SEC Filing | Visteon Corporation

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vc-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

________________

FORM 10-Q

(Mark One)

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 001-15827

VISTEON CORPORATION

(Exact name of registrant as specified in its charter)


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

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

Securities registered pursuant to Section 12(b) of the Act:


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

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

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

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

Large accelerated filer ü Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ü No ☐

As of July 21, 2022, the registrant had outstanding 28,122,075 shares of common stock.

Exhibit index located on page number 38.

Visteon Corporation and Subsidiaries

Index


Part I - Financial Information		Page
	Item 1 - Condensed Consolidated Financial Statements	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Condensed Consolidated Statements of Changes in Equity (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3 - Quantitative and Qualitative Disclosures about Market Risk	35
	Item 4 - Controls and Procedures	36
Part II - Other Information		37
	Item 1 - Legal Proceedings	37
	Item 1A - Risk Factors	37
	Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	37
	Item 6 - Exhibits	37
Exhibit Index		38
Signatures		38

Part I

Financial Information

Item 1.Condensed Consolidated Financial Statements

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	848	$	610	$	1,666	$	1,356
Cost of sales	(774)		(575)		(1,516)		(1,248)
Gross margin	74		35		150		108
Selling, general and administrative expenses	(43)		(44)		(87)		(89)
Restructuring and impairment	(4)		(1)		(11)		—
Interest expense	(4)		(3)		(7)		(6)
Interest income	1		1		2		2
Equity in net income of non-consolidated affiliates	1		—		4		—
Other income, net	5		5		10		9
Income (loss) before income taxes	30		(7)		61		24
Provision for income taxes	(7)		(4)		(15)		(16)
Net income (loss)	23		(11)		46		8
Less: Net (income) loss attributable to non-controlling interests	1		—		—		(3)
Net income (loss) attributable to Visteon Corporation	$	24	$	(11)	$	46	$	5

Comprehensive income (loss)	$	(21)	$	8	$	6	$	9
Less: Comprehensive (income) loss attributable to non-controlling interests	5		(3)		4		(5)
Comprehensive income (loss) attributable to Visteon Corporation	$	(16)	$	5	$	10	$	4




Basic earnings (loss) per share attributable to Visteon Corporation	$	0.85	$	(0.39)	$	1.64	$	0.18




Diluted earnings (loss) per share attributable to Visteon Corporation	$	0.85	$	(0.39)	$	1.61	$	0.18

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)


	(Unaudited)
	June 30,		December 31,
	2022		2021
ASSETS
Cash and equivalents	$	322	$	452
Restricted cash	3		3
Accounts receivable, net	593		549
Inventories, net	306		262
Other current assets	175		158
Total current assets	1,399		1,424
Property and equipment, net	348		388
Intangible assets, net	109		118
Right-of-use assets	124		139
Investments in non-consolidated affiliates	57		54
Other non-current assets	109		111
Total assets	$	2,146	$	2,234
LIABILITIES AND EQUITY
Short-term debt	$	—	$	4
Accounts payable	490		522
Accrued employee liabilities	67		80
Current lease liability	27		28
Other current liabilities	217		218
Total current liabilities	801		852
Long-term debt, net	349		349
Employee benefits	180		198
Non-current lease liability	103		117
Deferred tax liabilities	27		27
Other non-current liabilities	60		75
Stockholders’ equity:
Preferred stock (par value 0.01, 50 million shares authorized, none outstanding as of June 30, 2022 and December 31, 2021)	—		—
Common stock (par value $0.01, 250 million shares authorized, 55 million shares issued, 28.1 and 28 million shares outstanding as of June 30, 2022 and December 31, 2021, respectively)	1		1
Additional paid-in capital	1,345		1,349
Retained earnings	1,710		1,664
Accumulated other comprehensive loss	(265)		(229)
Treasury stock	(2,259)		(2,269)
Total Visteon Corporation stockholders’ equity	532		516
Non-controlling interests	94		100
Total equity	626		616
Total liabilities and equity	$	2,146	$	2,234

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended June 30,
	2022		2021
Operating Activities
Net income (loss)	$	46	$	8
Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities:
Depreciation and amortization	52		55
Non-cash stock-based compensation	13		9
Equity in net loss (income) of non-consolidated affiliates, net of dividends remitted	(4)		—
Impairments	4		—
Other non-cash items	—		3
Changes in assets and liabilities:
Accounts receivable	(74)		51
Inventories	(62)		(35)
Accounts payable	(2)		(66)
Other assets and other liabilities	(45)		(24)
Net cash (used by) provided from operating activities	(72)		1
Investing Activities
Capital expenditures, including intangibles	(36)		(33)
Contributions to equity method investments	(1)		(2)
Settlement of derivative contracts	5		—
Loan repayments from non-consolidated affiliates	—		2
Other	1		2
Net cash used by investing activities	(31)		(31)
Financing Activities
Dividends to non-controlling interests	—		(1)
Short-term debt, net	(4)		6
Other	—		1
Net cash (used by) provided from financing activities	(4)		6
Effect of exchange rate changes on cash	(23)		(6)
Net decrease in cash, equivalents, and restricted cash	(130)		(30)
Cash, equivalents, and restricted cash at beginning of the period	455		500
Cash, equivalents, and restricted cash at end of the period	$	325	$	470

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In millions)

(Unaudited)


	Total Visteon Corporation Stockholders' Equity
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Visteon Corporation Stockholders' Equity		Non-Controlling Interests		Total Equity
December 31, 2021	$	1	$	1,349	$	1,664	$	(229)	$	(2,269)	$	516	$	100	$	616
Net income (loss)	—		—		22		—		—		22		1		23
Other comprehensive income (loss)	—		—		—		4		—		4		—		4
Stock-based compensation, net	—		(10)		—		—		9		(1)		—		(1)
March 31, 2022	$	1	$	1,339	$	1,686	$	(225)	$	(2,260)	$	541	$	101	$	642
Net income (loss)	—		—		24		—		—		24		(1)		23
Other comprehensive income (loss)	—		—		—		(40)		—		(40)		(4)		(44)
Stock-based compensation, net	—		6		—		—		1		7		—		7
Dividends declared to non-controlling interest	$	—	$	—	$	—	$	—	$	—	$	—	$	(2)	$	(2)
June 30, 2022	$	1	$	1,345	$	1,710	$	(265)	$	(2,259)	$	532	$	94	$	626


	Total Visteon Corporation Stockholders' Equity
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Visteon Corporation Stockholders' Equity		Non-Controlling Interests		Total Equity
December 31, 2020	$	1	$	1,348	$	1,623	$	(304)	$	(2,281)	$	387	$	123	$	510
Net income (loss)	—		—		16		—		—		16		3		19
Other comprehensive income (loss)	—		—		—		(17)		—		(17)		(1)		(18)
Stock-based compensation, net	—		(11)		—		—		9		(2)		—		(2)
Dividends declared to non-controlling interest	—		—		—		—		—		—		(3)		(3)
March 31, 2021	$	1	$	1,337	$	1,639	$	(321)	$	(2,272)	$	384	$	122	$	506
Net income (loss)	—		—		(11)		—		—		(11)		—		(11)
Other comprehensive income (loss)	—		—		—		16		—		16		3		19
Stock-based compensation, net	—		4		—		—		1		5		—		5
Cash dividend	—		—		—		—		—		—		(1)		(1)
Dividends declared to non-controlling interest	—		—		—		—		—		—		(31)		(31)
June 30, 2021	$	1	$	1,341	$	1,628	$	(305)	$	(2,271)	$	394	$	93	$	487

See accompanying notes to the condensed consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. Summary of Significant Accounting Policies

Basis of Presentation - Interim Financial Statements

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

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported herein. Considerable judgment is involved in making these determinations and the use of different estimates or assumptions could result in significantly different results. Management believes its assumptions and estimates are reasonable and appropriate. However, actual results could differ from those reported herein. Events and changes in circumstances arising after June 30, 2022, including those resulting from the impacts of COVID-19 and the subsequent semiconductor supply shortage, as further described in Note 14, "Commitments and Contingencies", will be reflected in management's estimates in future periods.

Allowance for Doubtful Accounts: The Company establishes an allowance for doubtful accounts for accounts receivable based on the current expected credit loss impairment model (“CECL”). The Company applies a historical loss rate based on historic write-offs by region to aging categories. The historical loss rate is adjusted for current conditions and reasonable and supportable forecasts of future losses, as necessary. The Company may also record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer's operating results or financial position. The allowance for doubtful accounts was $4 million as of June 30, 2022 and December 31, 2021.

Recently Adopted Accounting Pronouncements

Government Assistance - In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance." to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. The amendments in this update are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. The adoption of the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

NOTE 2. Non-Consolidated Affiliates

Investments in Affiliates

The Company's investments in non-consolidated equity method affiliates include the following:


	June 30,		December 31,
(In millions)	2022		2021
Yanfeng Visteon Investment Co., Ltd. ("YFVIC") (50%)	$	34	$	36
Limited partnerships	13		10
Other	10		8
Total investments in non-consolidated affiliates	$	57	$	54

Variable Interest Entities

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

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

The Company's investments in YFVIC consists of the following:


	June 30,		December 31,
(In millions)	2022		2021
Payables due to YFVIC	$	40	$	20
Exposure to loss in YFVIC:
Investment in YFVIC	$	34	$	36
Receivables due from YFVIC	51		48


Maximum exposure to loss in YFVIC	$	85	$	84

The Company recorded a $9 million settlement charge related to a one-time contract dispute with a joint venture partner during the second quarter 2022. This charge is recorded within Cost of Sales.

Equity Investments

In 2018, the Company committed to make a $15 million investment in two funds managed by venture capital firms principally focused on the automotive sector pursuant to limited partnership agreements. As a limited partner in each fund, the Company will periodically make capital contributions toward this total commitment amount. As of June 30, 2022, the Company has contributed a total of approximately $10 million toward the aggregate investment commitments. These limited partnerships are classified as equity method investments.

NOTE 3. Restructuring and Impairments

Given the economically-sensitive and highly competitive nature of the automotive electronics industry, the Company continues to closely monitor current market factors and industry trends, including potential impacts related to COVID-19, taking action as necessary which may include restructuring actions. However, there can be no assurance that any such actions will be sufficient to fully offset the impact of adverse factors on the Company or its results of operations, financial position and cash flows.

Current restructuring actions include the following:

•During the second quarter 2022 the Company approved and recorded $2 million of restructuring expense primarily in Europe in order to improve efficiencies and rationalize the Company's footprint. As of June 30, 2022, $1 million remains accrued related to this action.

•During the first quarter 2022 the Company approved and recorded restructuring expense, primarily impacting Europe, in order to improve efficiencies and rationalize the Company's footprint and to capture the indefinite suspension of operations in Russia. During the first six months of 2022, $2 million of restructuring expense was recorded related to this action. As of June 30, 2022, $2 million remains accrued related to this action.

•During 2021 the Company approved various restructuring programs, primarily impacting Europe and Brazil in order to improve efficiencies and rationalize the Company's footprint. During the first six months of 2022 the Company recorded $1 million of costs related to these programs. As of June 30, 2022, $2 million remains accrued related to these programs.

•During 2020 the Company approved various restructuring programs impacting engineering, administrative and manufacturing functions to improve efficiency and rationalize the Company’s footprint. During the second quarter of 2022 the Company recorded $1 million of costs related to these programs. As of June 30, 2022, $6 million remains accrued related to these programs.

•During 2018, the Company approved a restructuring program impacting legacy employees at a South America facility due to the wind-down of certain products. As of June 30, 2022, $2 million remains accrued related to this program.

•As of June 30, 2022, the Company retained restructuring reserves as part of the Company's divestiture of the majority of its global Interiors business (the "Interiors Divestiture") of $2 million associated with completed programs for the fundamental reorganization of operations at facilities in Brazil and France.

Restructuring Reserves

The Company’s restructuring reserves and related activity are summarized below.


(In millions)
December 31, 2021	$	18
Expense	2
Change in estimate	1
Payments	(5)
March 31, 2022	$	16
Expense	2
Change in estimate	2
Payments	(4)
Foreign exchange	(1)
June 30, 2022	$	15

Impairments

During the six months ended June 30, 2022, due to the current geopolitical situation in Eastern Europe the Company indefinitely suspended operations in Russia beginning in the second quarter 2022. As such, the Company recognized a non-cash impairment charge of $2 million to fully impair property and equipment as of June 30, 2022.

During the six months ended June 30, 2022, the Company recorded a $2 million charge to reduce certain inventory in Russia to its net realizable value based on the Company’s suspension of operations in Russia during the second quarter 2022.

NOTE 4. Inventories

Inventories, net consist of the following components:


	June 30,		December 31,
(In millions)	2022		2021
Raw materials	$	254	$	206
Work-in-process	26		29
Finished products	26		27
	$	306	$	262

NOTE 5. Goodwill and Other Intangible Assets

Intangible assets, net are comprised of the following:


		June 30, 2022						December 31, 2021
(In millions)	Estimated Weighted Average Useful Life (years)	Gross Intangibles		Accumulated Amortization		Net Intangibles		Gross Intangibles		Accumulated Amortization		Net Intangibles
Definite-Lived:
Developed technology	10	$	40	$	(39)	$	1	$	41	$	(39)	$	2
Customer related	10	92		(76)		16		96		(75)		21
Capitalized software development	5	49		(11)		38		48		(10)		38
Other	32	16		(9)		7		15		(8)		7
Subtotal		197		(135)		62		200		(132)		68
Indefinite-Lived:
Goodwill		47		—		47		50		—		50
Total		$	244	$	(135)	$	109	$	250	$	(132)	$	118

Capitalized software development consists of software development costs intended for integration into customer products.

NOTE 6. Other Assets

Other current assets are comprised of the following components:


	June 30,		December 31,
(In millions)	2022		2021
Receivables from non-consolidated affiliates	$	51	$	48
Recoverable taxes	49		40
Contractually reimbursable engineering costs	33		34
Prepaid assets and deposits	28		21
Derivative financial instruments	5		2
Royalty agreements	3		4
China bank notes	—		3
Other	6		6
	$	175	$	158

The Company receives bank notes from certain customers in China to settle trade accounts receivable. The collection of such bank notes are included in operating cash flows based on the substance of the underlying transactions which are operating in nature. The Company redeemed $70 million and $82 million of China bank notes during the six months ended June 30, 2022

and 2021, respectively. Remaining amounts outstanding at third-party institutions related to sold bank notes will mature by the end of the fourth quarter of 2022.

In July 2022, the Company terminated the derivative financial instruments and received approximately $6 million of proceeds upon settlement.

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


	June 30,		December 31,
(In millions)	2022		2021
Deferred tax assets	$	47	$	47
Contractually reimbursable engineering costs	31		34
Recoverable taxes	9		9
Pension assets	6		7
Royalty agreements	1		2

Other	15		12
	$	109	$	111

Current and non-current contractually reimbursable engineering costs are related to pre-production design and development costs incurred pursuant to long-term supply arrangements that are contractually guaranteed for reimbursement by customers. The Company expects to receive cash reimbursement payments of $17 million during the remainder of 2022, $31 million in 2023, $12 million in 2024, $3 million in 2025, and $1 million in 2026 and beyond.

NOTE 7. Other Liabilities

Other current liabilities are summarized as follows:


	June 30,		December 31,
(In millions)	2022		2021
Deferred income	$	51	$	69
Payables to non-consolidated affiliates	40		20
Product warranty and recall accruals	28		30
Non-income taxes payable	23		26
Restructuring reserves	12		16
Royalty reserves	11		12
Income taxes payable	8		8
Other	44		37
	$	217	$	218

Other non-current liabilities are summarized as follows:


	June 30,		December 31,
(In millions)	2022		2021
Product warranty and recall accruals	$	19	$	20
Deferred income	16		15
Income tax reserves	8		8
Royalty agreements	4		5
Restructuring reserves	3		2
Derivative financial instruments	—		13
Other	10		12
	$	60	$	75

NOTE 8. Debt

The Company’s debt consists of the following:


	June 30,		December 31,
(In millions)	2022		2021
Short-Term Debt:
Short-term borrowings	$	—	$	4

Long-Term Debt:


Term debt facility, net	$	349	$	349

Short-Term Debt

Short-term borrowings are related to subsidiary borrowings. As of June 30, 2022, the Company has no short-term borrowing and there is $187 million available capacity under short-term credit facilities.

Long-Term Debt

As of June 30, 2022, the Company has an amended credit agreement ("Credit Agreement") which includes a $350 million Term Facility maturing March 24, 2024 and a $400 million Revolving Credit Facility which matures the earlier of (i) December 24, 2024, (ii) 90 days prior to the scheduled maturity of the Term Facility, or (iii) the date of the termination of the Company's Credit Agreement.

The Company has no outstanding borrowings on the Revolving Credit Facility as of June 30, 2022.

Interest on the Term Facility loans accrue at a rate equal to a LIBOR-based rate plus an applicable margin of 1.75% per annum. Loans under the Company's Revolving Credit Facility accrue interest at a rate equal to a LIBOR-based rate plus an applicable margin of between 1.00% and 2.00%, as determined by the Company's total gross leverage ratio.

The Credit Agreement requires compliance with customary affirmative and negative covenants and contains customary events of default. The Revolving Credit Facility also requires that the Company maintain a total net leverage ratio no greater than 3.50:1.00. During any period when the Company’s corporate and family ratings meet investment grade ratings, certain of the negative covenants are suspended.

The Revolving Credit Facility also provides $75 million availability for the issuance of letters of credit and a maximum of $20 million for swing line borrowings. Any amount of the facility utilized for letters of credit or swing line loans outstanding will reduce the amount available under the existing Revolving Credit Facility. The Company may request increases in the limits under the Credit Agreement and may request the addition of one or more term loan facilities. Outstanding borrowings may be prepaid without penalty (other than borrowings made for the purpose of reducing the effective interest rate margin or weighted average yield of the loans). There are mandatory prepayments of principal in connection with: (i) excess cash flow sweeps above certain leverage thresholds, (ii) certain asset sales or other dispositions, (iii) certain refinancing of indebtedness and (iv) over-advances under the Revolving Credit Facility. There are no excess cash flow sweeps required at the Company’s current leverage level.

All obligations under the Credit Agreement and obligations with respect to certain cash management services and swap transaction agreements between the Company and its lenders are unconditionally guaranteed by certain of the Company’s subsidiaries. Under the terms of the Credit Agreement, any amounts outstanding are secured by a first-priority perfected lien on substantially all property of the Company and the subsidiaries party to the security agreement, subject to certain limitations.

Other

The Company has a $5 million letter of credit facility, whereby the Company is required to maintain a cash collateral account equal to 103% (110% for non-U.S. dollar denominated letters) of the aggregate stated amount of issued letters of credit and must reimburse any amounts drawn under issued letters of credit. The Company had $2 million of outstanding letters of credit issued under this facility secured by restricted cash, as of June 30, 2022. Additionally, the Company had $4 million of locally issued letters of credit with $2 million of collateral as of June 30, 2022, to support various tax appeals, customs arrangements and other obligations at its local affiliates.

Subsequent Event

On July 19, 2022, the Company entered into a new amendment to the Credit Agreement to, among other things, extend the maturity dates of both facilities. The amended Revolving Credit Facility and Term Facility will mature on July 19, 2027 as disclosed in the Form 8-K filed with the Securities and Exchange Commission on July 22, 2022.

NOTE 9. Employee Benefit Plans

The Company's net periodic benefit costs for all defined benefit plans for the three month periods ended June 30, 2022 and 2021 were as follows:


	U.S. Plans				Non-U.S. Plans
(In millions)	2022		2021		2022		2021
Costs Recognized in Income:
Pension service (cost):
Service cost	$	—	$	—	$	(1)	$	—
Pension financing benefits (cost):
Interest cost	$	(5)	$	(4)	$	(1)	$	(1)
Expected return on plan assets	10		10		2		2
Amortization of losses and other	—		(1)		(1)		(1)
Total pension financing benefits:	5		5		—		—



Net pension benefit (cost)	$	5	$	5	$	(1)	$	—

The Company's net periodic benefit costs for all defined benefit plans for the six month periods ended June 30, 2022 and 2021 were as follows:


	U.S. Plans				Non-U.S. Plans
(In millions)	2022		2021		2022		2021
Costs Recognized in Income:
Pension service (cost):
Service cost	$	—	$	—	$	(1)	$	—
Pension financing benefits (costs):
Interest cost	$	(10)	$	(8)	$	(3)	$	(3)
Expected return on plan assets	20		19		4		4
Amortization of losses and other	—		(2)		(1)		(1)
Total pension financing benefits:	10		9		—		—

Net pension benefit (cost)	$	10	$	9	$	(1)	$	—

Pension financing benefits are classified as Other income, net on the Company's condensed consolidated statements of comprehensive income.

During the six months ended June 30, 2022, cash contributions to the Company's defined benefit plans were $2 million related to its non-U.S. plans. The Company estimates that total cash contributions to its non-U.S. defined benefit pension plans during 2022 will be $6 million.

NOTE 10. Income Taxes

During the six month period ended June 30, 2022, the Company recorded a provision for income tax of $15 million which reflects income tax expense in countries where the Company is profitable, accrued withholding taxes, and the inability to record a tax benefit for pretax losses and/or recognize expense for pretax income in certain jurisdictions, including the United States ("U.S."), due to valuation allowances. Pre-tax losses in jurisdictions where valuation allowances are maintained and no income tax benefits are recognized totaled $13 million and $34 million for the six month periods ended June 30, 2022 and 2021, respectively, resulting in an increase in the Company's effective tax rate.

The Company's provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against income before income taxes, excluding equity in net income of non-consolidated affiliates for the period. Effective tax rates vary from period to period as separate calculations are performed for those countries where the Company's operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are maintained.

The need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will cause variability in the Company’s quarterly and annual effective tax rates. Full valuation allowances against deferred tax assets in the U.S. and applicable foreign countries will be maintained until sufficient positive evidence exists to reduce or eliminate them. The Company evaluates its deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted.

During the second quarter of 2022, there were no material changes in unrecognized tax benefits. The long-term portion of uncertain income tax positions (including interest) of $8 million is included in other non-current liabilities on the condensed consolidated balance sheet, while $3 million is reflected as a reduction of a deferred tax asset related to a net operating loss included in other non-current assets on the condensed consolidated balance sheet. Outstanding income tax refund claims related primarily to India and Brazil jurisdictions, total $7 million as of June 30, 2022, and are included in other non-current assets on the condensed consolidated balance sheets.

NOTE 11. Stockholders’ Equity and Non-controlling Interests

Non-Controlling Interests

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


	June 30,		December 31,
(In millions)	2022		2021
Shanghai Visteon Automotive Electronics, Co., Ltd.	$	43	$	45
Yanfeng Visteon Automotive Electronics Co., Ltd.	33		33
Changchun Visteon FAWAY Automotive Electronics, Co., Ltd.	16		20
Other	2		2
	$	94	$	100

Accumulated Other Comprehensive Income (Loss)

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


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Changes in AOCI:
Beginning balance	$	(225)	$	(321)	$	(229)	$	(304)
Other comprehensive income (loss) before reclassification, net of tax	(41)		14		(37)		(4)
Amounts reclassified from AOCI	1		2		1		3
Ending balance	$	(265)	$	(305)	$	(265)	$	(305)
Changes in AOCI by Component:
Foreign currency translation adjustments
Beginning balance	$	(156)	$	(148)	$	(149)	$	(115)
Other comprehensive income (loss) before reclassification, net of tax (a)	(50)		17		(57)		(16)
Ending balance	(206)		(131)		(206)		(131)
Net investment hedge
Beginning balance	10		(2)		4		(15)
Other comprehensive income (loss) before reclassification, net of tax (a)	7		(1)		15		13
Amounts reclassified from AOCI	1		(2)		(1)		(3)
Ending balance	18		(5)		18		(5)
Benefit plans
Beginning balance	(80)		(163)		(81)		(165)
Other comprehensive income (loss) before reclassification, net of tax (b)	1		(1)		1		—
Amounts reclassified from AOCI	—		2		1		3
Ending balance	(79)		(162)		(79)		(162)
Unrealized hedging gain (loss)
Beginning balance	1		(8)		(3)		(9)
Other comprehensive income (loss) before reclassification, net of tax (c)	1		(1)		4		(1)
Amounts reclassified from AOCI	—		2		1		3
Ending balance	2		(7)		2