FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2008, or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number
1-15827
VISTEON CORPORATION
(Exact name of registrant as
specified in its charter)
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Delaware
(State of incorporation)
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38-3519512
(I.R.S. employer
Identification number)
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One Village Center Drive, Van Buren Township, Michigan
(Address of principal executive
offices)
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48111
(Zip code)
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Registrants telephone number, including area code:
(800)-VISTEON
Indicate by check mark whether the
registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ü No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large Accelerated
Filer ü Accelerated
Filer Non-Accelerated
Filer Smaller
Reporting
Company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes No ü
As of October 24, 2008, the Registrant had outstanding
130,562,025 shares of common stock, par value $1.00 per
share.
Exhibit index located on page
number 60.
VISTEON
CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
INDEX
1
PART I
FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL
STATEMENTS
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REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Visteon Corporation:
We have reviewed the accompanying consolidated balance sheet of
Visteon Corporation and its subsidiaries as of
September 30, 2008, and the related consolidated statements
of operations for each of the three-month and nine-month periods
ended September 30, 2008 and September 30, 2007 and
the consolidated statements of cash flows for the nine-month
periods ended September 30, 2008 and September 30,
2007. These interim financial statements are the responsibility
of the Companys management.
We conducted our review in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting
Oversight Board (United States), the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated interim financial statements for them to be in
conformity with accounting principles generally accepted in the
United States of America.
We previously audited in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheet as of December 31, 2007, and the
related consolidated statements of operations, of
shareholders deficit and of cash flows for the year then
ended (not presented herein), and in our report dated
February 22, 2008, except for Note 21, as to which the
date is May 19, 2008, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance
sheet information as of December 31, 2007 is fairly stated
in all material respects in relation to the consolidated balance
sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Detroit, Michigan
October 30, 2008
2
(Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30
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September 30
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2008
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2007
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2008
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2007
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(Dollars in Millions, Except Per Share Data)
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Net sales
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Products
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$
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2,010
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$
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2,410
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$
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7,530
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$
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8,001
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Services
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100
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136
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345
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407
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2,110
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2,546
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7,875
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8,408
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Cost of sales
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Products
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1,968
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2,313
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7,064
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7,635
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Services
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99
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134
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342
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402
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2,067
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2,447
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7,406
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8,037
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Gross margin
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43
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99
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469
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371
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Selling, general and administrative expenses
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138
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131
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442
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445
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Restructuring expenses
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42
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27
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117
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89
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Reimbursement from Escrow Account
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39
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27
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81
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109
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Asset impairments and loss on divestitures
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19
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14
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70
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65
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Operating loss
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(117
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(46
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(79
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(119
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Interest expense
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48
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59
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160
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163
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Interest income
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10
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17
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38
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40
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Equity in net income of non-consolidated affiliates
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5
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11
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35
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34
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Loss from continuing operations before income taxes and
minority interests
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(150
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(77
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(166
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(208
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Provision for income taxes
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31
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20
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131
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65
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Minority interests in consolidated subsidiaries
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7
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12
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38
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32
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Net loss from continuing operations
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(188
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(109
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(335
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(305
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Loss from discontinued operations, net of tax
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24
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Net loss
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$
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(188
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$
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(109
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$
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(335
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$
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(329
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Basic and Diluted Loss Per Share:
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Continuing operations
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$
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(1.45
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$
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(0.84
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$
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(2.59
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$
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(2.36
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Loss from discontinued operations, net of tax
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(0.18
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Net loss
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$
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(1.45
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)
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$
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(0.84
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$
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(2.59
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$
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(2.54
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See accompanying notes to the consolidated financial statements.
3
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(Unaudited)
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September 30
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December 31
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2008
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2007
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(Dollars in Millions)
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ASSETS
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Cash and equivalents
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$1,133
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$1,758
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Accounts receivable, net
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1,020
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1,150
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Interests in accounts receivable transferred
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237
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434
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Inventories, net
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429
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495
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Other current assets
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314
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235
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Total current assets
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3,133
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4,072
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Property and equipment, net
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2,486
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2,793
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Equity in net assets of non-consolidated affiliates
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226
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218
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Other non-current assets
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96
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122
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Total assets
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$5,941
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$7,205
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LIABILITIES AND SHAREHOLDERS DEFICIT
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Short-term debt, including current portion of long-term debt
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$ 97
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$95
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Accounts payable
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1,331
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1,766
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Accrued employee liabilities
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271
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316
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Other current liabilities
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319
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|
351
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Total current liabilities
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2,018
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2,528
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Long-term debt
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2,492
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2,745
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Postretirement benefits other than pensions
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584
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624
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Employee benefits, including pensions
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539
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530
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Deferred income taxes
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148
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147
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Other non-current liabilities
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412
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428
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Minority interests in consolidated subsidiaries
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|
278
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|
293
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Shareholders deficit
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Preferred stock (par value $1.00, 50 million shares
authorized, none outstanding)
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Common stock (par value $1.00, 500 million shares
authorized, 131 million shares issued, 131 million and
130 million shares outstanding, respectively)
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131
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131
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Stock warrants
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|
127
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127
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Additional paid-in capital
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3,407
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3,406
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Accumulated deficit
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(4,358
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)
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(4,016
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)
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Accumulated other comprehensive income
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|
169
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|
275
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Other
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(6
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)
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|
(13
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)
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Total shareholders deficit
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(530
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)
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(90
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)
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Total liabilities and shareholders deficit
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$5,941
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$7,205
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See accompanying notes to the consolidated financial statements.
4
(Unaudited)
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|
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Nine Months Ended September 30
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2008
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2007
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(Dollars in Millions)
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Operating activities
|
|
|
|
|
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Net loss
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$
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(335
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)
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|
$
|
(329
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)
|
Adjustments to reconcile net loss to net cash used by operating
activities:
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Depreciation and amortization
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|
327
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|
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|
346
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Asset impairments and loss on divestitures
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|
70
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|
|
|
77
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Gain on asset sales
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|
(15
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)
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|
|
(16
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)
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Equity in net income of non-consolidated affiliates, net of
dividends remitted
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|
|
(30
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)
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|
1
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Other non-cash items
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|
(43
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)
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|
|
(29
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)
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Changes in assets and liabilities:
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|
|
|
|
|
|
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Accounts receivable and retained interests
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|
|
204
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|
|
|
25
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|
Inventories
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|
|
(16
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)
|
|
|
(39
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)
|
Accounts payable
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|
|
(259
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)
|
|
|
(99
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)
|
Other assets and liabilities
|
|
|
(56
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)
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
Net cash used by operating activities
|
|
|
(153
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)
|
|
|
(38
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)
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(230
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)
|
|
|
(232
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)
|
Proceeds from divestitures and asset sales
|
|
|
65
|
|
|
|
159
|
|
Other
|
|
|
5
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
(160
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)
|
|
|
(79
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)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Short-term debt, net
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|
|
24
|
|
|
|
(1
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)
|
Proceeds from issuance of debt, net of issuance costs
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|
|
185
|
|
|
|
497
|
|
Principal payments on debt
|
|
|
(78
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)
|
|
|
(27
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)
|
Repurchase of unsecured debt securities
|
|
|
(337
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)
|
|
|
|
|
Other, including overdrafts
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|
|
(62
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)
|
|
|
(17
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)
|
|
|
|
|
|
|
|
|
|
Net cash (used by) provided from financing activities
|
|
|
(268
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)
|
|
|
452
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|
Effect of exchange rate changes on cash
|
|
|
(44
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)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and equivalents
|
|
|
(625
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)
|
|
|
365
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|
Cash and equivalents at beginning of year
|
|
|
1,758
|
|
|
|
1,057
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at end of period
|
|
$
|
1,133
|
|
|
$
|
1,422
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
5
(Unaudited)
NOTE 1. Description
of Business and Company Background
Visteon Corporation (the Company or
Visteon) is a leading global supplier of climate,
interiors, electronics and other automotive systems, modules and
components to global automotive original equipment manufacturers
(OEMs). Headquartered in Van Buren Township,
Michigan, Visteon has a workforce of approximately
35,500 employees and a network of manufacturing operations,
technical centers, sales offices and joint ventures in every
major geographic region of the world.
The Company was incorporated in Delaware in January 2000 as a
wholly-owned subsidiary of Ford Motor Company (Ford
or Ford Motor Company). Subsequently, Ford
transferred the assets and liabilities comprising its automotive
components and systems business to Visteon. The Company
separated from Ford on June 28, 2000 when all of the
Companys common stock was distributed by Ford to its
shareholders. On October 1, 2005, the Company sold
Automotive Components Holdings, LLC (ACH), an
indirect, wholly-owned subsidiary of the Company to Ford
(ACH Transactions).
During the third quarter of 2008, the Company, Ford and ACH
amended certain agreements initially completed in connection
with the ACH Transactions, including the Escrow Agreement, dated
as of October 1, 2005 (the Escrow Agreement),
among Ford, the Company and Deutsche Bank Trust Company
Americas; the Reimbursement Agreement, dated as of
October 1, 2005 (the Reimbursement Agreement),
between Ford and the Company; the Master Services Agreement,
dated as of September 30, 2005, as amended, between the
Company and ACH (the Master Services Agreement); the
Visteon Salaried Employee Lease Agreement, dated as of
October 1, 2005, as amended, between the Company and ACH
(the Visteon Salaried Employee Lease Agreement); and
the Intellectual Property Contribution Agreement, dated as of
October 1, 2005, as amended, among the Company, Visteon
Global Technologies, Inc., Automotive Components Holdings, Inc.
and ACH (the Intellectual Property Contribution
Agreement).
|
|
|
The Amended Escrow Agreement The Escrow
Agreement was amended to, among other things, provide that Ford
contribute an additional $50 million into the escrow
account, and to provide that such additional funds shall be
available to the Company to fund restructuring and other
qualifying costs, as defined within the Escrow Agreement, on a
100% basis. The additional $50 million was funded into the
escrow account in August 2008.
|
|
|
The Amended Reimbursement Agreement The
Reimbursement Agreement was amended and restated to, among other
things, require Ford to reimburse the Company in full for
certain severance expenses and other qualifying termination
benefits, as defined in such agreement, relating to the
termination of salaried employees who were leased to ACH.
Previously, the amount required to be reimbursed by Ford was
capped at $150 million, of which the first $50 million
was to be funded in total by Ford and the remaining
$100 million was to be matched by the Company. Any unused
portion of the $150 million as of December 31, 2009
was to be deposited into the escrow account governed by the
Escrow Agreement. The Reimbursement Agreement was amended to
eliminate the $150 million cap as well as the
Companys obligation to match any costs during the term of
the agreement. Further, Fords obligation to deposit
remaining funds into the escrow account, which was established
pursuant to the Escrow Agreement, was eliminated.
|
|
|
The Amended Master Services Agreement
The Master Services Agreement was amended to, among other
things, extend the term that Visteon will provide certain
services to ACH, Ford and others from December 31, 2009 to
January 1, 2011.
|
|
|
The Amended Visteon Salaried Employee Lease
Agreement The Visteon Salaried Employee Lease
Agreement was amended to, among other things, extend the term
that ACH may lease salaried employees of the Company from
December 31, 2010 to December 31, 2014.
|
6
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 1. |
Description of Business and Company
Background (Continued)
|
|
|
|
The Amended Intellectual Property Contribution
Agreement The Intellectual Property
Contribution Agreement was amended to, among other things,
clarify the availability for use by ACH of certain patents,
design tools and other proprietary information.
|
The Company continues to transact a significant amount of
commercial activity with Ford. The financial statement impact of
these commercial activities is summarized in the table below as
adjusted for discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
643
|
|
|
$
|
893
|
|
|
$
|
2,631
|
|
|
$
|
3,171
|
|
Services
|
|
$
|
96
|
|
|
$
|
132
|
|
|
$
|
331
|
|
|
$
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Accounts receivable, net
|
|
$
|
243
|
|
|
$
|
277
|
|
Postretirement employee benefits
|
|
$
|
116
|
|
|
$
|
121
|
|
Additionally, as of September 30, 2008 and
December 31, 2007, the Company transferred approximately
$67 million and $154 million, respectively, of Ford
receivables under a European receivables securitization program.
|
|
NOTE 2.
|
Basis of
Presentation
|
The unaudited consolidated financial statements of the Company
have been prepared in accordance with the rules and regulations
of the U.S. Securities and Exchange Commission
(SEC). Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United
States (GAAP) have been condensed or omitted
pursuant to such rules and regulations.
These interim consolidated financial statements include all
adjustments (consisting of normal recurring adjustments) that
management believes are necessary for a fair presentation of the
results of operations, financial position and cash flows of the
Company for the interim periods presented. The Companys
management believes that the disclosures are adequate to make
the information presented not misleading when read in
conjunction with the consolidated financial statements and the
notes thereto included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 and Current
Report on
Form 8-K
dated May 19, 2008, as filed with the SEC. Interim results
are not necessarily indicative of full year results.
Principles of Consolidation: The consolidated
financial statements include the accounts of the Company and all
subsidiaries that are more than 50% owned and over which the
Company exercises control. Investments in affiliates of 50% or
less but greater than 20% are accounted for using the equity
method. The consolidated financial statements also include the
accounts of certain entities in which the Company holds a
controlling interest based on exposure to economic risks and
potential rewards (variable interests) for which it is the
primary beneficiary.
7
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 2.
|
Basis of
Presentation (Continued)
|
Revenue Recognition: The Company records
revenue when persuasive evidence of an arrangement exists,
delivery occurs or services are rendered, the sales price or fee
is fixed or determinable and collectibility is reasonably
assured. The Company delivers product and records revenue
pursuant to commercial agreements with its customers generally
in the form of an approved purchase order, including the effects
of contractual customer price productivity. The Company does
negotiate discrete price changes with its customers, which are
generally the result of unique commercial issues between the
Company and its customers and are generally the subject of
specific negotiations between the Company and its customers. The
Company records amounts associated with discrete price changes
as a reduction to revenue when specific facts and circumstances
indicate that a price reduction is probable and the amounts are
reasonably estimable. The Company records amounts associated
with discrete price changes as an increase to revenue upon
execution of a legally enforceable contractual agreement and
when collectibility is reasonably assured.
Services revenues are recognized as services are rendered and
associated costs of providing such services are recorded as
incurred.
Reclassifications: Certain prior period
amounts have been reclassified to conform to current period
presentation.
Use of Estimates: The preparation of financial
statements in conformity with GAAP requires management to make
estimates, judgments and assumptions that affect amounts
reported herein. Management believes that such estimates,
judgments and assumptions are reasonable and appropriate.
However, due to the inherent uncertainty involved, actual
results may differ from those provided in the Companys
consolidated financial statements.
Fair Value Measurements: The Company uses fair
value measurements in the preparation of its financial
statements, which utilize various inputs including those that
can be readily observable, corroborated or are generally
unobservable. The Company utilizes market-based data and
valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs. Additionally, the
Company applies assumptions that market participants would use
in pricing an asset or liability, including assumptions about
risk.
Recent Accounting Pronouncements: In October
2008, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP)
No. FAS 157-3
(FSP
FAS 157-3),
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active, which clarifies the
application of Statement of Financial Accounting Standard
No. 157 (SFAS 157), Fair Value
Measurements, in a market that is not active and provides
an example to illustrate key considerations in determining the
fair value of a financial asset when the market for that
financial asset is not active. FSP
FAS 157-3
became effective upon issuance and was adopted by the Company
for the reporting period ending September 30, 2008 without
material impact on its consolidated financial statements.
In September 2008, the FASB issued FASB Staff Position
No. FAS 133-1
and
FIN 45-4
(FSP
FAS 133-1
and
FIN 45-4),
Disclosures about Credit Derivatives and Certain
Guarantees, an amendment of FASB Statement No. 133 and
FASB Interpretation No. 45; and Clarification of the
Effective Date of FASB Statement No. 161. This FSP
requires disclosure of information about credit derivatives by
sellers of credit derivatives and disclosure of the current
status of the payment/performance risk of a guarantee. This FSP
is effective for financial statements issued for reporting
periods ending after November 15, 2008.
8
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 2.
|
Basis of
Presentation (Continued)
|
In March 2008, the FASB issued Statement of Financial Accounting
Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB
Statement No. 133. This statement requires disclosure
of (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are
accounted for under Statement of Financial Accounting Standards
No. 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an
entitys financial position, results of operations, and
cash flows. This statement is effective for financial statements
issued for fiscal years and interim periods beginning after
November 15, 2008 and becomes effective for the Company on
a prospective basis on January 1, 2009.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141(R), Business
Combinations and Statement of Financial Accounting
Standards No. 160, Non-controlling Interests in
Consolidated Financial Statements, an amendment to ARB
No. 51. These statements change the accounting and
reporting for business combination transactions and minority
interests in consolidated financial statements. These statements
are required to be adopted simultaneously and are effective for
the first annual reporting period beginning on or after
December 15, 2008. The Company is currently evaluating the
impact of these statements on its consolidated financial
statements.
In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities
Including an Amendment of FASB Statement
No. 115. This statement permits measurement of
financial instruments and certain other items at fair value. The
Company adopted this statement effective January 1, 2008
and has not elected the permitted fair value measurement
provisions of this statement.
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, Fair Value
Measurements. This statement, which became effective
January 1, 2008, defines fair value, establishes a
framework for measuring fair value and expands disclosure
requirements regarding fair value measurements. The Company
adopted the requirements of SFAS 157 as of January 1,
2008 without a material impact on its consolidated financial
statements. In February 2008, the FASB issued FASB Staff
Position
No. FAS 157-2
(FSP
FAS 157-2),
Effective Date of FASB Statement No. 157, which
delays the effective date of SFAS 157 for nonfinancial
assets and nonfinancial liabilities that are recognized or
disclosed in the financial statements on a nonrecurring basis to
fiscal years beginning after November 15, 2008. The Company
has not applied the provisions of SFAS 157 to its
nonfinancial assets and nonfinancial liabilities in accordance
with FSP
FAS 157-2.
2008
Divestitures
On August 29, 2008, the Company completed the sale of its
Interiors operation located in Halewood, UK, consisting of the
facility and associated assets including purchase and supply
contracts (the Halewood Divestiture) to
International Automotive Components, Ltd. During 2007, the
Halewood, UK facility operated on a break-even basis on sales of
approximately $150 million. The Company recorded losses of
$2 million in connection with the Halewood Divestiture
during the third quarter of 2008.
9
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 3.
|
Divestitures (Continued)
|
On July 7, 2008, Visteon UK Limited, an indirect,
wholly-owned subsidiary of the Company, sold the entire share
capital of Visteon Swansea Limited, a company incorporated in
England and a wholly-owned subsidiary of Visteon UK Limited, to
Linamar UK Holdings Inc., a wholly-owned subsidiary of Linamar
Corporation for nominal cash consideration (together, the
Swansea Divestiture). The Swansea operation, which
manufactured driveline products, generated negative gross margin
of approximately $40 million on sales of approximately
$80 million during 2007. While the Swansea Divestiture
resulted in the complete exit of driveline product
manufacturing, the Company continues to generate significant
continuing cash flows related to ongoing services and
contractual arrangements pursuant to the ACH Transactions.
The Company recorded losses of approximately $48 million in
connection with this transaction, of which approximately
$13 million was reimbursed from the escrow account
established pursuant to the Escrow Agreement. Losses on the
Swansea Divestiture include $18 million of employee
severance and termination benefits, $7 million of pension
curtailment losses and $7 million of asset impairment
charges, which were recorded in the second quarter of 2008 along
with $13 million of escrow reimbursement. The remaining
losses of $16 million were related to working capital
adjustments recorded during the third quarter of 2008 in
connection with the July 7, 2008 transaction closing date.
During the first quarter of 2008, the Company sold its North
America aftermarket operations including facilities located in
Sparta, Tennessee and Reynosa, Mexico where the Company
manufactured starters and alternators, radiators, compressors
and condensers and also remanufactured steering pumps and gears
(the NA Aftermarket Divestiture). These operations
recorded sales for the year ended December 31, 2007 of
approximately $133 million and generated negative gross
margin of approximately $16 million. During the first
quarter of 2008, the Company recorded losses of $40 million
in connection with the NA Aftermarket Divestiture.
2007
Divestitures
During the third quarter of 2007, the Company completed the sale
of its Visteon Powertrain Control Systems India
(VPCSI) operation located in Chennai, India. The
VPCSI operation manufactured starters and alternators for global
automotive manufacturers. The VPCSI divesture did not result in
the complete exit of any of the affected product lines.
In March 2007, the Company entered into a Master Asset and Share
Purchase Agreement (MASPA) to sell certain assets
and liabilities associated with the Companys chassis
operations (the Chassis Divestiture). The
Companys chassis operations were primarily comprised of
suspension, driveline and steering product lines and included
facilities located in Dueren and Wuelfrath, Germany, Praszka,
Poland and Sao Paulo, Brazil. Collectively, these operations
recorded sales for the year ended December 31, 2006 of
approximately $600 million. The Chassis Divestiture, while
representing a significant portion of the Companys chassis
operations, did not result in the complete exit of any of the
affected product lines.
10
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 3.
|
Divestitures (Continued)
|
Effective May 31, 2007, the Company ceased to produce brake
components at its Swansea, UK facility, which resulted in the
complete exit of the Companys global suspension product
line. Accordingly, the results of operations of the
Companys global suspension product line have been
reclassified to Loss from discontinued operations, net of
tax in the consolidated statements of operations for the
nine-month period ended September 30, 2007. A summary of
the results of discontinued operations is provided in the table
below.
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2007
|
|
|
|
(Dollars in Millions)
|
|
|
Net product sales
|
|
$
|
50
|
|
Cost of sales
|
|
|
63
|
|
Selling, general and administrative expenses
|
|
|
1
|
|
Asset impairments
|
|
|
12
|
|
Restructuring expenses
|
|
|
10
|
|
Reimbursement from escrow account
|
|
|
12
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
(24
|
)
|
|
|
|
|
|
|
|
NOTE 4.
|
Restructuring
Activities
|
The Company has undertaken various restructuring activities to
achieve its strategic and financial objectives. Restructuring
activities include, but are not limited to, plant closures,
production relocation, administrative cost structure realignment
and consolidation of available capacity and resources. The
Company expects to finance restructuring programs through cash
reimbursement from an escrow account established pursuant to the
ACH Transactions, from cash on hand, from cash generated from
its ongoing operations or through cash available under its
existing debt agreements, subject to the terms of applicable
covenants. It is possible that actual cash restructuring costs
could vary significantly from the Companys current
estimates resulting in unexpected costs in future periods.
2008
Restructuring Actions
In September 2008, the Company commenced a program designed to
fundamentally realign, consolidate and rationalize the
Companys administrative organization structure on a global
basis through various voluntary and involuntary employee
separation actions. Related employee severance and termination
benefit costs of $10 million were recorded during the three
months ended September 30, 2008 associated with
approximately 200 salaried employees in the United States, for
which severance and termination benefits were deemed probable
and estimable. The Company estimates additional costs of
approximately $35 million related to this global program in
future periods when elements of the plan are finalized and the
timing of activities and the amount of related costs are not
likely to change. Additionally, the Company recorded
$8 million of employee severance and termination benefit
costs associated with approximately 820 hourly and 60
salaried employees at a North American Climate facility. As of
September 30, 2008, restructuring reserves related to these
programs were approximately $7 million.
11
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 4.
|
Restructuring
Activities (Continued)
|
The Company also continued to execute actions under the
previously announced multi-year improvement plan, incurring
restructuring expenses of $24 million during the third
quarter of 2008. Significant actions under the multi-year
improvement plan, include the following:
|
|
|
$15 million of employee severance and termination benefit
costs associated with approximately 130 employees to reduce
the Companys salaried workforce in higher cost countries.
|
|
|
$6 million of employee severance and termination benefit
costs associated with approximately 40 employees at a
European Interiors facility.
|
The Company currently estimates that the total cost associated
with the multi-year improvement plan will be approximately
$475 million. The Company has incurred $373 million in
cumulative restructuring costs related to the multi-year
improvement plan including $154 million, $125 million,
$63 million and $31 million for the Other, Interiors,
Climate and Electronics product groups, respectively. As of
September 30, 2008, restructuring reserves related to the
multi-year improvement plan are approximately $60 million.
Restructuring
Reserves
Restructuring reserves are recorded in Other current
liabilities on the Companys consolidated balance
sheets as of September 30, 2008 and December 31, 2007,
respectively. The following is a summary of the Companys
consolidated restructuring reserves and related activity as of
and for the nine months ended September 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interiors
|
|
|
Climate
|
|
|
Electronics
|
|
|
Other
|
|
|
Total
|
|
|
|
(Dollars in Millions)
|
|
|
December 31, 2007
|
|
$
|
58
|
|
|
$
|
23
|
|
|
$
|
7
|
|
|
$
|
24
|
|
|
$
|
112
|
|
Expenses
|
|
|
25
|
|
|
|
1
|
|
|
|
1
|
|
|
|
19
|
|
|
|
46
|
|
Currency exchange
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Utilization
|
|
|
(18
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
69
|
|
|
|
4
|
|
|
|
8
|
|
|
|
28
|
|
|
|
109
|
|
Expenses
|
|
|
3
|
|
|
|
4
|
|
|
|
|
|
|
|
22
|
|
|
|
29
|
|
Utilization
|
|
|
(11
|
)
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
|
(24
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
61
|
|
|
|
2
|
|
|
|
7
|
|
|
|
26
|
|
|
|
96
|
|
Expenses
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
|
|
26
|
|
|
|
42
|
|
Currency exchange
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
Utilization
|
|
|
(13
|
)
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
|
(41
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
$
|
50
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all restructuring expenses recorded to date relate
to employee severance and termination benefit costs and are
classified as Restructuring expenses on the
consolidated statements of operations for the three and
nine-month periods ended September 30, 2008 and 2007,
respectively. Utilization for the three months ended
September 30, 2008 includes $39 million of payments
for severance and other employee termination benefits,
$18 million of special termination benefits reclassified to
pension and other postretirement employee benefits, where such
payments are made from the Companys benefit plans and
$8 million of payments for contract termination, equipment
relocation and other costs.
12
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 4.
|
Restructuring
Activities (Continued)
|
Amended Escrow
Agreement
Pursuant to the Escrow Agreement, Ford paid $400 million
into an escrow account for use by the Company to restructure its
businesses. The Escrow Agreement provides that the Company will
be reimbursed from the escrow account for the first
$250 million of reimbursable restructuring costs, as
defined in the Escrow Agreement, and up to one half of the next
$300 million of such costs. In August 2008 and pursuant to
the Amended Escrow Agreement, Ford contributed an additional
$50 million into the escrow account. The Amended Escrow
Agreement provides that such additional funds are available to
fund restructuring and other qualified costs on a 100% basis.
Cash in the escrow account is invested, at the direction of the
Company, in high quality, short-term investments and related
investment earnings are credited to the account as earned.
Investment earnings of $28 million became available to
reimburse the Companys restructuring costs following the
use of the first $250 million of available funds.
Investment earnings on the remaining $200 million will be
available for reimbursement after full utilization of those
funds. The following table provides a reconciliation of amounts
available in the escrow account.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
Inception through
|
|
|
|
September 30, 2008
|
|
|
September 30, 2008
|
|
|
September 30, 2008
|
|
|
|
(Dollars in Millions)
|
|
|
Beginning escrow account available
|
|
$
|
97
|
|
|
$
|
144
|
|
|
$
|
400
|
|
Add: Amended Escrow Agreement funding
|
|
|
50
|
|
|
|
50
|
|
|
|
50
|
|
Add: Investment earnings
|
|
|
1
|
|
|
|
2
|
|
|
|
34
|
|
Deduct: Disbursements for restructuring costs
|
|
|
(31
|
)
|
|
|
(79
|
)
|
|
|
(367
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending escrow account available
|
|
$
|
117
|
|
|
$
|
117
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately $23 million and $22 million of amounts
receivable from the escrow account were classified as
Other current assets in the Companys
consolidated balance sheets as of September 30, 2008 and
December 31, 2007, respectively. While the Company
anticipates full utilization of funds available, any amounts
remaining in the escrow account after December 31, 2012
will be disbursed to the Company.
|
|
NOTE 5.
|
Asset Impairments
and Loss on Divestitures
|
Statement of Financial Accounting Standards No. 144
(SFAS 144), Accounting for the Impairment
or Disposal of Long-Lived Assets requires that long-lived
assets and intangible assets subject to amortization be reviewed
for impairment when certain indicators of impairment are
present. Impairment exists if estimated future undiscounted cash
flows associated with long-lived assets are not sufficient to
recover the carrying value of such assets. Generally, when
impairment exists the long-lived assets are adjusted to their
respective fair values.
2008 Asset
Impairments and Loss on Divestitures
During the three and nine-month periods ended September 30,
2008 the Company recorded asset impairments and loss on
divestitures of $19 million and $70 million,
respectively. These amounts were related to the following:
|
|
|
During the third quarter of 2008, the Company recorded
approximately $16 million of losses on the Swansea
Divestiture related to working capital adjustments in connection
with the July 7, 2008 transaction closing date. Additional
losses on the Swansea Divestiture included $7 million of
asset impairment charges recorded in the second quarter of 2008
in connection with the Companys determination that
long-lived assets subject to the Swansea Divestiture met the
held for sale criteria of SFAS 144.
|
13
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 5.
|
Asset Impairments
and Loss on Divestitures (Continued)
|
|
|
|
The Company also recorded asset impairments and loss on
divestitures of $2 million during the third quarter of 2008
in connection with the Halewood Divestiture and $4 million
during the second quarter of 2008 for long-lived assets related
to the Other product group that met the held for
sale criteria of SFAS 144.
|
|
|
During the first quarter of 2008, the Company determined that
long-lived assets subject to the NA Aftermarket Divestiture met
the held for sale criteria of SFAS 144.
Accordingly, these assets were valued at the lower of carrying
amount or fair value less cost to sell, which resulted in an
asset impairment charge of approximately $21 million. The
Company also recorded a $19 million loss on the NA
Aftermarket Divestiture during the first quarter of 2008.
|
2007 Asset
Impairments
During the three and nine-month periods ended September 30,
2007 the Company recorded asset impairments of $14 million
and $65 million, respectively. These amounts were related
to the following:
|
|
|
During the third quarter of 2007, the Company completed the sale
of its Visteon Powertrain Control Systems India operation
located in Chennai, India. The Company determined that assets
subject to the VPCSI divestiture including inventory,
intellectual property and real and personal property met the
held for sale criteria of SFAS 144. Accordingly,
these assets were valued at the lower of carrying amount or fair
value less cost to sell, which resulted in asset impairment
charges of approximately $14 million.
|
|
|
During 2007, the Company determined that assets subject to the
Chassis Divestiture met the held for sale criteria
of SFAS 144. Accordingly, these assets were valued at the
lower of carrying amount or fair value less cost to sell, which
resulted in asset impairment charges of approximately
$25 million for the nine-month period ended
September 30, 2007.
|
|
|
During the second quarter of 2007, the Company recorded an asset
impairment of $3 million to reduce the net book value of
certain long-lived assets to their estimated fair value, in
connection with restructuring activities undertaken at a North
American Other facility.
|
|
|
In consideration of the MASPA and the Companys announced
exit of the brake manufacturing business at its Swansea, UK
facility, an asset impairment charge of $16 million was
recorded to reduce the net book value of certain long-lived
assets at the facility to their estimated fair value in the
first quarter of 2007. The Companys estimate of fair value
was based on market prices, prices of similar assets, and other
available information.
|
|
|
Additionally, during the first quarter of 2007, the Company
entered into an agreement to sell an Electronics building
located in Japan. The Company determined that the building met
the held for sale criteria of SFAS 144 and was
recorded at the lower of carrying amount or fair value less cost
to sell, which resulted in an asset impairment charge of
approximately $7 million.
|
14
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 6.
|
Asset
Securitization
|
Effective August 14, 2006, the Company entered into a
European accounts receivable securitization facility
(European Securitization) that extends until August
2011 and provides up to $325 million in funding from the
sale of trade receivables originating from Company subsidiaries
located in Germany, Portugal, Spain, France and the UK (the
Sellers). Under the European Securitization, trade
receivables originated by the Sellers and certain of their
subsidiaries are transferred to Visteon Financial Centre P.L.C.
(the Transferor). The Transferor is a
bankruptcy-remote qualifying special purpose entity. Trade
receivables transferred from the Sellers are funded through cash
obtained from the issuance of variable loan notes to third-party
lenders and through subordinated loans obtained from a
wholly-owned
subsidiary of the Company, which represent the Companys
retained interest in the trade receivables transferred.
Transfers under the European Securitization, for which the
Company receives consideration other than a beneficial interest,
are accounted for as true sales under the provisions
of Statement of Financial Accounting Standards No. 140
(SFAS 140), Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities and are removed from the balance sheet.
Transfers under the European Securitization, for which the
Company receives a beneficial interest are not removed from the
balance sheet and total $237 million and $434 million
as of September 30, 2008 and December 31, 2007,
respectively. Such amounts are recorded at fair value and are
subordinated to the interests of
third-party
lenders. Securities representing the Companys retained
interests are accounted for as trading securities under
Statement of Financial Accounting Standards No. 115
Accounting for Certain Investments in Debt and Equity
Securities.
Availability of funding under the European Securitization
depends primarily upon the amount of trade receivables reduced
by outstanding borrowings under the program and other
characteristics of those trade receivables that affect their
eligibility (such as bankruptcy or the grade of the obligor,
delinquency and excessive concentration). As of
September 30, 2008, approximately $114 million of the
Companys transferred trade receivables were considered
eligible for borrowing under this facility, $93 million was
outstanding and $21 million was available for funding. The
Company recorded losses of $5 million and $6 million
for the nine-month periods ended September 30, 2008 and
2007, respectively, related to trade receivables sold under the
European Securitization. The table below provides a
reconciliation of changes in interests in account receivables
transferred for the period.
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Beginning balance
|
|
$
|
434
|
|
|
$
|
482
|
|
Receivables transferred
|
|
|
2,028
|
|
|
|
2,495
|
|
Proceeds from new securitizations
|
|
|
|
|
|
|
(41
|
)
|
Proceeds from collections reinvested in securitization
|
|
|
(425
|
)
|
|
|
(381
|
)
|
Cash flows received on interest retained
|
|
|
(1,778
|
)
|
|
|
(2,132
|
)
|
Currency exchange
|
|
|
(22
|
)
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
237
|
|
|
$
|
463
|
|
|
|
|
|
|
|
|
|
|
15
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 6.
|
Asset
Securitization (Continued)
|
In October 2008, the Company amended and restated agreements
related to the European Securitization to, among other things;
include Visteon Electronics Corporation as a seller under the
facility and remove Visteon UK Limited as the master service
provider. In connection with these amendments, the Company
regained control of previously transferred trade receivables and
the Transferor will be consolidated in accordance with the
requirements of FASB Interpretation 46(R), Consolidation
of Variable Interest Entities an interpretation of
ARB No. 51. Accordingly, upon consolidation, Visteon
will account for transferred accounts receivable as secured
borrowings and will recognize the related receivables and the
obligations to third-party lenders on its consolidated balance
sheet.
Inventories are stated at the lower of cost, determined on a
first-in,
first-out basis, or market. A summary of inventories is provided
below:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Raw materials
|
|
$
|
213
|
|
|
$
|
159
|
|
Work-in-process
|
|
|
139
|
|
|
|
224
|
|
Finished products
|
|
|
122
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
474
|
|
|
|
543
|
|
Valuation reserves
|
|
|
(45
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
429
|
|
|
$
|
495
|
|
|
|
|
|
|
|
|
|
|
Other current assets are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Recoverable taxes
|
|
$
|
116
|
|
|
$
|
88
|
|
Current deferred tax assets
|
|
|
43
|
|
|
|
47
|
|
Prepaid assets
|
|
|
33
|
|
|
|
28
|
|
Dividend receivable
|
|
|
30
|
|
|
|
|
|
Deposits
|
|
|
24
|
|
|
|
30
|
|
Escrow receivable
|
|
|
23
|
|
|
|
22
|
|
Note receivable
|
|
|
10
|
|
|
|
|
|
Other
|
|
|
35
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
314
|
|
|
$
|
235
|
|
|
|
|
|
|
|
|
|
|
16
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 8.
|
Other
Assets (Continued)
|
Other non-current assets are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Non-current deferred tax assets
|
|
$
|
34
|
|
|
$
|
39
|
|
Unamortized debt costs and other intangible assets
|
|
|
28
|
|
|
|
33
|
|
Other
|
|
|
34
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
96
|
|
|
$
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 9.
|
Non-Consolidated
Affiliates
|
The Company had $226 million and $218 million of
equity in the net assets of non-consolidated affiliates at
September 30, 2008 and December 31, 2007,
respectively. The Company recorded equity in net income of
non-consolidated affiliates of $5 million and
$11 million for the three months ended September 30,
2008 and 2007, respectively. For the nine-month periods ended
September 30, 2008 and 2007, the Company recorded
$35 million and $34 million, respectively.
The following table presents summarized financial data for the
Companys non-consolidated affiliates. Amounts included in
the table below represent 100% of the results of operations of
the Companys
non-consolidated
affiliates accounted for under the equity method. Yanfeng
Visteon Automotive Trim Systems Co., Ltd, of which the Company
owns a 50% interest, is considered a significant
non-consolidated
affiliate and is shown separately below.
Summarized financial data for the three-month periods ended
September 30 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Gross Margin
|
|
|
Net Income
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Yanfeng Visteon Automotive Trim Systems Co., Ltd.
|
|
$
|
154
|
|
|
$
|
243
|
|
|
$
|
35
|
|
|
$
|
40
|
|
|
$
|
9
|
|
|
$
|
16
|
|
All other
|
|
|
206
|
|
|
|
195
|
|
|
|
27
|
|
|
|
21
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
360
|
|
|
$
|
438
|
|
|
$
|
62
|
|
|
$
|
61
|
|
|
$
|
9
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized financial data for the nine-month periods ended
September 30 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Gross Margin
|
|
|
Net Income
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Yanfeng Visteon Automotive Trim Systems Co., Ltd.
|
|
$
|
704
|
|
|
$
|
672
|
|
|
$
|
136
|
|
|
$
|
116
|
|
|
$
|
53
|
|
|
$
|
50
|
|
All other
|
|
|
626
|
|
|
|
543
|
|
|
|
91
|
|
|
|
74
|
|
|
|
16
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,330
|
|
|
$
|
1,215
|
|
|
$
|
227
|
|
|
$
|
190
|
|
|
$
|
69
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys share of net assets and net income is
reported in the consolidated financial statements as
Equity in net assets of non-consolidated affiliates
on the consolidated balance sheets and Equity in net
income of non-consolidated affiliates on the consolidated
statements of operations. Included in the Companys
accumulated deficit is undistributed income of non-consolidated
affiliates accounted for under the equity method of
approximately $100 million and $99 million at
September 30, 2008 and December 31, 2007, respectively.
17
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 10.
|
Property and
Equipment
|
Property and equipment is stated at cost and is depreciated over
the estimated useful lives of the assets, principally using the
straight-line method. A summary of property and equipment, net
is provided below:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Land
|
|
$
|
82
|
|
|
$
|
95
|
|
Buildings and improvements
|
|
|
1,012
|
|
|
|
1,083
|
|
Machinery, equipment and other
|
|
|
3,529
|
|
|
|
3,894
|
|
Construction in progress
|
|
|
126
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
4,749
|
|
|
|
5,218
|
|
Accumulated depreciation
|
|
|
(2,378
|
)
|
|
|
(2,573
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2,371
|
|
|
|
2,645
|
|
Product tooling, net of amortization
|
|
|
115
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
2,486
|
|
|
$
|
2,793
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expenses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Depreciation
|
|
$
|
93
|
|
|
$
|
98
|
|
|
$
|
299
|
|
|
$
|
310
|
|
Amortization
|
|
|
9
|
|
|
|
11
|
|
|
|
28
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
102
|
|
|
$
|
109
|
|
|
$
|
327
|
|
|
$
|
346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 11.
|
Other
Liabilities
|
Other current liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Restructuring accrual
|
|
$
|
67
|
|
|
$
|
87
|
|
Product warranty and recall accrual
|
|
|
53
|
|
|
|
54
|
|
Non-income taxes payable
|
|
|
50
|
|
|
|
34
|
|
Accrued interest payable
|
|
|
25
|
|
|
|
62
|
|
Income taxes payable
|
|
|
23
|
|
|
|
13
|
|
Other accrued liabilities
|
|
|
101
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
319
|
|
|
$
|
351
|
|
|
|
|
|
|
|
|
|
|
18
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11.
|
Other
Liabilities (Continued)
|
Other non-current liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Income tax accrual
|
|
$
|
195
|
|
|
$
|
154
|
|
Non-income tax payable
|
|
|
75
|
|
|
|
80
|
|
Product warranty and recall accrual
|
|
|
53
|
|
|
|
54
|
|
Deferred income
|
|
|
49
|
|
|
|
63
|
|
Restructuring accrual
|
|
|
|
|
|
|
25
|
|
Other accrued liabilities
|
|
|
40
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
412
|
|
|
$
|
428
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007, non-current deferred income
included approximately $42 million related to the sale of
two facilities in connection with the ACH Transactions, which
the Company leased-back. During the three months ended
September 30, 2008, the Company terminated the lease on one
of the facilities and recognized $12 million of related
deferred income, which was offset by the remaining net book
value associated with the facility.
Short-term and long-term debt including the fair value of
related interest rate swaps are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Short-term debt
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
27
|
|
|
$
|
44
|
|
Other
|
|
|
70
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
Total short-term debt
|
|
|
97
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
8.25% notes due August 1, 2010
|
|
|
207
|
|
|
|
553
|
|
Term loan due June 13, 2013
|
|
|
1,000
|
|
|
|
1,000
|
|
Term loan due December 13, 2013
|
|
|
500
|
|
|
|
500
|
|
7.00% notes due March 10, 2014
|
|
|
453
|
|
|
|
449
|
|
12.25% notes due December 31, 2016
|
|
|
197
|
|
|
|
|
|
Other
|
|
|
135
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
2,492
|
|
|
|
2,745
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
2,589
|
|
|
$
|
2,840
|
|
|
|
|
|
|
|
|
|
|
Fair value of total debt was $1,541 million and $2,542 as
of September 30, 2008 and December 31, 2007,
respectively.
19
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12.
|
Debt (Continued)
|
2008 Issuance of
New Notes and Tender Offer for Notes due 2010
On June 18, 2008, the Company completed the sale of
$206.4 million aggregate principal amount of its
12.25% senior notes due 2016 (the New Notes) in
a private placement exempt from the registration requirements of
the Securities Act of 1933. On June 18, 2008, the Company
repurchased $344 million in aggregate principal amount of
its 8.25% senior notes due August 2010 pursuant to a
partial tender offer commenced on May 19, 2008
(collectively the Bond Transactions). The Company
used the net proceeds from the sale of the New Notes, plus
additional cash on hand, to pay the aggregate consideration of
approximately $337 million, excluding costs and expenses,
for such repurchase. The New Notes rank equally with the
Companys existing and future unsecured term debt, senior
to any future subordinated debt, and are guaranteed by certain
of its U.S. subsidiaries. The New Notes have not been and
will not be registered under the Securities Act or any state
securities laws.
The New Notes were issued pursuant to a supplemental indenture
which contains covenants that limit, among other things, the
ability of the Company and its restricted subsidiaries to incur
additional indebtedness, make certain distributions, investments
and other restricted payments, dispose of assets, grant liens on
assets, issue guarantees, designate unrestricted subsidiaries,
engage in transactions with affiliates, enter into agreements
restricting the ability of subsidiaries to pay dividends, engage
in sale and leaseback transactions and merge or consolidate or
transfer substantially all of its assets, subject to certain
exceptions and qualifications. Each of the Companys
existing and future
wholly-owned
domestic restricted subsidiaries that guarantee debt under the
Companys revolving credit facility guarantee the New Notes.
Holders of the New Notes have the right to require the Company
to redeem their New Notes in whole or in part on
December 31, 2013 at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest (the
Put Option). The Company may redeem the New Notes
prior to December 31, 2013 in whole at any time or in part
from time to time, at its option, at a redemption price equal to
the greater of (1) 100% of the principal amount to be
redeemed, and (2) the sum of the present values of the
remaining scheduled payments of principal and interest on the
New Notes to be redeemed discounted to the date of redemption on
a semi-annual basis at the applicable Treasury Rate plus
50 basis points plus accrued and unpaid interest,
including, if applicable, liquidated damages, on the principal
amount being redeemed to the redemption date. Thereafter, the
Company may redeem the New Notes in whole at any time or in part
from time to time, at its option, at specified redemption prices
plus accrued and unpaid interest. In addition, upon the
occurrence of certain change of control events, holders of the
New Notes have the right to require the Company to purchase some
or all of the New Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest.
Interest on the New Notes is fixed at an annual rate of 12.25%
and is payable semi-annually in arrears on June 30 and
December 31, beginning December 31, 2008. The Company
is required to pay additional interest on the New Notes if, at
any time during the period beginning six months and ending one
year after June 18, 2008, adequate current public
information with respect to the Company is unavailable.
The Bond Transactions were accounted for as a modification of
existing indebtedness under FASB Emerging Issues Task Force
No. 96-19,
Debtors Accounting for a Modification or Exchange of
Debt Instruments. Accordingly, an aggregate discount of
$10 million related to the net amount of the discount on
the New Notes, which were issued at a price of $916.21 per
$1,000 in aggregate principle amount, fees paid to creditors and
the gain on retirement of $344 million of 8.25% senior
notes due August 2010 has been deferred and will be amortized
over the life of the New Notes up to the date of the Put Option.
Additionally, during the second quarter of 2008 the Company
recorded $5 million of expenses related to third party fees
and recognized $3 million of unamortized gains related to
previously terminated interest rate swaps in connection with the
Bond Transactions.
20
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12.
|
Debt (Continued)
|
Other
Debt
As of September 30, 2008, the Company had additional debt
facilities of $494 million, with $97 million and
$135 million in short-term and long-term debt outstanding,
respectively, consisting of credit facilities and capital leases
for various affiliates and other obligations. Remaining
availability on the credit facilities is approximately
$262 million. Certain of these balances are related to a
number of the Companys
non-U.S. operations,
a portion of which are payable in
non-U.S. currencies
including, but not limited to, the Euro, Korean Won and
Brazilian Real.
|
|
NOTE 13.
|
Employee
Retirement Benefits
|
The components of the Companys net periodic benefit costs
for the three-month periods ended September 30, 2008 and
2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care
|
|
|
|
Retirement Plans
|
|
|
and Life
|
|
|
|
|
|
|
Non-U.S.
|
|
|
Insurance
|
|
|
|
U.S. Plans
|
|
|
Plans
|
|
|
Benefits
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Service cost
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Interest cost
|
|
|
19
|
|
|
|
18
|
|
|
|
20
|
|
|
|
18
|
|
|
|
8
|
|
|
|
8
|
|
Expected return on plan assets
|
|
|
(21
|
)
|
|
|
(19
|
)
|
|
|
(15
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan amendments
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
(7
|
)
|
|
|
(13
|
)
|
Actuarial losses and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
2
|
|
|
|
4
|
|
Special termination benefits
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Curtailments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visteon sponsored plan net periodic benefit costs
|
|
|
5
|
|
|
|
6
|
|
|
|
10
|
|
|
|
18
|
|
|
|
(9
|
)
|
|
|
(10
|
)
|
Expense for certain salaried employees whose pensions are
partially covered by Ford
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefits costs, excluding restructuring
|
|
$
|
8
|
|
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
18
|
|
|
$
|
(11
|
)
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special termination benefits
|
|
|
11
|
|
|
|
|
|
|
|
4
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employee retirement benefit related restructuring costs
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 13.
|
Employee
Retirement Benefits (Continued)
|
The components of the Companys net periodic benefit costs
for the nine-month periods ended September 30, 2008 and
2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care
|
|
|
|
Retirement Plans
|
|
|
and Life
|
|
|
|
|
|
|
Non-U.S.
|
|
|
Insurance
|
|
|
|
U.S. Plans
|
|
|
Plans
|
|
|
Benefits
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Service cost
|
|
$
|
16
|
|
|
$
|
19
|
|
|
$
|
15
|
|
|
$
|
21
|
|
|
$
|
3
|
|
|
$
|
5
|
|
Interest cost
|
|
|
55
|
|
|
|
54
|
|
|
|
55
|
|
|
|
54
|
|
|
|
24
|
|
|
|
24
|
|
Expected return on plan assets
|
|
|
(62
|
)
|
|
|
(57
|
)
|
|
|
(45
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan amendments
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
4
|
|
|
|
4
|
|
|
|
(24
|
)
|
|
|
(36
|
)
|
Actuarial losses and other
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
9
|
|
|
|
8
|
|
|
|
12
|
|
Special termination benefits
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
Curtailments
|
|
|
1
|
|
|
|
10
|
|
|
|
5
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visteon sponsored plan net periodic benefit costs
|
|
|
12
|
|
|
|
29
|
|
|
|
36
|
|
|
|
80
|
|
|
|
(32
|
)
|
|
|
(15
|
)
|
Expense for certain salaried employees whose pensions are
partially covered by Ford
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefits costs, excluding restructuring
|
|
$
|
13
|
|
|
$
|
29
|
|
|
$
|
36
|
|
|
$
|
80
|
|
|
$
|
(37
|
)
|
|
$
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special termination benefits
|
|
|
12
|
|
|
|
3
|
|
|
|
21
|
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employee retirement benefit related restructuring costs
|
|
$
|
12
|
|
|
$
|
3
|
|
|
$
|
21
|
|
|
$
|
9
|
|
|
$
|
1
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments and
Settlements
Curtailment and settlement gains and losses are recorded in
accordance with Statement of Financial Accounting Standards Nos.
88 (SFAS 88), Employers Accounting
for Settlements and Curtailments of Defined Benefit Pension
Plans and for Termination Benefits and 106
(SFAS 106), Employers Accounting
for Postretirement Benefits Other Than Pensions and are
classified in the Companys consolidated statements of
operations as Cost of sales or Selling,
general and administrative expenses. Qualifying
curtailment and settlement losses related to the Companys
restructuring activities are reimbursable under the terms of the
Amended Escrow Agreement. The following curtailments and
settlements were recorded during the three and nine-month
periods ended September 30, 2008 and 2007:
|
|
|
The Company recorded curtailment gains of $13 million and
$43 million for the three and nine months ended
September 30, 2008 related to elimination of employee
benefits associated with U.S. other postretirement benefit
(OPEB) plans in connection with employee headcount
reductions under previously announced restructuring actions.
|
22
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 13.
|
Employee
Retirement Benefits (Continued)
|
|
|
|
During the second quarter of 2008 the Company recorded pension
curtailment losses of $7 million related to the reduction
of future service in the UK pension plan for employees at the
Companys Swansea, UK operation in connection with the
Swansea Divestiture. Additionally, in accordance with Statement
of Financial Accounting Standards No. 158
(SFAS 158), Employers Accounting
for Defined Benefit and Other Postretirement Benefits, an
amendment of FASB Statements No. 87, 88, 106, and
132(R), the Company re-measured the assets and obligations
of its UK pension plan, which resulted in an increase of
$57 million in the Companys net pension liability and
a corresponding decrease in Accumulated other comprehensive
income.
|
|
|
The Company recorded curtailment gains of $11 million and
$20 million for the three and nine months ended
September 30, 2007, respectively, related to elimination of
employee benefits associated with a U.S. OPEB plan in
connection with employee headcount reductions under previously
announced restructuring actions.
|
|
|
The Company recorded a settlement loss of $13 million
during the second quarter of 2007 related to employee retirement
benefit obligations under certain German retirement plans for
employees of the Dueren and Wuelfrath, Germany facilities, which
were included in the Chassis Divestiture.
|
|
|
The Company recorded settlement losses of $3 million and
$20 million during the three and nine months ended
September 30, 2007, respectively, related to employee
retirement benefit obligations under a Canadian retirement plan
for employees of the Markham, Ontario facility, which was closed
in 2002.
|
|
|
The Company recorded a curtailment loss of $10 million
during the first quarter of 2007 for retirement benefit
obligations under U.S. retirement plans per previously
announced restructuring actions.
|
Retirement
Benefit Related Restructuring Expenses
In addition to retirement benefit expenses, the Company recorded
$18 million and $36 million for the three and nine
months ended September 30, 2008, respectively, for
retirement benefit related restructuring charges, of which
$2 million are expenses for certain salaried employees
whose pensions are partially covered by Ford. Such charges
generally relate to special termination benefits, voluntary
termination incentives, and pension losses and are the result of
various restructuring actions as described in Note 4
Restructuring Activities. Retirement benefit related
restructuring charges are initially classified as restructuring
expenses and related accruals are subsequently reclassified to
retirement benefit liabilities.
Contributions
During the nine-month period ended September 30, 2008,
contributions to the Companys U.S. retirement plans
and postretirement health care and life insurance plans were
$19 million and $21 million, respectively, and
contributions to
non-U.S. retirement
plans were $48 million. The Company presently anticipates
additional contributions to its U.S. retirement plans and
postretirement health care and life insurance plans of
$12 million and $9 million, respectively, in 2008. The
Company also anticipates additional 2008 contributions to
non-U.S. retirement
plans of $64 million.
23
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 13.
|
Employee
Retirement Benefits (Continued)
|
Other
In October 2008, the Company approved changes to certain hourly
postretirement employee health care plans to eliminate
Company-sponsored prescription drug benefits for Medicare
eligible retirees, spouses and dependents effective
January 1, 2009, to eliminate all benefits for certain
employees who are not currently eligible and to provide
additional retirement plan benefits. These changes are expected
to result in a net reduction in pension and OPEB liabilities in
the fourth quarter of 2008 of approximately $93 million.
This amount will be amortized as a net reduction of retirement
and postretirement employee benefit expense over the average
remaining life expectancy of plan participants. The Company
expects to record curtailment gains in the fourth quarter of
2008 of approximately $15 million reflecting the
elimination of future service in these plans.
In October 2008, the Company settled employee pension
obligations of approximately $90 million related to the UK
pension plan for employees that transferred from Visteon to Ford
during the years 2005 through 2007 in accordance with certain
agreements initially completed in connection with the ACH
Transactions. Accordingly, the Company expects to record a
charge of approximately $40 million during the fourth
quarter of 2008. The charge is subject to reimbursement under
the terms of the Amended Escrow Agreement.
In accordance with the adoption of SFAS 158, the Company
re-measured plan assets and obligations as of January 1,
2007. As a result, the Company recorded a reduction to the
pension liability of approximately $120 million, a
reduction of the OPEB liability of approximately
$90 million and an increase to accumulated other
comprehensive income of approximately $210 million. The
Company also adjusted the January 1, 2007 retained earnings
balance by approximately $34 million, representing the net
periodic benefit costs for the period between September 30,
2006 and January 1, 2007 that would have been recognized on
a delayed basis during the first quarter of 2007 absent the
change in measurement date.
Provision for
Income Taxes
The Companys provision for income taxes in interim periods
is computed by applying an estimated annual effective tax rate
against loss from continuing operations before income taxes and
minority interests, 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 Companys
operations are profitable and whose results continue to be
tax-effected and for those countries where full deferred tax
asset valuation allowances exist and are maintained. The
Companys provision for income tax of $31 million and
$131 million for the three-month and nine-month periods
ended September 30, 2008, respectively, reflects income tax
expense related to those countries where the Company is
profitable, accrued withholding taxes, ongoing assessments
related to the recognition and measurement of uncertain tax
benefits and certain non-recurring tax items and the inability
to record a tax benefit for pre-tax losses in the U.S. and
certain other jurisdictions to the extent not offset by other
categories of income.
24
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 14.
|
Income
Taxes (Continued)
|
In July 2008, the Housing Assistance Tax Act of 2008 (the
Act) was signed into law. The Act allows corporations to
elect to treat certain unused U.S. research tax credits as
refundable in lieu of claiming bonus and accelerated
depreciation for eligible qualified property placed in service
between April 1, 2008 and December 31, 2008. The
amount of the Companys unused research tax credits
eligible for the refund is limited to approximately
$7 million. Based on initial projections of expected
qualified eligible property to be placed in service between
April 1, 2008 and December 31, 2008, the Company
estimates that it will be able to accelerate the use of
approximately $4 million of research tax credits previously
subject to limitation and obtain a refund. Due to the existence
of valuation allowances against its U.S. research tax
credit carryforwards, the anticipated realization of a portion
of these credits resulted in the Company recording an income tax
benefit of approximately $4 million in the third quarter of
2008.
The need to maintain valuation allowances against deferred tax
assets in the U.S. and other affected countries will
continue to cause variability in the Companys quarterly
and annual effective tax rates. Full valuation allowances
against deferred tax assets in the U.S. and applicable
foreign countries, which include the UK and Germany, will be
maintained until sufficient positive evidence exists to reduce
or eliminate them.
Unrecognized Tax
Benefits
The Company and its subsidiaries have operations in every major
geographic region of the world and are subject to income taxes
in the U.S. and numerous foreign jurisdictions.
Accordingly, the Company files tax returns and is subject to
examination by taxing authorities throughout the world,
including such significant jurisdictions as Korea, India,
Portugal, Spain, Czech Republic, Hungary, Mexico, Canada,
Germany and the United States. With few exceptions, the Company
is no longer subject to U.S. federal tax examinations for
years before 2004 or state and local, or
non-U.S. income
tax examinations for years before 2000.
The Companys gross unrecognized tax benefits at
September 30, 2008 were approximately $290 million,
and the amount of unrecognized tax benefits that, if recognized,
would impact the effective tax rate were approximately
$150 million. The gross unrecognized tax benefits differ
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. Since the
uncertainty is expected to be resolved while a full valuation
allowance is maintained, these uncertain tax positions will not
impact the effective tax rate in current or future periods.
During the third quarter of 2008, the Company increased its
gross unrecognized tax benefits by approximately
$20 million primarily as a result of certain positions
expected to be taken in future tax returns, of which,
$10 million would impact the effective tax rate if the
unrecognized tax benefits were recognized.
It is reasonably possible that the amount of the Companys
unrecognized tax benefits may change within the next twelve
months as a result of settlement of ongoing audits or for
changes in judgment as new information becomes available related
to positions expected to be taken in future tax returns,
primarily related to transfer pricing initiatives. An estimate
of the range of reasonably possible outcomes cannot be made at
this time. Further, substantially all of the Companys
unrecognized tax benefits relate to uncertain tax positions that
are not currently under review by taxing authorities, and the
Company is unable to specify the future periods in which it may
be obligated to settle such amounts.
The Company records interest and penalties related to uncertain
tax positions as a component of income tax expense. Estimated
interest and penalties related to the potential underpayment of
income taxes totaled $4 million for the three months ended
September 30, 2008. As of September 30, 2008, the
Company had approximately $45 million of accrued interest
and penalties related to uncertain tax positions.
25
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 15.
|
Comprehensive
Loss
|
Comprehensive loss, net of tax is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Net loss
|
|
$
|
(188
|
)
|
|
$
|
(109
|
)
|
|
$
|
(335
|
)
|
|
$
|
(329
|
)
|
Pension and other postretirement benefit adjustments
|
|
|
13
|
|
|
|
(4
|
)
|
|
|
(46
|
)
|
|
|
105
|
|
Change in foreign currency translation adjustments
|
|
|
(140
|
)
|
|
|
54
|
|
|
|
(60
|
)
|
|
|
86
|
|
Unrealized losses on derivatives
|
|
|
(8
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(323
|
)
|
|
$
|
(62
|
)
|
|
$
|
(441
|
)
|
|
$
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income is comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Foreign currency translation adjustments
|
|
$
|
237
|
|
|
$
|
297
|
|
Pension and other postretirement benefit adjustments, net of tax
|
|
|
(56
|
)
|
|
|
(10
|
)
|
Unrealized losses on derivatives
|
|
|
(12
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
169
|
|
|
$
|
275
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share of common stock is calculated by
dividing reported net loss by the average number of shares of
common stock outstanding during the applicable period, adjusted
for restricted stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(188
|
)
|
|
$
|
(109
|
)
|
|
$
|
(335
|
)
|
|
$
|
(305
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(188
|
)
|
|
$
|
(109
|
)
|
|
$
|
(335
|
)
|
|
$
|
(329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common stock outstanding
|
|
|
130.6
|
|
|
|
129.8
|
|
|
|
130.4
|
|
|
|
129.5
|
|
Less: Average restricted stock outstanding
|
|
|
(1.2
|
)
|
|
|
(0.1
|
)
|
|
|
(0.9
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted shares
|
|
|
129.4
|
|
|
|
129.7
|
|
|
|
129.5
|
|
|
|
129.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share from continuing operations
|
|
$
|
(1.45
|
)
|
|
$
|
(0.84
|
)
|
|
$
|
(2.59
|
)
|
|
$
|
(2.36
|
)
|
Loss from discontinued operations, net of tax
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(1.45
|
)
|
|
$
|
(0.84
|
)
|
|
$
|
(2.59
|
)
|
|
$
|
(2.54
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 16.
|
Loss Per
Share (Continued)
|
Stock options and stock warrants with exercise prices that
exceed the average market price of the Companys common
stock have an anti-dilutive effect and therefore were excluded
from the computation of diluted loss per share. The number of
stock options excluded from the computation of diluted loss
per share was 12 million and 13 million for the
three and nine months ended September 30, 2008,
respectively, and 12 million for both the three and nine
month periods ended September 30, 2007. The number of stock
warrants excluded from the computation of diluted loss per share
was 25 million for the three and nine months ended
September 30, 2008 and 2007.
|
|
NOTE 17.
|
Fair Value
Measurements
|
In September 2006, the FASB issued SFAS 157, Fair
Value Measurements. SFAS 157 establishes a framework
for measuring fair value, which includes a hierarchy based on
the quality of inputs used to measure fair value and provides
specific disclosure requirements based on the hierarchy.
Fair Value
Hierarchy
SFAS 157 requires the categorization of financial assets
and liabilities, based on the inputs to the valuation technique,
into a three-level fair value hierarchy. 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. The various levels of the
SFAS 157 fair value hierarchy are described as follows:
|
|
|
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.
|
SFAS 157 requires the use of observable market data, when
available, in making fair value measurements. When inputs used
to measure fair value fall within different levels of the
hierarchy, the level within which the fair value measurement is
categorized is based on the lowest level input that is
significant to the fair value measurement.
Recurring Fair
Value Measurements
The following table presents the Companys fair value
hierarchy for financial assets and liabilities measured at fair
value on a recurring basis as of September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
Other Observable
|
|
Unobservable
|
|
|
Inputs
|
|
Inputs
|
|
|
(Level 2)
|
|
(Level 3)
|
|
|
(Dollars in Millions)
|
|
Assets
|
|
|
|
|
|
|
|
|
Interests in accounts receivable transferred
|
|
$
|
|
|
|
$
|
237
|
|
Foreign currency instruments
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9
|
|
|
$
|
237
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
2
|
|
|
$
|
|
|
Foreign currency instruments
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
27
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 17.
|
Fair Value
Measurements (Continued)
|
Financial instruments whose fair values are based on prices or
valuation techniques that require inputs that are both
unobservable and significant to the fair value measurement are
considered to be Level 3 assets or liabilities. Changes in
the fair value of the Companys Level 3 assets for the
three and nine-month periods ended September 30, 2008 were
not material.
Valuation
Methods
Interest rate swaps and foreign currency hedge
instruments These financial instruments are valued
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 counterparty
non-performance
risk. Substantially all of these assumptions are observable in
the marketplace throughout the full term of the instrument, can
be derived from observable data or are supported by observable
levels at which transactions are executed in the marketplace.
Interests in accounts receivable transferred These
financial assets result from the transfer of trade accounts
receivable under the European Securitization. These securities
are valued under an income approach, which requires inputs that
are both unobservable and significant to the overall fair value
measurement. These inputs reflect the assumptions a market
participant would use in pricing the asset or liability and
include consideration of time value and counterparty
non-performance risk.
|
|
NOTE 18.
|
Commitments and
Contingencies
|
Guarantees
The Company has guaranteed approximately $16 million of
debt capacity held by subsidiaries and $91 million for
lifetime lease payments held by consolidated subsidiaries.
Litigation and
Claims
In February 2005, a shareholder lawsuit was filed in the
U.S. District Court for the Eastern District of Michigan
against the Company and certain current and former officers of
the Company. In July 2005, the Public Employees Retirement
System of Mississippi was appointed as lead plaintiff in this
matter. In September 2005, the lead plaintiff filed an amended
complaint, which alleges, among other things, that the Company
and its independent registered public accounting firm,
PricewaterhouseCoopers LLP, made misleading statements of
material fact or omitted to state material facts necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading. The named plaintiff
seeks to represent a class consisting of purchasers of the
Companys securities during the period between
June 28, 2000 and January 31, 2005. On August 31,
2006, the defendants motion to dismiss the amended
complaint for failure to state a claim was granted and on
August 26, 2008 the dismissal was affirmed on appeal by the
U.S. Court of Appeals for the Sixth Circuit.
Product Warranty
and Recall
Amounts accrued for product warranty and recall claims are based
on managements best estimates of the amounts that will
ultimately be required to settle such items. The Companys
estimates for product warranty and recall obligations are
developed with support from its sales, engineering, quality and
legal functions and include due consideration of contractual
arrangements, past experience, current claims and related
information, production changes, industry and regulatory
developments and various other considerations. The Company can
provide no assurances that it will not experience material
claims in the future or that it will not incur significant costs
to defend or settle such claims beyond the amounts accrued or
beyond what the Company may recover from its suppliers.
28
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 18.
|
Commitments and
Contingencies (Continued)
|
The following table provides a reconciliation of changes in
product warranty and recall liability for the nine months ended
September 30, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
Product Warranty and Recall
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Beginning balance, December 31
|
|
$
|
108
|
|
|
$
|
105
|
|
Accruals for products shipped
|
|
|
33
|
|
|
|
36
|
|
Changes related to pre-existing conditions (including changes in
estimates)
|
|
|
9
|
|
|
|
(11
|
)
|
Settlements
|
|
|
(44
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance, September 30
|
|
$
|
106
|
|
|
$
|
103
|
|
|
|
|
|
|
|
|
|
|
Environmental
Matters
The Company is subject to the requirements of federal, state,
local and foreign environmental and occupational safety and
health laws and regulations. These include laws regulating air
emissions, water discharge and waste management. The Company is
also subject to environmental laws requiring the investigation
and cleanup of environmental contamination at properties it
presently owns or operates and at third-party disposal or
treatment facilities to which these sites send or arranged to
send hazardous waste.
The Company is aware of contamination at some of its properties
and relating to various third-party superfund sites at which the
Company or its predecessor has been named as a potentially
responsible party. The Company is in various stages of
investigation and cleanup at these sites and at
September 30, 2008, had recorded an accrual of
approximately $6 million for this environmental
investigation and cleanup. However, estimating liabilities for
environmental investigation and cleanup is complex and dependent
upon a number of factors beyond the Companys control and
which may change dramatically. Although the Company believes its
accrual is adequate based on current information, the Company
cannot provide assurance that the eventual environmental
investigation, cleanup costs and related liabilities will not
exceed the amount of its current accrual.
Other Contingent
Matters
In addition to the matters discussed above, various other 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 Companys products; governmental regulations
relating to safety; employment-related matters; customer,
supplier and other contractual relationships; intellectual
property rights; and non-income taxes. Some of the foregoing
matters may involve compensatory, punitive or antitrust or other
treble damage claims in very large amounts, or demands for
equitable relief, sanctions, or other relief.
29
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 18.
|
Commitments and
Contingencies (Continued)
|
Contingencies are subject to many uncertainties, and the outcome
of individual litigated matters is not predictable with
assurance. Accruals have been established by the Company for
matters where losses are deemed probable and reasonably
estimable. It is possible, however, that some of the matters
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 at
September 30, 2008 or that are in excess of established
accruals. The Company does not reasonably expect, except as
otherwise described herein, based on its analysis, that any
adverse outcome from such matters would have a material effect
on the Companys financial condition, results of operations
or cash flows, although such an outcome is possible.
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.
|
|
NOTE 19.
|
Segment
Information
|
Statement of Financial Accounting Standards No. 131
(SFAS 131), Disclosures about Segments of
an Enterprise and Related Information, requires the
Company to disclose certain financial and descriptive
information about segments of its business. Segments are defined
as components of an enterprise for which discrete financial
information is available that is evaluated regularly by the
chief operating
decision-maker,
or a decision-making group, in deciding the allocation of
resources and in assessing performance.
The Companys operating structure is comprised of the
following: Climate, Electronics, Interiors and Other. These
global product groups have financial and operating
responsibility over the design, development and manufacture of
the Companys product portfolio. Within each of the global
product groups, certain facilities manufacture a broader range
of the Companys total product line offering and are not
limited to the primary product line. Regional customer groups
are responsible for the marketing, sales and service of the
Companys product portfolio to its customer base. Certain
functions such as procurement, information technology and other
administrative activities are managed on a global basis with
regional deployment. In addition to these global product groups,
the Company also operates Visteon Services, a centralized
administrative function to monitor and facilitate transactions
primarily with ACH for the costs of leased employees and other
services provided by the Company.
The Companys chief operating decision making group,
comprised of the Executive Chairman, Chief Executive Officer
(CEO) and Chief Financial Officer (CFO),
evaluates the performance of the Companys segments
primarily based on net sales, before elimination of
inter-company shipments, gross margin and operating assets.
Gross margin is defined as total sales less costs to manufacture
and product development and engineering expenses. Operating
assets include inventories and property and equipment utilized
in the manufacture of the segments products.
Overview of
Segments
|
|
|
Climate: The Climate product group includes
facilities that primarily manufacture climate air handling
modules, powertrain cooling modules, heat exchangers,
compressors, fluid transport, and engine induction systems.
|
|
|
|
Electronics: The Electronics product group includes
facilities that primarily manufacture audio systems,
infotainment systems, driver information systems, powertrain and
feature control modules, climate controls, electronic control
modules and lighting.
|
|
|
Interiors: The Companys Interior product group
includes facilities that primarily manufacture instrument
panels, cockpit modules, door trim and floor consoles.
|
30
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 19.
|
Segment
Information (Continued)
|
|
|
|
Other: The Other product group includes facilities
that primarily manufacture fuel and powertrain products.
|
|
|
Services: The Companys Services operations
supply leased personnel and transition services pursuant to the
ACH Transactions. The Company provides ACH with certain
information technology, personnel and other services to enable
ACH to conduct its business in accordance with the Amended
Master Services Agreement and the Amended Salaried Employee
Lease Agreement. Services to ACH are provided at a rate
approximately equal to the Companys cost until such time
the services are no longer required by ACH or the expiration of
the related agreement. In addition to services provided to ACH,
the Company has also agreed to provide certain transition
services related to other divestitures.
|
Net Sales, Gross
Margin and Operating Assets
A summary of net sales and gross margin by segment is provided
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Gross Margin
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Climate
|
|
$
|
674
|
|
|
$
|
795
|
|
|
$
|
2,407
|
|
|
$
|
2,508
|
|
|
$
|
30
|
|
|
$
|
52
|
|
|
$
|
191
|
|
|
$
|
145
|
|
Electronics
|
|
|
756
|
|
|
|
851
|
|
|
|
2,725
|
|
|
|
2,696
|
|
|
|
9
|
|
|
|
43
|
|
|
|
217
|
|
|
|
175
|
|
Interiors
|
|
|
609
|
|
|
|
712
|
|
|
|
2,294
|
|
|
|
2,320
|
|
|
|
|
|
|
|
15
|
|
|
|
39
|
|
|
|
51
|
|
Other
|
|
|
71
|
|
|
|
189
|
|
|
|
445
|
|
|
|
971
|
|
|
|
3
|
|
|
|
(11
|
)
|
|
|
19
|
|
|
|
15
|
|
Eliminations
|
|
|
(100
|
)
|
|
|
(137
|
)
|
|
|
(341
|
)
|
|
|
(494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total products
|
|
|
2,010
|
|
|
|
2,410
|
|
|
|
7,530
|
|
|
|
8,001
|
|
|
|
42
|
|
|
|
99
|
|
|
|
466
|
|
|
|
386
|
|
Services
|
|
|
100
|
|
|
|
136
|
|
|
|
345
|
|
|
|
407
|
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
|
2,110
|
|
|
|
2,546
|
|
|
|
7,875
|
|
|
|
8,408
|
|
|
|
43
|
|
|
|
101
|
|
|
|
469
|
|
|
|
391
|
|
Reconciling Item
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
$
|
2,110
|
|
|
$
|
2,546
|
|
|
$
|
7,875
|
|
|
$
|
8,408
|
|
|
$
|
43
|
|
|
$
|
99
|
|
|
$
|
469
|
|
|
$
|
371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of operating assets by segment is provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
Property and Equipment, net
|
|
|
|
September 30
|
|
|
December 31
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Climate
|
|
$
|
192
|
|
|
$
|
197
|
|
|
$
|
843
|
|
|
$
|
947
|
|
Electronics
|
|
|
162
|
|
|
|
154
|
|
|
|
701
|
|
|
|
758
|
|
Interiors
|
|
|
57
|
|
|
|
59
|
|
|
|
492
|
|
|
|
533
|
|
Other
|
|
|
18
|
|
|
|
85
|
|
|
|
6
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total products
|
|
|
429
|
|
|
|
495
|
|
|
|
2,042
|
|
|
|
2,295
|
|
Reconciling Item
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
444
|
|
|
|
498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
$
|
429
|
|
|
$
|
495
|
|
|
$
|
2,486
|
|
|
$
|
2,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
VISTEON
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 19.
|
Segment
Information (Continued)
|
Reconciling Item
and Reclassification
Certain adjustments are necessary to reconcile segment
information to the Companys consolidated amounts.
Corporate reconciling items are related to the Companys
technical centers, corporate headquarters and other
administrative and support functions. Segment information for
the three-month and nine-month periods ended September 30,
2007 and as of December 31, 2007 has been recast to reflect
the Companys Mobile Electronics and Philippines operations
in the Electronics and Interiors product groups, respectively.
These operations were previously reflected in the Other product
group and have been reclassified consistent with the
Companys current management reporting structure.
32
|
|
ITEM 2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following Managements 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 Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 and Current
Report on
Form 8-K
dated May 19, 2008, as filed with the Securities and
Exchange Commission, and the financial statements and
accompanying notes to the financial statements included
elsewhere herein. The financial data presented herein are
unaudited, but in the opinion of management reflect all
adjustments, including normal recurring adjustments, necessary
for a fair presentation of such information.
Executive
Summary
Visteon Corporation is a leading global supplier of climate,
interiors, electronics and other automotive systems, modules and
components to global automotive original equipment manufacturers
(OEMs). The Company sells to all the of the
worlds largest vehicle manufacturers including BMW,
Chrysler LLC, Daimler AG, Fiat, Ford, General Motors, Honda,
Hyundai/Kia, Nissan, PSA Peugeot Citroën, Renault, Toyota
and Volkswagen. The Company has a broad network of
manufacturing, technical engineering and joint venture
operations in every major geographic region of the world,
supported by approximately 35,500 employees dedicated to
the design, development, manufacture and support of its product
offering and its global customers, and conducts its business
across five segments: Climate, Interiors, Electronics, Other and
Services.
Market
Conditions
Unfavorable market conditions continued to negatively impact the
automotive sector throughout the third quarter of 2008,
particularly in North America, where significant declines in
consumer sentiment and demand have been driven by sustained
economic weakness in the United States. Downturns in the housing
and mortgage markets, a weakening job market, and concerns about
inflation and tightening credit have adversely impacted consumer
confidence and spending, resulting in delayed purchases of
durable consumer goods including automobiles. Additionally,
significant and sustained increases in fuel prices have resulted
in a shift of North American consumer preference away from sport
utility vehicles and trucks toward more fuel-efficient passenger
cars. These changes in consumer behavior have resulted in lower
volumes and adverse product mix and continue to present
significant challenges for the Company. During the latter part
of the third quarter of 2008, similar signs of an economic
slowdown began to emerge in Western Europe, including rising
inflation and energy costs leading to higher interest rates and
a general contraction of consumer spending.
Global Credit
Crisis
In the early part of 2008 as the United States economy began to
soften, doubts were raised about the ability of borrowers to pay
debts. As fuel and other commodity prices began to rise, housing
values began to fall and marginal loans were first to default,
triggering the sub-prime lending crisis. Financial institutions
responded by tightening their lending policies with respect to
counterparties determined to have sub-prime mortgage risk. This
tightening of institutional lending policies, caused the failure
of major financial institutions late in the third quarter of
2008. Continued failures, losses, and write-downs at major
financial institutions through October 2008 have intensified
concerns about credit and liquidity risks and have resulted in a
sharp reduction in overall market liquidity and broad
governmental intervention. Accordingly, asset prices continue to
be volatile and many financial markets and institutions remain
under considerable stress. The global credit crisis threatens
the stability of the global economy and may cause further macro
economic contraction through the fourth quarter of 2008 and into
2009.
33
Further deterioration of market conditions resulting in a
sustained adverse impact on the global automotive sector could
reduce the Companys sales and harm its results of
operations, cash flows and financial position including, but not
limited to, significant operating losses, potential asset
impairments and reduced availability under asset-backed credit
arrangements.
Overview of Third
Quarter 2008 Results
The Company recorded total sales of $2.1 billion for the
three months ended September 30, 2008, compared with
$2.5 billion for the same period in 2007. The decrease in
sales includes the impact of divestitures and plant closures and
lower vehicle production volumes largely attributable to the
weakened economic conditions in the United States, initial
softening of certain Western European economies and further
tightening of global credit markets. The Company, despite
accelerated efforts to reduce costs in line with lower volumes
through manufacturing efficiencies, purchasing savings and
restructuring actions, was not able to overcome the full impact
of adverse market conditions during the third quarter of 2008,
realizing a decrease in gross margin as a percentage of sales
and a higher net loss.
Restructuring
Activities
The Company has taken actions, in addition to the previously
announced multi-year improvement plan, to reduce overall costs
in line with lower customer volumes and weakened economic
conditions in the United States, including the
reorganization of its global administrative structure.
Significant actions include the following:
|
|
|
In October 2008, the Company implemented changes in other
postretirement benefit (OPEB) and retirement plans
for former employees at its Bedford and Connersville, Indiana
facilities. These changes eliminate Company-sponsored
prescription drug benefits for Medicare eligible retirees,
spouses and dependents effective January 1, 2009 and
provide additional retirement plan benefits. The change will
result in a net reduction to the related liabilities of
approximately $71 million, and will be amortized as a net
reduction to expense over the average remaining life expectancy
of plan participants.
|
|
|
In September 2008, the Company commenced a program designed to
fundamentally realign, consolidate and rationalize the
Companys administrative organization structure on a global
basis through various voluntary and involuntary employee
separation actions. Related employee severance and termination
benefit costs of $10 million were recorded during the three
months ended September 30, 2008 associated with
approximately 200 salaried employees in the United States, for
which severance and termination benefits were deemed probable
and estimable. The Company expects to record additional costs
related to this global program in future periods when elements
of the plan are finalized and the timing of activities and the
amount of related costs are not likely to change.
|
|
|
On August 29, 2008, the Company completed the sale of its
Interiors operation located in Halewood, UK, consisting of the
facility and associated assets including purchase and supply
contracts. During 2007, the Halewood, UK facility operated on a
break-even basis on sales of approximately $150 million.
The Company recorded losses of $2 million in connection
with this transaction during the third quarter of 2008.
|
|
|
During the third quarter of 2008, Visteon amended a number of
agreements between Ford and ACH initially related to the 2005
ACH Transactions. The Reimbursement Agreement with Ford was
amended to require Ford to reimburse Visteon for certain
severance and other qualifying benefits relating to the
termination of salaried employees leased to ACH, without a cap
or sharing by Visteon. The Escrow Agreement with Ford was
amended to provide an additional $50 million of
restructuring funds into the escrow account for first dollar
funding of restructuring and other qualifying expenses. The
additional $50 million was funded into the escrow account
by Ford in August 2008.
|
34
|
|
|
Additionally, the Company terminated the employment of
approximately 820 hourly and 60 salaried employees at a
North American Climate facility during the third quarter of
2008, resulting in $8 million of employee severance and
termination benefit costs.
|
The Company also continued to execute actions under the
previously announced multi-year improvement plan, including the
following significant actions:
|
|
|
In October 2008, hourly employees at the Companys
Electronics facility in Lansdale, Pennsylvania voted to extend
their labor contract through March 13, 2011. The extended
contract includes changes related to OPEB benefits that will
result in a reduction to the OPEB liability of approximately
$22 million, which will be amortized as a reduction to OPEB
expense over the average remaining life expectancy of plan
participants. The Company expects to record curtailment gains
during the fourth quarter of 2008 of approximately
$15 million reflecting the elimination of future service in
the plan.
|
|
|
During the third quarter of 2008, Visteon entered into customer
agreements whereby it will be reimbursed for operating losses
generated by certain UK operations. During 2007, the
UK operations subject to these customer agreements
generated negative gross margin of approximately
$21 million on sales of approximately $295 million.
|
|
|
On July 7, 2008, Visteon completed the sale of its Swansea,
UK, operation. The Swansea operation, Visteons largest
operation in the UK, generated negative gross margin of
approximately $40 million on sales of approximately
$80 million during 2007. During the three months ended
September 30, 2008, the Company recorded a $16 million
loss on the divestiture of the Swansea, UK operation related to
working capital adjustments in connection with the July 7,
2008 transaction closing date. This loss was in addition to
amounts previously recorded in the second quarter of 2008
including $32 million related to employee termination costs
and asset impairment charges and $13 million of escrow
reimbursement. Additionally, the Company entered into customer
agreements to mitigate the impact of ongoing operating losses at
certain UK manufacturing facilities.
|
|
|
During the third quarter of 2008, the Company continued to
evaluate its general and administrative support infrastructure
in connection with the actions taken under the multi-year
improvement plan. Accordingly, the Company recorded
$15 million of employee severance and termination benefit
costs associated with approximately 130 employees to reduce
the Companys salaried workforce in higher cost countries.
|
The Company currently estimates that the total cost associated
with the multi-year improvement plan will be approximately
$475 million. To date, the Company has incurred
$373 million in cumulative restructuring costs related to
the multi-year improvement plan including $154 million,
$125 million, $63 million and $31 million for the
Other, Interiors, Climate and Electronics product groups,
respectively. The Company has completed 28 of 30 previously
identified restructuring actions under the multi-year
improvement plan. As a result of these actions, the Company has
recognized cumulative savings of approximately $345 million
since the inception of the multi-year improvement plan. The
Company continues to evaluate alternative courses of action
related to the remaining facilities, including the possibility
of divestiture, closure or renegotiated commercial
and/or labor
arrangements. However, there is no assurance that a transaction
or other arrangement will occur in the near term or at all. The
Companys ultimate course of action for these facilities
will be dependent upon that which provides the greatest
long-term
return to shareholders.
Financial results
for the three-month period ended September 30,
2008
|
|
|
Product sales of approximately $2.0 billion, a decline of
$400 million when compared to the
third quarter of 2007
|
|
|
Product gross margin of $42 million or 2% of product sales,
down from $97 million or 4% of product sales when compared
to the same period of 2007.
|
|
|
Net loss of $188 million compared to a net loss of
$109 million for the third quarter of 2007.
|
|
|
Cash and equivalents of approximately $1.1 billion,
including $613 million in the United States.
|
35
During the third quarter of 2008, the Company recorded product
sales of $2.0 billion compared to $2.4 billion for the
same period in 2007. Lower vehicle production volumes decreased
sales by $270 million, while the impact of plant
divestitures and closures contributed $205 million to the
decrease. These decreases were partially offset by favorable
currency of $75 million.
North America product sales of $464 million for the three
months ended September 30, 2008 decreased by
$308 million or 40% when compared to the same period of
2007 and comprise 22% of the Companys total product sales.
This decrease was primarily driven by production declines in
North America for key customers, including a 218,000 and a
47,000 unit decline in Ford and Nissan truck production,
respectively. Plant closures and divestitures in connection with
the Companys multi-year improvement plan also resulted in
product sales declines in North America. Europe product sales of
$901 million for the three months ended September 30,
2008 have decreased by $23 million or 3% when compared to
the same period of 2007 and comprise 42% of total product sales.
The decline in Europe product sales resulted from the impact of
divestitures and Ford volume declines partially offset by the
strengthening of the Euro. Asia product sales of
$628 million decreased by $91 million or 13% when
compared to the same period of 2007 and comprise 29% of total
product sales. The decrease in Asia product sales was primarily
due to lower Hyundai/Kia vehicle production volumes as a result
of labor disruption and the weakening of the Korean Won.
The Companys product gross margin was $42 million in
the third quarter of 2008, compared with $97 million in the
third quarter of 2007, representing a decrease of
$55 million. The decrease in gross margin included
$141 million related to lower sales volumes and
divestitures and plant closures associated with the
Companys ongoing restructuring activities, partially
offset by net cost performance of $91 million reflecting
efficiencies achieved through restructuring actions, cost
reduction efforts and commercial agreements.
As of September 30, 2008 the Companys consolidated
cash and equivalents totaled $1.1 billion and approximately
54% of this balance was located in the U.S. The
Companys cash and equivalent balance decreased by
approximately $625 million during 2008 including capital
spending of $230 million, the repurchase of a portion of
the Companys 8.25% senior notes due August 2010 of
approximately $150 million, changes in assets and
liabilities of approximately $130 million, and net
repayment of other debt and other financing cash changes of
approximately $120 million.
Liquidity
Considerations
The Companys cash and liquidity needs are impacted by the
level, variability and timing of its customers worldwide
vehicle production, which varies based on economic conditions
and market shares in major markets. Additionally, the
Companys business is highly dependent upon the ability to
access the credit and capital markets. Accordingly, the
Companys ability to fund its working capital,
restructuring and capital expenditure needs may be adversely
affected by many factors including, but not limited to, general
economic conditions, specific industry conditions, financial
markets, competitive factors and legislative and regulatory
changes. Therefore, assurance cannot be provided that Visteon
will generate sufficient cash flow from operations or that
available borrowings will be sufficient to enable the Company to
meet its liquidity needs.
The Company has additional sources of liquidity available for
use in the conduct of its ongoing operations and to fund its
restructuring activities including a revolving credit agreement,
a European Securitization facility and an escrow account
established pursuant to the ACH Transactions. As of
September 30, 2008, the Company had received cumulative
reimbursements from the escrow account of $367 million and
$117 million was available for reimbursement pursuant to
the terms of the Amended Escrow Agreement.
The Companys revolving credit agreement allows for
available borrowings of up to $350 million. As of
September 30, 2008, there were no outstanding borrowings
under the revolving credit agreement. The total facility
availability for the Company was $225 million, with
$170 million of available borrowings under the facility
after a reduction for $55 million of obligations under
letters of credit.
36
Availability of funding under the European Securitization
depends primarily upon the amount of trade account receivables,
reduced by outstanding borrowings under the program and other
characteristics of those receivables that affect their
eligibility (such as bankruptcy or the grade of the obligor,
delinquency and excessive concentration). As of
September 30, 2008, approximately $114 million of the
Companys transferred receivables were considered eligible
for borrowing under this facility, $93 million was
outstanding and $21 million was available for funding. In
October 2008, the Company amended and restated agreements
related to the European Securitization to, among other things,
include Visteon Electronics Corporation as a seller under
the facility. The inclusion of Visteon Electronics Corporation
as a seller is expected to increase the amount of qualifying
receivables transferred into the facility and to enhance
availability of funds under the facility.
As of September 30, 2008, the Company had availability on
various other credit facilities of approximately
$262 million. Certain of these balances are related to a
number of the Companys
non-U.S. operations,
a portion of which are payable in
non-U.S. currencies
including, but not limited to, the Euro, Korean Won and
Brazilian Real.
Results of
Operations
Three Months
Ended September 30, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
Gross Margin
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(Dollars in Millions)
|
|
|
Climate
|
|
$
|
674
|
|
|
$
|
795
|
|
|
$
|
(121
|
)
|
|
$
|
30
|
|
|
|
$52
|
|
|
$
|
(22
|
)
|
Electronics
|
|
|
756
|
|
|
|
851
|
|
|
|
(95
|
)
|
|
|
9
|
|
|
|
43
|
|
|
|
(34
|
)
|
Interiors
|
|
|
609
|
|
|
|
712
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
15
|
|
|
|
(15
|
)
|
Other
|
|
|
71
|
|
|
|
189
|
|
|
|
(118
|
)
|
|
|
3
|
|
|
|
(11
|
)
|
|
|
14
|
|
Eliminations
|
|
|
(100
|
)
|
|
|
(137
|
)
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product
|
|
|
2,010
|
|
|
|
2,410
|
|
|
|
(400
|
)
|
|
|
42
|
|
|
|
99
|
|
|
|
(57
|
)
|
Services
|
|
|
100
|
|
|
|
136
|
|
|
|
(36
|
)
|
|
|
1
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment
|
|
|
2,110
|
|
|
|
2,546
|
|
|
|
(436
|
)
|
|
|
43
|
|
|
|
101
|
|
|
|
(58
|
)
|
Reconciling Item
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
$
|
2,110
|
|
|
$
|
2,546
|
|
|
$
|
(436
|
)
|
|
$
|
43
|
|
|
|
$99
|
|
|
$
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
Net sales decreased $436 million during the three months
ended September 30, 2008 when compared to the same period
of 2007, consisting of a $400 million decrease in product
sales and a $36 million decrease in services revenues. The
decrease was primarily attributable to vehicle production volume
reductions of approximately $270 million, with the North
America market being the largest driver. Additionally,
divestitures and plant closures of $205 million and net
customer price reductions were partially offset by favorable
currency of $75 million.
Net sales for Climate were $674 million for the three
months ended September 30, 2008, compared with
$795 million for the same period of 2007, representing a
decrease of $121 million or 15%. Vehicle production volume
and mix decreased Climate sales by $77 million, primarily
due to Ford volumes in North America while, to a lesser
extent, Hyundai/Kia volumes in Asia also contributed to the
decline. Unfavorable currency, primarily driven by the Korean
Won, decreased sales by $15 million. Sales were also lower
by $29 million due to the fourth quarter 2007 closure of
the Companys Connersville, Indiana facility.
37
Net sales for Electronics were $756 million for the three
months ended September 30, 2008, compared to
$851 million for the same period of 2007, representing a
decrease of $95 million or 11%. Vehicle production volume
and mix, primarily related to Ford North America, and the impact
of past sourcing actions resulted in a $150 million
reduction in sales. These declines were partially offset by
$66 million of favorable currency, primarily related to the
Euro.
Net sales for Interiors were $609 million for the three
months ended September 30, 2008 representing a decrease of
$103 million or 14% when compared to the same period in
2007. Vehicle production volume and mix, primarily related to
Nissan North America, resulted in a $124 million decline.
Also contributing to the decline was $11 million related to
the divestiture of the Companys Halewood, UK facility and
the impact of net customer price reductions. These reductions
were partially offset by $26 million of favorable currency,
primarily related to the Euro, and revenue associated with
customer agreements at certain of the Companys UK
operations.
Net sales for Other were $71 million in the third quarter
of 2008, compared with $189 million in the third quarter of
2007, representing a decrease of $118 million or 62%. The
decrease is associated with divestitures and plant closures of
$126 million including divestiture of the Visteon
Powertrain Control Systems India operation, the North America
Aftermarket operations, and the Swansea, UK facility, and the
closure of the Bedford, Indiana facility. These reductions were
partially offset by revenue associated with customer agreements
at certain of the Companys UK operations.
Services revenues primarily relate to information technology,
engineering, administrative and other business support services
provided by the Company to ACH, under the terms of various
agreements between the Company and ACH. Such services are
generally provided at an amount that approximates cost. Total
services revenues were $100 million for the three months
ended September 30, 2008, compared with $136 million
for the same period of 2007. The decrease in services revenue
represents lower ACH utilization of the Companys services
in connection with the terms of various agreements.
Gross
Margin
The Companys gross margin was $43 million for the
three months ended September 30, 2008, a decrease of
$56 million. The decrease included $96 million related
to lower vehicle production volumes, primarily in North America,
and $45 million related to plant closures and divestitures.
Gross margin also declined as a result of the non-recurrence of
$15 million of asset sales in the UK and the non-recurrence
of a $7 million benefit in 2007 for share-based
compensation. These declines were partially offset by
$102 million of net cost efficiencies achieved through
manufacturing performance, purchasing improvement efforts and
restructuring activities and commercial agreements.
Gross margin for Climate of $30 million, or 4% of sales,
for the three months ended September 30, 2008 represents a
decrease of $22 million when compared to the same period of
2007. Lower vehicle production volume and the impact of the
Connersville, Indiana closure resulted in a reduction of
$29 million.
Non-recurrence
of OPEB curtailment gains of $10 million, which were
recorded in 2007 related to the Connersville, Indiana closure,
resulted in a comparatively lower gross margin. These declines
were partially offset by net cost performance of
$16 million achieved through manufacturing and purchasing
improvement efforts and restructuring activities.
Gross margin for Electronics was $9 million, or 1% of
sales, for the three months ended September 30, 2008,
compared with $43 million for the same period of 2007,
representing a decrease of $34 million. Lower vehicle
production volume and unfavorable product mix and the impact of
past sourcing actions resulted in a reduction in gross margin of
$48 million. This reduction was partially offset by net
cost performance of $7 million achieved through
manufacturing and purchasing improvement efforts and OPEB
curtailment gains of $7 million related to the elimination
of employee benefits associated with U.S. OPEB plans in
connection with employee headcount reductions under previously
announced restructuring actions.
38
The Interiors product group broke even on a gross margin level
during the three-month period ended September 30, 2008 for
a reduction of $15 million when compared to the same period
of 2007. Lower vehicle production volume in North America
related to Nissan and the impact of the Halewood, UK divestiture
reduced gross margin $28 million, and the non-recurrence of
$12 million related to UK asset sales in 2007 caused a
further reduction. These reductions were partially offset by net
cost performance of $26 million achieved through
manufacturing and purchasing improvement efforts and
restructuring activities and commercial agreements.
Gross margin for Other was $3 million for the three months
ended September 30, 2008, compared with a loss of
$11 million in the same period of 2007. The effect of
divestitures and plant closures and lower production volumes on
the remaining business was more than offset by restructuring
savings resulting from those actions.
Selling, General
and Administrative Expenses
Selling, general and administrative expenses were
$138 million in the third quarter of 2008, compared with
$131 million in the third quarter of 2007, representing an
increase of $7 million. The increase in expense includes
$15 million related to the non-recurrence of a 2007 bad
debt recovery, $9 million associated with the
non-recurrence of a 2007 benefit for share-based compensation,
$6 million of implementation costs associated with the
Companys cost reduction initiatives and currency of
$4 million. These items were partially offset by
$27 million of efficiencies resulting from the
Companys continuing cost reduction efforts.
Restructuring
Expenses and Reimbursement from Escrow Account
The Company recorded restructuring expenses of $42 million
during the three months ended September 30, 2008 for an
increase of $15 million when compared to the same period of
2007. The Company recorded reimbursement for such costs of
$39 million and $27 million during the three months
ended September 30, 2008 and 2007, respectively, pursuant
to the terms of the Amended Escrow Agreement. The following is a
summary of the Companys consolidated restructuring
reserves and related activity as of and for the three months
ended September 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interiors
|
|
|
Climate
|
|
|
Electronics
|
|
|
Other
|
|
|
Total
|
|
|
|
(Dollars in Millions)
|
|
|
June 30, 2008
|
|
$
|
61
|
|
|
$
|
2
|
|
|
$
|
7
|
|
|
$
|
26
|
|
|
$
|
96
|
|
Expenses
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
|
|
26
|
|
|
|
42
|
|
Currency exchange
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
Utilization
|
|
|
(13
|
)
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
|
(41
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
$
|
50
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In September 2008, the Company commenced a program designed to
fundamentally realign, consolidate and rationalize the
Companys administrative organization structure on a global
basis through various voluntary and involuntary employee
separation actions. Related employee severance and termination
benefit costs of $10 million were recorded during the three
months ended September 30, 2008 associated with
approximately 200 salaried employees in the United States, for
which severance and termination benefits were deemed probable
and estimable. The Company expects to record additional costs
related to this global program in future periods when elements
of the plan are finalized and the timing of activities and the
amount of related costs are not likely to change. Additionally,
the Company recorded $8 million of employee severance and
termination benefit costs associated with approximately
820 hourly and 60 salaried employees at a North American
Climate facility. As of September 30, 2008, restructuring
reserves related to these programs were approximately
$7 million.
39
The Company also continued to execute actions under the
previously announced multi-year improvement plan, incurring
restructuring expenses of $24 million during the third
quarter of 2008. Significant actions under the multi-year
improvement plan, include the following:
|
|
|
$15 million of employee severance and termination benefit
costs associated with approximately 130 employees to reduce
the Companys salaried workforce in higher cost countries.
|
|
|
$6 million of employee severance and termination benefit
costs associated with approximately 40 employees at a
European Interiors facility.
|
The Company currently estimates that the total cost associated
with the multi-year improvement plan will be approximately
$475 million. The Company has incurred $373 million in
cumulative restructuring costs related to the multi-year
improvement plan including $154 million, $125 million,
$63 million and $31 million for the Other, Interiors,
Climate and Electronics product groups, respectively. As of
September 30, 2008, restructuring reserves related to the
multi-year improvement plan are approximately $60 million.
Substantially all restructuring expenses recorded to date relate
to employee severance and termination benefit costs. Utilization
for the three months ended September 30, 2008 includes
$39 million of payments for severance and other employee
termination benefits, $18 million of special termination
benefits reclassified to pension and other postretirement
employee benefits, where such payments are made from the
Companys benefit plans and $8 million of payments for
contract termination, equipment relocation and other costs.
Asset Impairments
and Loss on Divestitures
The Company recorded asset impairments and loss on divestitures
of $19 million during the three months ended
September 30, 2008 for an increase of $5 million when
compared to the same period of 2007. The amounts recorded during
the three months ended September 30, 2008 are related to
the Companys ongoing restructuring activities.
During the third quarter of 2008, the Company recorded
approximately $16 million of losses on the Swansea
Divestiture related to working capital adjustments in connection
with the July 7, 2008 transaction closing date. Additional
losses on the Swansea Divestiture included $7 million of
asset impairment charges recorded in the second quarter of 2008
in connection with the Companys determination that
long-lived assets subject to the Swansea Divestiture met the
held for sale criteria of Statement of Financial
Accounting Standards No. 144 (SFAS 144),
Accounting for the Impairment or Disposal of Long-Lived
Assets.
The Company also recorded asset impairments and loss on
divestiture of $2 million during the third quarter of 2008
in connection with the Halewood Divestiture and $4 million
during the second quarter of 2008 for long-lived assets related
to the Other product group that met the held for
sale criteria of SFAS 144.
Interest
Interest expense was $48 million for the quarterly period
ended September 30, 2008, compared with $59 million
for the same period of 2007. The decrease is primarily related
to lower borrowing rates. Interest income decreased by
$7 million during the three months ended September 30,
2008, primarily due to lower investment rates.
Income
Taxes
The provision for income taxes of $31 million for the third
quarter of 2008 represents an increase of $11 million when
compared with $20 million in the same period of 2007. The
increase in tax expense is primarily attributable to the
non-recurrence of a $25 million tax benefit related to the
Companys ability to offset pre-tax losses against other
categories of income despite the existence of deferred tax asset
valuation allowances. This increase in tax expense was partially
offset by a net reduction in unrecognized tax benefits
year-over-year.
40
Nine Months Ended
September 30, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Gross Margin
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(Dollars in Millions)
|
|
|
Climate
|
|
$
|
2,407
|
|
|
$
|
2,508
|
|
|
$
|
(101
|
)
|
|
$
|
191
|
|
|
$
|
145
|
|
|
$
|
46
|
|
Electronics
|
|
|
2,725
|
|
|
|
2,696
|
|
|
|
29
|
|
|
|
217
|
|
|
|
175
|
|
|
|
42
|
|
Interiors
|
|
|
2,294
|
|
|
|
2,320
|
|
|
|
(26
|
)
|
|
|
39
|
|
|
|
51
|
|
|
|
(12
|
)
|
Other
|
|
|
445
|
|
|
|
971
|
|
|
|
(526
|
)
|
|
|
19
|
|
|
|
15
|
|
|
|
4
|
|
Eliminations
|
|
|
(341
|
)
|
|
|
(494
|
)
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total products
|
|
|
7,530
|
|
|
|
8,001
|
|
|
|
(471
|
)
|
|
|
466
|
|
|
|
386
|
|
|
|
80
|
|
Services
|
|
|
345
|
|
|
|
407
|
|
|
|
(62
|
)
|
|
|
3
|
|
|
|
5
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
|
7,875
|
|
|
|
8,408
|
|
|
|
(533
|
)
|
|
|
469
|
|
|
|
391
|
|
|
|
78
|
|
Reconciling Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
$
|
7,875
|
|
|
$
|
8,408
|
|
|
$
|
(533
|
)
|
|
$
|
469
|
|
|
$
|
371
|
|
|
$
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
Net sales decreased $533 million during the nine months
ended September 30, 2008 when compared to the same period
of 2007. The decrease was due to divestitures and plant closures
of $806 million, vehicle production volume declines of
$66 million and net customer price reductions, partially
offset by favorable currency of $419 million. The impact of
lower vehicle production volume is primarily due to lower Ford
and Nissan vehicle production in North America partially offset
by higher Hyundai/Kia volumes in Asia.
Net sales for Climate were $2.41 billion for the nine
months ended September 30, 2008, compared with
$2.51 billion for the same period of 2007, representing a
decrease of $101 million. This decrease included
$134 million related to the closure of the Companys
Connersville, Indiana facility and net customer price
reductions. These decreases were partially offset by vehicle
production volume and mix of $46 million, primarily related
to higher Hyundai/Kia sales in Asia, and favorable currency of
$41 million, primarily due to the strengthening of the Euro.
Net sales for Electronics were $2.72 billion for the nine
months ended September 30, 2008, compared to
$2.70 billion for the same period of 2007, representing an
increase of $29 million. This increase included
$245 million of favorable currency and $46 million of
vehicle production volume and mix in Europe primarily related to
higher volumes with Ford, Volkswagen and BMW. These increases
were partially offset by lower North America sales volumes
related to Ford, the impact of past customer sourcing actions
and net customer price reductions.
Net sales for Interiors were $2.29 billion and
$2.32 billion for the nine-month periods ended
September 30, 2008 and 2007, respectively, for a decrease
of $26 million. This decrease includes lower customer
production volumes of $112 million primarily due to Nissan
in North America and Nissan/Renault and PSA in Europe,
$65 million related to the Halewood Divestiture and closure
of the Companys Chicago, Illinois facility and net
customer price reductions. These decreases were partially offset
by favorable currency of $131 million, and revenue
associated with customer agreements at certain of the
Companys UK operations.
Net sales for Other were $445 million in the first nine
months of 2008, compared with $971 million in the first
nine months of 2007, representing a decrease of
$526 million. The decrease was attributable to divestitures
and plant closures of $518 million, including the Chassis
divestiture, the Visteon Powertrain Control Systems India
divestiture, and the NA Aftermarket divestiture.
41
Services revenues primarily relate to information technology,
engineering, administrative and other business support services
provided by the Company to ACH, under the terms of various
agreements with ACH. Such services are generally provided at an
amount that approximates cost. Total services revenues were
$345 million for the nine months ended September 30,
2008, compared with $407 million for the same period of
2007. The decrease in services revenue represents lower ACH
utilization of the Companys services in connection with
the terms of various agreements.
Gross
Margin
The Companys gross margin was $469 million for the
nine months ended September 30, 2008, compared to
$371 million for the same period of 2007, an increase of
$98 million. The increase includes $176 million of net
cost efficiencies achieved through manufacturing performance,
purchasing improvement efforts and restructuring activities and
commercial agreements, $70 million of favorable currency
and $43 million related to OPEB and pension curtailments
and settlements. These increases were partially offset by
$87 million related to lower vehicle production volumes and
unfavorable product mix, $93 million due to plant closures
and divestitures and $8 million related to the
non-recurrence of a 2007 benefit for share-based compensation.
Gross margin for Climate of $191 million for the nine
months ended September 30, 2008 represents an increase of
$46 million when compared to the same period of 2007. This
increase includes $27 million related to net cost
efficiencies achieved through manufacturing performance,
purchasing improvement efforts and restructuring activities,
$13 million related to real property asset sales,
$13 million for the
non-recurrence
of 2007 accelerated depreciation and amortization and
$13 million of favorable currency. These increases were
partially offset by the non-recurrence of a 2007 curtailment
gain of $14 million and lower sales volumes, primarily
attributable to Ford North America.
Gross margin for Electronics was $217 million for the
nine-month period ended September 30, 2008, compared with
$175 million for the same period in 2007, representing an
increase of $42 million. This increase includes
$63 million related to net cost efficiencies achieved
through manufacturing performance and purchasing improvement
efforts, $36 million related to favorable currency and
$7 million related to curtailment gains. These increases
were partially offset by $49 million related to lower
vehicle production volumes and the impact of past customer
sourcing decisions and $15 million related to accelerated
depreciation and amortization.
Gross margin for Interiors was $39 million for the nine
months ended September 30, 2008, compared with
$51 million for the same period of 2007, for a reduction of
$12 million. The reduction includes $44 million
related to lower vehicle production volumes, primarily in North
America, and $12 million related to the
non-recurrence
of a 2007 building sale in the UK. These reductions were
partially offset by $26 million related to net cost
efficiencies and commercial agreements and by $17 million
related to favorable currency.
Gross margin for Other was $19 million, or 4% of sales, for
the nine months ended September 30, 2008, compared with
$15 million for the same period of 2007, for an increase of
$4 million. The effect of divestitures, plant closures and
lower production volumes was more than offset by the
restructuring savings resulting from those actions.
42
Selling, General
and Administrative Expenses
Selling, general and administrative expenses were
$442 million in the first nine months of 2008, compared
with $445 million in the first nine months of 2007,
representing a decrease of $3 million or 1%. The decrease
is primarily attributable to $63 million of cost
efficiencies resulting from the Companys ongoing
restructuring activities and $3 million of lower
securitization expenses. This decrease was partially offset by
$20 million of implementation costs associated with the
Companys cost reduction activities, currency of
$16 million, non-recurrence of an $11 million benefit
in 2007 for share-based compensation and $15 million
related to the non-recurrence of a 2007 customer bad debt
recovery.
Restructuring
Expenses and Reimbursement from Escrow Account
The Company recorded restructuring expenses of $117 million
during the nine months ended September 30, 2008 for an
increase of $28 million when compared to the same period of
2007. The Company recorded reimbursement for such costs of
$81 million and $109 million during the nine months
ended September 30, 2008 and 2007, respectively, pursuant
to the terms of the Amended Escrow Agreement. The following is a
summary of the Companys consolidated restructuring
reserves and related activity as of and for the nine months
ended September 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interiors
|
|
|
Climate
|
|
|
Electronics
|
|
|
Other
|
|
|
Total
|
|
|
|
(Dollars in Millions)
|
|
|
December 31, 2007
|
|
$
|
58
|
|
|
$
|
23
|
|
|
$
|
7
|
|
|
$
|
24
|
|
|
$
|
112
|
|
Expenses
|
|
|
36
|
|
|
|
13
|
|
|
|
1
|
|
|
|
67
|
|
|
|
117
|
|
Currency exchange
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Utilization
|
|
|
(42
|
)
|
|
|
(35
|
)
|
|
|
(3
|
)
|
|
|
(80
|
)
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
$
|
50
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring expenses in addition to those incurred in the
three months ended September 30, 2008 totaled
$75 million and were entirely related to the previously
announced multi-year improvement plan. Utilization for the nine
months ended September 30, 2008 includes $111 million
of payments for severance and other employee termination
benefits, $36 million of special termination benefits
reclassified to pension and other postretirement employee
benefits, where such payments are made from the Companys
benefit plans and $13 million of payments for contract
termination, equipment relocation and other costs.
Asset Impairments
and Loss on Divestitures
During the first nine months of 2008, the Company recorded asset
impairments and loss on divestitures of $70 million,
including $40 million related to the NA Aftermarket
divestiture, $23 million related to the Swansea
divestiture, and $7 million related to the Halewood
divestiture and other assets.
Interest
Interest expense was $160 million for the nine months ended
September 30, 2008 as compared to $163 million for the
same period of 2007. The decrease is due to lower borrowing
rates partially offset by higher debt levels. Interest income
decreased by $2 million to a total of $38 million for
the nine months ended September 30, 2008, when compared to
the same period in 2007. The decrease in interest income is due
to lower investment rates partially offset by higher global cash
balances in 2008.
43
Income
Taxes
The provision for income taxes of $131 million for the
nine-month period ended September 30, 2008 represents an
increase of $66 million when compared with $65 million
in the same period of 2007. The increase in tax expense is
attributable to higher earnings in those countries where the
Company is profitable resulting in an increase in income tax of
$28 million. Additionally, the year to date income tax
expense was affected by a $52 million lower income tax
benefit corresponding to the Companys ability to offset
pre-tax losses against other categories of income despite the
existence of deferred tax asset valuation allowances. These
increases in tax expense were partially offset by a
$9 million net reduction in unrecognized tax benefits.
Liquidity
Overview
The Companys cash and liquidity needs are impacted by the
level, variability, and timing of its customers worldwide
vehicle production, which varies based on economic conditions
and market shares in major markets. The Companys
intra-year needs are impacted by seasonal effects in the
industry, such as the shutdown of operations for two weeks in
July, the subsequent
ramp-up of
new model production and the additional one-week shutdown in
December by its primary North American customers. These seasonal
effects normally require use of liquidity resources during the
first and third quarters. The Company expects to fund its
working capital, restructuring and capital expenditure needs
with cash flows from operations. To the extent that the
Companys liquidity needs exceed cash from operations, the
Company would look to its cash balances and availability for
borrowings to satisfy those needs, as well as the need to raise
additional capital. However, the Companys ability to fund
its working capital, restructuring and capital expenditure needs
may be adversely affected by many factors including, but not
limited to, general economic conditions, specific industry
conditions, financial markets, competitive factors and
legislative and regulatory changes. Therefore, assurance cannot
be provided that Visteon will generate sufficient cash flow from
operations or that available borrowings will be sufficient to
enable the Company to meet its liquidity needs.
The Companys business is highly dependent upon the ability
to access the credit and capital markets. Access to, and the
costs of borrowing in, these markets depend in part on the
Companys credit ratings, which are currently below
investment grade. Moodys current corporate rating of the
Company is B3 with a negative outlook, and the SGL rating is 3.
The rating on the 2010 and 2014 senior unsecured debt is Caa2,
and the rating on the new 2016 senior unsecured debt is Caa1.
The current corporate rating of the Company by S&P is B-
with a negative outlook on the rating. S&Ps senior
unsecured debt rating is CCC+. Fitchs current rating on
the Companys senior secured debt is B with a negative
outlook. Any further downgrade in the Companys credit
ratings could reduce its access to capital, increase the costs
of future borrowings and increase the possibility of more
restrictive terms and conditions contained in any new or
replacement financing arrangements or commercial agreements or
payment terms with suppliers.
Global Credit
Market Conditions
In the early part of 2008 as the United States economy began to
soften, doubts were raised about the ability of borrowers to pay
debts. As fuel and other commodity prices began to rise housing
values began to fall, marginal loans were first to default,
triggering the sub-prime lending crisis. Financial institutions
responded by tightening their lending policies with respect to
counterparties determined to have sub-prime mortgage risk. This
tightening of institutional lending policies, caused the failure
of major financial institutions late in the third quarter of
2008. Continued failures, losses, and write-downs at major
financial institutions through October 2008 have intensified
concerns about credit and liquidity risks and have resulted in a
sharp reduction in overall market liquidity and broad
governmental intervention. Continuation of such credit market
constraints may increase the Companys costs of borrowing
and could restrict the Companys access to future liquidity.
44
2008 Issuance of
New Notes and Tender Offer for Notes due 2010
On June 18, 2008, the Company completed the sale of
$206.4 million aggregate principal amount of its
12.25% senior notes due 2016 (the New Notes) in
a private placement exempt from the registration requirements of
the Securities Act of 1933. On June 18, 2008, the Company
repurchased $344 million in aggregate principal amount of
its 8.25% senior notes due August 2010 pursuant to a
partial tender offer commenced on May 19, 2008. The Company
used the net proceeds from the sale of the New Notes, plus
additional cash on hand, to pay the aggregate consideration of
approximately $337 million, excluding costs and expenses,
for such repurchase. The New Notes rank equally with the
Companys existing and future unsecured term debt, senior
to any future subordinated debt, and are guaranteed by certain
of its U.S. subsidiaries. The New Notes have not been and
will not be registered under the Securities Act or any state
securities laws.
Cash and
Equivalents
As of September 30, 2008 and December 31, 2007 the
Companys consolidated cash balances totaled
$1.1 billion and $1.8 billion, respectively.
Approximately 54% and 68% of these consolidated cash balances
were located in the U.S. as of September 30, 2008 and
December 31, 2007, respectively. As the Companys
operating profitability has become more concentrated with its
foreign subsidiaries and joint ventures, the Companys cash
balances located outside the U.S. remain significant. The
Companys ability to efficiently access cash balances in
certain foreign jurisdictions is subject to local regulatory and
statutory requirements.
Amended Escrow
Account
In connection with the ACH Transactions, Ford paid
$400 million into an escrow account for use by the Company
to restructure its businesses subject to the terms and
conditions of the Escrow Agreement, dated October 1, 2005,
among the Company, Ford and Deutsche Bank Trust Company
Americas. The Escrow Agreement provides that the Company will be
reimbursed from the escrow account for the first
$250 million of reimbursable restructuring costs, as
defined in the Escrow Agreement, and up to one half of the next
$300 million of such costs. On August 14, 2008 the
Company and Ford amended the Escrow Agreement to provide that
Ford would deposit an additional $50 million into the
escrow account which would be immediately available to reimburse
the Company for its restructuring and other qualified costs on a
100% basis. Subsequent to utilization of the additional
$50 million the Company will continue to utilize the
remainder of the funds on a 50% reimbursement basis until such
time the investment earnings on those funds become available.
The additional $50 million was funded into the escrow
account by Ford in August 2008.
Cash in the escrow account is invested, at the direction of the
Company, in high quality, short-term investments and related
investment earnings are credited to the account as earned.
Investment earnings of $28 million became available to
reimburse the Companys restructuring costs following the
use of the first $250 million of available funds. As of
September 30, 2008, the Company had received cumulative
reimbursements from the escrow account of $367 million and
$117 million was available for reimbursement pursuant to
the terms of the Amended Escrow Agreement.
Amended
Reimbursement Agreement
Pursuant to the ACH Transactions, the Company and Ford entered
into the Reimbursement Agreement whereby Ford would reimburse
the Company for the first $50 million of separation costs
incurred for the Companys salaried employees who are
leased to ACH and whose services are no longer required by ACH
or a subsequent buyer. Ford would then reimburse up to one half
of the next $200 million of such costs. Any unused portion
of the $150 million as of December 31, 2009 was to be
deposited into the escrow account governed by the Escrow
Agreement.
45
On August 14, 2008, the Reimbursement Agreement was amended
and restated to, among other things, require Ford to reimburse
the Company in full for certain severance expenses and other
qualifying termination benefits, as defined in such agreement,
relating to the termination of salaried employees who were
leased to ACH. Previously, the amount required to be reimbursed
by Ford was capped at $150 million, of which the first
$50 million was to be funded in total by Ford and the
remaining $100 million was to be matched by the Company.
Any unused portion of the $150 million as of
December 31, 2009 was to be deposited into the escrow
account governed by the Escrow Agreement. The Reimbursement
Agreement was amended to eliminate the $150 million cap as
well as the Companys obligation to match any costs during
the term of the agreement. Further, Fords obligation to
deposit remaining funds into the escrow account was eliminated.
Asset
Securitization
The Company transfers certain customer trade account receivables
originating from subsidiaries located in Germany, Portugal,
Spain, France and the UK (Sellers) pursuant to a
European securitization agreement (European
Securitization). The European Securitization agreement
extends until August 2011 and provides up to
$325 million in funding from the sale of receivables
originated by the Sellers and transferred to Visteon Financial
Centre P.L.C. The Transferor is a bankruptcy-remote qualifying
special purpose entity. Receivables transferred from the Sellers
are funded through cash obtained from the issuance of variable
loan notes to third-party lenders and through subordinated loans
obtained from a wholly-owned subsidiary of the Company.
Availability of funding under the European Securitization
depends primarily upon the amount of trade account receivables,
reduced by outstanding borrowings under the program and other
characteristics of those receivables that affect their
eligibility (such as bankruptcy or the grade of the obligor,
delinquency and excessive concentration). As of
September 30, 2008, approximately $114 million of the
Companys transferred receivables were considered eligible
for borrowing under this facility, $93 million was
outstanding and $21 million was available for funding.
Revolving Credit
Agreement
The Companys revolving credit agreement allows for
available borrowings of up to $350 million. Availability at
any time is dependent upon various factors, including
outstanding letters of credit, as well as, the amount of
eligible receivables, inventory and property and equipment
available at security. Borrowings under the revolving credit
agreement bear interest based on a variable rate interest option
selected at the time of borrowing. The revolving credit
agreement expires on August 14, 2011. As of
September 30, 2008, there were no outstanding borrowings
under the revolving credit agreement. The total facility
availability for the Company was $225 million, with
$170 million of available borrowings under the facility
after a reduction for $55 million of obligations under
letters of credit.
Other
Debt
As of September 30, 2008, the Company had availability on
various other credit facilities of approximately
$262 million. Certain of these balances are related to a
number of the Companys
non-U.S. operations,
a portion of which are payable in
non-U.S. currencies
including, but not limited to, the Euro, Korean Won and
Brazilian Real.
46
Cash
Flows
Operating
Activities
Cash used by operating activities during the nine months ended
September 30, 2008 totaled $153 million, compared with
$38 million for the same period in 2007. The increase in
usage is attributable to higher net restructuring cash outflow,
lower dividends from non-consolidated affiliates, an increase in
recoverable tax assets, higher trade working capital outflow
excluding change in receivables sold and higher interest
payments. The increase in usage was partially offset by
non-recurrence of a $67 million reduction in receivables
sold in 2007 and lower net loss, as adjusted for certain
non-cash items.
Investing
Activities
Cash used by investing activities was $160 million during
the nine months ended September 30, 2008, compared with
$79 million for the same period in 2007. The increase in
cash usage primarily resulted from lower proceeds from
divestiture and asset sales. The proceeds from divestiture and
asset sales for the nine months ended September 30, 2008,
which included proceeds from the NA Aftermarket Divestiture,
totaled $65 million compared to $159 million for the
nine months ended September 30, 2007, which included
proceeds from the Chassis divestiture. Capital expenditures,
excluding capital leases, were $230 million in the nine
months ended September 30, 2008 compared with
$232 million in the same period of 2007.
Financing
Activities
Cash used by financing activities totaled $268 million in
the nine months ended September 30, 2008, compared with
$452 million provided from financing activities in the same
period of 2007. Cash used by financing activities in the nine
months ended September 30, 2008 primarily resulted from the
purchase of $344 million in aggregate principal amount of
the Companys 8.25% notes and issuance of
$206.4 million in aggregate principal amount of New Notes,
reductions in affiliate debt, a decrease in book overdrafts and
dividends to minority shareholders. Cash provided from financing
activities in the nine months ended September 30, 2007
reflects the proceeds from the Companys $500 million
addition to its seven-year term loan, partially offset by
reductions in affiliate debt, dividends to minority shareholders
and a decrease in book overdrafts.
Debt and Capital
Structure
Debt
Additional information related to the Companys debt is set
forth in Note 12 Debt to the consolidated
financial statements included herein under Item 1.
Covenants and
Restrictions
The New Notes were issued pursuant to a supplemental indenture
which contains covenants that limit, among other things, the
ability of the Company and its restricted subsidiaries to incur
additional indebtedness, make certain distributions, investments
and other restricted payments, dispose of assets, grant liens on
assets, issue guarantees, designate unrestricted subsidiaries,
engage in transactions with affiliates, enter into agreements
restricting the ability of subsidiaries to pay dividends, engage
in sale and leaseback transactions, and merge or consolidate or
transfer substantially all of its assets, subject to certain
exceptions and qualifications. Each of the Companys
existing and future
wholly-owned
domestic restricted subsidiaries that guarantee debt under the
Companys revolving credit facility guarantee the New Notes.
47
Holders of the New Notes have the right to require the Company
to redeem their New Notes in whole or in part on
December 31, 2013 at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest. The
Company may redeem the New Notes prior to December 31, 2013
in whole at any time or in part from time to time, at its
option, at a redemption price equal to the greater of
(1) 100% of the principal amount to be redeemed, and
(2) the sum of the present values of the remaining
scheduled payments of principal and interest on the New Notes to
be redeemed discounted to the date of redemption on a
semi-annual basis at the applicable Treasury Rate plus
50 basis points plus accrued and unpaid interest,
including, if applicable, liquidated damages, on the principal
amount being redeemed to the redemption date. Thereafter, the
Company may redeem the New Notes in whole at any time or in part
from time to time, at its option, at specified redemption prices
plus accrued and unpaid interest. In addition, upon the
occurrence of certain change of control events, holders of the
New Notes have the right to require the Company to purchase some
or all of the New Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest. The Company is required to pay
additional interest on the New Notes if, at any time during the
period beginning six months and ending one year after
June 18, 2008, adequate current public information with
respect to the Company is unavailable.
Subject to limited exceptions, each of the Companys direct
and indirect, existing and future, domestic subsidiaries as well
as certain foreign subsidiaries, acts as guarantor under its
term loan credit agreement. The obligations under the credit
agreement are secured by a first-priority lien on certain assets
of the Company and most of its domestic subsidiaries, including
intellectual property, intercompany debt, the capital stock of
nearly all direct and indirect domestic subsidiaries as well as
certain foreign subsidiaries, and 65% of the stock of certain
foreign subsidiaries, as well as a second-priority lien on
substantially all other material tangible and intangible assets
of the Company and most of its domestic subsidiaries.
Obligations under the revolving credit agreement are secured by
a first-priority lien on certain assets of the Company and most
of its domestic subsidiaries, including real property, accounts
receivable, inventory, equipment and other tangible and
intangible property, including the capital stock of nearly all
direct and indirect domestic subsidiaries (other than those
domestic subsidiaries the sole assets of which are capital stock
of foreign subsidiaries) and certain foreign subsidiaries, as
well as a second-priority lien on substantially all other
material tangible and intangible assets of the Company and most
of its domestic subsidiaries which secure the Companys
term loan credit agreement.
The terms relating to both credit agreements specifically limit
the obligations to be secured by a security interest in certain
U.S. manufacturing properties and intercompany indebtedness
and capital stock of U.S. manufacturing subsidiaries in
order to ensure that, at the time of any borrowing under the
credit agreement and other credit lines, the amount of the
applicable borrowing which is secured by such assets (together
with other borrowings which are secured by such assets and
obligations in respect of certain sale-leaseback transactions)
do not exceed 15% of Consolidated Net Tangible Assets (as
defined in the indenture applicable to the Companys
outstanding bonds and debentures).
The credit agreements contain, among other things, mandatory
prepayment provisions for certain asset sales, recovery events,
equity issuances and debt incurrence, covenants, representations
and warranties and events of default customary for facilities of
this type. Such covenants include certain restrictions on the
incurrence of additional indebtedness, liens, acquisitions and
other investments, mergers, consolidations, liquidations and
dissolutions, sales of assets, dividends and other repurchases
in respect of capital stock, voluntary prepayments of certain
other indebtedness, capital expenditures, transactions with
affiliates, changes in fiscal periods, hedging arrangements,
lines of business, negative pledge clauses, subsidiary
distributions and the activities of certain holding company
subsidiaries, subject to certain exceptions.
48
Under certain conditions, amounts outstanding under the credit
agreements may be accelerated. Bankruptcy and insolvency events
with respect to the Company or certain of its subsidiaries will
result in an automatic acceleration of the indebtedness under
the credit agreements. Subject to notice and cure periods in
certain cases, other events of default under the credit
agreements will result in acceleration of indebtedness under the
credit agreements at the option of the lenders. Such other
events of default include failure to pay any principal, interest
or other amounts when due, failure to comply with covenants,
breach of representations or warranties in any material respect,
non-payment or acceleration of other material debt, entry of
material judgments not covered by insurance, or a change of
control of the Company.
At September 30, 2008, the Company was in compliance with
applicable covenants and restrictions, as amended, although
there can be no assurance that the Company will remain in
compliance with such covenants in the future. If the Company was
to violate a covenant and not obtain a waiver, the credit
agreements could be terminated and amounts outstanding would be
accelerated. The Company can provide no assurance that, in such
event, that it would have access to sufficient liquidity
resources to repay such amounts.
Off-Balance Sheet
Arrangements
Guarantees
The Company has guaranteed certain Tier 2 suppliers
debt and lease obligations and other third-party service
providers obligations to ensure the continued supply of
essential parts. These guarantees have not, nor does the Company
expect they are reasonably likely to have, a material current or
future effect on the Companys financial position, results
of operations or cash flows.
Asset
Securitization
Transfers under the European Securitization, for which the
Company receives consideration other than a beneficial interest,
are accounted for as true sales under the provisions
of SFAS 140 and are removed from the balance sheet.
Transfers under the European Securitization, for which the
Company receives a beneficial interest are not removed from the
balance sheet and total $237 million and $434 million
as of September 30, 2008 and December 31, 2007,
respectively. Such amounts are recorded at fair value and are
subordinated to the interests of third-party lenders. Securities
representing the Companys retained interests are accounted
for as trading securities under Statement of Financial
Accounting Standards No. 115 Accounting for Certain
Investments in Debt and Equity Securities.
Availability of funding under the European Securitization
depends primarily upon the amount of trade receivables reduced
by outstanding borrowings under the program and other
characteristics of those trade receivables that affect their
eligibility (such as bankruptcy or the grade of the obligor,
delinquency and excessive concentration). As of
September 30, 2008, approximately $114 million of the
Companys transferred trade receivables were considered
eligible for borrowing under this facility, $93 million was
outstanding and $21 million was available for funding. The
Company recorded losses of $5 million and $6 million
for the nine-month periods ended September 30, 2008 and
2007, respectively, related to trade receivables sold under the
European Securitization.
49
The table below provides a reconciliation of changes in
interests in account receivables transferred for the period.
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in Millions)
|
|
|
Beginning balance
|
|
$
|
434
|
|
|
$
|
482
|
|
Receivables transferred
|
|
|
2,028
|
|
|
|
2,495
|
|
Proceeds from new securitizations
|
|
|
|
|
|
|
(41
|
)
|
Proceeds from collections reinvested in securitization
|
|
|
(425
|
)
|
|
|
(381
|
)
|
Cash flows received on interest retained
|
|
|
(1,778
|
)
|
|
|
(2,132
|
)
|
Currency exchange
|
|
|
(22
|
)
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
237
|
|
|
$
|
463
|
|
|
|
|
|
|
|
|
|
|
In October 2008, the Company amended and restated agreements
related to the European Securitization to, among other things;
include Visteon Electronics Corporation as a seller under the
facility and remove Visteon UK Limited as the master service
provider. In connection with these amendments, the Company
regained control of previously transferred trade receivables and
the Transferor will be consolidated in accordance with the
requirements of FASB Interpretation 46(R), Consolidation
of Variable Interest Entities an interpretation of
ARB No. 51. Accordingly, upon consolidation, Visteon
will account for transferred accounts receivable as secured
borrowings and will recognize the related receivables and the
obligations to third-party lenders on its consolidated balance
sheet.
Fair Value
Measurements
The Company uses fair value measurements in the preparation of
its financial statements, which utilize various inputs including
those that can be readily observable, corroborated or are
generally unobservable. The Company utilizes market-based data
and valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs.
Additionally, the Company applies assumptions that market
participants would use in pricing an asset or liability,
including assumptions about risk. The primary financial
instruments that are recorded at fair value in the
Companys financial statements include derivative
instruments and retained interests in trade accounts receivable
transferred under the European Securitization.
Statement of Financial Accounting Standards No. 157
(SFAS 157), Fair Value
Measurements, requires the categorization of financial
assets and liabilities, based on the inputs to the valuation
technique, into a three-level fair value hierarchy. 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. The various levels of
the SFAS 157 fair value hierarchy are described as follows:
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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.
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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.
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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.
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The Companys use of derivative instruments creates
exposure to credit loss in the event of nonperformance by the
counterparty to the derivative financial instruments. The
Company limits this exposure by entering into agreements
directly with a variety of major financial institutions with
high credit standards and that are expected to fully satisfy
their obligations under the contracts. Fair value measurements
related to derivative assets take into account the
non-performance risk of the respective counterparty, while
derivative liabilities take into account the non-performance
risk of the Company and its foreign affiliates.
50
The fair values of derivative instruments are determined 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 counterparty non-performance risk.
Substantially all of which are observable in the marketplace
throughout the full term of the instrument, can be derived from
observable data or are supported by observable levels at which
transactions are executed in the marketplace, therefore are
categorized as Level 2 assets or liabilities in the fair
value hierarchy established by SFAS 157. The hypothetical
gain or loss from a 100 basis point change in
non-performance risk would be less than $1 million for the
fair value of foreign currency derivatives and net interest rate
swaps as of September 30, 2008.
The fair value of retained interests in accounts receivable
transferred is based on an income approach that requires inputs
that are both unobservable and significant to the overall fair
value measurement, therefore are categorized as Level 3
assets under the fair value hierarchy established by
SFAS 157. These inputs reflect the assumptions a market
participant would use in pricing the asset or liability and
include consideration of time value and counterparty
non-performance risk. The hypothetical gain or loss from a
100 basis point change in these assumptions would be
approximately $3 million.
New Accounting
Standards
In October 2008, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP)
No. FAS 157-3
(FSP
FAS 157-3),
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active, which clarifies the
application of SFAS 157 in a market that is not active and
provides an example to illustrate key considerations in
determining the fair value of a financial asset when the market
for that financial asset is not active. FSP
FAS 157-3
became effective upon issuance and was adopted by the Company
for the reporting period ending September 30, 2008 without
material impact on its consolidated financial statements.
In September 2008, the FASB issued FASB Staff Position
No. FAS 133-1
and
FIN 45-4
(FSP
FAS 133-1
and
FIN 45-4),
Disclosures about Credit Derivatives and Certain
Guarantees, an amendment of FASB Statement No. 133 and
FASB Interpretation No. 45; and Clarification of the
Effective Date of FASB Statement No. 161. This FSP
requires disclosure of information about credit derivatives by
sellers of credit derivatives and disclosure of the current
status of the payment/performance risk of a guarantee. This FSP
is effective for financial statements issued for reporting
periods ending after November 15, 2008.
In March 2008, the FASB issued Statement of Financial Accounting
Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB
Statement No. 133. This statement requires disclosure
of (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are
accounted for under Statement of Financial Accounting Standards
No. 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an
entitys financial position, results of operations, and
cash flows. This statement is effective for financial statements
issued for fiscal years and interim periods beginning after
November 15, 2008 and becomes effective for the Company on
a prospective basis on January 1, 2009.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141(R), Business
Combinations and Statement of Financial Accounting
Standards No. 160, Non-controlling Interests in
Consolidated Financial Statements, an amendment to ARB
No. 51. These statements change the accounting and
reporting for business combination transactions and minority
interests in consolidated financial statements. These statements
are required to be adopted simultaneously and are effective for
the first annual reporting period beginning on or after
December 15, 2008. The Company is currently evaluating the
impact of these statements on its consolidated financial
statements.
In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities
Including an Amendment of FASB Statement
No. 115. This statement permits measurement of
financial instruments and certain other items at fair value. The
Company adopted this statement effective January 1, 2008
and has not elected the permitted fair value measurement
provisions of this statement.
51
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, Fair Value
Measurements. This statement, which became effective
January 1, 2008, defines fair value, establishes a
framework for measuring fair value and expands disclosure
requirements regarding fair value measurements. The Company
adopted the requirements of SFAS 157 as of January 1,
2008 without a material impact on its consolidated financial
statements, as more fully disclosed in Note 17, Fair
Value Measurements. In February 2008, the FASB issued FASB
Staff Position
No. FAS 157-2
(FSP
FAS 157-2),
Effective Date of FASB Statement No. 157, which
delays the effective date of SFAS 157 for nonfinancial
assets and nonfinancial liabilities that are recognized or
disclosed in the financial statements on a nonrecurring basis to
fiscal years beginning after November 15, 2008. The Company
has not applied the provisions of SFAS 157 to its
nonfinancial assets and nonfinancial liabilities in accordance
with FSP
FAS 157-2.
Cautionary
Statements Regarding Forward-Looking Information
Certain statements contained or incorporated in this Quarterly
Report on
Form 10-Q
which are not statements of historical fact constitute
Forward-Looking Statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the
Reform Act). Forward-looking statements give current
expectations or forecasts of future events. Words such as
anticipate, expect, intend,
plan, believe, seek,
estimate and other words and terms of similar
meaning in connection with discussions of future operating or
financial performance signify forward-looking statements. These
statements reflect the Companys current views with respect
to future events and are based on assumptions and estimates,
which are subject to risks and uncertainties including those
discussed in Item 1A under the heading
Risk Factors in the Companys Annual
Report on
Form 10-K
for fiscal year 2007 and elsewhere in this report. Accordingly,
the reader should not place undue reliance on these
forward-looking statements. Also, these forward-looking
statements represent the Companys estimates and
assumptions only as of the date of this report. The Company does
not intend to update any of these forward-looking statements to
reflect circumstances or events that occur after the statement
is made. The Company qualifies all of its
forward-looking
statements by these cautionary statements.
The reader should understand that various factors, in addition
to those discussed elsewhere in this document, could affect the
Companys future results and could cause results to differ
materially from those expressed in such forward-looking
statements, including:
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Visteons ability to satisfy its future capital and
liquidity requirements; Visteons ability to access the
credit and capital markets at the times and in the amounts
needed and on terms acceptable to Visteon, which is influenced
by Visteons credit ratings (which have declined in the
past and could decline further in the future), as well as,
general economic and market conditions; Visteons ability
to comply with covenants applicable to it; and the continuation
of acceptable supplier payment terms.
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Visteons ability to satisfy its pension and other
postemployment benefit obligations, and to retire outstanding
debt and satisfy other contractual commitments, all at the
levels and times planned by management.
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Visteons ability to access funds generated by its foreign
subsidiaries and joint ventures on a timely and cost effective
basis.
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Changes in the operations (including products, product planning
and part sourcing), financial condition, results of operations
or market share of Visteons customers, particularly its
largest customer, Ford.
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Changes in vehicle production volume of Visteons customers
in the markets where we operate, and in particular changes in
Fords North American and European vehicle production
volumes and platform mix.
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Visteons ability to profitably win new business from
customers other than Ford and to maintain current business with,
and win future business from, Ford, and Visteons ability
to realize expected sales and profits from new business.
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52
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The availability of Visteons federal net operating loss
carryforward and other federal income tax attributes may be
eliminated or significantly limited if a change of ownership of
Visteon, within the meaning of Section 382 of the Internal
Revenue Code, were to occur.
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Increases in commodity costs or disruptions in the supply of
commodities, including steel, resins, aluminum, copper, fuel and
natural gas.
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Visteons ability to generate cost savings to offset or
exceed agreed upon price reductions or price reductions to win
additional business and, in general, improve its operating
performance; to achieve the benefits of its restructuring
actions; and to recover engineering and tooling costs.
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Visteons ability to compete favorably with automotive
parts suppliers with lower cost structures and greater ability
to rationalize operations; and to exit non-performing businesses
on satisfactory terms, particularly due to limited flexibility
under existing labor agreements.
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Restrictions in labor contracts with unions that restrict
Visteons ability to close plants, divest unprofitable,
noncompetitive businesses, change local work rules and practices
at a number of facilities and implement cost-saving measures.
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The costs and timing of facility closures or dispositions,
business or product realignments, or similar restructuring
actions, including potential impairment or other charges related
to the implementation of these actions or other adverse industry
conditions and contingent liabilities.
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Significant changes in the competitive environment in the major
markets where Visteon procures materials, components or supplies
or where its products are manufactured, distributed or sold.
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Legal and administrative proceedings, investigations and claims,
including shareholder class actions, SEC inquiries, product
liability, warranty, employee-related, environmental and safety
claims, and any recalls of products manufactured or sold by
Visteon.
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Changes in economic conditions, currency exchange rates, changes
in foreign laws, regulations or trade policies or political
stability in foreign countries where Visteon procures materials,
components or supplies or where its products are manufactured,
distributed or sold.
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Shortages of materials or interruptions in transportation
systems, labor strikes, work stoppages or other interruptions to
or difficulties in the employment of labor in the major markets
where Visteon purchases materials, components or supplies to
manufacture its products or where its products are manufactured,
distributed or sold.
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Changes in laws, regulations, policies or other activities of
governments, agencies and similar organizations, domestic and
foreign, that may tax or otherwise increase the cost of, or
otherwise affect, the manufacture, licensing, distribution,
sale, ownership or use of Visteons products or assets.
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Possible terrorist attacks or acts of war, which could
exacerbate other risks such as slowed vehicle production,
interruptions in the transportation system, or fuel prices and
supply.
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The cyclical and seasonal nature of the automotive industry.
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Visteons ability to comply with environmental, safety and
other regulations applicable to it and any increase in the
requirements, responsibilities and associated expenses and
expenditures of these regulations.
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Visteons ability to protect its intellectual property
rights, and to respond to changes in technology and
technological risks and to claims by others that Visteon
infringes their intellectual property rights.
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Visteons ability to provide various employee and
transition services to Automotive Components Holdings, LLC in
accordance with the terms of existing agreements between the
parties, as well as Visteons ability to recover the costs
of such services.
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53
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Visteons ability to quickly and adequately remediate
control deficiencies in its internal control over financial
reporting.
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Other factors, risks and uncertainties detailed from time to
time in Visteons Securities and Exchange Commission
filings.
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Other Financial
Information
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, performed a limited review of the financial
data presented on page 3 through 32 inclusive. The review
was performed in accordance with standards for such reviews
established by the Public Company Accounting Oversight Board
(United States). The review did not constitute an audit;
accordingly, PricewaterhouseCoopers LLP did not express an
opinion on the aforementioned data. Their review report included
herein is not a report within the meaning of
Sections 7 and 11 of the Securities Act of 1933 and the
independent registered public accounting firms liability
under Section 11 does not extend to it.
54
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ITEM 3.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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The primary market risks to which the Company is exposed include
changes in foreign currency exchange rates, interest rates and
certain commodity prices. The Company manages these risks
through derivative instruments and various operating actions
including fixed price contracts with suppliers and cost sourcing
arrangements with customers. The Companys use of
derivative instruments is limited to hedging activities and such
instruments are not used for speculative or trading purposes, as
per clearly defined risk management policies. Additionally, the
Companys use of derivative instruments creates exposure to
credit loss in the event of nonperformance by the counterparty
to the derivative financial instruments. The Company limits this
exposure by entering into agreements directly with a variety of
major financial institutions with high credit standards and that
are expected to fully satisfy their obligations under the
contracts.
Foreign Currency
Risk
The Companys net cash inflows and outflows exposed to the
risk of changes in 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.
The Company utilizes derivative financial instruments to manage
foreign currency exchange rate risks. Forward contracts and, to
a lesser extent, option contracts are utilized to protect the
Companys cash flow from adverse movements in exchange
rates. Foreign currency exposures are reviewed monthly and any
natural offsets are considered prior to entering into a
derivative financial instrument. The Companys primary
foreign exchange operating exposures include the Euro, Korean
Won, Czech Koruna and Mexican Peso. For transactions in
these currencies, the Company utilizes a strategy of partial
coverage. As of September 30, 2008, the Companys
coverage for projected transactions in these currencies was
approximately 73%. As of September 30, 2008 and
December 31, 2007, the net fair value of foreign currency
forward and option contracts was an asset of $3 million and
a liability of $1 million, respectively.
The hypothetical pre-tax gain or loss in fair value from a 10%
favorable or adverse change in quoted currency exchange rates
would be approximately $39 million and $30 million as
of September 30, 2008 and December 31, 2007,
respectively. These estimated changes assume a parallel shift in
all currency exchange rates and include the gain or loss on
financial instruments used to hedge loans to subsidiaries.
Because exchange rates typically do not all move in the same
direction, the estimate may overstate the impact of changing
exchange rates on the net fair value of the Companys
financial derivatives. It is also important to note that gains
and losses indicated in the sensitivity analysis would generally
be offset by gains and losses on the underlying exposures being
hedged.
Interest Rate
Risk
The Company is subject to interest rate risk principally in
relation to fixed-rate and variable-rate debt. The Company uses
derivative financial instruments to manage exposure to
fluctuations in interest rates in connection with its risk
management policies. The Company has entered into interest rate
swaps for a portion of the 8.25% notes due August 1,
2010 ($125 million) and a portion of the 7.00% notes
due March 10, 2014 ($225 million). These interest rate
swaps effectively convert the designated portions of these notes
from fixed interest rate to variable interest rate instruments.
Additionally, the Company has entered into interest rate swaps
for a portion of the $1 billion term loan due 2013
($200 million), effectively converting the designated
portion of this loan from a variable interest rate to a fixed
interest rate instrument. Approximately 33% and 37% of the
Companys borrowings were effectively on a fixed rate basis
as of September 30, 2008 and December 31, 2007,
respectively. As of September 30, 2008 and
December 31, 2007, the net fair value of interest rate
swaps were liabilities of $2 million and $9 million,
respectively.
55
The potential loss in fair value of these swaps from a
hypothetical 50 basis point adverse change in interest
rates would be approximately $3 million as of
September 30, 2008 and $4 million as of
December 31, 2007. The annual increase in pre-tax interest
expense from a hypothetical 50 basis point adverse change
in variable interest rates (including the impact of interest
rate swaps) would be approximately $9 million as of
September 30, 2008 and December 31, 2007. This
analysis may overstate the adverse impact on net interest
expense because of the short-term nature of the Companys
interest bearing investments.
During the third quarter of 2004 and the first quarter of 2005,
the Company terminated interest rate swaps with a notional
amount of $190 million and $200 million, respectively,
related to the 8.25% notes due 2010. The fair value of
these swaps at termination was deferred and amortized as a
reduction in interest expense over the remaining term of the
debt. In connection with the June 2008 retirement of
$344 million of the 8.25% notes due 2010, the Company
recognized $3 million of unamortized gains associated with
approximately $300 million notional amount of such
previously terminated interest rate swaps.
Commodity
Risk
The Companys exposure to market risks from changes in the
price of commodities including steel products, plastic resins,
aluminum, natural gas and diesel fuel are not hedged due to a
lack of acceptable hedging instruments in the market. While the
Company addresses exposures to price changes in such commodities
through operating actions, including negotiations with suppliers
and customers, there can be no assurance that the Company will
be able to mitigate any or all price increases
and/or
surcharges. When and if acceptable hedging instruments are
available in the market, management will determine at that time
if financial hedging is appropriate, depending upon the
Companys exposure level at that time, the effectiveness of
the financial hedge and other factors.
56
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ITEM 4.
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CONTROLS
AND PROCEDURES
|
Disclosure
Controls and Procedures
The Company maintains disclosure controls and procedures that
are designed to ensure that information required to be disclosed
in reports the Company files with the SEC under the Securities
Exchange Act of 1934 is recorded, processed, summarized, and
reported within the time periods specified in the SECs
rules and forms, and that such information is accumulated and
communicated to the Companys management, including its CEO
and CFO, as appropriate, to allow timely decisions regarding
required disclosure.
The Companys management carried out an evaluation, under
the supervision and with the participation of the CEO and the
CFO, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as of
September 30, 2008. Based upon that evaluation, the CEO and
CFO concluded that the Companys disclosure controls and
procedures were effective.
Changes in
Internal Control over Financial Reporting
There were no changes in the Companys internal controls
over financial reporting during the quarterly period ended
September 30, 2008 that have materially affected the
Companys internal controls over financial reporting.
During the third quarter of 2008, the Company continued the
implementation of a new enterprise resource planning system at
two operating locations in North America. The planned
information system upgrade is expected to be completed in 2010.
57
PART II
OTHER INFORMATION
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ITEM 1.
|
LEGAL
PROCEEDINGS
|
See the information above under Note 18, Commitments
and Contingencies, to the consolidated financial
statements which is incorporated herein by reference.
Visteons common stock is currently listed on the New York
Stock Exchange (the NYSE). In the future, the
Company may not be able to meet the continued listing
requirements of the NYSE. The continued listing requirements on
the NYSE require, among other things: (i) that the average
closing price of common stock be not less than $1.00 for 30
consecutive trading days and (ii) that market
capitalization be not less than $75 million if at the same
time shareholder equity is less than $75 million for 30
consecutive trading days. On October 21, 2008, the
Companys market capitalization was $120 million and
as of September 30, 2008 shareholder equity was a deficit
of $530 million. Also, starting on October 21, 2008,
the closing price of the Companys stock has been below
$1.00. If Visteon is unable to satisfy the NYSE criteria for
continued listing, the Companys common stock would be
subject to delisting. A delisting of common stock could
negatively impact the Company by reducing the liquidity and
market price of common stock and reducing the number of
investors willing to hold or acquire common stock, which could
negatively impact the Companys ability to raise additional
funds through equity financing.
For additional information regarding factors that could affect
the Companys results of operations, financial condition
and liquidity, see the risk factors discussed in Part I,
Item 1A. Risk Factors in the Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 and Current
Report on
Form 8-K
dated May 19, 2008. See also, Cautionary Statements
Regarding Forward-Looking Information included in
Part I, Item 2 of this Quarterly Report on
Form 10-Q.
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ITEM 5.
|
OTHER
INFORMATION
|
During September 2008, the Company commenced a voluntary
separation incentive program to realign the Companys
administrative organization structure. Following the close of
that voluntary program on September 26, 2008, the Company
commenced an involuntary salaried workforce reduction program.
During the three months ended September 30, 2008, the
Company recorded employee severance and termination benefit
costs of $10 million associated with approximately 200
salaried employees in the United States, for which severance and
termination benefits were deemed probable and estimable.
On October 24, 2008 and in response to worsening market
conditions, management of the Company committed to significantly
expand its involuntary salaried workforce reduction program.
Under the expanded involuntary salaried workforce reduction
program, the Company expects to reduce its global salaried
workforce by more than 400 employees through the end of the
first quarter of 2009. The Company expects to incur
approximately $35 million in employee termination costs as
a result of this workforce reduction.
All of these termination costs will result in future cash
expenditures and will be subject to reimbursement from the
escrow account in accordance with terms of the Amended Escrow
Agreement. Additionally, the Company expects to record a net
curtailment gain during the fourth quarter of 2008, related to
the reduction in future service of employees affected by the
voluntary and involuntary programs in related pension and OPEB
benefit plans.
Effective as of October 30, 2008, the Company amended and
restated certain agreements related to the European
Securitization. The information set forth under Item 2.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Off-Balance Sheet
Arrangements Asset Securitization is
incorporated herein by reference.
See Exhibit Index on Page 60.
58
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
VISTEON CORPORATION
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By:
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/s/ MICHAEL
J. WIDGREN
|
Michael J. Widgren
Vice President, Corporate Controller and
Chief Accounting Officer
Date: October 30, 2008
59
EXHIBIT INDEX
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Exhibit
|
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|
Number
|
|
Exhibit Name
|
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3.1
|
|
Amended and Restated Certificate of Incorporation of Visteon
Corporation (Visteon) is incorporated herein by
reference to Exhibit 3.1 to the Current Report on
Form 8-K
of Visteon dated May 22, 2007.
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3.2
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Amended and Restated By-laws of Visteon as in effect on the date
hereof is incorporated herein by reference to Exhibit 3.2
to the Current Report on
Form 8-K
of Visteon dated May 22, 2007.
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4.1
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Amended and Restated Indenture dated as of March 10, 2004
between Visteon and J.P. Morgan Trust Company, as
Trustee, is incorporated herein by reference to
Exhibit 4.01 to the Current Report on
Form 8-K
of Visteon dated March 3, 2004 (filed as of March 19,
2004).
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4.2
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Supplemental Indenture dated as of March 10, 2004 between
Visteon and J.P. Morgan Trust Company, as Trustee, is
incorporated herein by reference to Exhibit 4.02 to the
Current Report on
Form 8-K
of Visteon dated March 3, 2004 (filed as of March 19,
2004).
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4.3
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Form of Common Stock Certificate of Visteon is incorporated
herein by reference to Exhibit 4.1 to Amendment No. 1
to the Registration Statement on Form 10 of Visteon dated
May 19, 2000.
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4.4
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Warrant to purchase 25 million shares of common stock of
Visteon, dated as of May 17, 2007, is incorporated herein
by reference to Exhibit 4.1 to the Current Report on
Form 8-K
of Visteon dated May 18, 2007.
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4.5
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Form of Stockholder Agreement, dated as of October 1, 2005,
between Visteon and Ford Motor Company (Ford) is
incorporated herein by reference to Exhibit 4.2 to the
Current Report on
Form 8-K
of Visteon dated September 16, 2005.
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4.6
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Letter Agreement, dated as of May 17, 2007, among Visteon,
LB I Group, Inc. and Ford Motor Company is incorporated herein
by reference to Exhibit 4.2 to the Current Report on
Form 8-K
of Visteon dated May 18, 2007.
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4.7
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Term sheet dated July 31, 2000 establishing the terms of
Visteons 8.25% Notes due August 1, 2010 and
7.00% Notes due March 10, 2014 is incorporated herein
by reference to Exhibit 4.7 to the Quarterly Report on
Form 10-Q
of Visteon dated April 30, 2008.
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4.8
|
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Second Supplemental Indenture, dated as of June 18, 2008,
between Visteon, the guarantors party thereto and The Bank of
New York Trust Company, N.A., as Trustee, (including a form
of Note) is incorporated herein by reference to Exhibit 4.1
to the Current Report on
Form 8-K
of Visteon dated June 24, 2008.
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10.1
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Master Transfer Agreement dated as of March 30, 2000
between Visteon and Ford is incorporated herein by reference to
Exhibit 10.2 to the Registration Statement on
Form S-1
of Visteon dated June 2, 2000 (File
No. 333-38388).
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10.2
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Master Separation Agreement dated as of June 1, 2000
between Visteon and Ford is incorporated herein by reference to
Exhibit 10.4 to Amendment No. 1 to the Registration
Statement on
Form S-1
of Visteon dated June 6, 2000 (File
No. 333-38388).
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10.3
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Amended and Restated Employee Transition Agreement dated as of
April 1, 2000, as amended and restated as of
December 19, 2003, between Visteon and Ford is incorporated
herein by reference to Exhibit 10.7 to the Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2003.
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10.3.1
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Amendment Number Two, effective as of October 1, 2005, to
Amended and Restated Employee Transition Agreement, dated as of
April 1, 2000 and restated as of December 19, 2003,
between Visteon and Ford is incorporated herein by reference to
Exhibit 10.15 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
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10.4
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Tax Sharing Agreement dated as of June 1, 2000 between
Visteon and Ford is incorporated herein by reference to
Exhibit 10.8 to the Registration Statement on
Form S-1
of Visteon dated June 2, 2000 (File
No. 333-38388).
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10.5
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Visteon Corporation 2004 Incentive Plan, as amended through
October 3, 2008.*
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10.5.1
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Form of Terms and Conditions of Nonqualified Stock Options is
incorporated herein by reference to Exhibit 10.5.2 to the
Quarterly Report on
Form 10-Q
of Visteon dated November 8, 2007.*
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10.5.2
|
|
Form of Terms and Conditions of Restricted Stock Grants is
incorporated herein by reference to Exhibit 10.5.2 to the
Quarterly Report on
Form 10-Q
of Visteon dated May 9, 2007.*
|
60
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Name
|
|
10.5.3
|
|
Form of Terms and Conditions of Restricted Stock Units (cash
settled only) is incorporated herein by reference to
Exhibit 10.5.3 to the Quarterly Report on
Form 10-Q
of Visteon dated May 9, 2007.*
|
10.5.4
|
|
Form of Terms and Conditions of Stock Appreciation Rights (cash
settled only) is incorporated herein by reference to
Exhibit 10.5.4 to the Quarterly Report on
Form 10-Q
of Visteon dated May 9, 2007.*
|
10.5.5
|
|
Form of Terms and Conditions of Stock Appreciation Rights (stock
or cash settled) is incorporated herein by reference to
Exhibit 10.5.6 to the Quarterly Report on
Form 10-Q
of Visteon dated April 30, 2008.*
|
10.5.6
|
|
Form of Terms and Conditions of Restricted Stock Units (stock or
cash settled) is incorporated herein by reference to
Exhibit 10.5.7 to the Quarterly Report on
Form 10-Q
of Visteon dated April 30, 2008.*
|
10.6
|
|
Form of Amended and Restated Three Year Executive Officer Change
in Control Agreement.*
|
10.6.1
|
|
Schedule identifying substantially identical agreements to
Amended and Restated Three Year Executive Officer Change in
Control Agreement constituting Exhibit 10.6 hereto entered
into by Visteon with Messrs. Johnston, Stebbins, Donofrio,
and Quigley and Ms. Stephenson is incorporated herein by
reference to Exhibit 10.6.2 to the Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2007.*
|
10.7
|
|
Visteon Corporation Deferred Compensation Plan for Non-Employee
Directors, as amended effective Jun 12, 2008, is incorporated
herein by reference to Exhibit 10.7 to the Quarterly Report
on
Form 10-Q
of Visteon dated July 30, 2008.*
|
10.8
|
|
Visteon Corporation Restricted Stock Plan for Non-Employee
Directors, as amended, is incorporated herein by reference to
Exhibit 10.15 to the Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2003.*
|
10.8.1
|
|
Amendments to the Visteon Corporation Restricted Stock Plan for
Non-Employee Directors, effective as of January 1, 2005 is
incorporated herein by reference to Exhibit 10.15.1 to the
Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2005.*
|
10.8.2
|
|
Amendment to the Visteon Corporation Restricted Stock Plan for
Non-Employee Directors, effective as of May 10, 2006, is
incorporated herein by reference to Exhibit 10.3 to the
Current Report on
Form 8-K
of Visteon dated May 12, 2006.*
|
10.9
|
|
Visteon Corporation Deferred Compensation Plan is incorporated
herein by reference to Exhibit 10.9 to the Quarterly Report
on
Form 10-Q
of Visteon dated April 30, 2008.*
|
10.9.1
|
|
Amendments to the Visteon Corporation Deferred Compensation
Plan, effective as of December 23, 2005 is incorporated
herein by reference to Exhibit 10.16.1 to the Annual Report
on
Form 10-K
of Visteon for the period ended December 31, 2005.*
|
10.10
|
|
Employment Agreement dated as of December 7, 2004 between
Visteon and William G. Quigley III is
incorporated herein by reference to Exhibit 10.17 to the
Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2005.*
|
10.11
|
|
Visteon Corporation Pension Parity Plan, as amended through
February 9, 2005, is incorporated herein by reference to
Exhibit 10.4 to the Current Report on
Form 8-K
of Visteon dated February 15, 2005.*
|
10.11.1
|
|
Amendments to the Visteon Corporation Pension Parity Plan,
effective as of January 1, 2005 is incorporated herein by
reference to Exhibit 10.18.1 to the Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2005.*
|
10.12
|
|
Visteon Corporation Supplemental Executive Retirement Plan, as
amended through February 9, 2005, is incorporated herein by
reference to Exhibit 10.2 to the Current Report on
Form 8-K
of Visteon dated February 15, 2005.*
|
10.12.1
|
|
Amendments to the Visteon Corporation Supplemental Executive
Retirement Plan, effective as of January 1, 2005 is
incorporated herein by reference to Exhibit 10.19.1 to the
Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2005.*
|
10.12.2
|
|
Amendments to the Visteon Corporation Supplemental Executive
Retirement Plan, effective as of June 30, 2006, is
incorporated herein by reference to Exhibit 10.1 to the
Current Report on
Form 8-K
of Visteon dated June 19, 2006.*
|
61
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Name
|
|
10.13
|
|
Amended and Restated Employment Agreement, effective as of
March 1, 2007, between Visteon and Michael F. Johnston is
incorporated herein by reference to Exhibit 10.13 to the
Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2006.*
|
10.13.1
|
|
Amendment to the Amended and Restated Employment Agreement,
effective as of March 1, 2007, between Visteon and Michael
F. Johnston, is incorporated herein by reference to
Exhibit 10.13.1 to the Quarterly Report on
Form 10-Q
of Visteon dated July 30, 2008.*
|
10.14
|
|
Visteon Corporation Executive Separation Allowance Plan, as
amended through February 9, 2005, is incorporated herein by
reference to Exhibit 10.3 to the Current Report on
Form 8-K
of Visteon dated February 15, 2005.*
|
10.14.1
|
|
Amendments to the Visteon Corporation Executive Separation
Allowance Plan, effective as of January 1, 2005 is
incorporated herein by reference to Exhibit 10.22.1 to the
Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2005.*
|
10.15
|
|
Trust Agreement dated as of February 7, 2003 between
Visteon and The Northern Trust Company establishing a
grantor trust for purposes of paying amounts to certain
directors and executive officers under the plans constituting
Exhibits 10.6, 10.6.1, 10.7, 10.7.1, 10.9, 10.9.1, 10.11,
10.11.1, 10.12, 10.12.1, 10.12.2, 10.14 and 10.14.1 hereto is
incorporated herein by reference to Exhibit 10.15 to the
Quarterly Report on
Form 10-Q
of Visteon dated April 30, 2008.*
|
10.16
|
|
Credit Agreement, dated as of August 14, 2006, among
Visteon, certain subsidiaries of Visteon, the several banks and
other financial institutions or entities from time to time party
thereto, Bank of America, NA, Sumitomo Mitsui Banking
Corporation, New York, and Wachovia Capital Finance Corporation
(Central), as co-documentation agents, Citicorp USA, Inc., as
syndication agent, and JPMorgan Chase Bank, N.A., as
administrative agent, is incorporated herein by reference to
Exhibit 10.17 to the Quarterly Report on
Form 10-Q
of Visteon dated November 7, 2006.
|
10.16.1
|
|
First Amendment to Credit Agreement and Consent, dated as of
November 27, 2006, to the Credit Agreement, dated as of
August 14, 2006, among Visteon, certain subsidiaries of
Visteon, the several banks and other financial institutions or
entities from time to time party thereto, Bank of America, NA,
Sumitomo Mitsui Banking Corporation, New York, and Wachovia
Capital Finance Corporation (Central), as co-documentation
agents, Citicorp USA, Inc., as syndication agent, and JPMorgan
Chase Bank, N.A., as administrative agent, is incorporated
herein by reference to Exhibit 10.3 to the Current Report
on
Form 8-K
of Visteon dated December 1, 2006.
|
10.16.2
|
|
Second Amendment to Credit Agreement and Consent, dated as of
April 10, 2007, to the Credit Agreement, dated as of
August 14, 2006, among Visteon, certain subsidiaries of
Visteon, the several banks and other financial institutions or
entities from time to time party thereto, Bank of America, NA,
Sumitomo Mitsui Banking Corporation, New York, and Wachovia
Capital Finance Corporation (Central), as co-documentation
agents, Citicorp USA, Inc., as syndication agent, and JPMorgan
Chase Bank, N.A., as administrative agent, is incorporated
herein by reference to Exhibit 10.3 to the Current Report
on
Form 8-K
of Visteon dated April 16, 2007.
|
10.16.3
|
|
Third Amendment to Credit Agreement, dated as of March 12,
2008, to the Credit Agreement, dated as of August 14, 2006,
among Visteon, certain subsidiaries of Visteon, the several
banks and other financial institutions or entities from time to
time party thereto, Bank of America, NA, Sumitomo Mitsui Banking
Corporation, New York, and Wachovia Capital Finance Corporation
(Central), as co-documentation agents, Citicorp USA, Inc., as
syndication agent, and JPMorgan Chase Bank, N.A., as
administrative agent, is incorporated herein by reference to
Exhibit 10.16.3 to the Quarterly Report on
Form 10-Q
of Visteon dated April 30, 2008.
|
10.17
|
|
Amended and Restated Credit Agreement, dated as of
April 10, 2007, among Visteon, the several banks and other
financial institutions or entities from time to time party
thereto, Credit Suisse Securities (USA) LLC and Sumitomo Mitsui
Banking Corporation, as co-documentation agents, Citicorp USA,
Inc., as syndication agent, and JPMorgan Chase Bank, N.A., as
administrative agent, is incorporated herein by reference to
Exhibit 10.1 to the Current Report on
Form 8-K
of Visteon dated April 16, 2007.
|
62
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Name
|
|
10.18
|
|
Hourly Employee Conversion Agreement dated as of
December 22, 2003 between Visteon and Ford is incorporated
herein by reference to Exhibit 10.28 to the Annual Report
on
Form 10-K
of Visteon for the period ended December 31, 2003.
|
10.19
|
|
Letter Agreement, effective as of May 23, 2005, between
Visteon and Mr. Donald J. Stebbins is incorporated herein
by reference to Exhibit 10.1 to the Current Report on
Form 8-K
of Visteon dated May 23, 2005.*
|
10.20
|
|
Visteon Corporation Non-Employee Director Stock Unit Plan, as
amended effective June 12, 2008, is incorporated herein by
reference to Exhibit 10.20 to the Quarterly Report on
Form 10-Q
of Visteon dated July 30, 2008.*
|
10.21
|
|
Settlement Agreement, dated as of July 27, 2007 between
Visteon Systemes Interieurs, Visteon and Joel Coque (unofficial
translation) is incorporated herein by reference to
Exhibit 10.23 to the Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2007.*
|
10.22
|
|
Visteon Executive Severance Plan is incorporated herein by
reference to Exhibit 10.1 to the Current Report on
Form 8-K
of Visteon dated February 15, 2005.*
|
10.23
|
|
Form of Executive Retiree Health Care Agreement is incorporated
herein by reference to Exhibit 10.28 to the Current Report
on
Form 8-K
of Visteon dated December 9, 2004.*
|
10.23.1
|
|
Schedule identifying substantially identical agreements to
Executive Retiree Health Care Agreement constituting
Exhibit 10.23 hereto entered into by Visteon with
Messrs. Johnston and Stebbins and Ms. D. Stephenson is
incorporated herein by reference to Exhibit 10.25.1 to the
Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2007.*
|
10.24
|
|
Contribution Agreement, dated as of September 12, 2005,
between Visteon and VHF Holdings, Inc. is incorporated herein by
reference to Exhibit 10.2 to the Current Report on
Form 8-K
of Visteon dated September 16, 2005.
|
10.25
|
|
Visteon A Transaction Agreement, dated as of
September 12, 2005, between Visteon and Ford is
incorporated herein by reference to Exhibit 10.3 to the
Current Report on
Form 8-K
of Visteon dated September 16, 2005.
|
10.26
|
|
Visteon B Purchase Agreement, dated as of
September 12, 2005, between Visteon and Ford is
incorporated herein by reference to Exhibit 10.4 to the
Current Report on
Form 8-K
of Visteon dated September 16, 2005.
|
10.27
|
|
Escrow Agreement, dated as of October 1, 2005, among
Visteon, Ford and Deutsche Bank Trust Company Americas, as
escrow agent, is incorporated herein by reference to
Exhibit 10.11 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.27.1
|
|
Amendment, dated as of August 14, 2008, to the Escrow
Agreement, dated as of October 1, 2005, among Ford, Visteon
and Deutsche Bank Trust Company Americas is incorporated
herein by reference to Exhibit 10.1 to the Current Report
on
Form 8-K
of Visteon dated August 20, 2008.
|
10.28
|
|
Amended and Restated Reimbursement Agreement, dated as of
August 14, 2008, between Visteon and Ford is incorporated
herein by reference to Exhibit 10.12 to the Current Report
on
Form 8-K
of Visteon dated October 6, 2005.
|
10.29
|
|
Master Services Agreement, dated as of September 30, 2005,
between Visteon and Automotive Components Holdings, LLC is
incorporated herein by reference to Exhibit 10.2 to the
Current Report on
Form 8-K
of Visteon dated August 20, 2008.
|
10.29.1
|
|
Third Amendment, dated as of August 14, 2008, to the Master
Services Agreement, dated as of September 30, 2005, as
amended, between Visteon and Automotive Components Holdings, LLC
is incorporated herein by reference to Exhibit 10.3 to the
Current Report on
Form 8-K
of Visteon dated August 20, 2008.
|
10.30
|
|
Visteon Hourly Employee Lease Agreement, effective as of
October 1, 2005, between Visteon and Automotive Components
Holdings, LLC is incorporated herein by reference to
Exhibit 10.2 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.31
|
|
Visteon Hourly Employee Conversion Agreement, dated effective as
of October 1, 2005, between Visteon and Ford is
incorporated herein by reference to Exhibit 10.9 to the
Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
63
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Name
|
|
10.32
|
|
Visteon Salaried Employee Lease Agreement, effective as of
October 1, 2005, between Visteon and Automotive Components
Holdings, LLC is incorporated herein by reference to
Exhibit 10.3 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.32.1
|
|
Amendment to Salaried Employee Lease Agreement and Payment
Acceleration Agreement, dated as of March 30, 2006, among
Visteon, Ford Motor Company and Automotive Components Holdings,
LLC is incorporated herein by reference to Exhibit 10.46.1
to the Quarterly Report on
Form 10-Q
of Visteon dated May 10, 2006.
|
10.32.2
|
|
Amendment, dated as of August 14, 2008, to the Visteon
Salaried Employee Lease Agreement, dated as of October 1,
2005, as amended, between Visteon and Automotive Components
Holdings, LLC is incorporated herein by reference to
Exhibit 10.4 to the Current Report on
Form 8-K
of Visteon dated August 20, 2008.
|
10.33
|
|
Visteon Salaried Employee Lease Agreement
(Rawsonville/Sterling), dated as of October 1, 2005,
between Visteon and Ford is incorporated herein by reference to
Exhibit 10.8 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.34
|
|
Visteon Salaried Employee Transition Agreement, dated effective
as of October 1, 2005, between Visteon and Ford is
incorporated herein by reference to Exhibit 10.10 to the
Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.34.1
|
|
Amendment Number One to Visteon Salaried Employee Transition
Agreement, effective as of March 1, 2006, between Visteon
and Ford is incorporated herein by reference to
Exhibit 10.36.1 to the Quarterly Report on
Form 10-Q
of Visteon dated August 8, 2006.
|
10.35
|
|
Purchase and Supply Agreement, dated as of September 30,
2005, between Visteon (as seller) and Automotive Components
Holdings, LLC (as buyer) is incorporated herein by reference to
Exhibit 10.4 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.36
|
|
Purchase and Supply Agreement, dated as of September 30,
2005, between Automotive Components Holdings, LLC (as seller)
and Visteon (as buyer) is incorporated herein by reference to
Exhibit 10.5 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.37
|
|
Purchase and Supply Agreement, dated as of October 1, 2005,
between Visteon (as seller) and Ford (as buyer) is incorporated
herein by reference to Exhibit 10.13 to the Current Report
on
Form 8-K
of Visteon dated October 6, 2005.
|
10.38
|
|
Intellectual Property Contribution Agreement, dated as of
September 30, 2005, among Visteon, Visteon Global
Technologies, Inc., Automotive Components Holdings, Inc. and
Automotive Components Holdings, LLC is incorporated herein by
reference to Exhibit 10.6 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.38.1
|
|
Amendment to Intellectual Property Contribution Agreement, dated
as of December 11, 2006, among Visteon, Visteon Global
Technologies, Inc., Automotive Components Holdings, Inc. and
Automotive Components Holdings, LLC, is incorporated herein by
reference to Exhibit 10.40.1 to the Annual Report on
Form 10-K
of Visteon for the period ended December 31, 2006.
|
10.38.2
|
|
Fourth Amendment, dated as of August 14, 2008, to the
Intellectual Property Contribution Agreement, dated as of
October 1, 2005, as amended, among Visteon, Visteon Global
Technologies, Inc., Automotive Components Holdings, LLC and
Automotive Components Holdings, Inc. is incorporated herein by
reference to Exhibit 10.5 to the Current Report on
Form 8-K
of Visteon dated August 20, 2008.
|
10.39
|
|
Software License and Contribution Agreement, dated as of
September 30, 2005, among Visteon, Visteon Global
Technologies, Inc. and Automotive Components Holdings, Inc. is
incorporated herein by reference to Exhibit 10.7 to the
Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
10.40
|
|
Intellectual Property License Agreement, dated as of
October 1, 2005, among Visteon, Visteon Global
Technologies, Inc. and Ford is incorporated herein by reference
to Exhibit 10.14 to the Current Report on
Form 8-K
of Visteon dated October 6, 2005.
|
64
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Name
|
|
10.41
|
|
Master Agreement, dated as of September 12, 2005, between
Visteon and Ford is incorporated herein by reference to
Exhibit 10.1 to the Current Report on
Form 8-K
of Visteon dated September 16, 2005.
|
10.42
|
|
Master Receivables Purchase & Servicing Agreement,
dated as of August 14, 2006, by and among Visteon UK
Limited, Visteon Deutschland GmbH, Visteon Sistemas Interiores
Espana S.L., Cadiz Electronica SA, Visteon Portuguesa Limited,
Visteon Financial Centre P.L.C., The Law Debenture
Trust Corporation P.L.C., Citibank, N.A., Citibank
International Plc, Citicorp USA, Inc., and Visteon is
incorporated herein by reference to Exhibit 10.44 to the
Quarterly Report on
Form 10-Q
of Visteon dated November 7, 2006.
|
10.43
|
|
Variable Funding Agreement, dated as of August 14, 2006, by
and among Visteon UK Limited, Visteon Financial Centre P.L.C.,
The Law Debenture Trust Corporation P.L.C., Citibank
International PLC, and certain financial institutions listed
therein, is incorporated herein by reference to
Exhibit 10.45 to the Quarterly Report on
Form 10-Q
of Visteon dated November 7, 2006.
|
10.44
|
|
Subordinated VLN Facility Agreement, dated as of August 14,
2006, by and among Visteon Netherlands Finance B.V., Visteon
Financial Centre P.L.C., The Law Debenture
Trust Corporation P.L.C., and Citibank International PLC is
incorporated herein by reference to Exhibit 10.46 to the
Quarterly Report on
Form 10-Q
of Visteon dated November 7, 2006.
|
10.45
|
|
Master Definitions and Framework Deed, dated as of
August 14, 2006, by and among Visteon, Visteon Netherlands
Finance B.V., Visteon UK Limited, Visteon Deutschland GmbH,
Visteon Systemes Interieurs SAS, Visteon Ardennes Industries
SAS, Visteon Sistemas Interiores Espana S.L., Cadiz Electronica
SA, Visteon Portuguesa Limited, Visteon Financial Centre P.L.C.,
The Law Debenture Trust Corporation P.L.C., Citibank, N.A.,
Citibank International PLC, Citicorp USA, Inc., Wilmington
Trust SP Services (Dublin) Limited, and certain financial
institutions and other entities listed therein, is incorporated
herein by reference to Exhibit 10.47 to the Quarterly
Report on
Form 10-Q
of Visteon dated November 7, 2006.
|
10.46
|
|
Share Purchase Agreement, dated as of July 7, 2008, among
Visteon UK Limited, Linamar UK Holdings Inc. and Visteon Swansea
Limited is incorporated herein by reference to Exhibit 10.1
to the Current Report on
Form 8-K
of Visteon dated July 11, 2008.
|
12.1
|
|
Statement re: Computation of Ratios.
|
14.1
|
|
Visteon Corporation Ethics and Integrity Policy
(code of business conduct and ethics) is incorporated herein by
reference to Exhibit 14.1 to the Quarterly Report on
Form 10-Q
of Visteon dated July 30, 2008.
|
15.1
|
|
Letter of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm, dated October 30, 2008 relating to
Unaudited Interim Financial Information.
|
31.1
|
|
Rule 13a-14(a)
Certification of Chief Executive Officer dated October 30,
2008.
|
31.2
|
|
Rule 13a-14(a)
Certification of Chief Financial Officer dated October 30,
2008.
|
32.1
|
|
Section 1350 Certification of Chief Executive Officer dated
October 30, 2008.
|
32.2
|
|
Section 1350 Certification of Chief Financial Officer dated
October 30, 2008.
|
|
|
|
|
|
Portions of these exhibits have
been redacted pursuant to confidential treatment requests filed
with the Secretary of the Securities and Exchange Commission
pursuant to
Rule 24b-2
under the Securities Exchange Act of 1934, as amended. The
redacted material was filed separately with the Securities and
Exchange Commission.
|
|
*
|
|
Indicates that exhibit is a
management contract or compensatory plan or arrangement.
|
In lieu of filing certain instruments with respect to long-term
debt of the kind described in Item 601(b)(4) of
Regulation S-K,
Visteon agrees to furnish a copy of such instruments to the
Securities and Exchange Commission upon request.
65
EX-10.5
EXHIBIT 10.5
VISTEON CORPORATION
2004 INCENTIVE PLAN
(Effective as of May 12, 2004
and as amended through October 3, 2008)
Section 1. PURPOSE AND DEFINITIONS
(a) Purpose. This Plan, known as the Visteon Corporation 2004 Incentive Plan, is intended
to provide an incentive to certain employees and certain non-employees who provide services to
Visteon Corporation and its subsidiaries, in order to encourage them to remain in the employ of the
Company and its subsidiaries and to increase their interest in the Companys success. It is
intended that this purpose be effected through awards or grants of stock options and various other
rights with respect to shares of the Companys common stock, and through performance cash awards,
as provided herein, to such eligible employees.
(b) Definitions. The following terms shall have the following respective meanings unless the
context requires otherwise:
(1) The term Affiliate or Affiliates shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(2) The term Beneficial Owner shall mean beneficial owner as set forth in Rule 13d-3 under
the Exchange Act.
(3) The term Board shall mean the Board of Directors of Visteon Corporation.
(4) The term Change in Control shall mean the occurrence of any one of the following:
(A) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of the Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates) representing 40% or more of
the combined voting power of the Companys then outstanding securities, excluding any Person
who becomes such a Beneficial Owner in connection with a transaction described in clause (i)
of paragraph (C) below;
(B) within any twelve (12) month period, the following individuals cease for any reason
to constitute a majority of the number of directors then serving: individuals who, on the
effective date of this Plan, constitute the Board and any new director (other than a director
whose initial assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board or nomination for
election by the Companys stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously so approved or
recommended;
(C) there is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, other than (i) a merger or
consolidation which results in the directors of the Company immediately prior to such merger
or consolidation continuing to constitute at least a majority of the board of directors of the
Company, the surviving entity or any parent thereof or (ii) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in which no Person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities Beneficially Owned by such Person any securities acquired directly
from the Company or its Affiliates) representing 40% or more of the combined voting power of
the Companys then outstanding securities;
(D) the stockholders of the Company approve a plan of complete liquidation or dissolution
of the Company or there is consummated an agreement for the sale or disposition by the Company
of more than 50% of the Companys assets, other than a sale or disposition by the Company of
more than 50% of the Companys assets to an entity, at least 50% of the combined voting power
of the voting securities of which are owned by stockholders of the Company in substantially
the same proportions as their ownership of the Company immediately prior to such sale; or
(E) any other event that the Board, in its sole discretion, determines to be a Change in
Control for purposes of this Plan.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred
by virtue of the consummation of any transaction or series of integrated transactions
immediately following which the record holders of the common stock of the Company immediately
prior to such transaction or series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of transactions.
If a Plan Award is considered deferred compensation subject to the provisions of Code
Section 409A, and if a payment under such Plan Award would be accelerated or otherwise
triggered upon a change in control, then the foregoing definition is modified, to the extent
necessary to avoid the imposition of an excise tax under Section 409A, to mean a change in
control event as such term is defined for purposes of Code Section 409A.
(5) The term Code shall mean the Internal Revenue Code of 1986, or any successor thereto,
as the same may be amended and in effect from time to time.
(6) The term Committee shall mean the committee appointed pursuant to Section 2 to
administer the Plan.
(7) The term Company shall mean Visteon Corporation.
(8) The term Covered Executive shall mean an employee of the Company or any Subsidiary
who, at the end of the Companys tax year, is the principal executive officer of the Company (or
the employee who acts in such capacity), or is among the three highest compensated officers of
the Company or any Subsidiary (other than the Companys principal executive officer or principal
financial officer) whose compensation is required to be reported in the Summary Compensation
Table of the Companys Proxy Statement, or is employed in such other classification as the
Internal Revenue Service determines to be a covered executive for purposes of Code Section
162(m).
(9) The term Employee shall mean an employee of the Company or any Subsidiary. The term
Employee shall also be deemed to include any person who is an employee of any joint venture
corporation or partnership, or comparable entity, in which the Company or Subsidiary has a
substantial equity interest; provided such person was an employee of the Company or Subsidiary
immediately prior to becoming employed by such entity, and designated non-employees who provide
services to the Company or a Subsidiary. Notwithstanding the foregoing, with respect to the
granting of an Option or Stock Appreciation Right, a person who is employed by or a non-employee
service provider to a joint venture corporation, partnership or comparable entity in which the
Company or a Subsidiary has an ownership interest shall be considered to be an Employee only if
such corporation, partnership or entity itself constitutes a Subsidiary.
(10) The term Exchange Act shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same may be amended and in effect from time to time.
(11) The term Fair Market Value shall mean the average of the highest and lowest sale
prices at which a share of Stock shall have been sold regular way on the New York Stock Exchange
on the date of grant of any Option or Stock Appreciation Right or other relevant valuation date.
In the event that any Option or Stock Appreciation Right shall be granted, or other relevant
valuation date shall occur, on a date on which there were no such sales of Stock on the New York
Stock Exchange, the Fair Market Value of a share of Stock shall be deemed to be the average of
the highest and lowest sale prices on the next preceding day on which there were such sales.
(12) The term Final Award shall mean the amount of compensation to be awarded finally to
the Participant who holds a Performance Cash Right pursuant to Section 3, the number of shares of
Stock to be awarded finally to the Participant who holds a Performance Stock Right pursuant to
Section 5, the number of shares of Restricted Stock to be retained by the Participant who holds
Restricted Stock pursuant to Section 6, or the number of shares of Stock or the amount of
compensation to be awarded finally to a Participant who holds Restricted Stock Units pursuant to
Section 6, in each case as determined by the Committee taking into account the extent to which
the Performance Goals have been satisfied.
(13) The term Option or Options shall mean the option to purchase Stock in accordance
with Section 7 and such other terms and conditions as may be prescribed by the Committee. An
Option may be either an incentive stock option, as such term is defined in the Code, or shall
otherwise be designated as an option entitled to favorable treatment under the Code (ISO) or a
nonqualified stock option (NQO). ISOs and NQOs are individually called an Option and
collectively called Options.
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(14) The term Other Stock-Based Awards shall mean awards of Stock or other rights made in
accordance with Section 8.
(15) The term Participant shall mean an Employee who has been designated for participation
in the Plan.
(16) The term Performance Cash Right shall mean the right to receive, pursuant to Section
3, a cash payment as described in the Participants award agreement, taking into account the
Target Award and the Performance Formula, upon the attainment of one or more specified
Performance Goals, subject to the terms and provisions of the award agreement and the Plan.
(17) The term Performance Goals shall mean, with respect to any Performance Cash Right,
Performance Stock Right, performance-based Restricted Stock or performance-based Restricted Stock
Unit granted to a Participant who is a Covered Executive, a performance measure that is based
upon one or more of the following objective business criteria established by the Committee with
respect to the Company and/or any Subsidiary, division, business unit or component thereof: asset
charge, asset turnover, return on sales, capacity utilization, capital employed in the business,
capital spending, cash flow, cost structure improvements, complexity reductions, customer
loyalty, diversity, earnings growth, earnings per share, economic value added, environmental
health and/or safety, facilities and tooling spending, hours per component, increase in customer
base, inventory turnover, market price appreciation, market share, net cash balance, net income,
net income margin, net operating cash flow, operating profit margin, order to delivery time,
plant capacity, process time, profits before tax, quality, customer satisfaction, return on
assets, return on capital, return on equity, return on net operating assets, return on sales,
revenue growth, safety, sales margin, sales volume, total stockholder return, production per
employee, warranty performance to budget, variable margin and working capital. With respect to
any Right granted to a Participant who is not a Covered Executive, performance goals may be based
on one or more of the business criteria described above or any other criteria based on
individual, business unit, group or Company performance selected by the Committee. The
Performance Goals may be expressed in absolute terms or relate to the performance of other
companies or to an index.
(18) The term Performance Formula shall mean a formula to be applied in relation to the
Performance Goals in determining the amount of cash earned under a Performance Cash Right granted
pursuant to Section 3, the number of shares of Stock earned under a Performance Stock Right
granted pursuant to Section 5, performance-based Restricted Stock granted pursuant to Section 6,
or the amount of cash or shares of Stock earned under performance-based Restricted Stock Units
granted pursuant to Section 6, in each case expressed as a percentage of the Target Award.
(19) The term Performance Period shall mean the period of time for which performance with
respect to one or more Performance Goals with respect to any Performance Cash Right, Performance
Stock Right, Restricted Stock or Restricted Stock Unit award is to be measured, with such period
commencing not earlier than 90 days prior to the date of grant of such Right.
(20) The term Performance Stock Right shall mean the right to receive, pursuant to Section
5 and without payment to the Company, up to the number of shares of Stock described in the
Participants award agreement upon the attainment of one or more specified Performance Goals,
subject to the terms and provisions of the award agreement and the Plan.
(21) The term Person shall have the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include
(A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its Affiliates, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities, or (D) a corporation
owned, directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Stock of the Company.
(22) The term Plan shall mean this Visteon Corporation 2004 Incentive Plan (formerly known
as the Visteon Corporation 2000 Incentive Plan) as the same may be amended and in effect from
time to time.
(23) The term Plan Awards shall mean awards of cash or grants of Performance Stock Rights,
Restricted Stock, Restricted Stock Units, Options, Stock Appreciation Rights and various other
rights with respect to shares of Stock.
(24) The term Restricted Stock means Stock issued to a Participant pursuant to Section 6
that is subject to forfeiture if one or more specified Performance Goals or minimum periods of
service are not attained.
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(25) The term Restricted Stock Unit means an award granted pursuant to Section 6
consisting of a unit credited to a hypothetical account, valued based on the Fair Market Value of
Visteon Stock, and is subject to forfeiture if one or more specified Performance Goals or minimum
periods of service are not attained.
(26) The term Right shall mean a Performance Cash Right, Performance Stock Right, a
Restricted Stock award, or a Restricted Stock Unit, as required by the context.
(27) The term Stock Appreciation Right shall mean the right to receive, without payment to
the Company, an amount of cash or Stock as determined in accordance with Section 7, based on the
amount by which the Fair Market Value of a share of Stock on the relevant valuation date exceeds
the grant price.
(28) The term Subsidiary shall mean (A) any corporation a majority of the voting stock of
which is owned directly or indirectly by the Company or (B) any limited liability company a
majority of the membership interest of which is owned, directly or indirectly, by the Company.
In addition, solely for purposes of determining those individuals to whom an Option (other than
an Option that is designated as an incentive stock option for purposes of the Code) or a Stock
Appreciation Right may be granted, the term Subsidiary includes an entity that would be a
Subsidiary if the preceding sentence were applied by substituting at least twenty percent (20%)
in lieu of at least fifty percent (50%) if the Committee determines that there are legitimate
business reasons for extending Options or Stock Appreciation Rights to individuals employed by
such an entity.
(29) The term Stock shall mean shares of the Companys common stock, par value $1.00 per
share.
(30) The term Target Award shall mean the amount of compensation to be earned by a
Participant under a Performance Cash Right or the number of shares of Stock, subject to
adjustment pursuant to Section 13, to be earned by a Participant under a Performance Stock Right,
if all of the Performance Goals with respect to such Right are achieved.
Section 2. ADMINISTRATION
(a) Committee. The Plan shall be administered by the Organization & Compensation Committee of
the Board consisting of not less than two (2) members of the Board who meet the outside director
requirements of Section 162(m) of the Code and the non-employee director requirements of Rule
16b-3(b)(3) of the Exchange Act, or by any other committee appointed by the Board, provided the
members of such committee meet such requirements. The Committee shall administer the Plan and
perform such other functions as are assigned to it under the Plan. The Committee is authorized,
subject to the provisions of the Plan, from time to time, to establish such rules and regulations
as it may deem appropriate for the proper administration of the Plan, and to make such
determinations under, and such interpretations of, and to take such steps in connection with, the
Plan and the Plan Awards as it may deem necessary or advisable, in each case in its sole
discretion. The Committees decisions and determinations under the Plan need not be uniform and may
be made selectively among Participants, whether or not they are similarly situated. Any authority
granted to the Committee may also be exercised by the Board, except to the extent that the grant or
exercise of such authority would cause any qualified performance based award to cease to qualify
for exemption under Section 162(m) of the Code. To the extent that any permitted action taken by
the Board conflicts with any action taken by the Committee, the Board action shall control.
(b) Delegation of Authority. The Committee may delegate any or all of its powers and duties
under the Plan, including, but not limited to, its authority to make awards under the Plan or to
grant waivers pursuant to Section 10, to one or more other committees (including a committee
consisting of two or more corporate officers) as it shall appoint, pursuant to such conditions or
limitations as the Committee may establish; provided, however, that the Committee shall not
delegate its authority to (1) act on matters affecting any Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act, or the liability provisions of Section
16(b) of the Exchange Act (any such Participant being called a Section 16 Person) or (2) amend or
modify the Plan pursuant to the provisions of Section 16(b). To the extent of any such delegation,
the term Committee when used herein shall mean and include any such delegate.
(c) Eligibility of Committee Members. No person while a member of the Committee or any other
committee of the Board administering the Plan shall be eligible to hold or receive a Plan Award.
Section 3. PERFORMANCE CASH RIGHTS
(a) Grant of Performance Cash Rights. The Committee, at any time and from time to time while
the Plan is in effect, may grant or authorize the granting of Performance Cash Rights to such
officers of the Company and any Subsidiary and other Employees, whether or not members of the
Board, as it may select and in such amount as it shall designate, subject to the provisions of this
Section 3.
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(b) Maximum Awards. The maximum amount granted to a Covered Executive as a Final Award with
respect to all Performance Cash Rights granted during a calendar year shall be $10 million.
(c) Terms and Provisions of Performance Cash Rights. Prior to the grant of any Performance
Cash Right, the Committee shall determine the terms and provisions of such Right, including,
without limitation (1) the Target Award; (2) one or more Performance Goals to be used to measure
performance under such Right, and the Performance Formula to be applied against the Performance
Goals in determining the amount of compensation earned under such Right as a percentage of the
Target Award; (3) the Performance Period, and (4) the effect of the Participants termination of
employment, death or disability. Within 90 days of commencement of a Performance Period, the
Committee may establish a minimum threshold objective for any Performance Goal for such Performance
Period which, if not met, would result in no Final Award being made to any Participant with respect
to such Performance Goal for such Performance Period. During and after the Performance Period, but
prior to the Committees final determination of the Participants Final Award as provided in
subsection (d), the Committee may adjust the Performance Goals, Performance Formula and Target
Award and otherwise modify the terms and provisions of a Right granted to a Participant who is not
a Covered Executive, subject to the terms and conditions of the Plan. Each Right shall be evidenced
by an award agreement or notification in such form as the Committee may determine.
(d) Final Awards. As soon as practicable following the completion of the Performance Period
relating to any Performance Cash Right, but not later than 12 months following such completion, the
Committee shall determine the extent to which the Performance Goals have been achieved and the
amount of compensation to be awarded as a Final Award to the Participant who holds such Right. In
making such determination, the Committee shall apply the applicable Performance Formula for the
Participant for the Performance Period against the accomplishment of the related Performance Goals.
The Committee may, in its sole discretion, reduce the amount of any Final Award that otherwise
would be awarded to any Participant for any Performance Period. In addition, the Committee may, in
its sole discretion, increase the amount of any Final Award that otherwise would be awarded to any
Participant who is not a Covered Executive. Any such determination shall take into account (A) the
extent to which the Performance Goals provided in such Right were, in the Committees sole opinion,
achieved, (B) the individual performance of such Participant during the related Performance Period
and (C) such other factors as the Committee may deem relevant, including, without limitation, any
change in circumstances or unforeseen events, relating to the Company, the economy or otherwise,
since the date of grant of such Right. The Committee shall notify such Participant of such
Participants Final Award as soon as practicable following such determination.
(e) Following the determination of each Final Award, unless the Participant has elected to
defer all or a portion of the Final Award in accordance with the procedures set forth in the
Visteon Corporation Deferred Compensation Plan, the Final Award will be payable to the Participant
in cash.
Section 4. STOCK AVAILABLE FOR PLAN AWARDS
(a) Stock Subject to Plan. The Stock that may be issued under the Plan may be either
authorized and unissued or held in the treasury of the Company. The maximum number of shares of
Stock that may be issued with respect to Plan Awards, subject to adjustment in accordance with the
provisions of Section 13, shall be 21,800,000. Notwithstanding the foregoing, (1) the aggregate
number of shares that may be issued upon exercise of ISOs shall not exceed 10,280,000 shares,
subject to adjustment in accordance with the provisions of Section 13; (2) the maximum number of
shares subject to Options, with or without any related Stock Appreciation Rights, or Stock
Appreciation Rights (not related to Options) that may be granted pursuant to Section 7 to any
Covered Executive during any calendar year prior to 2004 shall be 500,000, and for calendar years
after 2003 shall be 1,000,000, subject to adjustment in accordance with the provisions of Section
13; and (3) the maximum number of shares of Stock that may be issued pursuant to such Performance
Stock Rights and performance-based Restricted Stock Awards when combined with the number of
performance-based Restricted Stock Units granted pursuant to Section 6 (whether such Restricted
Stock Units are settled in cash or in Stock), to any Covered Executive during any calendar year
prior to 2004 shall be 500,000 shares, and for calendar years after 2003 shall be 1 million shares
and/or units, subject to adjustment in accordance with the provisions of Section 13.
(b) Computation of Stock Available for Plan Awards. For the purpose of computing the total
number of shares of Stock remaining available for Plan Awards at any time while the Plan is in
effect, and for the purpose of determining the maximum number of shares of Stock that remain
available to be issued with respect to Performance Stock Rights, Restricted Stock Awards,
Restricted Stock Units, and Other Stock-Based Awards under clause (3) of subsection (a) there shall
be debited against the total number of shares determined to be available pursuant to subsections
(a) and (c) of this Section 4, (1) the maximum number of shares of Stock subject to issuance upon
exercise of Options or Stock Appreciation Rights granted under this Plan, (2) the maximum number of
shares of Stock issued or issuable under Performance Stock Rights, Restricted Stock Awards and
Restricted Stock Units granted under this Plan, and (3) the number of shares of Stock related to
Other Stock-Based Awards granted under this Plan, as determined by the Committee in each case
as of the dates on which such Plan Awards were granted, provided, however, that a Restricted
Stock Unit or Other Stock-Based Award that is or may be settled only in cash shall not be counted
against any of the share limits under this Section 4, except as required by Section 162(m) of the
Code to preserve the status of an award as performance-based compensation as set forth under
clause (4) of subsection (a) above.
5
(c) Terminated, Expired or Forfeited Plan Awards. The shares involved in the unexercised,
undistributed or unvested portion of any terminated, expired or forfeited Plan Award shall be made
available for further Plan Awards. Any shares of Stock made available for Plan Awards pursuant to
this subsection (c) shall be in addition to the shares available pursuant to subsection (a) of this
Section 4. Notwithstanding the foregoing, in the event any Option or Stock Appreciation Right
granted to a Covered Executive is canceled, the number of shares of Stock subject to such canceled
Option or Stock Appreciation Right shall continue to count against the individual limit specified
in subsection (a), in accordance with the requirements of Code Section 162(m).
Section 5. PERFORMANCE STOCK RIGHTS
(a) Grant of Performance Stock Rights. The Committee, at any time and from time to time while
the Plan is in effect, may grant, or authorize the granting of, Performance Stock Rights to such
officers of the Company and any Subsidiary, and other Employees, whether or not members of the
Board, as it may select and for such numbers of shares as it shall designate, subject to the
provisions of this Section 5 and Section 4.
(b) Terms and Provisions of Performance Stock Rights. Prior to the grant of any Performance
Stock Right, the Committee shall determine the terms and provisions of each Right, including,
without limitation (1) the Target Award; (2) one or more Performance Goals to be used to measure
performance under such Right, and the Performance Formula to be applied against the Performance
Goals in determining the number of shares of Stock earned under such Right as a percentage of the
Target Award; (3) the Performance Period; (4) the period of time, if any, during which the
disposition of shares of Stock issuable under such Right shall be restricted as provided in
subsection (a) of Section 11, provided, however, that the Committee may establish restrictions
applicable to any Right at the time of or at any time prior to the granting of the related Final
Award rather than at the time of granting such Right; and (5) the effect of the Participants
termination of employment, death or disability. Within 90 days of commencement of a Performance
Period, the Committee may establish a minimum threshold objective for any Performance Goal for such
Performance Period which, if not met, would result in no Final Award being made to any Participant
with respect to such Performance Goal for such Performance Period. During and after the Performance
Period, but prior to the Committees final determination of the Participants Final Award as
provided in subsection (d), the Committee may adjust the Performance Goals, Performance Formula and
Target Award and otherwise modify the terms and provisions of a Right granted to a Participant who
is not a Covered Executive, subject to the terms and conditions of the Plan. Each Right shall be
evidenced by an award agreement or notification in such form as the Committee may determine.
(c) Dividend Equivalents on Rights. If the Committee shall determine, each Participant to
whom a Right is granted shall be entitled to receive payment of the same amount of cash that such
Participant would have received as cash dividends if, on each record date during the Performance
Period relating to such Right, such Participant had been the holder of record of a number of shares
of Stock equal to 100% of the related Target Award (as adjusted pursuant to Section 13). Any such
payment may be made at the same time as a dividend is paid or may be deferred until the date that a
Final Award is determined, as determined by the Committee in its sole discretion. Such cash
payments are hereinafter called dividend equivalents. Notwithstanding anything to the contrary
herein, if the Committee determines that dividend equivalents should be granted with respect to any
stock right within the meaning of Code Section 409A, the terms and conditions of the dividend
equivalent rights shall be set forth in writing, and to the extent that the dividend equivalents
are considered deferred compensation subject to Code Section 409A, the writing shall include terms
and conditions, including payment terms, that comply with the provisions of Code Section 409A.
(1) As soon as practicable following the completion of the Performance Period relating to
any Performance Stock Right, but not later than 12 months following such completion, the
Committee shall determine the extent to which the Participant achieved the Performance Goals
and the number of shares of Stock to be awarded as a Final Award to the Participant who holds
such Right. Each Final Award shall represent only full shares of Stock, and any fractional
share that would otherwise result from such Final Award calculation shall be disregarded. In
making such determination, the Committee shall apply the applicable Performance Formula for
the Participant for the Performance Period against the accomplishment of the related
Performance Goals. The Committee may, in its sole discretion, reduce the amount of any Final
Award that otherwise would be awarded to any Participant for any Performance Period. In
addition, the Committee may, in its sole discretion, increase the
amount of any Final Award that otherwise would be awarded to any Participant who is not a
Covered Executive. Any such determination shall take into account (A) the extent to which the
Performance Goals provided in such Right was, in the Committees sole opinion, achieved, (B)
the individual performance of such Participant during the related Performance Period and (C)
such other factors as the Committee may deem relevant, including, without limitation, any
change in circumstances or unforeseen events, relating to the Company, the economy or
otherwise, since the date of grant of such Right. The Committee shall notify such Participant
of such Participants Final Award as soon as practicable following such determination.
6
(2) Following the determination of each Final Award, the Company shall issue or cause to
be issued certificates for the number of shares of Stock representing such Final Award,
registered in the name of the Participant who received such Final Award. Such Participant
shall thereupon become the holder of record of the number of shares of Stock evidenced by such
certificates, entitled to dividends, voting rights and other rights of a holder thereof,
subject to the terms and provisions of the Plan, including, without limitation, the provisions
of this subsection (d) and Sections 10, 11 and 13. The Committee may require that such
certificates bear such restrictive legend as the Committee may specify and be held by the
Company in escrow or otherwise pursuant to any form of agreement or instrument that the
Committee may specify. If the Committee has determined that deferred dividend equivalents
shall be payable to a Participant with respect to any Performance Stock Right pursuant to
subsection (c) of this Section 5, then concurrently with the issuance of such certificates,
the Company shall deliver to such Participant a cash payment or additional shares of Stock in
settlement of such dividend equivalents. Notwithstanding the foregoing, the Committee, in its
sole discretion, may permit a Participant to defer receipt of a Final Award and to instead
receive stock units under the Visteon Corporation Deferred Compensation Plan that represent
hypothetical shares of Stock of the Company, or such other deemed investment made available by
the Committee for this purpose. Any such election, if permitted by the Committee, must be made
at such time and in such form as prescribed by the Committee, and is subject to such other
terms and conditions as the Committee, in its sole discretion, may prescribe.
(3) Notwithstanding the provisions of this subsection (d) or any other provision of the
Plan, the Committee may specify that a Participants Final Award shall not be represented by
certificates for shares of Stock but shall be represented by rights approximately equivalent
(as determined by the Committee) to the rights that such Participant would have received if
certificates for shares of Stock had been issued in the name of such Participant in accordance
with subsection (d) (such rights being called Stock Equivalents). Subject to the provisions
of Section 13 and the other terms and provisions of the Plan, if the Committee shall so
determine, each Participant who holds Stock Equivalents shall be entitled to receive the same
amount of cash that such Participant would have received as dividends if certificates for
shares of Stock had been issued in the name of such Participant pursuant to subsection (d)
covering the number of shares equal to the number of shares to which such Stock Equivalents
relate. Notwithstanding any other provision of the Plan to the contrary, the Stock Equivalents
representing any Final Award may, at the option of the Committee, be converted into an
equivalent number of shares of Stock or, upon the expiration of any restriction period imposed
on such Stock Equivalents, into cash, under such circumstances and in such manner as the
Committee may determine.
Section 6. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
(a) Grant of Restricted Stock. The Committee, at any time and from time to time while the
Plan is in effect, may grant, or authorize the granting of, Restricted Stock to such officers of
the Company and any Subsidiary, and other Employees, whether or not members of the Board, as it may
select. In lieu of, or in addition to, such Restricted Stock, the Committee may grant, or authorize
the granting of, awards denominated in the form of Restricted Stock Units to such eligible
Employees.
(b) Terms and Provisions of Restricted Stock and Restricted Stock Units. Subject to the
provisions of the Plan, the Committee shall have the authority to determine the time or times at
which Restricted Stock or Restricted Stock Units shall be granted and the number of shares of
Restricted Stock or the number of Restricted Stock Units to be granted (subject to the provisions
of Section 4). Prior to the grant of any Restricted Stock or Restricted Stock Units, the Committee
shall determine such time-based or performance-based restrictions as the Committee shall deem
appropriate, and all other terms and conditions of such Restricted Stock and Restricted Stock
Units, including, without limitation (1) the number of shares of Restricted Stock or Restricted
Stock Units to be issued; (2) in the case of time-based Restricted Stock or Restricted Stock Units,
the minimum period of service required for the Participant to receive a Final Award; (3) in the
case of performance-based Restricted Stock or performance-based Restricted Stock Units, one or more
Performance Goals to be used to measure performance with respect to such Restricted Stock or
Restricted Stock Units; (4) the Performance Period applicable to any such performance-based award;
(5) whether Final Awards pursuant to such Restricted Stock Units shall be payable in Stock, cash or
otherwise; (6) the period of time, if any, during which the disposition of the Restricted Stock or
Final Award pursuant to a Restricted Stock Unit is restricted as provided in subsection (a) of
Section 10, provided, however, that the Committee may establish restrictions applicable to
Restricted Stock or Restricted Stock Units at the time of or at any time prior to
the granting of the related Final Award rather than at the time of granting such Right; and
(7) the effect of the Participants termination of employment, death or disability. Within 90 days
of commencement of a Performance Period, the Committee may establish a minimum threshold objective
for any Performance Goal for such Performance Period which, if not met, would result in no Final
Award being made to any Participant with respect to such Performance Goal for such Performance
Period. During and after the Performance Period, but prior to the Committees final determination
of the Participants Final Award as provided in subsection (d), the Committee may adjust the
Performance Goals and otherwise modify the terms and provisions of the Restricted Stock grant or
Restricted Stock Unit to a Participant who is not a Covered Executive, subject to the terms and
conditions of the Plan. Each grant of Restricted Stock or Restricted Stock Units shall be evidenced
by an award agreement or notification in such form as the Committee may determine.
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(c) Dividend and Dividend Equivalents.
(1) During any period that Restricted Stock has been issued to the Participant and
remains outstanding, the Participant shall be entitled to receive all dividends and other
distributions paid with respect to the Restricted Stock. If any such dividends or
distributions are paid in Stock and such distribution occurs when the restrictions applicable
to such shares are still in effect, such shares shall be subject to the same restrictions as
the Restricted Stock with respect to which they were paid.
(2) If the committee shall determine, each Participant to whom a Restricted Stock Unit is
granted and remains outstanding shall be entitled to receive payment of the same amount of
cash that such Participant would have received as cash dividends as if, on each record date
during the minimum period of service or the Performance Period related to the Restricted Stock
Unit, such Participant had been the holder of record of a number of shares of Stock equal to
100% of the Restricted Stock Units (as adjusted pursuant to Section 13). Any such payment may
be made at the same time as a dividend is paid, or may be deferred until the date that a Final
Award is determined, as determined by the Committee in its sole discretion. Such cash payments
are hereinafter called dividend equivalents. Notwithstanding anything to the contrary
herein, if the Committee determines that dividend equivalents should be granted with respect
to any stock right within the meaning of Code Section 409A, the terms and conditions of the
dividend equivalent rights shall be set forth in writing, and to the extent that the dividend
equivalents are considered deferred compensation subject to Code Section 409A, the writing
shall include terms and conditions, including payment terms, that comply with the provisions
of Code Section 409A.
(d) Voting Rights. Subject to the restrictions established by the Committee pursuant to the
Plan, Participants shall be entitled to vote Restricted Shares granted under this Section 6, unless
and until such shares are forfeited pursuant to subsection (e) below. Participants shall have no
voting rights with respect to Restricted Stock Units.
(e) Final Awards. As soon as practicable following the completion of the Performance Period
relating to any Restricted Stock or Restricted Stock Unit, but not later than 12 months following
such completion, the Committee shall determine (1) the extent to which the Participant achieved the
minimum period of service, with respect to time-based awards, or the applicable Performance Goals,
with respect to performance-based awards, (2) the number of shares of Restricted Stock to be
retained as a Final Award by the Participant who holds such Restricted Stock, (3) the number of
shares of Restricted Stock to be forfeited by such Participant, (4) the number of shares of Stock
or amount of other compensation to be issued as a Final Award to the Participant who holds
Restricted Stock Units, and (5) the number of Restricted Stock Units to be forfeited by such
Participant. Each Final Award shall represent only full shares of Stock and any fractional share
that would otherwise result from such Final Award calculation shall be forfeited. In making such
determination, the Committee shall apply the applicable minimum period of service or Performance
Goals that the Committee had established. The Committee may, in its sole discretion, increase the
amount of any Final Award that otherwise would be awarded to any Participant who is not a Covered
Executive by determining that the Participant should be allowed to retain some or all of the
Restricted Stock that would otherwise be forfeited, or should receive Stock or other consideration
for Restricted Stock Units that would otherwise be forfeited, notwithstanding the fact that the
minimum period of service or Performance Goals were not satisfied in full. Any such determination
shall take into account (A) the extent to which the Performance Goals that relate to such
Restricted Stock or Restricted Stock Units were, in the Committees sole opinion, achieved, (B) the
individual performance of such Participant during the related period of service or Performance
Period and (C) such other factors as the Committee may deem relevant, including, without
limitation, any change in circumstances or unforeseen events, relating to the Company, the economy
or otherwise, since the date of grant of such Restricted Stock. The Committee shall notify such
Participant of such Participants Final Award as soon as practicable following such determination.
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(f) Election of Deferred Stock Units. The Committee, in its sole discretion, may permit a
Participant to defer or otherwise exchange receipt of a Final Award relating to Restricted Stock or
Restricted Stock Units and to instead receive stock units under the Visteon Corporation Deferred
Compensation Plan that represent hypothetical shares of Stock of the Company, or such other deemed
investment made available by the Committee for this purpose. Any such election, if permitted
by the Committee, must be made at such time and in such form as prescribed by the Committee. If the
Committee so permits and a Participant makes an appropriate election, the Participants right to
receive a benefit from the Visteon Corporation Deferred Compensation Plan based on such stock units
is contingent upon attainment of the applicable minimum period of service or Performance Goals and
such other terms and conditions as the Committee, in its sole discretion, may prescribe.
Section 7. OPTIONS AND STOCK APPRECIATION RIGHTS
(1) The Committee, at any time and from time to time while the Plan is in effect, may
authorize the granting of Options to such officers of the Company and any Subsidiary and other
Employees, whether or not members of the Board, as it may select, and for such numbers of
shares as it shall designate, subject to the provisions of this Section 7 and Section 4. Each
Option granted pursuant to the Plan shall be designated at the time of grant as either an ISO
or an NQO.
(2) The date on which an Option shall be granted shall be the date of authorization of
such grant or such later date as may be determined by the Committee at the time such grant is
authorized. Any individual may hold more than one Option.
(b) Price. In the case of each Option granted under the Plan the option price shall be the
Fair Market Value of Stock on the date of grant of such Option; provided, however, that the
Committee may in its discretion fix an option price in excess of the Fair Market Value of Stock on
such date.
(c) Grant of Stock Appreciation Rights.
(1) The Committee, at any time and from time to time while the Plan is in effect, may
authorize the granting of Stock Appreciation Rights to such officers of the Company and any
Subsidiary and other Employees, whether or not members of the Board, as it may select, and for
such numbers of shares as it shall designate, subject to the provisions of this Section 7 and
Section 4. Each Stock Appreciation Right may relate to all or a portion of a specific Option
granted under the Plan and may be granted concurrently with the Option to which it relates or
at any time prior to the exercise, termination or expiration of such Option (a Tandem SAR),
or may be granted independently of any Option, as determined by the Committee. If the Stock
Appreciation Right is granted independently of an Option, the grant price of such right shall
be the Fair Market Value of Stock on the date of grant; provided, however, that the Committee
may, in its discretion, fix a grant price in excess of the Fair Market Value of Stock on such
grant date.
(2) Upon exercise of a Stock Appreciation Right, the Participant shall be entitled to
receive, without payment to the Company, either (A) that number of shares of Stock determined
by dividing (i) the total number of shares of Stock subject to the Stock Appreciation Right
being exercised by the Participant, multiplied by the amount by which the Fair Market Value of
a share of Stock on the day the right is exercised exceeds the grant price (such amount being
hereinafter referred to as the Spread), by (ii) the Fair Market Value of a share of Stock on
the exercise date; or (B) cash in an amount determined by multiplying (i) the total number of
shares of Stock subject to the Stock Appreciation Right being exercised by the Participant, by
(ii) the amount of the Spread; or (C) a combination of shares of Stock and cash, in amounts
determined as set forth in clauses (A) and (B) above, as determined by the Committee in its
sole discretion; provided, however, that, in the case of a Tandem SAR, the total number of
shares which may be received upon exercise of a Stock Appreciation Right for Stock shall not
exceed the total number of shares subject to the related Option or portion thereof, and the
total amount of cash which may be received upon exercise of a Stock Appreciation Right for
cash shall not exceed the Fair Market Value on the date of exercise of the total number of
shares subject to the related Option or portion thereof.
(d) Terms and Conditions.
(1) Each Option and Stock Appreciation Right granted under the Plan shall be exercisable
on such date or dates, during such period, for such number of shares and subject to such
further conditions as shall be determined pursuant to the provisions of the award agreement
with respect to such Option and Stock Appreciation Right; provided, however, that a Tandem SAR
shall not be exercisable prior to or later than the time the related Option could be
exercised; and provided, further, that in any event no Option or Stock Appreciation Right
granted prior to 2004 shall be exercised beyond ten years from the date of grant, no Option or
Stock Appreciation Right granted after 2003 but prior to 2006 shall be exercised beyond five
years from the date
of grant, and no Option or Stock Appreciation Right granted after 2005 shall be exercised
beyond seven years from the date of grant.
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(2) The Committee may impose such conditions as it may deem appropriate upon the exercise
of an Option or a Stock Appreciation Right, including, without limitation, a condition that
the Stock Appreciation Right may be exercised only in accordance with rules and regulations
adopted by the Committee from time to time.
(3) With respect to Options issued with Tandem SARs, the right of a Participant to
exercise the Tandem SAR shall be cancelled if and to the extent the related Option is
exercised, and the right of a Participant to exercise an Option shall be cancelled if and to
the extent that shares covered by such Option are used to calculate shares or cash received
upon exercise of the Tandem SAR.
(4) If any fractional share of Stock would otherwise be payable to a Participant upon the
exercise of an Option or Stock Appreciation Right, the Participant shall be paid a cash amount
equal to the same fraction of the Fair Market Value of the Stock on the date of exercise.
(e) Award Agreement. Each Option and Stock Appreciation Right shall be evidenced by an award
agreement or notification in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve.
(f) Payment for Option Shares.
(1) Payment for shares of Stock purchased upon exercise of an Option granted hereunder
shall be made, either in full or, if the Committee shall so determine and at the election of
the Participant, in installments, in such manner as is provided in the applicable award
agreement.
(2) Subject to applicable law and/or accounting expense implications, the consideration
to be paid for shares of Stock purchased upon exercise of an Option granted hereunder shall be
determined by the Committee, which, in addition to any other types of consideration the
Committee may so determine, may include the acceptance of the following: (i) cash, (ii) the
delivery or surrender of shares of Stock (including the withholding of Stock otherwise
deliverable upon exercise of the Option), (iii) a cashless sale and remittance procedure
executed through a broker-dealer, or (iv) any combination of the foregoing methods of payment.
Any such shares of Stock so delivered or surrendered shall be valued at their Fair Market
Value on the date of such exercise. The Committee shall determine whether and if so the extent
to which actual delivery of share certificates to the Company shall be required.
Section 8. STOCK AND OTHER STOCK-BASED AWARDS
(a) Grants of Other Stock-Based Awards. The Committee, at any time and from time to time
while the Plan is in effect, may grant Other Stock-Based Awards to such officers of the Company and
its Subsidiaries and other Employees, whether or not members of the Board, as it may select. Such
Plan Awards pursuant to which Stock is or may in the future be acquired, or Plan Awards valued or
determined in whole or part by reference to, or otherwise based on, Stock, may include, but are not
limited to, awards of restricted Stock (in addition to or in lieu of Restricted Stock under Section
6) or Plan Awards denominated in the form of stock units (in addition to or in lieu of Restricted
Stock Units under Section 6), grants of so-called phantom stock and options containing terms or
provisions differing in whole or in part from Options granted pursuant to Section 7. Other
Stock-Based Awards may be granted either alone, in addition to, in tandem with or as an alternative
to any other kind of Plan Award, grant or benefit granted under the Plan or under any other
employee plan of the Company, including a plan of any acquired entity.
(b) Terms and Conditions. Subject to the provisions of the Plan, the Committee shall have the
authority to determine the time or times at which Other Stock-Based Awards shall be made, the
number of shares of Stock or stock units and the like to be granted or covered pursuant to such
Plan Awards (subject to the provisions of Section 4) and all other terms and conditions of such
Plan Awards, including, but not limited to, whether such Plan Awards shall be payable or paid in
cash, Stock or otherwise.
(c) Consideration for Other Stock-Based Awards. In the discretion of the Committee, any Other
Stock-Based Award may be granted as a Stock bonus for no consideration other than services
rendered.
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Section 9. CASH AWARDS TO EMPLOYEES OF FOREIGN SUBSIDIARIES OR BRANCHES OR JOINT VENTURES
In order to facilitate the granting of Plan Awards to Participants who are foreign nationals
or who are employed outside of the United States of America, the Committee may provide for such
special terms and conditions, including without limitation substitutes for Plan Awards, as the
Committee may consider necessary or appropriate to accommodate differences in local law, tax policy
or custom. Such substitutes for Plan Awards may include a requirement that the Participant receive
cash, in such amount as the Committee may determine in its sole discretion, in lieu of any Plan
Award or share of Stock that would otherwise have been granted to or delivered to such Participant
under the Plan. The Committee may approve any supplements to, or amendments, restatements or
alternative versions of the Plan as it may consider necessary or appropriate for purposes of this
Section 9 without thereby affecting the terms of the Plan as in effect for any other purpose, and
the Secretary or other appropriate officer of the Company may certify any such documents as having
been approved and adopted pursuant to properly delegated authority; provided, however, that no such
supplements, amendments, restatements or alternative versions shall include any provision that is
inconsistent with the terms of the Plan as then in effect. Participants subject to the laws of a
foreign jurisdiction may request copies of, or the right to view, any materials that are required
to be provided by the Company pursuant to the laws of such jurisdiction.
Section 10. PAYMENT OF PLAN AWARDS AND CONDITIONS THEREON
(a) Effect of Competitive Activity. Anything contained in the Plan to the contrary
notwithstanding, if the employment of any Participant shall terminate, for any reason other than
death, while any Plan Award granted to such Participant is outstanding hereunder, and such
Participant has not yet received the Stock or cash covered by such Plan Award or otherwise received
the full benefit of such Plan Award, such Participant, if otherwise entitled thereto, shall receive
such Stock, cash or benefit only if, during the entire period from the date of such Participants
termination to the date of such receipt, such Participant shall have (1) made himself or herself
available, upon request, at reasonable times and upon a reasonable basis, to consult with, supply
information to and otherwise cooperate with the Company or any Subsidiary with respect to any
matter that shall have been handled by him or her or under his or her supervision while he or she
was in the employ of the Company or of any Subsidiary, and (2) refrained from engaging in any
activity that is directly or indirectly in competition with any activity of the Company or any
Subsidiary.
(b) Nonfulfillment of Competitive Activity Conditions: Waivers Under the Plan. In the event
of a Participants nonfulfillment of any condition set forth in subsection (a) of this Section 10,
such Participants rights under any Plan Award shall be forfeited and cancelled forthwith;
provided, however, that the nonfulfillment of such condition may at any time (whether before, at
the time of or subsequent to termination of employment) be waived in the following manner:
(1) with respect to any such Participant who at any time shall have been a Section 16
Person, such waiver may be granted by the Committee upon its determination that in its sole
judgment there shall not have been and will not be any substantial adverse effect upon the
Company or any Subsidiary by reason of the nonfulfillment of such condition; and
(2) with respect to any other such Participant, such waiver may be granted by the Committee
(or any delegate thereof) upon its determination that in its sole judgment there shall not have
been and will not be any such substantial adverse effect.
(c) Effect of Detrimental Conduct. Anything contained in the Plan to the contrary
notwithstanding, all rights of a Participant under any Plan Award shall cease on and as of the date
on which it has been determined by the Committee that such Participant at any time (whether before
or subsequent to termination of such Participants employment) acted in a manner detrimental to the
best interests of the Company or any Subsidiary.
(d) Tax and Other Withholding. Prior to any distribution of cash, Stock or Other Stock-Based
Awards (including payments under Section 5(c)) to any Participant, appropriate arrangements
(consistent with the Plan and any rules adopted hereunder) shall be made for the payment of any
taxes and other amounts required to be withheld by federal, state or local law.
(e) Substitution. The Committee, in its sole discretion, may substitute a Plan Award (except
ISOs) for another Plan Award or Plan Awards of the same or different type; provided, however, that
the Committee shall not, without shareholder approval, substitute Options or any other Plan Award
for outstanding Options with a higher price than the substitute Option or other Plan Award.
(f) Section 409A Separation from Service. For purposes of any Plan Award that is subject to
Code Section 409A and with respect to which the terms and conditions of the Plan Award, as
determined by the Committee (or if applicable, elected by the Participant) at the time of grant
provide for distribution or settlement of the Plan Award upon the Participants termination of
employment, the Participant will be deemed to have terminated employment on the date on which the
Participant incurs a separation from service within the meaning of Code Section 409A.
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Section 11. NON-TRANSFERABILITY OF PLAN AWARDS; RESTRICTIONS ON DISPOSITION AND EXERCISE OF PLAN
AWARDS
(a) Restrictions on Transfer of Rights or Final Awards. No Performance Cash Right,
Performance Stock Right, Restricted Stock Unit or, until the expiration of any restriction period
imposed by the Committee, no shares of Stock acquired under the Plan, shall be transferred,
pledged, assigned or otherwise disposed of by a Participant, except as permitted by the Plan,
without the consent of the Committee, otherwise than by will or the laws of descent and
distribution; provided, however, that the Committee may permit, on such terms as it may deem
appropriate, use of Stock included in any Final Award as partial or full payment upon exercise of
an Option under the Plan or a stock option under any other stock option plan of the Company prior
to the expiration of any restriction period relating to such Final Award.
(b) Restrictions on Transfer of Options or Stock Appreciation Rights. Unless the Committee
determines otherwise, no Option or Stock Appreciation Right shall be transferable by a Participant
otherwise than by will or the laws of descent and distribution, and during the lifetime of a
Participant the Option or Stock Appreciation Right shall be exercisable only by such Participant or
such Participants guardian or legal representative; provided, however, that no Option or Stock
Appreciation Right shall be transferred for consideration.
(c) Restrictions on Transfer of Certain Other Stock-Based Awards. Unless the Committee
determines otherwise, no Other Stock-Based Award shall be transferable by a Participant otherwise
than by will or the laws of descent and distribution, and during the lifetime of a Participant any
such Other Stock-Based Award shall be exercisable only by such Participant or such Participants
guardian or legal representative.
(d) Attachment and Levy. No Plan Award shall be subject, in whole or in part, to attachment,
execution or levy of any kind, and any purported transfer in violation hereof shall be null and
void. Without limiting the generality of the foregoing, no domestic relations order purporting to
authorize a transfer of a Plan Award, or to grant to any person other than the Participant the
authority to exercise or otherwise act with respect to a Plan Award, shall be recognized as valid.
Section 12. DESIGNATION OF BENEFICIARIES
Anything contained in the Plan to the contrary notwithstanding, a Participant may file with
the Company a written designation of a beneficiary or beneficiaries under the Plan, subject to such
limitations as to the classes and number of beneficiaries and contingent beneficiaries and such
other limitations as the Committee from time to time may prescribe. A Participant may from time to
time revoke or change any such designation of beneficiary. If a Participant designates his spouse
as a Beneficiary, such designation automatically shall become null and void on the date of the
Participants divorce or legal separation from such spouse. Any designation of a beneficiary under
the Plan shall be controlling over any other disposition, testamentary or otherwise; provided,
however, that if the Committee shall be in doubt as to the entitlement of any such beneficiary to
receive any Right, Final Award, Restricted Stock, Restricted Stock Unit, Option, Stock Appreciation
Right, or Other Stock-Based Award, or if applicable law requires the Company to do so, the
Committee may recognize only the legal representative of such Participant, in which case the
Company, the Committee and the members thereof shall not be under any further liability to anyone.
In the event of the death of any Participant, the term Participant as used in the Plan shall
thereafter be deemed to refer to the beneficiary designated pursuant to this Section 12 or, if no
such designation is in effect, the executor or administrator of the estate of such Participant,
unless the context otherwise requires.
Section 13. MERGER, CONSOLIDATION, STOCK DIVIDENDS, ETC.
(a) Adjustments. In the event of any merger, consolidation, reorganization, stock split,
stock dividend or other event affecting Stock, an appropriate adjustment shall be made in the total
number of shares available for Plan Awards and in all other provisions of the Plan that include a
reference to a number of shares or units, and in the numbers of shares or units covered by, and
other terms and provisions (including but not limited to the grant or exercise price of any Plan
Award) of outstanding Plan Awards.
(b) Committee Determinations. The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of any fractional share which might otherwise become
subject to a Plan Award.
Section 14. ACCELERATION OF PAYMENT OR MODIFICATION OF PLAN AWARDS
(a) Acceleration and Modification. The Committee, in the event of the death of a Participant
or in any other circumstance, may accelerate distribution of any Plan Award in its entirety or in a
reduced amount, in cash or in Stock, or modify any Plan Award, in
each case on such basis and in such manner as the Committee may determine in its sole
discretion. Notwithstanding the foregoing, unless determined otherwise by the Committee, any such
action shall be taken in a manner that will enable a Plan Award that is intended to be exempt from
Code Section 409A to continue to be so exempt, or to enable a Plan Award that is intended to comply
with Code Section 409A to continue to so comply.
12
(b) Change in Control. Notwithstanding any other provision of the Plan, unless the Committee
determines otherwise at the time of grant, upon the occurrence of a Change in Control, (1) any Plan
Awards outstanding as of the date of such Change in Control that relate to Performance Periods that
have been completed as of the date of the Change in Control, but that have not yet been paid, shall
be paid in accordance with the terms of such Plan Awards, (2) any Plan Awards outstanding as of the
date of such Change in Control that relate to Performance Periods that have not been completed as
of the date of the Change in Control, and that are not then vested, shall become fully vested if
vesting is based solely upon the length of the employment relationship as opposed to the
satisfaction of one or more Performance Goals, and (3) any other Plan Awards outstanding as of the
date of such Change in Control that relate to Performance Periods that have not been completed as
of the date of the Change in Control, and that are not then vested, shall be treated as vested and
earned pro rata, as if the Performance Goals for the Target Award associated with a Performance
Cash Right or a Performance Stock Right or the Performance Goals with respect to Restricted Stock,
Restricted Stock Units or Other Stock Based Awards are attained as of the effective date of the
Change in Control, by taking the product of (A) the Target Award (in the case of a Performance Cash
Right or a Performance Stock Right) or the number of shares of Restricted Stock, Restricted Stock
Units or Other Stock Based Awards granted to the Participant, and (B) a fraction, the numerator of
which is the number of full or partial months that have elapsed from the beginning of the
Performance Period to the date of the Change in Control and the denominator of which is the total
number of months in the original Performance Period; provided, however, that any such Plan Award
shall be immediately vested and payable to the Participant to the extent of the foregoing formula,
and shall be free of all restrictions and conditions that would otherwise apply to such Plan Award.
The foregoing provisions are subject to the terms of any employment contract governing the
employment of a Participant to the extent that such contract provides greater rights to the
Participant in the event of a Change in Control. Notwithstanding the foregoing provisions of
Section 14(b), unless determined otherwise by the Committee, Section 14(b) shall be applied in a
manner that will enable a Plan Award that is intended to be exempt from Code Section 409A to
continue to be so exempt, or to enable a Plan Award that is intended to comply with Code Section
409A to continue to so comply.
(c) Maximum Payment Limitation. If any portion of the payments or benefits described in this
Plan or under any other agreement with or plan of the Company (in the aggregate, Total Payments),
would constitute an excess parachute payment, then the Total Payments to be made to the
Participant shall be reduced such that the value of the aggregate Total Payments that the
Participant is entitled to receive shall be one dollar ($1) less than the maximum amount which the
Participant may receive without becoming subject to the tax imposed by Section 4999 of the Code or
which the Company may pay without loss of deduction under Section 280G(a) of the Code; provided
that this Section shall not apply in the case of a Participant who has in effect a valid employment
contract providing that the Total Payments to the Participant shall be determined without regard to
the maximum amount allowable under Section 280G of the Code. The terms excess parachute payment
and parachute payment shall have the meanings assigned to them in Section 280G of the Code, and
such parachute payments shall be valued as provided therein. Present value shall be calculated in
accordance with Section 280G(d)(4) of the Code. Within forty (40) days following delivery of notice
by the Company to the Participant of its belief that there is a payment or benefit due the
Participant which will result in an excess parachute payment as defined in Section 280G of the
Code, the Participant and the Company, at the Companys expense, shall obtain the opinion (which
need not be unqualified) of nationally recognized tax counsel selected by the Companys independent
auditors and acceptable to the Participant in his sole discretion (which may be regular outside
counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and present value of any excess
parachute payments determined without regard to the limitations of this Section. As used in this
Section, the term Base Period Income means an amount equal to the Participants annualized
includible compensation for the base period as defined in Section 280G(d)(1) of the Code. For
purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Companys independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code, which determination shall be evidenced in a certificate of
such auditors addressed to the Company and the Participant. Such opinion shall be addressed to the
Company and the Participant and shall be binding upon the Company and the Participant. If such
opinion determines that there would be an excess parachute payment, the payments hereunder that are
includible in Total Payments or any other payment or benefit determined by such counsel to be
includible in Total Payments shall be reduced or eliminated as specified by the Participant in
writing delivered to the Company within thirty days of his receipt of such opinion or, if the
Participant fails to so notify the Company, then as the Company shall reasonably determine, so that
under the bases of calculations set forth in such opinion there will be no excess parachute
payment. If such legal counsel so requests in connection with the opinion required by this Section,
the Participant and the Company shall obtain, at the Companys expense, and the legal counsel may
rely on in providing the opinion, the advice of a firm of recognized executive compensation
consultants as to the reasonableness of any item of compensation to be
received by the Participant. If the provisions of Sections 280G and 4999 of the Code (or any
successor provisions) are repealed without succession, then this Section shall be of no further
force or effect.
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Section 15. RIGHTS AS A STOCKHOLDER
Except with respect to shares of Restricted Stock, a Participant shall not have any rights as
a stockholder with respect to any share covered by any Plan Award until such Participant shall have
become the holder of record of such share.
Section 16. TERM, AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN AND AGREEMENTS
(a) Term. Unless terminated earlier pursuant to subsection (b), the Plan shall terminate on
May 11, 2014.
(b) Amendment, Modification and Termination of Plan. The Board may, from time to time, amend
or modify the Plan or any outstanding Plan Award, including without limitation, to authorize the
Committee to make Plan Awards payable in other securities or other forms of property of a kind to
be determined by the Committee, and such other amendments as may be necessary or desirable to
implement such Plan Awards, or may terminate the Plan or any provision thereof; provided, however,
that no such action of the Board, without approval of the stockholders, may (1) increase the total
number of shares of Stock with respect to which Plan Awards may be granted under the Plan or the
individual limits specified in Section 4(a), (2) increase the total amount that may be paid to an
individual with respect to a Performance Cash Award, as specified in Section 3(b), (3) extend the
term of the Plan as set forth in paragraph (a) of this Section 16, (4) permit any person while a
member of the Committee or any other committee of the Board administering the Plan to be eligible
to receive or hold a Plan Award, or (5) permit the Company to decrease the grant price of any
outstanding Option or Stock Appreciation Right.
(c) Limitation and Survival. No amendment to or termination of the Plan or any provision
hereof, and no amendment or cancellation of any outstanding Plan Award, by the Board or the
stockholders of the Company, shall, without the written consent of the affected Participant,
adversely affect any outstanding Plan Award. The Committees authority to act with respect to any
outstanding Plan Award shall survive termination of the Plan.
(d) Amendments for Changes in Law. Notwithstanding the foregoing provisions, the Board shall
have the authority to amend outstanding Plan Awards and the Plan to take into account changes in
law and tax and accounting rules as well as other developments, and to grant Plan Awards that
qualify for beneficial treatment under such rules, without stockholder approval. Further, the
provisions of Code Section 409A are incorporated into the Plan by reference to the extent necessary
for any Plan Award that is subject to Code Section 409A to comply with such requirements, and
except as otherwise determined by the Committee, the Plan shall be administered in accordance with
Section 409A as if the requirements of Code Section 409A were set forth herein.
Section 17. INDEMNIFICATION AND EXCULPATION
(a) Indemnification. Each person who is or shall have been a member of the Board, the
Committee, or of any other committee of the Board administering the Plan or of any committee
appointed by the foregoing committees, shall be indemnified and held harmless by the Company
against and from any and all loss, cost, liability or expense that may be imposed upon or
reasonably incurred by such person in connection with or resulting from any claim, action, suit or
proceeding to which such person may be or become a party or in which such person may be or become
involved by reason of any action taken or failure to act under the Plan and against and from any
and all amounts paid by such person in settlement thereof (with the Companys written approval) or
paid by such person in satisfaction of a judgment in any such action, suit or proceeding, except a
judgment in favor of the Company based upon a finding of such persons lack of good faith; subject,
however, to the condition that, upon the institution of any claim, action, suit or proceeding
against such person, such person shall in writing give the Company an opportunity, at its own
expense, to handle and defend the same before such person undertakes to handle and defend it on
such persons behalf. The foregoing right of indemnification shall not be exclusive of any other
right to which such person may be entitled as a matter of law or otherwise, or any power that the
Company may have to indemnify or hold such person harmless.
(b) Exculpation. Each member of the Board, the Committee, or of any other committee of the
Board administering the Plan or any committee appointed by the foregoing committees, and each
officer and employee of the Company, shall be fully justified in relying or acting in good faith
upon any information furnished in connection with the administration of the Plan by any appropriate
person or persons other than such person. In no event shall any person who is or shall have been a
member of the Board, the Committee, or of any other committee of the Board administering the Plan
or of any committee appointed by the foregoing committees, or an officer or
employee of the Company, be held liable for any determination made or other action taken or
any omission to act in reliance upon any such information, or for any action (including the
furnishing of information) taken or any failure to act, if in good faith.
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Section 18. EXPENSES OF PLAN
The entire expense of offering and administering the Plan shall be borne by the Company and
its participating Subsidiaries; provided, that the costs and expenses associated with the
redemption or exercise of any Plan Award, including but not limited to commissions charged by any
agent of the Company, may be charged to the Participants.
Section 19. FINALITY OF DETERMINATIONS
Each determination, interpretation, or other action made or taken pursuant to the provisions
of the Plan by the Board, the Committee or any committee of the Board administering the Plan or any
committee appointed by the foregoing committees, shall be final and shall be binding and conclusive
for all purposes and upon all persons, including, but without limitation thereto, the Company, the
stockholders, the Committee and each of the members thereof, and the directors, officers, and
employees of the Company and its Subsidiaries, the Participants, and their respective successors in
interest.
Section 20. NO RIGHTS TO CONTINUED EMPLOYMENT OR TO PLAN AWARD
(a) No Right to Employment. Nothing contained in this Plan, or in any booklet or document
describing or referring to the Plan, shall be deemed to confer on any Participant the right to
continue as an Employee or director of the Company or Subsidiary, whether for the duration of any
Performance Period, the duration of any vesting period under a Plan Award, or otherwise, or affect
the right of the Company or Subsidiary to terminate the employment of any Participant for any
reason.
(b) No Right to Award. No Employee or other person shall have any claim or right to be
granted a Plan Award under the Plan. Having received an Award under the Plan shall not give a
Participant or any other person any right to receive any other Plan Award under the Plan. A
Participant shall have no rights in any Plan Award, except as set forth herein and in the
applicable award grant.
Section 21. GOVERNING LAW AND CONSTRUCTION
The Plan and all actions taken hereunder shall be governed by, and the Plan shall be construed
in accordance with, the laws of the State of Delaware without regard to the principle of conflict
of laws. Titles and headings to Sections are for purposes of reference only, and shall in no way
limit, define or otherwise affect the meaning or interpretation of the Plan.
Section 22. SECURITIES AND STOCK EXCHANGE REQUIREMENTS
(a) Restrictions on Resale. Notwithstanding any other provision of the Plan, no person who
acquires Stock pursuant to the Plan may, during any period of time that such person is an affiliate
of the Company (within the meaning of the rules and regulations of the Securities Exchange
Commission) sell or otherwise transfer such Stock, unless such offer and sale or transfer is made
(1) pursuant to an effective registration statement under the Securities Act of 1933 (1933 Act),
which is current and includes the Stock to be sold, or (2) pursuant to an appropriate exemption
from the registration requirements of the 1933 Act, such as that set forth in Rule 144 promulgated
pursuant thereto.
(b) Registration, Listing and Qualification of Shares of Common Stock. Notwithstanding any
other provision of the Plan, if at any time the Committee shall determine that the registration,
listing or qualification of the Stock covered by a Plan Award upon any securities exchange or under
any foreign, federal, state or local law or practice, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in connection with,
the granting of such Plan Award or the purchase or receipt of Stock in connection therewith, no
Stock may be purchased, delivered or received pursuant to such Plan Award unless and until such
registration, listing, qualification, consent or approval shall have been effected or obtained free
of any condition not acceptable to the Committee. Any person receiving or purchasing Stock pursuant
to a Plan Award shall make such representations and agreements and furnish such information as the
Committee may request to assure compliance with the foregoing or any other applicable legal
requirements. The Company shall not be required to issue or deliver any certificate or certificates
for Stock under the Plan prior to the Committees determination that all related requirements have
been fulfilled. The Company shall in no event be obligated to register any securities pursuant to
the 1933 Act or applicable state or foreign law or to take any other action in order to cause the
issuance and delivery of such certificates to comply with any such law, regulation, or requirement.
15
EX-10.6
EXHIBIT 10.6
THREE YEAR EXECUTIVE OFFICER
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, which was originally effective (the Effective Date) and is
hereby amended and restated effective as of October 3, 2008 (the Restatement Date), is made by
and between Visteon Corporation, a Delaware corporation (the Company), and (the
Executive).
WHEREAS, the Company considers it essential to the best interests of its stockholders to
foster the continued employment of key management personnel; and
WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Companys management, including
the Executive, to their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this Agreement are
provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall commence on the
Effective Date and shall continue in effect through the fifth anniversary of the Effective Date;
provided, however, that commencing on the first anniversary of the Effective Date,
and on each anniversary of the Effective Date thereafter, the Term shall automatically be extended
for one additional year unless, not later than 90 days prior to each such date, the Company or the
Executive shall have given notice not to extend the Term; and provided, further,
that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier
than 36 months beyond the month in which such Change in Control occurred.
3. Companys Covenants Summarized. In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executives covenants set forth in Section 4
hereof, the Company agrees, under the conditions described herein, to pay the Executive the
Severance Payments and the other payments and benefits described herein. Except as provided in
Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall
have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be deemed
to have been) a termination of the Executives employment with the Company following a Change in
Control and during the Term. This Agreement shall not be construed as creating an express or
implied contract of employment and, except as otherwise
agreed in writing between the Executive and the Company, the Executive shall not have any
right to be retained in the employ of the Company.
4. The Executives Covenants.
4.1 The Executive agrees that, subject to the terms and conditions of this Agreement, in the
event of a Potential Change in Control during the Term, the Executive will remain in the employ of
the Company until the earliest of (i) a date which is six months from the date of such Potential
Change of Control, (ii) the date of a Change in Control, (iii) the date of termination by the
Executive of the Executives employment for Good Reason or by reason of death, Disability or
Retirement, or (iv) the termination by the Company of the Executives employment for any reason.
4.2 The Executive agrees that, during the Term and for a period ending on the second
anniversary of a termination of the Executives employment following a Change in Control under
circumstances entitling the Executive to payments and benefits under Section 6 hereof, the
Executive will not, without the prior written consent of the Chairman of the Board or the Chief
Executive Officer of the Company, engage in or perform any services of a similar nature to those
performed by the Executive at the Company for any other corporation or business which is primarily
engaged in the design, manufacture, development, promotion or sale of climate, instrument and door
panels or electronic components for the automotive industry within North America, Latin America,
Asia, Australia or Europe in competition with the Company or any of the Companys subsidiaries or
Affiliates, or any joint ventures to which the Company or any of the Companys subsidiaries or
Affiliates are a party.
4.3 During the Term and thereafter, the Executive will not (other than in the regular course
and in furtherance of the Companys business) divulge, furnish or make available to any person any
confidential knowledge, information or materials, whether tangible or intangible, regarding
proprietary matters relating to the Company, including, without limitation, trade secrets, customer
and supplier lists, pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition or disposition plans, new personnel
employment plans, methods of manufacture, technical processes, designs and design projects,
inventions and research projects and financial budgets and forecasts of the Company except (1)
information which at the time is available to others in the business or generally known to the
public other than as a result of disclosure by the Executive not permitted hereunder, and (2) when
required to do so by a court of competent jurisdiction, by any governmental agency or by any
administrative body or legislative body (including a committee thereof) with purported or apparent
jurisdiction to order the Executive to divulge, disclose or make accessible such information.
2
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during any period that the Executive
fails to perform the Executives full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Company shall pay to the Executive an amount
that when added to the amount paid to the Executive under the Companys short-term and/or long-term
disability plans, will result in the Executive receiving his full salary at the rate in effect at
the commencement of any such period, together with all compensation and benefits payable to the
Executive under the terms of any other compensation or benefit plan, program or arrangement
maintained by the Company during such period, until the Executives employment is terminated by the
Company for Disability.
5.2 If the Executives employment shall be terminated for any reason following a
Change in Control and during the Term, the Company shall pay the Executives full salary to the
Executive through the Date of Termination at the rate in effect immediately prior to the Date of
Termination or, if higher, the rate in effect immediately prior to the first occurrence of an event
or circumstance constituting Good Reason, together with all compensation and benefits payable to
the Executive through the Date of Termination under the terms of the Companys compensation and
benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination
or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of
an event or circumstance constituting Good Reason.
5.3 If the Executives employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive the Executives normal
post-termination compensation and benefits as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance with, the Companys
retirement, insurance and other compensation or benefit plans, programs and arrangements as in
effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in
effect immediately prior to the occurrence of the first event or circumstance constituting Good
Reason.
6.1 If (i) the Executives employment is terminated following a Change in Control and
within three (3) years after a Change in Control, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good Reason, or (ii) the Executive
voluntarily terminates his employment for any reason during the 30 day period commencing on the
first anniversary of a Change in Control, then, in either such case, the Company shall pay the
Executive the amounts, and provide the Executive the benefits, described in this Section 6.1
(Severance Payments) and Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this Agreement, the Executives
employment shall be deemed to have been terminated following a Change in Control by the Company
without Cause or by the Executive with Good Reason, if (i) the Executives employment is terminated
by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever
occurs) and such termination was at the request or direction of a Person who has entered into an
agreement with the Company the consummation of which would constitute a Change in Control, or (ii)
the Executive terminates his employment for Good Reason prior to a Change in Control (whether or
not a Change in Control ever occurs)
and the circumstance or event which constitutes Good Reason occurs at the request or direction
of such Person. For purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be presumed to be correct unless the
Company establishes to the Board by clear and convincing evidence that such position is not
correct.
3
(A) In lieu of any further salary payments to the Executive for periods subsequent to the
Date of Termination, the Company shall pay to the Executive, on the first day of the seventh
(7th) month following the month in which occurs the Executives Separation from Service,
a lump sum severance payment, in cash, equal to three (3) times the sum of (i) the Executives base
salary as in effect immediately prior to the Date of Termination or, if higher, in effect
immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and
(ii) the Executives target annual bonus pursuant to any annual bonus or incentive plan maintained
by the Company in respect of the fiscal year in which occurs the Date of Termination or, if higher,
the fiscal year in which occurs the first event or circumstance constituting Good Reason. The
amount payable pursuant to this Section 6.1(A) shall be reduced by the amount of any cash severance
or salary continuation benefit paid or payable to the Executive under any other plan, policy or
program of the Company or any of its Affiliates or any written employment agreement between the
Executive and the Company or any of its Affiliates.
(B) For the 36 month period immediately following the Date of Termination, the Company
shall arrange to provide the Executive and his dependents life, accident and health insurance
benefits substantially similar to those provided to the Executive and his dependents immediately
prior to the Date of Termination or, if more favorable to the Executive, those provided to the
Executive and his dependents immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater cost to the Executive than the cost to the Executive
immediately prior to such date or occurrence; provided, however, that, unless the
Executive consents to a different method (after taking into account the effect of such method on
the calculation of parachute payments pursuant to Section 6.2 hereof), such health and life
insurance benefits shall be provided through a third-party insurer. Benefits otherwise receivable
by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the
same type are received by or made available to the Executive during the 36 month period following
the Executives termination of employment (and any such benefits received by or made available to
the Executive shall be reported to the Company by the Executive); provided,
however, that the Company shall reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over such cost immediately prior to the Date of Termination or,
if more favorable to the Executive, the first occurrence of an event or circumstance constituting
Good Reason.
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(i) |
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If accident and health insurance benefits are
provided, with the Executives consent, under a health plan that is
subject to Section 105(h) of the Code, then, for any period of coverage
following the end of the continuation period required under
Sections 601 through 609 of the Employee Retirement Income
Security Act of 1974, as amended, the benefits payable under such
health plan shall comply with the requirements of
Sections 1.409A-3(i)(1)(A) and (B) of the Treasury regulations and,
if and to the extent necessary, the Company shall amend such health
plan to comply therewith;
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4
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(ii) |
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Notwithstanding anything in this Section 6.1(B)
to the contrary, with respect to the first six (6) months following the
Executives Separation from Service, if the premiums payable by the
Company for group term life insurance on the Executives life exceeds
the amount of the limited payments exemption set forth in Section 1.409A-1(b)(9)(v)(B) of the Income Tax Regulations (or any successor
provision thereto), then, to the extent required in order to comply
with Code Section 409A, the Executive, in advance, shall pay to the
Company an amount equal to the premiums for any such life insurance
policy, other than with respect to life insurance coverage to which the
Executive would be entitled independent of this Agreement. Promptly
following the end of such six (6) month period, the Company will make a
cash payment to the Executive equal to the difference between the
aggregate amount paid by the Executive for such coverage and the amount
that the Executive would have paid for such life insurance coverage if
such cost had been determined pursuant to this Section 6.1(B) other
than this subparagraph (ii).
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(C) Each option to purchase shares of common stock of the Company outstanding as of the Date
of Termination shall become fully vested and exercisable as of such date and shall remain
exercisable during the shorter of (i) the remaining term of such option (such remaining term to be
determined as if the Executive were still actively employed) or (ii) ten (10) years from the date
on which the option originally was granted, and each grant of restricted stock or similar grant,
the award of which is contingent only upon the continued employment of the Executive to a
subsequent date, shall become fully vested as of the Date of Termination.
(D) Unless payable to the Executive under the terms of any annual or long-term incentive
plan, the Company shall pay to the Executive, on the first day of the seventh (7th)
month following the month in which occurs the Executives Separation from Service, a lump sum
amount, in cash, equal to the sum of (i) any unpaid incentive compensation (including performance
share awards) which has been allocated or awarded to the Executive for a completed fiscal year or
other measuring period preceding the Date of Termination under any such plan and which, as of the
Date of Termination, is contingent only upon the continued employment of the Executive to a
subsequent date, and (ii) a pro rata portion to the Date of Termination of the aggregate value of
all contingent incentive compensation awards (including performance share awards) to the Executive
for all then uncompleted periods under any such
plan, calculated as to each such award by multiplying the award that the Executive would have
earned on the last day of the performance award period, assuming the achievement, at the target
level (or if higher, at the then projected actual final level), of the individual and corporate
performance goals established with respect to such award, by the fraction obtained by dividing the
number of full months and any fractional portion of a month during such performance award period
through the Date of Termination by the total number of months contained in such performance award
period. Notwithstanding the forgoing, if and to the extent the Executive had elected to defer
receipt of any such award, and if the Executives deferral election is irrevocable as of the Date
of Termination for purposes of Code Section 409A, the amount calculated above shall be credited to
the Executives account under the applicable deferred compensation plan in lieu of being
distributed directly to the Executive.
5
(E) The benefits then accrued by or payable to the Executive under the Companys
Supplemental Executive Retirement Plan, Executive Separation Allowance Plan, Deferred Compensation
Plan, Pension Parity Plan, or any successor to any such plan, and the benefits then accrued by or
payable to the Executive under any other nonqualified plan providing supplemental retirement or
deferred compensation benefits shall become fully vested notwithstanding any eligibility conditions
that would otherwise apply with respect to such benefits and the benefit, as so vested, will be
paid in accordance with the terms of the applicable plan or program; provided that if the Executive
has not attained fifty-five (55) years of age, the Executives benefit under the Executive
Separation Allowance Plan will commence to be paid upon the Executives attainment of age
fifty-five (55). With respect to the Supplemental Executive Retirement Plan, Executive Separation
Allowance Plan, and any other nonqualified nonaccount balance plan or portion of a plan providing
supplemental retirement or deferred compensation benefits, the Company shall transfer an amount in
cash sufficient to pay all benefits then accrued by or payable to the Executive under the terms of
such plans into an irrevocable grantor trust (a so-called Rabbi Trust) whose trustee shall be an
entity unaffiliated with and independent of the Company, which trust shall be required to pay such
benefits in accordance with and subject to the applicable terms of each plan (as modified by this
Agreement) and the trust instrument; provided that if such transfer to the Rabbi Trust would be
treated, under Code Sections 83 and 409A(b), as a taxable transfer to the Executive, such transfer
to the Rabbi Trust shall not be made until such time as the transfer will not be treated as a
taxable event under Code Sections 83 and 409A; and provided further, that any amendment or
termination of any such plan on or after the Change in Control date the effect of which would be to
reduce or eliminate the benefit payable to the Executive shall be disregarded.
(F) The Company shall reimburse the Executive for expenses incurred for outplacement services
suitable to the Executives position, until December 31 of the second calendar year following the
calendar year in which occurs the Executives Separation from Service (or, if earlier, until the
first acceptance by the Executive of an offer of employment) in an amount not exceeding 25% of the
sum of the Executives annual base salary as in effect immediately prior to the Date of Termination
or, if higher, in effect immediately prior to the first occurrence of an event or circumstances
constituting Good Reason, and target annual bonus pursuant to any annual bonus or incentive plan
maintained by the Company in respect of the
fiscal year in which occurs the Date of Termination or, if higher, the fiscal year in which
occurs the first event or circumstance constituting Good Reason.
6
(G) For the six (6) month period immediately following the Date of Termination, the Company
shall provide the Executive with the use of any Company provided automobile on the same terms and
conditions that were applicable immediately prior to the Date of Termination or, if more favorable,
immediately prior to the first occurrence of an event or circumstance constituting Good Reason.
The Executives right to use a Company provided automobile cannot be exchanged for cash or another
benefit.
6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of
the payments or benefits received or to be received by the Executive in connection with a Change in
Control or the Executives termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such Person) (such
payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the Total
Payments) will be subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the Gross-Up Payment) such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Total Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as
parachute payments (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion
of tax counsel (Tax Counsel) reasonably acceptable to the Executive and selected by the
accounting firm which was, immediately prior to the Change in Control, the Companys independent
auditor (the Auditor), such payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all excess
parachute payments within the meaning of section 280G(b)(l) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income
tax at the highest marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executives residence on the Date of Termination (or if
there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for
purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
7
(C) In the event that the Excise Tax is finally determined to be less than the amount taken
into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the
Company, within five business days following the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the
Executive), to the extent that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executives taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the amount of such repayment at 120%
of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive with respect to
such excess) within five business days following the time that the amount of such excess is finally
determined and paid, but in no event prior to the earliest date permitted without the imposition of
tax under Code Section 409A. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A) and (D) of Section 6.1 hereof and in Section 6.2
hereof shall be made, except as otherwise specifically noted, on the first day of the seventh
(7th) month following the month in which occurs the Executives Separation from Service;
provided that if the Executive (or the Company, on behalf of the Executive) is required to remit
the excise tax under Code Section 4999 to the Internal Revenue Service prior to such date, the
portion of the Gross-Up Payment that must be remitted to the Internal Revenue Service prior to the
otherwise applicable payment date will be remitted by the Company or reimbursed to the Executive
upon written notice by the Executive to the Company that the excise tax under Code Section 4999 has
been paid by the Executive to the Internal Revenue Service, and in either case the remaining
payment will be reduced accordingly. At the time that payments are made under this Agreement, the
Company shall provide the Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without limitation, any
opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing shall be attached to the
statement).
6.4 The Company also shall reimburse the Executive for all legal fees and expenses
incurred by the Executive in disputing in good faith any issue hereunder relating to the
termination of the Executives employment, in seeking in good faith to obtain or enforce any
benefit or right provided by this Agreement or in connection with any tax audit or proceeding to
the extent attributable to the application of Section 4999 of the Code to any payment or benefit
provided hereunder. Such payments shall be made within five business days after delivery of the
Executives written requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require; provided that no reimbursement pursuant to
this Section 6.4 shall be made later than the end of the calendar year following the calendar year
in which such fee or expense was incurred.
8
7. Termination Procedures and Compensation During Dispute.
7.1. Notice of Termination. After a Change in Control and during the Term, any
purported termination of the Executives employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this Agreement, a Notice of Termination shall
mean a notice which shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executives employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board which was called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive, together with the
Executives counsel, to be heard before the Board) finding that, in the good faith opinion of the
Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of
Cause herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. Date of Termination, with respect to any purported
termination of the Executives employment after a Change in Control and during the Term, shall mean
(i) if the Executives employment is terminated for Disability, 30 days after Notice of Termination
is given (provided that the Executive shall not have returned to the full-time performance of the
Executives duties during such 30 day period), and (ii) if the Executives employment is terminated
for any other reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than 30 days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less than 15 days nor more
than 60 days, respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within 15 days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as determined without regard
to this Section 7.3), the party receiving such Notice of Termination notifies the other party that
a dispute exists concerning the termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and the Executive pursues
the resolution of such dispute with reasonable diligence.
9
7.4 Compensation During Dispute. If a purported termination occurs following a
Change in Control and during the Term and the Date of Termination is extended in accordance with
Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and insurance plans in which
the Executive was participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executives employment with
the Company terminates during the Term, the Executive is not required to seek other employment or
to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to
Section 6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. If the successor to
all or substantially all of the business and/or assets of the Company arises in connection with a
transaction that constitutes a Change in Control Event (as defined for purposes of Code
Section 409A), the failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same terms as the
Executive would be entitled to hereunder if the Executive were to terminate the Executives
employment for Good Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date of the Change in Control Event (as defined for purposes of Code Section 409A)
shall be deemed the Date of Termination. If the successor to all or substantially all of the
business and/or assets of the Company arises in connection with a transaction that does not
constitute a Change in Control Event (as defined for purposes of Code Section 409A), the failure of
the Company to obtain such assumption and agreement prior to the effectiveness of such succession
shall be a breach of this Agreement and, following the Executives Separation from Service, shall
entitle the Executive to Compensation from the Company in the same amount and on the same terms as
the Executive would be entitled to hereunder if the Executive were to terminate the Executives
employment for Good Reason after a Change in Control.
10
9.2 This Agreement shall inure to the benefit of and be enforceable by the Executives
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executives estate.
10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed, if to the Executive, to the address inserted below the Executives
signature on the final page hereof and, if to the Company, to the address set forth below, or to
such other address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon actual receipt:
Visteon Corporation
One Village Center Drive
Van Buren Township, MI 48111
Attention: General Counsel
11. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and such officer as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or of any lack of compliance
with, any condition or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes any other agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof which have been made by
either party; provided, however, that this Agreement shall supersede any agreement
setting forth the terms and conditions of the Executives employment with the Company only in the
event that the Executives employment with the Company is terminated on or following a Change in
Control, by the Company other than for Cause or by the Executive other than for Good Reason. The
validity, interpretation, construction and performance of this Agreement shall be governed by the
laws of the State of Delaware. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under federal, state or local
law and any additional withholding to which the Executive has agreed. In addition, if prior to the
date of payment of the Severance Payments hereunder, the taxes imposed under Sections 3101, 3121(a)
and 3121(v)(2), where applicable, become due, the
Company may provide for an immediate payment of the amount needed to pay the Executives
portion of such tax (plus an amount equal to the taxes that will be due on such amount) and the
Executives Severance Payments shall be reduced accordingly. The obligations of the Company and
the Executive under this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
11
12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.
14. Settlement of Disputes. All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by
the Board of a claim for benefits under this Agreement shall be delivered to the Executive in
writing and shall set forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow the Executive to appeal to the Board
a decision of the Board within 60 days after notification by the Board that the Executives claim
has been denied. The Executive acknowledges that to avoid an additional tax on payments that may
be payable or benefits that may be provided under this Agreement and that constitute deferred
compensation that is not exempt from Section 409A of the Code, the Executive must make a
reasonable, good faith effort to collect any payment or benefit to which the Executive believes the
Executive is entitled hereunder no later than 90 days after the latest date upon which the payment
could have been made or benefit provided under this Agreement, and if not paid or provided, must
take further enforcement measures within 180 days after such latest date.
15. Definitions. For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(A) Affiliate shall have the meaning set forth in Rule 12b-2 promulgated under Section 12
of the Exchange Act.
(B) Auditor shall have the meaning set forth in Section 6.2 hereof.
(C) Base Amount shall have the meaning set forth in section 280G(b)(3) of the Code.
(D) Beneficial Owner shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
12
(E) Board shall mean the Board of Directors of the Company.
(F) Cause for termination by the Company of the Executives employment shall mean
(i) the willful and continued failure by the Executive to substantially perform the Executives
duties with the Company (other than any such failure resulting from the Executives incapacity due
to physical or mental illness or any such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a
written demand for substantial performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the Executive has not
substantially performed the Executives duties, or (ii) the willful engaging by the Executive in
conduct which is demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act, or
failure to act, on the Executives part shall be deemed willful unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the Executives act, or
failure to act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause exists shall be
given affect unless the Company establishes to the Board by clear and convincing evidence that
Cause exists.
(G) Change in Control shall be deemed to have occurred if the event set forth in any one of
the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing 40% or more of the combined
voting power of the Companys then outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (a) of paragraph (III) below;
(II) within any twelve (12) month period, the following individuals cease for any
reason to constitute a majority of the number of directors then serving: individuals who, on the
Effective Date, constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Companys shareholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof or whose appointment, election or nomination
for election was previously so approved or recommended;
(III) there is consummated a merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other than (a) a merger or consolidation
which results in the directors of the Company immediately prior to such merger or consolidation
continuing to constitute at least a majority of the board of directors of the Company, the
surviving entity or any parent thereof or (b) a merger or
consolidation effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities Beneficially Owned by such Person any securities acquired
directly from the Company or its Affiliates) representing 40% or more of the combined voting power
of the Companys then outstanding securities;
13
(IV) the shareholders of the Company approve a plan of complete liquidation or dissolution of
the Company or there is consummated an agreement for the sale or disposition by the Company of more
than 50% of the Companys assets, other than a sale or disposition by the Company of more than 50%
of the Companys assets to an entity, at least 50% of the combined voting power of the voting
securities of which are owned by shareholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale; or
(V) any other event that the Board, in its sole discretion, determines to be a Change in
Control for purposes of this Agreement.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of integrated transactions
immediately following which the record holders of the common stock of the Company immediately prior
to such transaction or series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
(H) Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
(I) Company shall mean Visteon Corporation, a Delaware corporation, and, except in
determining under Section 15(G) hereof whether or not any Change in Control of the Company has
occurred, shall include any successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(J) Date of Termination shall have the meaning set forth in Section 7.2 hereof.
(K) Disability shall be deemed the reason for the termination by the Company of the
Executives employment, if, as a result of the Executives incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time performance of the Executives
duties with the Company for a period of six consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within 30 days after such Notice of
Termination is given, the Executive shall not have returned to the full-time performance of the
Executives duties.
14
(L) Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to
time.
(M) Excise Tax shall mean any excise tax imposed under section 4999 of the Code.
(N) Executive shall mean the individual named in the first paragraph of this Agreement.
(O) Good Reason for termination by the Executive of the Executives employment shall
mean the occurrence (without the Executives express written consent) after any Change in Control,
or prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (VI) below
to a Change in Control as references to a Potential Change in Control), of any one of the
following acts by the Company, or failures by the Company to act, unless, in the case of any act or
failure to act described in paragraph (I), (IV), or (V) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of Termination given in respect
thereof:
(I) the assignment to the Executive of any duties inconsistent with the Executives status as
a senior executive officer of the Company or a material adverse alteration in the nature or status
of the Executives responsibilities from those in effect immediately prior to the Change in Control
(including, without limitation, the Executive ceasing to be an executive officer of a public
company);
(II) a reduction by the Company in the Executives annual base salary as in effect on the
date hereof or as the same may be increased from time to time, except for across-the-board salary
reductions similarly affecting all senior executives of the Company and all senior executives of
any Person in control of the Company;
(III) the relocation of the Executives principal place of employment to a location more than
50 miles from the Executives principal place of employment immediately prior to the Change in
Control or the Companys requiring the Executive to be based anywhere other than such principal
place of employment (or permitted relocation thereof) except for required travel on the Companys
business to an extent substantially consistent with the Executives present business travel
obligations;
(IV) the failure by the Company to pay to the Executive any portion of the Executives
current compensation, or to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company, within seven days of the date
such compensation is due;
15
(V) the failure by the Company to continue to provide the Executive with benefits
substantially similar to the material benefits enjoyed by the Executive
under any of the Companys executive compensation (including bonus, equity or incentive
compensation), pension, savings, life insurance, medical, health and accident, or disability plans
in which the Executive was participating immediately prior to the Change in Control (except for
across the board changes similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company), the taking of any other action by the Company
which would directly or indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the number of paid vacation days to which
the Executive is entitled on the basis of years of service with the Company in accordance with the
Companys normal vacation policy in effect at the time of the Change in Control; or
(VI) any purported termination of the Executives employment which is not effected pursuant
to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective.
The Executives right to terminate the Executives employment for Good Reason shall not be
affected by the Executives incapacity due to physical or mental illness. The Executives
continued employment shall not constitute consent to, or a waiver of rights with respect to, any
act or failure to act constituting Good Reason hereunder. For purposes of any determination
regarding the existence of Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Board by clear and convincing evidence
that Good Reason does not exist.
(P) Gross-Up Payment shall have the meaning set forth in Section 6.2 hereof.
(Q) Notice of Termination shall have the meaning set forth in Section 7.1 hereof.
(R) Person shall have the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
(S) Potential Change in Control shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control;
16
(II) the Company or any Person publicly announces an intention to take or to consider taking
actions which, if consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 15% or more of either the then outstanding shares of common stock of the
Company or the combined voting power of the Companys then outstanding securities (not including in
the securities beneficially owned by such Person any securities acquired directly from the Company
or its affiliates); or
(IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(T) Retirement shall be deemed the reason for the termination by the Executive of the
Executives employment if such employment is terminated in accordance with the Companys retirement
policy, including early retirement, generally applicable to its salaried employees.
(U) Separation from Service means the date on which the Executive separates from service
(within the meaning of Code Section 409A) from the Company when the Company and Executive
reasonably anticipate that no further services will be performed by the Executive for the Company
after that date or that the level of bona fide services the Executive will perform after such date
as an employee of the Company will permanently decrease to no more than 20% of the average level of
bona fide services performed by the Executive (whether as an employee or independent contractor)
for the Company over the immediately preceding 36-month period (or such lesser period of services).
For purposes of this definition, the term Company includes each other corporation, trade or
business that, with the Company, constitutes a controlled group of corporations or group of trades
or businesses under common control within the meaning of Code Sections 414(b) or (c), applied by
substituting at least 50 percent for at least 80 percent each place it appears, and the term
Company shall be deemed to refer collectively to the Company and each other controlled group
member as so defined. An Executive is not considered to have incurred a Separation from Service if
the Executive is absent from active employment due to military leave, sick leave or other bona fide
leave of absence if the period of such leave does not exceed the greater of (i) six months, or (ii)
the period during which the Executives right to reemployment by the Company is provided either by
statute or by contract; provided that if the leave of absence is due to a medically determinable
physical or mental impairment that can be expected to result in death or last for a continuous
period of not less than six months, where such impairment causes the Executive to be unable to
perform the duties of his or her position of employment or any substantially similar position of
employment, the leave may be extended for up to 29 months without causing the Executive to have
incurred a Separation from Service. Further, for purposes of determining whether the Executive has
incurred a Separation from Service, if the Executive is not actively at work during the period that
there exists a dispute pursuant to Section 7.3, the Executive shall be considered to be on a bona
fide leave of absence for which his right to reemployment is guaranteed during the period that
begins on the date on which the Executive last performs active services and ends on the Date
of Termination that ultimately is established pursuant to Section 7.3.
17
(V) Severance Payments shall have the meaning set forth in Section 6.1 hereof.
(W) Tax Counsel shall have the meaning set forth in Section 6.2 hereof.
(X) Term shall mean the period of time described in Section 2 hereof (including any
extension, continuation or termination described therein).
(Y) Total Payments shall mean those payments so described in Section 6.2 hereof.
18
IN WITNESS WHEREOF, the parties have duly executed this Agreement to be effective as of the
Restatement Date.
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VISTEON CORPORATION |
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By: |
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Name:
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Title:
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19
EX-12.1
EXHIBIT 12.1
Visteon Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions)
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Nine Months |
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Ended |
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For the Years Ended December 31, |
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September 30, 2008 |
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2007 |
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2006 |
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2005 |
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2004 |
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2003 |
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Earnings |
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Income/(loss) before income taxes, minority interest, discontinued
operations and change in accounting and extraordinary item |
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$ |
(166 |
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$ |
(285 |
) |
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$ |
(89 |
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$ |
(165 |
) |
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$ |
(540 |
) |
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$ |
(1,055 |
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Earnings of non-consolidated affiliates |
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(35 |
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(47 |
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(33 |
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(25 |
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(45 |
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(55 |
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Cash dividends received from non-consolidated affiliates |
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4 |
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71 |
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24 |
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48 |
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42 |
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35 |
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Fixed charges |
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175 |
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249 |
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212 |
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185 |
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140 |
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126 |
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Amortization of capitalized interest, net of interest capitalized |
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5 |
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6 |
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6 |
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4 |
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1 |
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3 |
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Earnings |
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$ |
(17 |
) |
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$ |
(6 |
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$ |
120 |
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$ |
47 |
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$ |
(402 |
) |
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$ |
(946 |
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Fixed Charges |
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Interest and related charges on debt |
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$ |
160 |
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$ |
226 |
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$ |
190 |
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$ |
158 |
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$ |
109 |
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$ |
97 |
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Portion of rental expense representative of the interest factor |
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21 |
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27 |
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23 |
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27 |
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31 |
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29 |
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Fixed charges |
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$ |
181 |
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$ |
253 |
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$ |
213 |
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$ |
185 |
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$ |
140 |
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$ |
126 |
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Ratios |
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Ratio of earnings to fixed charges * |
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N/A |
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N/A |
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N/A |
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N/A |
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N/A |
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N/A |
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* |
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For the nine months ended September 30, 2008 and years ended December 31, 2007,
2006, 2005, 2004 and 2003 fixed charges exceed earnings by $198 million, $259 million,
$93 million, $138 million, $542 million and
$1,072 million, respectively, resulting in a ratio of less than one. |
EX-15.1
EXHIBIT 15.1
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
We are aware that our report dated October 30, 2008 on our review of interim financial information
of Visteon Corporation (the Company) for the three and nine month periods ended September 30,
2008 and September 30, 2007 included in the Companys quarterly report on Form 10-Q for the quarter
ended September 30, 2008 is incorporated by reference in its Registration Statements on Form S-3
(No. 333-85406) dated April 2, 2002, and Form S-8 (Nos. 333-39756, 333-39758, 333-40202, 333-87794,
333-115463 and 333-145106) dated June 21, 2000, June 21, 2000, June 26, 2000, May 8, 2002, May 13,
2004 and August 3, 2007, respectively.
.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
EX-31.1
EXHIBIT 31.1
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)
I, Donald J. Stebbins, certify that:
1. |
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I have reviewed this Quarterly Report on Form 10-Q of Visteon Corporation; |
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2. |
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Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
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3. |
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Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
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4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
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designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
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b) |
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designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
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c) |
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evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
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d) |
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disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. |
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The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of registrants board of directors (or persons performing
the equivalent functions): |
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a) |
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all significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and |
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b) |
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any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting. |
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/s/Donald J. Stebbins
Donald J. Stebbins
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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EX-31.2
EXHIBIT 31.2
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)
I, William G. Quigley III, certify that:
1. |
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I have reviewed this Quarterly Report on Form 10-Q of Visteon Corporation; |
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2. |
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Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
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3. |
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Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
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4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f))for the registrant and have:
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a) |
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designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
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b) |
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designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
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c) |
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evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
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d) |
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disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and
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5. |
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The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of registrants board of directors (or persons performing
the equivalent functions):
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a) |
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all significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and |
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b) |
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any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting.
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/s/William G. Quigley III
William G. Quigley III
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Executive Vice President and |
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Chief Financial Officer |
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(Principal Financial Officer) |
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EX-32.1
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SS.1350
AND EXCHANGE ACT RULE 13a-14(b)
Solely for the purposes of complying with 18 U.S.C. ss.1350 and Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended (the Exchange Act), I, the undersigned President and
Chief Executive Officer of Visteon Corporation (the Company), hereby certify, based on my
knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September
30, 2008 (the Report) fully complies with the requirements of Section 13(a) of the Exchange Act
and that information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/Donald J. Stebbins
Donald J. Stebbins
EX-32.2
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SS.1350
AND EXCHANGE ACT RULE 13a-14(b)
Solely for the purposes of complying with 18 U.S.C. ss.1350 and Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended (the Exchange Act), I, the undersigned Executive Vice
President and Chief Financial Officer of Visteon Corporation (the Company), hereby certify, based
on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended
September 30, 2008 (the Report) fully complies with the requirements of Section 13(a) of the
Exchange Act of 1934 and that information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/William G. Quigley III
William G. Quigley III