accounts payable	429			463			464			436
Accrued employee liabilities	102			103			73			67
Current lease liabilities							28			—
Other current liabilities	235			309			150			161
Total current liabilities	810			911			762			721

Long-term debt	347			346			348			348
Employee benefits	305			303			247			257
Non-current lease liabilities							132			—
Deferred tax liabilities	22			20			27			23
Other non-current liabilities	62			69			64			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 September 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 September 30, 2019 and December 31, 2018)							1			1
Additional paid-in capital	1,333			1,327			1,340			1,335
Retained earnings	1,420			1,269			1,644			1,609
Accumulated other comprehensive loss	(194		)	(233		)	(234		)	(216		)
Treasury stock	(1,945		)	(1,778		)	(2,277		)	(2,264		)
Total Visteon Corporation stockholders’ equity	615			586			474			465
Non-controlling interests	118			138			110			117
Total equity	733			724			584			582
Total liabilities and equity	$	2,279		$	2,373		$	2,164		$	2,007



	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
Acquisition of non-controlling interest	—		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
Net income	—		—			14		—			—			14			4			18
Other comprehensive loss	—		—			—		(19		)	—			(19		)	(3		)	(22		)
Stock-based compensation, net	—		2			—		—			—			2			—			2
Cash dividends	—		—			—		—			—			—			(7		)	(7		)
September 30, 2019	$	1	$	1,340		$	1,644	$	(234	)	$	(2,277	)	$	474		$	110		$	584



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	)



	Three Months Ended September 30						Nine Months Ended September 30
	2019			2018			2019			2018
	(Dollars in Millions)
Geographical Markets
Europe	$	221		$	223		$	726		$	759
Americas	201			180			597			611
China Domestic	143			90			372			281
China Export	70			77			204			239
Other Asia-Pacific	141			155			440			508
Eliminations	(45		)	(44		)	(138		)	(145		)
	$	731		$	681		$	2,201		$	2,253


Item 3.	Quantitative and Qualitative Disclosures About Market Risk


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



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.



Exhibit No.		Description
31.1		Rule 13a-14(a) Certification of Chief Executive Officer dated October ~~26, 2017.~~24, 2019.
31.2		Rule 13a-14(a) Certification of Executive Vice President, Chief Financial Officer dated October ~~26, 2017.~~24, 2019.
32.1		Section 1350 Certification of Chief Executive Officer dated October ~~26, 2017.~~24, 2019.
32.2		Section 1350 Certification of Executive Vice President, Chief Financial Officer dated October ~~26, 2017.~~24, 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



	VISTEON CORPORATION

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