NOTE 13. Income Taxes
Details of the Company's income tax provision from continuing operations are provided in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
(Dollars in Millions)
|
Income (loss) before income taxes
(a)
|
|
|
|
|
|
U.S
|
$
|
(112
|
)
|
|
$
|
(165
|
)
|
|
$
|
(141
|
)
|
Non-U.S
|
781
|
|
|
230
|
|
|
310
|
|
Total income before income taxes
|
$
|
669
|
|
|
$
|
65
|
|
|
$
|
169
|
|
Current tax provision
|
|
|
|
|
|
U.S. federal
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
1
|
|
Non-U.S
|
165
|
|
|
125
|
|
|
126
|
|
U.S. state and local
|
1
|
|
|
1
|
|
|
1
|
|
Total current tax provision
|
171
|
|
|
130
|
|
|
128
|
|
Deferred tax provision (benefit)
|
|
|
|
|
|
U.S. federal
|
—
|
|
|
(3
|
)
|
|
1
|
|
Non-U.S
|
(64
|
)
|
|
(6
|
)
|
|
(2
|
)
|
Total deferred tax provision (benefit)
|
(64
|
)
|
|
(9
|
)
|
|
(1
|
)
|
Provision for income taxes
|
$
|
107
|
|
|
$
|
121
|
|
|
$
|
127
|
|
|
|
|
|
|
|
(a)
Income (loss) before income taxes excludes equity in net income of non-consolidated affiliates.
|
A summary of the differences between the provision for income taxes calculated at the U.S. statutory tax rate of
35%
and the consolidated provision for income taxes is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
(Dollars in Millions)
|
Income before income taxes, excluding equity in net income of non-consolidated affiliates, at U.S. statutory rate of 35%
|
$
|
234
|
|
|
$
|
23
|
|
|
$
|
59
|
|
Impact of foreign operations
|
(71
|
)
|
|
75
|
|
|
45
|
|
State and local income taxes
|
(1
|
)
|
|
(2
|
)
|
|
4
|
|
Tax reserve adjustments
|
(52
|
)
|
|
12
|
|
|
22
|
|
Change in valuation allowance
|
86
|
|
|
(1
|
)
|
|
190
|
|
Fresh-start accounting and reorganization items, net
|
—
|
|
|
—
|
|
|
(215
|
)
|
Impact of tax law change
|
(32
|
)
|
|
1
|
|
|
18
|
|
Yanfeng transactions
|
(58
|
)
|
|
—
|
|
|
—
|
|
Other
|
1
|
|
|
13
|
|
|
4
|
|
Provision for income taxes
|
$
|
107
|
|
|
$
|
121
|
|
|
$
|
127
|
|
The favorable impact of foreign operations of
$71 million
includes a
$58 million
favorable variance due to income taxes on foreign earnings taxed at rates lower than the U.S. statutory rate,
$54 million
represents primarily U.S. foreign tax credit adjustments, and
$16 million
represents the reduction of U.S. income tax associated with the taxation of non-U.S. earnings due to transfers of offshore cash between countries (“look-through” rules). The American Taxpayer Relief Act of 2012 retroactively extended the “look-through” provisions to December 31, 2013 on January 2, 2013. Because tax law changes are recognized in the period in which new legislation is enacted, the
$16 million
was reflected as a favorable discrete adjustment in the first quarter of 2013, but due to the Company's valuation allowance in the U.S. there was no net impact to the Company's provision for income taxes in 2013 or 2012 related to this item. These amounts were partially offset by
$34 million
of non-U.S. withholding taxes and
$23 million
of U.S. and non-U.S. income taxes related to the repatriation of earnings. The U.S. income tax consequences of these items approximate
$47 million
and were entirely offset by the U.S. valuation allowance. Tax reserve adjustments of
$52 million
primarily relate
to reevaluating transfer pricing-related exposures in Europe and the United States due to audit closures during 2013. The
$32 million
impact of tax law changes is primarily attributable to tax reform in Mexico resulting in restoration of
deferred tax assets, including net operating loss carryforwards, which were partially offset by a related valuation allowance of
$26 million
. The favorable
$58 million
variance related to the Yanfeng transactions primarily reflects the tax benefit associated with available foreign tax credits. The U.S. income tax consequences associated with the Yanfeng transactions approximate
$54 million
and were fully offset by the U.S. valuation allowance.
During the fourth quarter of 2013, the Company’s Visteon Climate Control Beijing Co., Ltd. operations received high-tech status from the Chinese government resulting in a reduction of the corporate income tax rate from
25%
to
15%
applied retroactively from January 1, 2013. The
$7 million
income tax benefit from this incentive and
$3 million
benefit in other jurisdictions are included with the impact of foreign operations in the effective tax rate reconciliation above. The income tax benefit from foreign tax holidays was approximately
$3 million
and
$5 million
in 2012 and 2011, respectively, attributable mainly to the Company's Thailand manufacturing operations which benefit from various incentives that expire at various times in the future.
The Company’s provision for income tax for continuing operations was
$121 million
for year ended December 31, 2012. Significant components of the variance from the U.S. statutory rate include
$29 million
of non-U.S. withholding taxes,
$80 million
of U.S. and non-U.S. income taxes related to the planned repatriation of earnings from its unconsolidated and certain consolidated foreign affiliates, and
$16 million
of U.S. income tax associated with the "look-through" rules described above, partially offset by a
$50 million
favorable variance for foreign rate differentials. The U.S. income tax consequences in connection with the Company's earnings from these affiliates of approximately
$93 million
were offset with the U.S. valuation allowance. The tax reserve adjustments of
$12 million
primarily relate to interest accrued on tax positions related to prior periods. Other items impacting the effective rate of
$13 million
primarily represent U.S. tax adjustments offset by an equal and opposite amount against the U.S. valuation allowance.
The Company’s provision for income tax for continuing operations was
$127 million
for year ended December 31, 2011. Significant components of the variance from the U.S. statutory rate include
$34 million
of non-U.S. withholding taxes,
$55 million
of U.S. and non-U.S. income taxes related to the planned repatriation of earnings from its unconsolidated and certain consolidated foreign affiliates, partially offset by a
$44 million
favorable variance for foreign rate differentials. The U.S. income tax consequences in connection with the Company's earnings from these affiliates of approximately
$56 million
were offset with the U.S. valuation allowance. The tax reserve adjustments of
$22 million
includes
$15 million
related to unrecognized tax benefits that are embedded in other deferred tax attributes offset by the U.S. valuation allowance. The fresh-start accounting adjustments and reorganization items include true-up adjustments to the net deferred tax assets related to the derecognition of U.S. tax loss and credit carryforwards as a result of the annual limitation imposed under IRC Sections 382 and 383, the legal entity restructuring approved as part of the Plan of Reorganization which utilized U.S. tax loss and credit carryforwards pre-emergence and other matters, all of which impact both the underlying deferred taxes and the related valuation allowances. The
$18 million
impact of tax law changes reflects an increase in the tax rate in Korea which increased the Company's net deferred tax liabilities by
$6 million
, as well as tax law changes in Michigan resulting in the elimination of
$12 million
in net operating loss carryforwards which were fully offset by the related valuation allowance.
Deferred income taxes and related valuation allowances
Deferred income taxes are provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws and regulations, as well as net operating loss, tax credit and other carryforwards. The Company has recorded a deferred tax liability, net of valuation allowances, for U.S. and non-U.S. income taxes and non-U.S. withholding taxes of approximately
$46 million
and
$83 million
as of December 31, 2013 and 2012, respectively, on the undistributed earnings of certain consolidated and unconsolidated foreign affiliates as such earnings are intended to be repatriated in the foreseeable future. The Company has not provided for deferred income taxes or foreign withholding taxes on the remainder of undistributed earnings from certain consolidated foreign affiliates because such earnings are considered to be permanently reinvested. It is not practicable to determine the amount of deferred tax liability on such earnings as the actual tax liability, if any, is dependent on circumstances existing when remittance occurs.
Deferred tax assets are required to be reduced by a valuation allowance if, based on all available evidence, both positive and negative, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. Significant management judgment is required in determining the Company’s valuation allowance. In making this assessment, management considers evidence including, historical and projected financial performance, as well as the nature, frequency and severity of recent losses along with any other pertinent information.
In determining the need for a valuation allowance, the Company also evaluates existing valuation allowances. During 2013, certain Korean legal entities were merged which should result in the future utilization of foreign tax credits in Korea for which a valuation allowance was previously recorded, and consequently, the Company recognized a tax benefit of
$12 million
related to the elimination
of the related valuation allowance. During 2012, the Company recorded a tax benefit of
$8 million
attributable to the elimination of valuation allowances at several foreign subsidiaries in China, India and the Czech Republic. During the third quarter of 2011, the Company recorded a tax benefit of
$8 million
related to the reversal of a full valuation allowance with respect to the deferred tax assets of its UK subsidiary. During the fourth quarter of 2011, the Company recorded a
$66 million
impairment charge attributable to the Company's Lighting assets. Approximately
$16 million
of the impairment charge related to jurisdictions where deferred tax assets are fully offset by a valuation allowance. The remaining
$50 million
related to other foreign jurisdictions where the Company concluded, based on the available evidence, it was more likely than not that the deferred tax assets associated with these jurisdictions would not be realized.
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 effective tax rate. The Company will maintain full valuation allowances against deferred tax assets in the U.S. and applicable foreign countries, including Germany, France, and Spain until sufficient positive evidence exists to reduce or eliminate the valuation allowances. At December 31, 2013 and 2012, the Company had net deferred tax assets, net of valuation allowances, of approximately
$42 million
and
$36 million
, respectively, in certain foreign jurisdictions, the realization of which is dependent on generating sufficient taxable income in future periods. While the Company believes it is more likely than not that these deferred tax assets will be realized, failure to achieve taxable income targets which considers, among other sources, future reversals of existing taxable temporary differences, would likely result in an increase in the valuation allowance in the applicable period.
The components of deferred income tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
December 31
|
|
2013
|
|
2012
|
|
(Dollars in Millions)
|
Deferred tax assets:
|
|
|
|
Employee benefit plans
|
$
|
83
|
|
|
$
|
135
|
|
Capitalized expenditures for tax reporting
|
53
|
|
|
82
|
|
Net operating losses and carryforwards
|
1,508
|
|
|
1,350
|
|
All other
|
235
|
|
|
224
|
|
Valuation allowance
|
(1,710
|
)
|
|
(1,695
|
)
|
Total deferred tax assets
|
$
|
169
|
|
|
$
|
96
|
|
Deferred tax liabilities:
|
|
|
|
Fixed assets and intangibles
|
$
|
116
|
|
|
$
|
111
|
|
Investment in foreign affiliates, including withholding tax
|
96
|
|
|
75
|
|
All other
|
32
|
|
|
42
|
|
Total deferred tax liabilities
|
$
|
244
|
|
|
$
|
228
|
|
Net deferred tax liabilities
|
$
|
75
|
|
|
$
|
132
|
|
Reported in Consolidated Balance Sheet as:
|
|
|
|
Other current assets
|
$
|
36
|
|
|
$
|
26
|
|
Other non-current assets
|
69
|
|
|
28
|
|
Other current liabilities
|
43
|
|
|
5
|
|
Deferred tax liabilities non-current
|
137
|
|
|
181
|
|
|
$
|
75
|
|
|
$
|
132
|
|
At December 31, 2013, the Company had available non-U.S. net operating loss carryforwards and tax credit carryforwards of
$1.6 billion
and
$12 million
, respectively, which have carryforward periods ranging from
5
years to
indefinite
. The Company had available U.S. federal net operating loss carryforwards of
$1.5 billion
at December 31, 2013, which will expire at various dates between
2028
and
2032
. U.S. foreign tax credit carryforwards are
$421 million
at December 31, 2013. These credits will begin to expire in
2015
. The Company had available tax-effected U.S. state operating loss carryforwards of
$26 million
at December 31, 2013, which will expire at various dates between
2015
and
2032
.
In connection with the Company's emergence from bankruptcy and resulting change in ownership on the Effective Date, an annual limitation was imposed on the utilization of U.S. net operating losses, U.S. credit carryforwards and certain U.S. built-in losses (collectively referred to as “tax attributes”) under Internal Revenue Code (“IRC”) Sections 382 and 383. The collective limitation is approximately
$120 million
per year on tax attributes in existence at the date of change in ownership. Additionally, the Company
has approximately
$437 million
of U.S. net operating loss carryforwards and
$145 million
of U.S. foreign tax credits that are not subject to any current limitation since they were realized after the Effective Date.
If the Company were to have another change in ownership within the meaning of IRC Sections 382 and 383, its tax attributes could be further limited to an amount equal to its market capitalization at the time of the subsequent ownership change multiplied by by the federal long-term tax exempt rate. The Company cannot provide any assurance that such an ownership change will not occur, in which case the availability of the Company's tax attributes could be significantly limited or possibly eliminated. In order to continue to protect the Company's pre and post-emergence period tax attributes and reduce the likelihood that the Company will experience an additional ownership change our second amended and restated certificate of incorporation provides, among other things, that any attempted transfer of the Company's securities during a Restricted Period shall be prohibited and void ab initio insofar as it purports to transfer ownership or rights in respect of such stock to the purported transferee to the extent that, as a result of such transfer, either any person or group of persons shall become a “5-percent shareholder” of Visteon pursuant to Treasury Regulation § 1.382-2T(g), other than a “direct public group” as defined in such regulation (a “Five-Percent Shareholder”), or the percentage stock ownership interest in Visteon of any Five-Percent Shareholder shall be increased.
The foregoing restriction does not apply to transfers if either the transferor or transferee gives written notice to the Board of Directors and obtains their approval. A Restricted Period means any period beginning when the Company's market capitalization falls below
$1.5 billion
(or such other level determined by the Board of Directors not more frequently than annually) and ending when such market capitalization has been above such threshold for 30 consecutive calendar days. These restrictions could prohibit or delay the accomplishment of an ownership change with respect to Visteon by (i) discouraging any person or group from being a Five-Percent Shareholder and (ii) discouraging any existing Five-Percent Shareholder from acquiring more than a minimal number of additional shares of Visteon's stock.
As of the end of 2013, valuation allowances totaling
$1.7 billion
have been recorded against the Company’s deferred tax assets where recovery of the deferred tax assets is unlikely. Of this amount,
$1.1 billion
relates to the Company’s deferred tax assets in the U.S. and
$571 million
relates to deferred tax assets in certain foreign jurisdictions, including Germany, a pass-through entity for U.S. tax purposes.
Unrecognized Tax Benefits
The Company operates in multiple jurisdictions throughout the world and the income tax returns of its subsidiaries in various tax jurisdictions are subject to periodic examination by respective tax authorities. The Company regularly assesses the status of these examinations and the potential for adverse and/or favorable outcomes to determine the adequacy of its provision for income taxes. The Company believes that it has adequately provided for tax adjustments that it believes are more likely than not to be realized as a result of any ongoing or future examination. Accounting estimates associated with uncertain tax positions require the Company to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If the Company determines it is more likely than not a tax position will be sustained based on its technical merits, the Company records the largest amount that is greater than 50% likely of being realized upon ultimate settlement. These estimates are updated at each reporting date based on the facts, circumstances and information available. Due to the complexity of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the liabilities recorded.
Gross unrecognized tax benefits were
$73 million
at December 31, 2013 and
$117 million
at December 31, 2012, of which approximately
$30 million
and
$71 million
, respectively, represent the amount of unrecognized benefits that, if recognized, would impact the effective tax rate. The gross unrecognized tax benefit differs from that which would impact the effective tax rate due to uncertain tax positions embedded in other deferred tax attributes carrying a full valuation allowance. Since the uncertainty is expected to be resolved while a full valuation allowance is maintained, these uncertain tax positions should not impact the effective tax rate in current or future periods. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense and related amounts accrued at December 31, 2013 and December 31, 2012 were
$23 million
and
$36 million
, respectively.
During the second quarter of 2013, the IRS commenced the audit of the Company's U.S. tax returns for the 2010 and 2011 tax years. At this stage in the audit, the Company is not aware of any proposed income tax adjustments that would have a material impact on the Company's effective tax rate due to the valuation allowances maintained against the Company's U.S. tax attributes. During the first quarter of 2013, the tax authorities in Spain completed an income tax examination related to the tax years 2006 through 2009 and the Company reached an agreement regarding its transfer pricing methodology resulting in a cash settlement of
$2 million
. During the second quarter of 2013, the Company paid
$2 million
to settle other tax matters (primarily in Mexico). Other net decreases in the Company's gross unrecognized tax benefits that impact the effective tax rate total approximately
$37 million
and primarily relate to reevaluating prior year uncertain tax positions associated with the examination in Spain which
further validated the transfer pricing methodologies to allocate income and expense among jurisdictions in Europe and the United States.
With few exceptions, the Company is no longer subject to U.S. federal tax examinations for years before 2009 or state and local, or non-U.S. income tax examinations for years before 2003. Although it is not possible to predict the timing of the resolution of all ongoing tax audits with accuracy, it is reasonably possible that certain tax proceedings in Asia (including Korea) could conclude within the next twelve months and result in a significant increase or decrease in the balance of gross unrecognized tax benefits. Given the number of years, jurisdictions and positions subject to examination, the Company is unable to estimate the full range of possible adjustments to the balance of unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
(Dollars in millions)
|
Beginning balance
|
$
|
117
|
|
|
$
|
123
|
|
Tax positions related to current period
|
|
|
|
Additions
|
8
|
|
|
15
|
|
Tax positions related to prior periods
|
|
|
|
Additions
|
5
|
|
|
—
|
|
Reductions
|
(51
|
)
|
|
(20
|
)
|
Settlements with tax authorities
|
(4
|
)
|
|
—
|
|
Lapses in statute of limitations
|
(2
|
)
|
|
(2
|
)
|
Effect of exchange rate changes
|
—
|
|
|
1
|
|
Ending balance
|
$
|
73
|
|
|
$
|
117
|
|
During 2012 Korean tax authorities commenced a review of the Company's Korean affiliates (including Halla) for tax years 2007 through 2012 and issued formal notice of assessments, including penalties, of approximately
$25 million
for alleged underpayment of withholding tax on dividends paid and other items, including certain management service fees charged by Visteon. During 2013, the Company's Korean affiliates have paid approximately
$23 million
to the Korean tax authorities, as required under Korean tax regulations, to pursue the appeals process. The Company believes that it is more likely than not that it will receive a favorable ruling when all of the available appeals have been exhausted. Also during 2012, Brazilian tax authorities issued tax assessment notices to Visteon Sistemas Automotivos (“Sistemas”) of approximately
$15 million
related to the sale of its chassis business to a third party. During 2013, after attempts to reopen an appeal of the administrative decision failed, Sistemas opened a judicial proceeding against the government to address the notice which required a deposit in the amount of the assessment in order to suspend the debt and allow Sistemas to operate regularly before the tax authorities. The Company believes that the risk of a negative outcome is remote once the matter is fully litigated at the highest judicial level. These appeal payments in Korea and Brazil, as well as contingent income tax refund claims associated with other jurisdictions, total
$47 million
as of December 31, 2013 and are included in Other non-current assets on the consolidated balance sheet.
NOTE 14. Stockholders’ Equity and Non-controlling Interests
Share Repurchase Program
In July 2012, the board of directors authorized the repurchase of up to
$100 million
of the Company's common stock. During 2012, the Company repurchased
1,005,559
shares of its outstanding common stock at an weighted average price of
$49.72
per share, excluding commissions, for the aggregate purchase price of
$50 million
. In January 2013, the board of directors reauthorized the previously authorized
$100 million
and increased the repurchase amount an additional
$200 million
, bringing the total share repurchase authorization to
$300 million
. In March 2013, the Company entered into an accelerated stock buyback ("ASB") program with a third-party financial institution to purchase shares of common stock for an aggregate purchase price of
$125 million
. Under the program, the Company paid the financial institution
$125 million
and received an initial delivery of
1,713,502
shares of common stock. The value of those shares on the date of delivery was
$100 million
at
$58.36
per share and is included in common stock held in treasury. On April 17, 2013, the program concluded, and the Company received an additional
495,576
shares.
In August 2013, the Company's board of directors raised the authorization of its remaining share repurchase program from
$125 million
to
$1 billion
over the next two years. The Company entered into another ASB program in August 2013 with a third-party financial institution to purchase shares of common stock for an aggregate purchase price of
$125 million
. The Company paid the financial institution
$125 million
and received an initial delivery of
1,368,925
shares of common stock. The value of those shares
on the date of delivery was
$100 million
at
$73.05
per share and is included in common stock held in treasury. On December 20, 2013, the program concluded and the Company received an additional
307,975
shares. As of December 31, 2013,
$875 million
remains authorized and available for repurchase through December 31, 2015. The Company anticipates that repurchases of common stock would occur from time to time in open market transactions, non-discretionary programs or in privately negotiated transactions depending on market and economic conditions, share price, trading volumes, alternative uses of capital and other factors.
Treasury Stock
The Company's board of directors has authorized a total of
$1.175 billion
in share repurchases since July of 2012, of which
$875 million
remains authorized and available for repurchase through December 31, 2015. As a result of the execution of this share repurchase program, the Company's treasury stock has increased. The
$125 million
ASB that completed on April 17, 2013 contributed a total of
2,209,078
shares to treasury stock in 2013. The
125 million
ASB that completed on December 20, 2013 contributed a total of
1,676,900
shares to treasury stock in 2013. In 2012, open market repurchases under the share repurchase program contributed a total of
1,005,559
shares to treasury stock. At December 31, 2013 and 2012, the Company held approximately
5,640,000
and
1,760,000
shares of common stock in treasury for use in satisfying obligations under employee incentive compensation arrangements. The Company values shares of common stock held in treasury at cost.
Warrants
The warrants to purchase up to
2,355,000
shares of common stock at an exercise price of
$9.66
per share, which expire ten years from issuance ("Ten Year Warrants") may be net share settled and are recorded as permanent equity in the Company’s consolidated balance sheets with
909
and
299,171
warrants outstanding at December 31, 2013 and 2012, respectively. The Ten Year Warrants were valued at
$15.00
per share on October 1, 2010 using the Black-Scholes option pricing model. Significant assumptions used in determining the fair value of such warrants at issuance included share price volatility and risk-free rate of return. The volatility assumption was based on the implied volatility and historical realized volatility for comparable companies. The risk-free rate assumption was based on U.S. Treasury bond yields.
The warrants to purchase up to
1,552,774
shares of common stock at an exercise price of
$58.8
per share, which expire five years from issuance ("Five Year Warrants") may be net share settled and are recorded as permanent equity in the Company’s consolidated balance sheets with
1,548,387
and
1,549,337
warrants outstanding at December 31, 2013 and 2012, respectively. The Five Year Warrants were valued at
$3.62
per share on October 1, 2010 using the Black-Scholes option pricing model. Significant assumptions used in determining the fair value of such warrants at issuance included share price volatility and risk-free rate of return. The volatility assumption was based on the implied volatility and historical realized volatility for comparable companies. The risk-free rate assumption was based on U.S. Treasury bond yields.
If the Company pays or declares a dividend or makes a distribution on common stock payable in shares of its common stock, the number of shares of common stock or other shares of common stock for which a Warrant (the Five Year Warrants and Ten Year Warrants, collectively) is exercisable shall be adjusted so that the holder of each Warrant shall be entitled upon exercise to receive the number of shares of common stock that such warrant holder would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event. In addition, if the Company pays an extraordinary dividend (as defined in each Warrant Agreement) to common share holders, then the exercise price shall be decreased effective immediately after the effective date of such extraordinary dividend, dollar-for-dollar by the fair market value of any securities or other assets paid or distributed on each share of common stock.
Non-Controlling Interests
Non-controlling interests in the Visteon Corporation economic entity are as follows:
|
|
|
|
|
|
|
|
|
|
December 31
|
|
2013
|
|
2012
|
|
(Dollars in Millions)
|
HVCC
|
$
|
777
|
|
|
$
|
723
|
|
YFVE
|
139
|
|
|
—
|
|
Visteon Interiors Korea, Ltd.
|
22
|
|
|
20
|
|
Other
|
15
|
|
|
13
|
|
Total non-controlling interests
|
$
|
953
|
|
|
$
|
756
|
|
Pursuant to the November 2013 step acquisition of a controlling interest in YFVE, Visteon applied business combination accounting and consolidated YFVE. In connection with the purchase accounting, Visteon recorded the estimated fair value of the non-controlling interest in YFVE at
$138 million
.
During the first quarter of 2013, Halla Climate Control Corporation purchased certain subsidiaries and intellectual property of Visteon's global climate business for approximately
$410 million
. The transfer of Visteon's Climate operations to HVCC represented a common control transaction. Accordingly, the assets and liabilities were transferred at their respective carrying value and no gain or loss was recorded by the Company. HVCC designs, develops and manufactures automotive climate control products, including air-conditioning systems, modules, compressors, and heat exchangers for sale to global OEMs. The Company holds a
70%
interest in HVCC, a consolidated subsidiary.
Accumulated Other Comprehensive Income (Loss)
Changes in Accumulated other comprehensive income (loss) (“AOCI”) and reclassifications out of AOCI by component includes:
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
(Dollars in Millions)
|
Changes in AOCI:
|
|
|
|
Beginning balance
|
$
|
(90
|
)
|
|
$
|
(25
|
)
|
Other comprehensive income (loss) before reclassification, net of tax
|
124
|
|
|
(66
|
)
|
Amounts reclassified from AOCI
|
(46
|
)
|
|
1
|
|
Ending balance
|
$
|
(12
|
)
|
|
$
|
(90
|
)
|
|
|
|
|
Changes in AOCI by component:
|
|
|
Foreign currency translation adjustments
|
|
|
|
Beginning balance
|
$
|
11
|
|
|
$
|
(41
|
)
|
Other comprehensive (loss) income before reclassification, net of tax
|
(11
|
)
|
|
47
|
|
Amounts reclassified from AOCI (a)
|
(37
|
)
|
|
5
|
|
Ending balance
|
(37
|
)
|
|
11
|
|
Benefit plans
|
|
|
|
Beginning balance
|
(108
|
)
|
|
25
|
|
Other comprehensive income (loss) before reclassification, net of tax (b)
|
131
|
|
|
(147
|
)
|
Amounts reclassified from AOCI (c)
|
2
|
|
|
14
|
|
Ending balance
|
25
|
|
|
(108
|
)
|
Unrealized hedging gains (loss)
|
|
|
|
Beginning balance
|
7
|
|
|
(9
|
)
|
Other comprehensive income before reclassification, net of tax (d)
|
4
|
|
|
34
|
|
Amounts reclassified from AOCI (e)
|
(11
|
)
|
|
(18
|
)
|
Ending balance
|
—
|
|
|
7
|
|
AOCI ending balance
|
$
|
(12
|
)
|
|
$
|
(90
|
)
|
(a) Amount included in Other expense in Consolidated Statement of Comprehensive Income.
(b) Net tax benefits of
$4 million
and
$11 million
are related to benefit plans for the year ended December 31, 2013 and 2012, respectively.
(c) Amount included in the computation of net periodic pension cost. (See Note 10 Employee retirement benefits for additional details.)
(d) Net tax benefit of
$3 million
and tax expense of
$6 million
are related to unrealized hedging gains (loss) for the year ended December 31, 2013 and 2012, respectively.
(e) Amount is included in Cost of sales in Consolidated Statement of Comprehensive Income.
Restricted Net Assets
Restricted net assets related to the Company’s non-consolidated affiliates were approximately
$228 million
and
$756 million
, respectively, as of December 31, 2013 and 2012. Restricted net assets related to the Company’s consolidated subsidiaries were approximately
$405 million
and
$165 million
, respectively as of December 31, 2013 and 2012. Restricted net assets of consolidated subsidiaries are attributable to the Company’s operations in China, where certain regulatory requirements and governmental restraints result in significant restrictions on the Company’s consolidated subsidiaries ability to transfer funds to the Company.
NOTE 15. Earnings Per Share
A summary of information used to compute basic and diluted earnings per share attributable to Visteon is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
(In Millions, Except Per Share Amounts)
|
Numerator:
|
|
|
|
|
|
Net income from continuing operations attributable to Visteon
|
$
|
690
|
|
|
$
|
103
|
|
|
$
|
136
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
(3
|
)
|
|
(56
|
)
|
Net income attributable to Visteon
|
$
|
690
|
|
|
$
|
100
|
|
|
$
|
80
|
|
Denominator:
|
|
|
|
|
|
Average common stock outstanding - basic
|
50.0
|
|
|
52.9
|
|
|
51.2
|
|
Dilutive effect of warrants and PSUs
|
1.1
|
|
|
0.4
|
|
|
0.8
|
|
Diluted shares
|
51.1
|
|
|
53.3
|
|
|
52.0
|
|
|
|
|
|
|
|
Basic and Diluted Per Share Data:
|
|
|
|
|
|
Basic earnings per share attributable to Visteon:
|
|
|
|
|
|
Continuing operations
|
$
|
13.80
|
|
|
$
|
1.95
|
|
|
$
|
2.65
|
|
Discontinued operations
|
—
|
|
|
(0.06
|
)
|
|
(1.09
|
)
|
|
$
|
13.80
|
|
|
$
|
1.89
|
|
|
$
|
1.56
|
|
Diluted earnings per share attributable to Visteon:
|
|
|
|
|
|
Continuing operations
|
$
|
13.50
|
|
|
$
|
1.93
|
|
|
$
|
2.62
|
|
Discontinued operations
|
—
|
|
|
(0.05
|
)
|
|
(1.08
|
)
|
|
$
|
13.50
|
|
|
$
|
1.88
|
|
|
$
|
1.54
|
|
The effect of certain common stock equivalents including warrants, performance-based share units, and stock options were excluded from the computation of weighted average diluted shares outstanding as inclusion of such items would be anti-dilutive, summarized
as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
(In Millions, Except Per Share Amounts)
|
Number of warrants
|
—
|
|
|
1.5
|
|
|
—
|
|
Exercise price
|
$
|
—
|
|
|
$
|
58.80
|
|
|
$
|
—
|
|
Number of performance stock units
|
0.1
|
|
|
1.3
|
|
|
—
|
|
Number of stock options
|
0.2
|
|
|
0.4
|
|
|
0.4
|
|
Exercise price
|
$
|
44.55
|
|
-
|
$
|
74.08
|
|
|
$
|
44.55
|
|
-
|
$
|
74.08
|
|
|
$
|
44.55
|
|
-
|
$
|
74.08
|
|
NOTE 16. Fair Value Measurements
Fair Value Hierarchy
The Company uses a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs.
|
|
•
|
Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
|
|
|
•
|
Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.
|
|
|
•
|
Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
|
The fair value hierarchy for assets and liabilities measured at fair value on a recurring basis are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
(Dollars in Millions)
|
Asset Category
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Total
|
Retirement plan assets
|
|
$
|
380
|
|
|
$
|
467
|
|
|
$
|
547
|
|
|
$
|
1,394
|
|
Foreign currency instruments
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Liability Category
|
|
|
|
|
|
|
|
|
Foreign currency instruments
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
(Dollars in Millions)
|
Asset Category
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Total
|
Retirement plan assets
|
|
$
|
309
|
|
|
$
|
559
|
|
|
$
|
502
|
|
|
$
|
1,370
|
|
Foreign currency instruments
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
Liability Category
|
|
|
|
|
|
|
|
|
Foreign currency instruments
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Foreign currency 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 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. The carrying amounts of all other financial instruments approximate their fair values because of the relatively short-term maturity of these instruments.
Retirement Plan Assets
Retirement plan assets categorized as Level 1 include the following:
|
|
•
|
Cash and cash equivalents, which consist of U.S. and foreign currencies held by designated trustees. Foreign currencies held are reported in terms of U.S. dollars based on currency exchange rates readily available in active markets.
|
|
|
•
|
Registered investment companies are mutual funds that are registered with the Securities and Exchange Commission. Mutual fund shares are traded actively on public exchanges. The share prices for mutual funds are published at the close of each business day. Mutual funds contain both equity and fixed income securities.
|
|
|
•
|
Common and preferred stock include equity securities issued by U.S. and non-U.S. corporations. Common and preferred securities are traded actively on exchanges and price quotes for these shares are readily available.
|
|
|
•
|
Other investments include several miscellaneous assets and liabilities and are primarily comprised of liabilities related to pending trades and collateral settlements.
|
Retirement plan assets categorized as Level 2 include the following:
|
|
•
|
Treasury and government securities consist of bills, notes, bonds, and other fixed income securities issued directly by a non-U.S. treasury or by government-sponsored enterprises. These assets are valued using observable inputs.
|
|
|
•
|
Common trust funds are comprised of shares or units in commingled funds that are not publicly traded. The underlying assets in these funds (equity securities, fixed income securities and commodity-related securities) are publicly traded on exchanges and price quotes for the assets held by these funds are readily available.
|
|
|
•
|
Liability Driven Investing (“LDI”) is an investment strategy that utilizes swaps to hedge discount rate volatility. The swaps are collateralized on a daily basis resulting in counterparty exposure that is limited to one day’s activity. Swaps are a derivative product, utilizing a pricing model to calculate market value.
|
|
|
•
|
Corporate debt securities consist of fixed income securities issued by non-U.S. corporations. These assets are valued using a bid evaluation process with bid data provided by independent pricing sources.
|
Retirement plan assets categorized as Level 3 include the following:
|
|
•
|
Global tactical asset allocation funds (“GTAA”) are common trust funds comprised of shares or units in commingled funds that are not publicly traded. GTAA managers primarily invest in equity, fixed income and cash instruments, with the ability to change the allocation mix based on market conditions while remaining within their specific strategy guidelines. The underlying assets in these funds may be publicly traded (equities and fixed income) and price quotes may be readily available. Assets may also be invested in various derivative products whose prices cannot be readily determined.
|
|
|
•
|
Limited partnership hedge fund of funds (“HFF”) directly invest in a variety of hedge funds. The investment strategies of the underlying hedge funds are primarily focused on fixed income and equity based investments. There is currently minimal exposure to less liquid assets such as real estate or private equity in the portfolio. However, due to the private nature of the partnership investments, pricing inputs are not readily observable. Asset valuations are developed by the general partners that manage the partnerships.
|
|
|
•
|
Insurance contracts are reported at cash surrender value and have no observable inputs.
|
The fair values of the Company’s U.S. retirement plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
Asset Category
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total
|
|
|
(Dollars in Millions)
|
Registered investment companies
|
|
$
|
234
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
234
|
|
Common trust funds
|
|
—
|
|
|
273
|
|
|
—
|
|
|
273
|
|
LDI
|
|
—
|
|
|
118
|
|
|
—
|
|
|
118
|
|
GTAA
|
|
—
|
|
|
—
|
|
|
70
|
|
|
70
|
|
HFF
|
|
—
|
|
|
—
|
|
|
247
|
|
|
247
|
|
Cash and cash equivalents
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
Insurance contracts
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
Total
|
|
$
|
244
|
|
|
$
|
391
|
|
|
$
|
325
|
|
|
$
|
960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
Asset Category
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total
|
|
|
(Dollars in Millions)
|
Registered investment companies
|
|
$
|
163
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
163
|
|
Common trust funds
|
|
—
|
|
|
354
|
|
|
—
|
|
|
354
|
|
LDI
|
|
—
|
|
|
148
|
|
|
—
|
|
|
148
|
|
GTAA
|
|
—
|
|
|
—
|
|
|
140
|
|
|
140
|
|
HFF
|
|
—
|
|
|
—
|
|
|
139
|
|
|
139
|
|
Cash and cash equivalents
|
|
14
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Insurance contracts
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
Total
|
|
$
|
177
|
|
|
$
|
502
|
|
|
$
|
287
|
|
|
$
|
966
|
|
The fair value measurements which used significant unobservable inputs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual Return on Plan Assets
|
|
GTAA
|
|
HFF
|
|
Insurance Contracts
|
|
|
(Dollars in Millions)
|
Ending balance at December 31, 2010
|
|
$
|
150
|
|
|
$
|
119
|
|
|
$
|
9
|
|
Relating to assets still held at the reporting date
|
|
(8
|
)
|
|
(1
|
)
|
|
1
|
|
Purchases, sales and settlements
|
|
—
|
|
|
10
|
|
|
—
|
|
Ending balance at December 31, 2011
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
10
|
|
Relating to assets still held at the reporting date
|
|
11
|
|
|
8
|
|
|
—
|
|
Purchases, sales and settlements
|
|
(13
|
)
|
|
3
|
|
|
—
|
|
Transfer out
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
Ending balance at December 31, 2012
|
|
$
|
140
|
|
|
$
|
139
|
|
|
$
|
8
|
|
Relating to assets still held at the reporting date
|
|
(16
|
)
|
|
15
|
|
|
—
|
|
Purchases, sales and settlements
|
|
(54
|
)
|
|
93
|
|
|
—
|
|
Ending balance at December 31, 2013
|
|
$
|
70
|
|
|
$
|
247
|
|
|
$
|
8
|
|
The fair values of the Company’s Non-U.S. retirement plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
Asset Category
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total
|
|
|
(Dollars in Millions)
|
Insurance contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
210
|
|
|
$
|
210
|
|
Treasury and government securities
|
|
22
|
|
|
35
|
|
|
—
|
|
|
57
|
|
Registered investment companies
|
|
85
|
|
|
—
|
|
|
—
|
|
|
85
|
|
Cash and cash equivalents
|
|
9
|
|
|
10
|
|
|
—
|
|
|
19
|
|
Corporate debt securities
|
|
8
|
|
|
6
|
|
|
—
|
|
|
14
|
|
Common trust funds
|
|
5
|
|
|
5
|
|
|
—
|
|
|
10
|
|
Limited partnerships (HFF)
|
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
Common and preferred stock
|
|
4
|
|
|
20
|
|
|
—
|
|
|
24
|
|
Other
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Total
|
|
$
|
136
|
|
|
$
|
76
|
|
|
$
|
222
|
|
|
$
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
Asset Category
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Total
|
|
|
(Dollars in Millions)
|
Insurance contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
199
|
|
|
$
|
199
|
|
Treasury and government securities
|
|
22
|
|
|
33
|
|
|
—
|
|
|
55
|
|
Registered investment companies
|
|
52
|
|
|
—
|
|
|
—
|
|
|
52
|
|
Cash and cash equivalents
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Corporate debt securities
|
|
8
|
|
|
9
|
|
|
—
|
|
|
17
|
|
Common trust funds
|
|
5
|
|
|
8
|
|
|
—
|
|
|
13
|
|
Limited partnerships (HFF)
|
|
—
|
|
|
—
|
|
|
16
|
|
|
16
|
|
Common and preferred stock
|
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
Other
|
|
11
|
|
|
7
|
|
|
—
|
|
|
18
|
|
Total
|
|
$
|
132
|
|
|
$
|
57
|
|
|
$
|
215
|
|
|
$
|
404
|
|
Fair value measurements which used significant unobservable inputs are as follows:
|
|
|
|
|
|
|
|
|
|
Actual Return on Plan Assets
|
|
Insurance Contracts
|
|
HFF
|
|
|
(Dollars in Millions)
|
Ending balance at December 31, 2010
|
|
$
|
179
|
|
|
$
|
5
|
|
Relating to assets held at the reporting date
|
|
4
|
|
|
—
|
|
Purchases, sales and settlements
|
|
(3
|
)
|
|
1
|
|
Ending balance at December 31, 2011
|
|
$
|
180
|
|
|
$
|
6
|
|
Relating to assets held at the reporting date
|
|
16
|
|
|
4
|
|
Purchases, sales and settlements
|
|
3
|
|
|
6
|
|
Ending balance at December 31, 2012
|
|
$
|
199
|
|
|
$
|
16
|
|
Relating to assets held at the reporting date
|
|
12
|
|
|
1
|
|
Purchases, sales and settlements
|
|
(1
|
)
|
|
(5
|
)
|
Ending balance at December 31, 2013
|
|
$
|
210
|
|
|
$
|
12
|
|
Items Measured at Fair Value on a Non-recurring Basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a non-recurring basis, which are not included in the table above. As these non-recurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. Items measured at fair value on a non-recurring basis during the year ended December 31, 2013 included the identifiable assets and liabilities in connection with the consolidation of YFVE. Assets measured at fair value on a non-recurring basis during the year ended December 31, 2012 included the retained interest in Duckyang, the equity in the net assets of Yanfeng, and the Lighting assets subject to the impairment analysis.
Fair Value of Debt
The fair value of debt was approximately
$755 million
and
$600 million
at December 31, 2013 and December 31, 2012, respectively. Fair value estimates were based on quoted market prices or current rates for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities. Accordingly, the Company's debt is classified as Level 1, "Market Prices" and Level 2, "Other Observable Inputs" in the fair value hierarchy, respectively.
NOTE 17. Financial Instruments
The Company is exposed to various market risks including, but not limited to, changes in foreign currency exchange rates and market interest rates. The Company manages these risks through the use of derivative financial instruments. The maximum length of time over which the Company hedges the variability in the future cash flows for forecast transactions excluding those forecast transactions related to the payment of variable interest on existing debt is up to eighteen months from the date of the forecast transaction. The maximum length of time over which the Company hedges forecast transactions related to the payment of variable interest on existing debt is the term of the underlying debt. The use of derivative financial instruments creates exposure to credit loss in the event of nonperformance by the counter-party 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 that are expected to fully satisfy their obligations under the contracts. Additionally, the Company’s ability to utilize derivatives to manage risks is dependent on credit and market conditions.
Accounting for Derivative Financial Instruments
Derivative financial instruments are recorded as assets or liabilities in the consolidated balance sheets at fair value. The fair values of derivatives used to hedge the Company’s risks fluctuate over time, generally in relation to the fair values or cash flows of the underlying hedged transactions or exposures. The accounting for changes in fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship.
At inception, the Company formally designates and documents the financial instrument as a hedge of a specific underlying exposure, as well as the risk management objectives and strategies for undertaking the hedge transaction, including designation of the instrument as a fair value hedge, a cash flow hedge or a hedge of a net investment in a foreign operation. Additionally, at inception
and at least quarterly thereafter, the Company formally assesses whether the financial instruments that are used in hedging transactions are effective at offsetting changes in either the fair value or cash flows of the related underlying exposure.
For a designated cash flow hedge, the effective portion of the change in the fair value of the derivative instrument is recorded in Accumulated other comprehensive (loss) income in the consolidated balance sheet. When the underlying hedged transaction is realized, the gain or loss included in Accumulated other comprehensive (loss) income is recorded in earnings and reflected in the consolidated statement of operations on the same line as the gain or loss on the hedged item attributable to the hedged risk. Any ineffective portion of a financial instrument's change in fair value is immediately recognized in operating results. For a designated fair value hedge, both the effective and ineffective portions of the change in the fair value of the derivative instrument are recorded in earnings and reflected in the consolidated statement of operations on the same line as the gain or loss on the hedged item attributable to the hedged risk. For a designated net investment hedge, the effective portion of the change in the fair value of the derivative instrument is recorded as a cumulative translation adjustment in Accumulated other comprehensive (loss) income in the consolidated balance sheet. Cash flows associated with designated hedges are reported in the same category as the underlying hedged item. Derivatives not designated as a hedge are adjusted to fair value through operating results. Cash flows associated with derivatives are reported in Net cash provided from operating activities in the Company’s consolidated statements of cash flows.
Foreign Currency Exchange Rate Risk
The Company’s net cash inflows and outflows exposed to the risk of changes in foreign currency exchange rates arise from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, subsidiary dividends and investments in subsidiaries. Where possible, the Company utilizes derivative financial instruments, including forward and option contracts, to protect the Company’s cash flow from changes in exchange rates. Foreign currency exposures are reviewed monthly and any natural offsets are considered prior to entering into a derivative financial instrument. The Company’s primary hedged foreign currency exposures include the Euro, Korean Won, Czech Koruna, Hungarian Forint, Indian Rupee and Mexican Peso. Where possible, the Company utilizes a strategy of partial coverage for transactions in these currencies.
As of December 31, 2013 and 2012, the Company had forward contracts to hedge changes in foreign currency exchange rates with notional amounts of approximately
$625 million
and
$554 million
, respectively. Fair value estimates of these contracts are based on quoted market prices and other observable inputs. A portion of these instruments have been designated as cash flow hedges with the effective portion of the gain or loss reported in the Accumulated other comprehensive (loss) income component of Stockholders’ equity in the Company’s consolidated balance sheet. The ineffective portion of these instruments is recorded as Cost of sales in the Company’s consolidated statement of operations.
Interest Rate Risk
On April 6, 2011, the Company refinanced its variable rate Term Loan with a fixed rate bond. In conjunction with the refinancing of the Term Loan, the Company terminated outstanding interest rate swaps with a notional amount of
$250 million
for a loss of less than
$1 million
. Approximately
58%
and
85%
of the Company's borrowings were effectively on a fixed rate basis as of December 31, 2013 and 2012, respectively. At December 31, 2013 and 2012 the Company had no interest rate swaps.
Financial Statement Presentation
The Company presents its derivative positions and any related material collateral under master netting agreements on a net basis. Derivative financial instruments designated and non-designated as hedging instruments are included in the Company’s consolidated balance sheets at December 31, 2013 and 2012 as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
Risk Hedged
|
|
Classification
|
|
2013
|
|
2012
|
|
Classification
|
|
2013
|
|
2012
|
|
|
(Dollars in Millions)
|
Designated
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
Other current assets
|
|
$
|
4
|
|
|
$
|
16
|
|
|
Other current assets
|
|
$
|
—
|
|
|
$
|
1
|
|
Foreign currency
|
|
Other current liabilities
|
|
2
|
|
|
1
|
|
|
Other current liabilities
|
|
4
|
|
|
1
|
|
Non-designated
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
Other current assets
|
|
3
|
|
|
6
|
|
|
Other current assets
|
|
1
|
|
|
—
|
|
|
|
|
|
$
|
9
|
|
|
$
|
23
|
|
|
|
|
$
|
5
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount Recognized
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Net Amounts Presented in the Statement of Financial Position
|
|
|
December 31
|
|
December 31
|
|
December 31
|
Foreign currency derivatives
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
(Dollars in Millions)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated
|
|
$
|
4
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
16
|
|
Non-designated
|
|
3
|
|
|
6
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
6
|
|
|
|
$
|
7
|
|
|
$
|
23
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
22
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
1
|
|
Gains and losses on derivative financial instruments recorded in Cost of sales and Interest expense for the year ended December 31, 2013 and 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss)
|
|
Recorded in AOCI, net of tax
|
|
Reclassified from AOCI into Income
|
|
Recorded in Income
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
(Dollars in Millions)
|
Foreign currency risk – Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
$
|
(7
|
)
|
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-designated cash flow hedges
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(4
|
)
|
|
$
|
(7
|
)
|
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
(4
|
)
|
Commodity Risk
The Company's exposures to market risk from changes in the price of production material are managed primarily through negotiations with suppliers and customers, although there can be no assurance that the Company will recover all such costs. While the Company periodically derivatives available in the marketplace, currently no such derivatives are utilized to manage or hedge the Company's commodity risks.
Concentrations of Credit Risk
Financial instruments including cash equivalents, derivative contracts, and accounts receivable, expose the Company to counter-party credit risk for non-performance. The Company’s counterparties for cash equivalents and derivative contracts are banks and financial institutions that meet the Company’s requirement of high credit standing. The Company’s counterparties for derivative contracts are substantial investment and commercial banks with significant experience using such derivatives. The Company manages its credit risk through policies requiring minimum credit standing and limiting credit exposure to any one counter-party and through monitoring counter-party credit risks. The Company’s concentration of credit risk related to derivative contracts at December 31, 2013 and 2012 is not material.
Hyundai Kia Automotive Group is one of the Company's largest customers, accounting for
33%
,
33%
and
31%
of total product sales in 2013, 2012 and 2011, respectively. Additionally, Ford is one of the Company's largest customers and accounted for
28%
,
27%
and
27%
of total product sales in 2013, 2012 and 2011, respectively. With the exceptions below, the Company’s credit risk with any individual customer does not exceed ten percent of total accounts receivable at December 31, 2013 and 2012, respectively.
|
|
|
|
|
|
2013
|
|
2012
|
Ford and its affiliates
|
20%
|
|
19%
|
Hyundai Mobis Company
|
15%
|
|
16%
|
Hyundai Motor Company
|
9%
|
|
10%
|
Management periodically performs credit evaluations of its customers and generally does not require collateral.
NOTE 18. Commitments and Contingencies
Litigation and Claims
In 2003, the Local Development Finance Authority of the Charter Township of Van Buren, Michigan (the “Township”) issued approximately
$28 million
in bonds finally maturing in 2032, the proceeds of which were used at least in part to assist in the development of the Company’s U.S. headquarters located in the Township. During January 2010, the Company and the Township entered into a settlement agreement (the “Settlement Agreement”) that, among other things, reduced the taxable value of the headquarters property to current market value and facilitated certain claims of the Township in the Company’s chapter 11 proceedings. The Settlement Agreement also provided that the Company would continue to negotiate in good faith with the Township in the event that property tax payments was inadequate to permit the Township to meet its payment obligations with respect to the bonds. In September 2013, the Township notified the Company in writing that it is estimating a shortfall in tax revenues of between
$25 million
and
$36 million
, which could render it unable to satisfy its payment obligations under the bonds, but made no specific monetary demand of the Company. The Company disputes the factual and legal assertions made by the Township and intends to vigorously defend the matter should the Township seek to commence a legal proceeding against the Company. The Company is not able to estimate the possible loss or range of loss in connection with this matter.
On March 29, 2012, the Korean Supreme Court ruled that regular bonuses should be included for purposes of calculating the ordinary wage of applicable employees, which was contrary to previous legal precedent and the position of the Korean Ministry of Employment and Labor. On December 18, 2013, the Korean Supreme Court issued an en banc decision clarifying that (i) regular bonuses, should be included for purposes of calculating such ordinary wage, and (ii) certain incentive pay and family allowances may also be included for purposes of calculating such ordinary wage if they were paid to employees as consideration for the labor actually provided by them. The court also indicated that employers could be excused from liability for excluding such regular bonuses from ordinary wages where an express or implied management-labor agreement or practice to exclude such amounts existed and to require such payment would cause “serious managerial difficulty.” The Company is evaluating the potential financial impact of these new court rulings, and is not able to determine at this time whether it will have a material impact on the results of operations and cash flows of its South Korean subsidiaries. However, the Company believes it qualifies for this provision for prior periods. In addition, on May 24, 2013, Halla Visteon Climate Control Union in Korea, representing
891
hourly employees of HVCC, filed a legal petition with Seoul Southern District Court, claiming unpaid statutory benefits for the past three years based on the initial Supreme Court ruling. The Company is in the process of evaluating these claims, but at this time is not able to estimate the possible loss or range of loss in connection with this matter.
In November 2013, the Company and Halla Visteon Climate Control Corp., the Company’s South Korean subsidiary (“HVCC”), jointly filed an Initial Notice of Voluntary Self-Disclosure statement with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) regarding certain sales of automotive HVAC components by a minority-owned, Chinese joint venture of HVCC into Iran, which the Company updated in December 2013. Pursuant to the notice, the Company and HVCC are reviewing these matters and will furnish OFAC with the results of their investigation. OFAC may conclude that our actions resulted in violations of U.S. economic sanctions laws and warrant the imposition of civil penalties, such as fines, limitations on our ability to export products from the United States, and/or referral for further investigation by the U.S. Department of Justice. Any such fines or restrictions may be material to the Company’s financial results in the period in which they are imposed. Additionally, disclosure of this conduct and any fines or other action relating to this conduct could harm the Company’s reputation and have a material adverse effect on our business, operating results and financial condition. Although the Company plans to file its full report with OFAC by March 2014, it cannot predict when OFAC will conclude its review of that report or whether it will impose any of the potential penalties described above.
During January 2014, HVCC provided documents and information to the Korean Fair Trade Commission regarding certain subcontracting transactions and practices. HVCC's policy is to comply with all laws and regulations applicable to it and it intends to cooperate fully with the Korean Fair Trade Commission. At this time, HVCC is not able to estimate a reasonably possible range of loss that may ultimately result from this investigation.
The Company's operations in Brazil are subject to highly complex labor, tax, customs and other laws. While the Company believes that it is in compliance with such laws, it is periodically engaged in litigation regarding the application of these laws. As of December 31, 2013, the Company maintained accruals of approximately
$9 million
for claims aggregating approximately
$150 million
. The amounts accrued represent claims that are deemed probable of loss and are reasonably estimable based on the Company's assessment of the claims and prior experience with similar matters.
Several current and former employees of Visteon Deutschland GmbH (“Visteon Germany”) filed civil actions against Visteon Germany in various German courts beginning in August 2007 seeking damages for the alleged violation of German pension laws that prohibit the use of pension benefit formulas that differ for salaried and hourly employees without adequate justification. Several of these actions have been joined as pilot cases. In a written decision issued in April 2010, the Federal Labor Court issued a declaratory judgment in favor of the plaintiffs in the pilot cases. To date, more than
750
current and former employees have filed similar actions or have inquired as to or been granted additional benefits, and an additional
600
current and former employees are similarly situated. The Company's remaining reserve for unsettled cases is approximately
$8 million
and is based on the Company’s best estimate as to the number and value of the claims that will be made in connection with the pension plan. However, the Company’s estimate is subject to many uncertainties which could result in Visteon Germany incurring amounts in excess of the reserved amount of up to approximately
$9 million
.
On May 28, 2009, the Company filed voluntary petitions in the Court seeking reorganization relief under the provisions of chapter 11 of the Bankruptcy Code and continued to operate as debtors-in-possession until emergence on October 1, 2010. Substantially all pre-petition liabilities and claims relating to rejected executory contracts and unexpired leases have been settled under the plan of reorganization, however, the ultimate amounts to be paid in settlement of each those claims will continue to be subject to the uncertain outcome of litigation, negotiations and Bankruptcy Court decisions for a period of time after the emergence date.
In December of 2009, the Court granted the Debtors' motion in part authorizing them to terminate or amend certain other postretirement employee benefits, including health care and life insurance. On December 29, 2009, the IUE-CWA, the Industrial Division of the Communications Workers of America, AFL-CIO, CLC, filed a notice of appeal of the Court's order with the District Court. By order dated March 31, 2010, the District Court affirmed the Court's order in all respects. On April 1, 2010, the IUE filed a notice of appeal. On July 13, 2010, the Circuit Court reversed the order of the District Court as to the IUE-CWA and directed the District Court to, among other things, direct the Court to order the Company to take whatever action is necessary to immediately restore terminated or modified benefits to their pre-termination/modification levels. On July 27, 2010, the Company filed a Petition for Rehearing or Rehearing En Banc requesting that the Circuit Court review the panel’s decision, which was denied. By orders dated August 30, 2010, the Court ruled that the Company should restore certain other postretirement employee benefits to the appellant-retirees and also to salaried retirees and certain retirees of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”).
On September 1, 2010, the Company filed a Notice of Appeal to the District Court of the Court's decision to include non-appealing retirees, and on September 15, 2010 the UAW filed a Notice of Cross-Appeal. On July 25, 2012, the District Court ruled in favor of the Company on both appeals, and the UAW has appealed this ruling to the Circuit Court. The Company reached an agreement with the original appellants in late-September 2010, which resulted in the Company not restoring other postretirement employee benefits of such retirees. On September 30, 2010, the UAW filed a complaint, which it amended on October 1, 2010, in the United States District Court for the Eastern District of Michigan seeking, among other things, a declaratory judgment to prohibit the Company from terminating certain other postretirement employee benefits for UAW retirees after October 1, 2010. The parties reached a preliminary settlement agreement in January 2013, but it was later terminated by the plaintiffs. On October 22, 2013, the U.S. District Court for the Eastern District of Michigan issued an order denying the Company's motion to dismiss the UAW's complaint and granted its motion to transfer the case to the U.S. District Court for the District of Delaware. As of December 31, 2013, the Company maintains an accrual for claims that are deemed probable of loss and are reasonably estimable.
While the Company believes its accruals for litigation and claims are adequate, the final amounts required to resolve such matters could differ materially from recorded estimates and the Company's results of operations and cash flows could be materially affected.
Product Warranty and Recall
Amounts accrued for product warranty and recall claims are based on management’s best estimates of the amounts that will ultimately be required to settle such items. The Company’s estimates for product warranty and recall obligations are developed with support from its sales, engineering, quality and legal functions and include due consideration of contractual arrangements, past experience, current claims and related information, production changes, industry and regulatory developments and various other considerations. The Company can provide no assurances that it will not experience material claims in the future or that it will not incur significant costs to defend or settle such claims beyond the amounts accrued or beyond what the Company may recover from its suppliers.
The following table provides a reconciliation of changes in the product warranty and recall claims liability, inclusive of amounts of discontinued operations for the selected periods:
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
(Dollars in Millions)
|
Beginning balance
|
$
|
57
|
|
|
$
|
66
|
|
Accruals for products shipped
|
17
|
|
|
19
|
|
Changes in estimates
|
(8
|
)
|
|
(6
|
)
|
Settlements
|
(17
|
)
|
|
(22
|
)
|
Ending balance
|
$
|
49
|
|
|
$
|
57
|
|
Environmental Matters
The Company is subject to the requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations and ordinances. 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. These sites are in various stages of investigation and cleanup. The Company currently is, has been, and in the future may become the subject of formal or informal enforcement actions or procedures.
Costs related to environmental assessments and remediation efforts at operating facilities, previously owned or operated facilities, or other waste site locations are accrued when it is probable that a liability has been incurred and the amount of that liability can be reasonably estimated. Estimated costs are recorded at undiscounted amounts, based on experience and assessments, and are regularly evaluated. The liabilities are recorded in Other current liabilities and Other non-current liabilities in the consolidated balance sheets. At December 31, 2013, the Company had recorded a reserve of approximately
$1 million
for environmental matters. However, estimating liabilities for environmental investigation and cleanup is complex and dependent upon a number of factors beyond the Company’s control and which may change dramatically. Accordingly, although the Company believes its reserve is adequate based on current information, the Company cannot provide any assurance that its ultimate environmental investigation and cleanup costs and liabilities will not exceed the amount of its current reserve.
Guarantees and Commitments
The Company has guaranteed approximately
$43 million
for subsidiary lease payments under various arrangements generally spanning between one and ten years in duration, and
$6 million
for affiliate credit lines and other credit support agreements.
Operating Leases
At December 31, 2013, the Company had the following minimum rental commitments under non-cancelable operating leases: 2014 —
$29 million
; 2015 —
$25 million
; 2016 —
$18 million
; 2017 —
$16 million
; 2018 —
$14 million
; thereafter —
$68 million
. Rent expense was
$53 million
for the year ended December 31, 2013,
$44 million
for the year ended December 31, 2012, and
$44 million
for the year ended December 31, 2011, respectively.
Purchase Obligations
In January 2003, the Company commenced a
10
-year outsourcing agreement with International Business Machines (“IBM”) pursuant to which the Company outsources information technology services on a global basis. In 2010, the agreement was amended to include only legacy mainframe and data center services out of the U.S. with the ability to terminate for convenience during the term of the agreement. At the end of 2013, Visteon terminated the mainframe portion of the services. Expenses incurred under the IBM arrangement were approximately
$13 million
during the years ended December 31, 2013, 2012 and 2011. Expenses for 2014 are estimated to be
$2 million
.
Other Contingent Matters
Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against the Company, including those arising out of alleged defects in the Company’s products; governmental regulations
relating to safety; employment-related matters; customer, supplier and other contractual relationships; intellectual property rights; product warranties; product recalls; and environmental matters. Some of the foregoing matters may involve compensatory, punitive or antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions, or other relief which, if granted, would require very large expenditures. The Company enters into agreements that contain indemnification provisions in the normal course of business for which the risks are considered nominal and impracticable to estimate.
Contingencies are subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by the Company for matters discussed in the immediately foregoing paragraph where losses are deemed probable and reasonably estimable. It is possible, however, that some of the matters discussed in the foregoing paragraph could be decided unfavorably to the Company and could require the Company to pay damages or make other expenditures in amounts, or a range of amounts, that cannot be estimated at December 31, 2013 and that are in excess of established reserves. The Company does not reasonably expect, except as otherwise described herein, based on its analysis, that any adverse outcome from such matters would have a material effect on the Company’s financial condition, results of operations or cash flows, although such an outcome is possible.
Under section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically stayed most actions against a debtor, including most actions to collect pre-petition indebtedness or to exercise control over the property of the debtor’s estate. Substantially all pre-petition liabilities and claims relating to rejected executory contracts and unexpired leases have been settled under the Debtor’s plan of reorganization, however, the ultimate amounts to be paid in settlement of each those claims will continue to be subject to the uncertain outcome of litigation, negotiations and Court decisions for a period of time after the Effective Date.
NOTE 19. Segment Information
The Company defines its operating segments as components of its business for which separate discrete financial information is available that is evaluated regularly by the chief operating decision-making group, in deciding the allocation of resources and in assessing performance. The Company’s chief operating decision making group, comprised of the Chief Executive Officer and Chief Financial Officer, evaluates the performance of the Company’s segments primarily based on net sales, before elimination of inter-company shipments, Adjusted EBITDA (non-GAAP financial measure) and operating assets. The Company’s operating structure is organized by global product lines, including: Climate, Electronics and Interiors. These global product lines have financial and operating responsibility over the design, development and manufacture of the Company’s product portfolio. Global customer groups are responsible for the business development of the Company’s product portfolio and overall customer relationships. Certain functions such as procurement, information technology and other administrative activities are managed on a global basis with regional deployment. The Company’s reportable segments are as follows:
|
|
•
|
Climate — The Company’s Climate product line includes climate air handling modules, powertrain cooling modules, heat exchangers, compressors, fluid transport and engine induction systems. Climate accounted for approximately
64%
,
62%
, and
52%
of the Company’s total product sales, excluding intra-product line eliminations, for the years ended December 31, 2013, 2012 and 2011, respectively.
|
|
|
•
|
Electronics — The Company’s Electronics product line includes audio systems, infotainment systems, driver information systems, powertrain and feature control modules, climate controls, and electronic control modules. Electronics accounted for approximately
19%
,
18%
, and
18%
of the Company’s total product sales, excluding intra-product line eliminations, for the years ended December 31, 2013 2012 and 2011, respectively.
|
|
|
•
|
Interiors — The Company’s Interiors product line includes instrument panels, cockpit modules, door trim and floor consoles. Interiors accounted for approximately
17%
,
20%
, and
30%
, of the Company’s total product sales, excluding intra-product line eliminations, for the years ended December 31, 2013, 2012 and 2011, respectively.
|
The accounting policies for the reportable segments are the same as those described in the Note 2 "Summary of Significant Accounting Policies” to the Company’s consolidated financial statements. Key financial measures reviewed by the Company’s chief operating decision makers are as follows.
Segment Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
(Dollars in Millions)
|
Climate
|
$
|
4,871
|
|
|
$
|
4,286
|
|
|
$
|
4,053
|
|
Electronics
|
1,455
|
|
|
1,274
|
|
|
1,370
|
|
Interiors
|
1,261
|
|
|
1,388
|
|
|
2,282
|
|
Eliminations
|
(148
|
)
|
|
(91
|
)
|
|
(173
|
)
|
Total consolidated sales
|
$
|
7,439
|
|
|
$
|
6,857
|
|
|
$
|
7,532
|
|
Net sales to Hyundai Kia Automotive Group were
$2.5 billion
during the year ended December 31, 2013,
$2.2 billion
during the year ended December 31, 2012, and
$2.5 billion
during the year ended ended December 31, 2011. Net sales to Ford were
$2.1 billion
during the year ended December 31, 2013,
$1.9 billion
during the year ended December 31, 2012, and
$2.0 billion
during the year ended December 31, 2011.
Segment Adjusted EBITDA
The Company defines Adjusted EBITDA as net income attributable to the Company, plus net interest expense, provision for income taxes and depreciation and amortization, as further adjusted to eliminate the impact of asset impairments, gains or losses on divestitures, discontinued operations, net restructuring expenses and other reimbursable costs, non-cash stock-based compensation expense, certain employee charges and benefits, reorganization items and other non-operating gains and losses. Adjusted EBITDA is presented as a supplemental measure of the Company's financial performance that management believes is useful to investors because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company's operating activities across reporting periods. Not all companies use identical calculations and, accordingly, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is not a recognized term under accounting principles generally accepted in the United States (“U.S. GAAP”) and does not purport to be a substitute for net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and is not intended to be a measure of cash flow available for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. In addition, the Company uses Adjusted EBITDA (i) as a factor in incentive compensation decisions, (ii) to evaluate the effectiveness of the Company's business strategies and (iii) the Company's credit agreements use measures similar to Adjusted EBITDA to measure compliance with certain covenants.
Segment Adjusted EBITDA for the years ended December 31, 2013 and 2012 is summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
(Dollars in Millions)
|
Climate
|
$
|
443
|
|
|
$
|
370
|
|
|
$
|
352
|
|
Electronics
|
137
|
|
|
126
|
|
|
148
|
|
Interiors
|
183
|
|
|
178
|
|
|
230
|
|
Total segment Adjusted EBITDA
|
763
|
|
|
674
|
|
|
730
|
|
Reconciling Item:
|
|
|
|
|
|
Corporate
|
(59
|
)
|
|
(48
|
)
|
|
(41
|
)
|
Total consolidated Adjusted EBITDA
|
$
|
704
|
|
|
$
|
626
|
|
|
$
|
689
|
|
During the first quarter of 2013, the Company changed its corporate cost allocation methodology for management reporting purposes. Accordingly, certain costs associated with the Company's corporate headquarters and other administrative support functions not allocated to the Company's operating segments and subject to the Company's previously announced corporate and administrative restructuring program have been separately reported for all periods presented as Corporate reconciling items.
The reconciliation of Adjusted EBITDA to net income attributable to Visteon for the years ended December 31, 2013, 2012 and 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
(Dollars in Millions)
|
Total Adjusted EBITDA
|
$
|
704
|
|
|
$
|
626
|
|
|
$
|
689
|
|
Interest expense, net
|
39
|
|
|
35
|
|
|
27
|
|
Provision for income taxes
|
107
|
|
|
121
|
|
|
127
|
|
Depreciation and amortization
|
262
|
|
|
258
|
|
|
295
|
|
Restructuring expense
|
39
|
|
|
79
|
|
|
24
|
|
Gain on Yanfeng transactions
|
(465
|
)
|
|
—
|
|
|
—
|
|
Non-cash, stock-based compensation expense
|
17
|
|
|
25
|
|
|
39
|
|
Equity in gain of non-consolidated affiliate
|
(29
|
)
|
|
(63
|
)
|
|
—
|
|
Other
|
44
|
|
|
71
|
|
|
97
|
|
Net income attributable to Visteon
|
$
|
690
|
|
|
$
|
100
|
|
|
$
|
80
|
|
Segment Operating Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
Property and Equipment, net
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
(Dollars in Millions)
|
Climate
|
$
|
324
|
|
|
$
|
276
|
|
|
$
|
1,046
|
|
|
$
|
974
|
|
Electronics
|
106
|
|
|
67
|
|
|
163
|
|
|
119
|
|
Interiors
|
42
|
|
|
42
|
|
|
190
|
|
|
178
|
|
Total segment operating assets
|
472
|
|
|
385
|
|
|
1,399
|
|
|
1,271
|
|
Corporate
|
—
|
|
|
—
|
|
|
15
|
|
|
55
|
|
Total consolidated operating assets
|
$
|
472
|
|
|
$
|
385
|
|
|
$
|
1,414
|
|
|
$
|
1,326
|
|
Corporate includes property and equipment associated with the Company's corporate headquarters and other administrative support functions.
Segment Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
Capital Expenditures
|
|
Year Ended December 31
|
|
Year Ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
|
(Dollars in Millions)
|
|
(Dollars in Millions)
|
Climate
|
$
|
194
|
|
|
$
|
180
|
|
|
$
|
187
|
|
|
$
|
187
|
|
|
$
|
152
|
|
|
$
|
168
|
|
Electronics
|
30
|
|
|
28
|
|
|
37
|
|
|
46
|
|
|
23
|
|
|
23
|
|
Interiors
|
29
|
|
|
31
|
|
|
40
|
|
|
35
|
|
|
34
|
|
|
41
|
|
Total segment
|
253
|
|
|
239
|
|
|
264
|
|
|
268
|
|
|
209
|
|
|
232
|
|
Corporate
|
9
|
|
|
19
|
|
|
31
|
|
|
1
|
|
|
9
|
|
|
8
|
|
Total consolidated
|
$
|
262
|
|
|
$
|
258
|
|
|
$
|
295
|
|
|
$
|
269
|
|
|
$
|
218
|
|
|
$
|
240
|
|
Corporate includes depreciation and amortization and capital expenditures attributable to the Company’s technical centers, corporate headquarters and other administrative and support functions.
Financial Information by Geographic Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
Property and Equipment, net
|
|
Year Ended December 31
|
|
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
(Dollars in Millions)
|
United States
|
$
|
1,403
|
|
|
$
|
1,239
|
|
|
$
|
1,104
|
|
|
$
|
67
|
|
|
$
|
113
|
|
Mexico
|
40
|
|
|
17
|
|
|
15
|
|
|
21
|
|
|
21
|
|
Canada
|
93
|
|
|
95
|
|
|
105
|
|
|
21
|
|
|
25
|
|
Intra-region eliminations
|
—
|
|
|
(12
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
North America
|
1,536
|
|
|
1,339
|
|
|
1,218
|
|
|
109
|
|
|
159
|
|
Germany
|
125
|
|
|
147
|
|
|
199
|
|
|
23
|
|
|
24
|
|
France
|
490
|
|
|
548
|
|
|
713
|
|
|
73
|
|
|
83
|
|
Portugal
|
574
|
|
|
539
|
|
|
468
|
|
|
99
|
|
|
85
|
|
Spain
|
236
|
|
|
264
|
|
|
421
|
|
|
35
|
|
|
32
|
|
Czech Republic
|
425
|
|
|
227
|
|
|
246
|
|
|
46
|
|
|
38
|
|
Hungary
|
290
|
|
|
282
|
|
|
321
|
|
|
69
|
|
|
69
|
|
Slovakia
|
405
|
|
|
374
|
|
|
339
|
|
|
58
|
|
|
54
|
|
Other Europe
|
233
|
|
|
200
|
|
|
178
|
|
|
72
|
|
|
24
|
|
Intra-region eliminations
|
(337
|
)
|
|
(190
|
)
|
|
(114
|
)
|
|
—
|
|
|
—
|
|
Europe
|
2,441
|
|
|
2,391
|
|
|
2,771
|
|
|
475
|
|
|
409
|
|
Korea
|
2,259
|
|
|
2,048
|
|
|
2,488
|
|
|
474
|
|
|
458
|
|
China
|
1,123
|
|
|
748
|
|
|
555
|
|
|
182
|
|
|
133
|
|
India
|
277
|
|
|
353
|
|
|
341
|
|
|
79
|
|
|
77
|
|
Japan
|
203
|
|
|
204
|
|
|
221
|
|
|
9
|
|
|
12
|
|
Thailand
|
347
|
|
|
339
|
|
|
225
|
|
|
30
|
|
|
28
|
|
Other Asia
|
9
|
|
|
12
|
|
|
19
|
|
|
—
|
|
|
—
|
|
Intra-region eliminations
|
(486
|
)
|
|
(424
|
)
|
|
(304
|
)
|
|
—
|
|
|
—
|
|
Asia
|
3,732
|
|
|
3,280
|
|
|
3,545
|
|
|
774
|
|
|
708
|
|
South America
|
411
|
|
|
423
|
|
|
511
|
|
|
56
|
|
|
50
|
|
Inter-region eliminations
|
(681
|
)
|
|
(576
|
)
|
|
(513
|
)
|
|
—
|
|
|
—
|
|
|
$
|
7,439
|
|
|
$
|
6,857
|
|
|
$
|
7,532
|
|
|
$
|
1,414
|
|
|
$
|
1,326
|
|
The decrease in sales in Korea of
$588 million
from 2011 to 2012 is due to the deconsolidation of Duckyang. Sales are attributable to geographic areas based on the location of the assets generating the sales.
NOTE 20. Condensed Consolidating Financial Information of Guarantor Subsidiaries
On April 6, 2011, the Company completed the sale of $500 million aggregate principal amount of 6.75% senior notes due April 15, 2019 (the "Original Senior Notes"). In January 2012, the Company exchanged substantially identical senior notes (the "Senior Notes") that have been registered under Securities Act of 1933, as amended, for all of the Original Senior Notes. The Senior Notes were issued under an Indenture, dated April 6, 2011 (the “Indenture”), among the Company, the subsidiary guarantors named therein, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Indenture and the form of Senior Notes provide, among other things, that the Senior Notes are senior unsecured obligations of the Company. Interest is payable on the Senior Notes on April 15 and October 15 of each year beginning on October 15, 2011 until maturity. Each of the Company’s existing and future wholly owned domestic restricted subsidiaries that guarantee debt under the Company’s revolving loan credit agreement guarantee the Senior Notes.
Guarantor Financial Statements
Certain subsidiaries of the Company (as listed below, collectively the “Guarantor Subsidiaries”) have guaranteed fully and unconditionally, on a joint and several basis, the obligation to pay principal and interest under the Company’s revolving loan credit agreement and the Senior Notes. The Guarantor Subsidiaries include: Visteon Electronics Corporation; Visteon European Holdings, Inc.; Visteon Global Treasury, Inc.; Visteon International Business Development, Inc.; Visteon International Holdings, Inc.; Visteon Global Technologies, Inc.; Visteon Systems, LLC; and VC Aviation Services, LLC.
The guarantor financial statements are comprised of the following condensed consolidating financial information:
|
|
•
|
The Parent Company, the issuer of the guaranteed obligations;
|
|
|
•
|
Guarantor subsidiaries, on a combined basis, as specified in the Indentures related to the Senior Notes;
|
|
|
•
|
Non-guarantor subsidiaries, on a combined basis;
|
|
|
•
|
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in subsidiaries, and (c) record consolidating entries.
|
VISTEON CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net sales
|
$
|
150
|
|
|
$
|
1,141
|
|
|
$
|
6,789
|
|
|
$
|
(641
|
)
|
|
$
|
7,439
|
|
Cost of sales
|
295
|
|
|
908
|
|
|
6,193
|
|
|
(641
|
)
|
|
6,755
|
|
Gross margin
|
(145
|
)
|
|
233
|
|
|
596
|
|
|
—
|
|
|
684
|
|
Selling, general and administrative expenses
|
64
|
|
|
44
|
|
|
259
|
|
|
—
|
|
|
367
|
|
Equity in net income of non-consolidated affiliates
|
—
|
|
|
—
|
|
|
213
|
|
|
—
|
|
|
213
|
|
Restructuring expenses
|
6
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
39
|
|
Interest expense (income), net
|
35
|
|
|
(8
|
)
|
|
12
|
|
|
—
|
|
|
39
|
|
Gain on Yanfeng transactions
|
—
|
|
|
—
|
|
|
465
|
|
|
—
|
|
|
465
|
|
Other expense, net
|
42
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
35
|
|
(Loss) income before income taxes and earnings of subsidiaries
|
(292
|
)
|
|
197
|
|
|
977
|
|
|
—
|
|
|
882
|
|
Provision for income taxes
|
1
|
|
|
—
|
|
|
106
|
|
|
—
|
|
|
107
|
|
(Loss) income before earnings of subsidiaries
|
(293
|
)
|
|
197
|
|
|
871
|
|
|
—
|
|
|
775
|
|
Equity in earnings of consolidated subsidiaries
|
983
|
|
|
699
|
|
|
—
|
|
|
(1,682
|
)
|
|
—
|
|
Net income
|
690
|
|
|
896
|
|
|
871
|
|
|
(1,682
|
)
|
|
775
|
|
Net income attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
85
|
|
Net income attributable to Visteon Corporation
|
$
|
690
|
|
|
$
|
896
|
|
|
$
|
786
|
|
|
$
|
(1,682
|
)
|
|
$
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net sales
|
$
|
247
|
|
|
$
|
1,392
|
|
|
$
|
6,229
|
|
|
$
|
(1,011
|
)
|
|
$
|
6,857
|
|
Cost of sales
|
454
|
|
|
1,140
|
|
|
5,685
|
|
|
(1,011
|
)
|
|
6,268
|
|
Gross margin
|
(207
|
)
|
|
252
|
|
|
544
|
|
|
—
|
|
|
589
|
|
Selling, general and administrative expenses
|
99
|
|
|
61
|
|
|
209
|
|
|
—
|
|
|
369
|
|
Equity in net income of non-consolidated affiliates
|
—
|
|
|
—
|
|
|
226
|
|
|
—
|
|
|
226
|
|
Restructuring expenses
|
4
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
79
|
|
Interest expense (income), net
|
39
|
|
|
(3
|
)
|
|
(1
|
)
|
|
—
|
|
|
35
|
|
Other expense (income), net
|
33
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
41
|
|
(Loss) income before income taxes and earnings of subsidiaries
|
(382
|
)
|
|
194
|
|
|
479
|
|
|
—
|
|
|
291
|
|
Provision for income taxes
|
—
|
|
|
—
|
|
|
121
|
|
|
—
|
|
|
121
|
|
(Loss) income before earnings of subsidiaries
|
(382
|
)
|
|
194
|
|
|
358
|
|
|
—
|
|
|
170
|
|
Equity in earnings of consolidated subsidiaries
|
497
|
|
|
277
|
|
|
—
|
|
|
(774
|
)
|
|
—
|
|
Income from continuing operations
|
115
|
|
|
471
|
|
|
358
|
|
|
(774
|
)
|
|
170
|
|
(Loss) income from discontinued operations, net of tax
|
(15
|
)
|
|
42
|
|
|
(30
|
)
|
|
—
|
|
|
(3
|
)
|
Net income
|
100
|
|
|
513
|
|
|
328
|
|
|
(774
|
)
|
|
167
|
|
Net income attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
67
|
|
Net income attributable to Visteon Corporation
|
$
|
100
|
|
|
$
|
513
|
|
|
$
|
261
|
|
|
$
|
(774
|
)
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net sales
|
$
|
194
|
|
|
$
|
1,497
|
|
|
$
|
7,045
|
|
|
$
|
(1,204
|
)
|
|
$
|
7,532
|
|
Cost of sales
|
391
|
|
|
1,200
|
|
|
6,527
|
|
|
(1,204
|
)
|
|
6,914
|
|
Gross margin
|
(197
|
)
|
|
297
|
|
|
518
|
|
|
—
|
|
|
618
|
|
Selling, general and administrative expenses
|
102
|
|
|
67
|
|
|
218
|
|
|
—
|
|
|
387
|
|
Equity in net income of non-consolidated affiliates
|
—
|
|
|
—
|
|
|
168
|
|
|
—
|
|
|
168
|
|
Restructuring expenses
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Interest expense (income), net
|
38
|
|
|
(12
|
)
|
|
1
|
|
|
—
|
|
|
27
|
|
Other expense (income), net
|
27
|
|
|
(6
|
)
|
|
(10
|
)
|
|
—
|
|
|
11
|
|
(Loss) income before income taxes and earnings of subsidiaries
|
(364
|
)
|
|
248
|
|
|
453
|
|
|
—
|
|
|
337
|
|
Provision for income taxes
|
—
|
|
|
—
|
|
|
127
|
|
|
—
|
|
|
127
|
|
(Loss) income before earnings of subsidiaries
|
(364
|
)
|
|
248
|
|
|
326
|
|
|
—
|
|
|
210
|
|
Equity in earnings of consolidated subsidiaries
|
490
|
|
|
172
|
|
|
—
|
|
|
(662
|
)
|
|
—
|
|
Income from continuing operations
|
126
|
|
|
420
|
|
|
326
|
|
|
(662
|
)
|
|
210
|
|
(Loss) income from discontinued operations, net of tax
|
(46
|
)
|
|
57
|
|
|
(67
|
)
|
|
—
|
|
|
(56
|
)
|
Net income
|
80
|
|
|
477
|
|
|
259
|
|
|
(662
|
)
|
|
154
|
|
Net income attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
74
|
|
|
—
|
|
|
74
|
|
Net income attributable to Visteon Corporation
|
$
|
80
|
|
|
$
|
477
|
|
|
$
|
185
|
|
|
$
|
(662
|
)
|
|
$
|
80
|
|
VISTEON CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net income
|
$
|
690
|
|
|
$
|
896
|
|
|
$
|
871
|
|
|
$
|
(1,682
|
)
|
|
$
|
775
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
(47
|
)
|
|
(48
|
)
|
|
(48
|
)
|
|
96
|
|
|
(47
|
)
|
Benefit plans, net of tax
|
132
|
|
|
32
|
|
|
(2
|
)
|
|
(31
|
)
|
|
131
|
|
Unrealized hedging (loss) gains and other, net of tax
|
(7
|
)
|
|
(7
|
)
|
|
(10
|
)
|
|
14
|
|
|
(10
|
)
|
Other comprehensive income (loss), net of tax
|
78
|
|
|
(23
|
)
|
|
(60
|
)
|
|
79
|
|
|
74
|
|
Comprehensive income
|
768
|
|
|
873
|
|
|
811
|
|
|
(1,603
|
)
|
|
849
|
|
Comprehensive income attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
81
|
|
Comprehensive income attributable to Visteon Corporation
|
$
|
768
|
|
|
$
|
873
|
|
|
$
|
730
|
|
|
$
|
(1,603
|
)
|
|
$
|
768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net income
|
$
|
100
|
|
|
$
|
513
|
|
|
$
|
328
|
|
|
$
|
(774
|
)
|
|
$
|
167
|
|
Other comprehensive (loss) income, net of tax
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
52
|
|
|
53
|
|
|
76
|
|
|
(108
|
)
|
|
73
|
|
Benefit plans, net of tax
|
(133
|
)
|
|
(126
|
)
|
|
(118
|
)
|
|
243
|
|
|
(134
|
)
|
Unrealized hedging (losses) gains and other, net of tax
|
16
|
|
|
16
|
|
|
22
|
|
|
(32
|
)
|
|
22
|
|
Other comprehensive (loss) income, net of tax
|
(65
|
)
|
|
(57
|
)
|
|
(20
|
)
|
|
103
|
|
|
(39
|
)
|
Comprehensive income
|
35
|
|
|
456
|
|
|
308
|
|
|
(671
|
)
|
|
128
|
|
Comprehensive income attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
93
|
|
|
—
|
|
|
93
|
|
Comprehensive income attributable to Visteon Corporation
|
$
|
35
|
|
|
$
|
456
|
|
|
$
|
215
|
|
|
$
|
(671
|
)
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net income
|
$
|
80
|
|
|
$
|
477
|
|
|
$
|
259
|
|
|
$
|
(662
|
)
|
|
$
|
154
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
(42
|
)
|
|
(47
|
)
|
|
(67
|
)
|
|
103
|
|
|
(53
|
)
|
Benefit plans, net of tax
|
(26
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
8
|
|
|
(26
|
)
|
Unrealized hedging (losses) gains and other, net of tax
|
(7
|
)
|
|
(8
|
)
|
|
(10
|
)
|
|
16
|
|
|
(9
|
)
|
Other comprehensive (loss) income, net of tax
|
(75
|
)
|
|
(58
|
)
|
|
(82
|
)
|
|
127
|
|
|
(88
|
)
|
Comprehensive income
|
5
|
|
|
419
|
|
|
177
|
|
|
(535
|
)
|
|
66
|
|
Comprehensive income attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
61
|
|
|
—
|
|
|
61
|
|
Comprehensive income attributable to Visteon Corporation
|
$
|
5
|
|
|
$
|
419
|
|
|
$
|
116
|
|
|
$
|
(535
|
)
|
|
$
|
5
|
|
VISTEON CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
$
|
1,115
|
|
|
$
|
12
|
|
|
$
|
550
|
|
|
$
|
—
|
|
|
$
|
1,677
|
|
Accounts receivable, net
|
363
|
|
|
566
|
|
|
1,298
|
|
|
(1,000
|
)
|
|
1,227
|
|
Inventories, net
|
13
|
|
|
21
|
|
|
438
|
|
|
—
|
|
|
472
|
|
Other current assets
|
30
|
|
|
41
|
|
|
306
|
|
|
—
|
|
|
377
|
|
Total current assets
|
1,521
|
|
|
640
|
|
|
2,592
|
|
|
(1,000
|
)
|
|
3,753
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
12
|
|
|
20
|
|
|
1,382
|
|
|
—
|
|
|
1,414
|
|
Investment in affiliates
|
1,312
|
|
|
1,185
|
|
|
—
|
|
|
(2,497
|
)
|
|
—
|
|
Equity in net assets of non-consolidated affiliates
|
—
|
|
|
—
|
|
|
228
|
|
|
—
|
|
|
228
|
|
Intangible assets, net
|
—
|
|
|
15
|
|
|
432
|
|
|
—
|
|
|
447
|
|
Other non-current assets
|
46
|
|
|
1,389
|
|
|
138
|
|
|
(1,388
|
)
|
|
185
|
|
Total assets
|
$
|
2,891
|
|
|
$
|
3,249
|
|
|
$
|
4,772
|
|
|
$
|
(4,885
|
)
|
|
$
|
6,027
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Short-term debt, including current portion of long-term debt
|
$
|
144
|
|
|
$
|
47
|
|
|
$
|
311
|
|
|
$
|
(396
|
)
|
|
$
|
106
|
|
Accounts payable
|
145
|
|
|
195
|
|
|
1,496
|
|
|
(604
|
)
|
|
1,232
|
|
Other current liabilities
|
102
|
|
|
16
|
|
|
346
|
|
|
—
|
|
|
464
|
|
Total current liabilities
|
391
|
|
|
258
|
|
|
2,153
|
|
|
(1,000
|
)
|
|
1,802
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
404
|
|
|
46
|
|
|
1,562
|
|
|
(1,388
|
)
|
|
624
|
|
Employee benefits
|
142
|
|
|
2
|
|
|
296
|
|
|
—
|
|
|
440
|
|
Other non-current liabilities
|
34
|
|
|
3
|
|
|
251
|
|
|
—
|
|
|
288
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Total Visteon Corporation stockholders’ equity
|
1,920
|
|
|
2,940
|
|
|
(443
|
)
|
|
(2,497
|
)
|
|
1,920
|
|
Non-controlling interests
|
—
|
|
|
—
|
|
|
953
|
|
|
—
|
|
|
953
|
|
Total equity
|
1,920
|
|
|
2,940
|
|
|
510
|
|
|
(2,497
|
)
|
|
2,873
|
|
Total liabilities and equity
|
$
|
2,891
|
|
|
$
|
3,249
|
|
|
$
|
4,772
|
|
|
$
|
(4,885
|
)
|
|
$
|
6,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
$
|
191
|
|
|
$
|
54
|
|
|
$
|
580
|
|
|
$
|
—
|
|
|
$
|
825
|
|
Accounts receivable, net
|
279
|
|
|
676
|
|
|
1,138
|
|
|
(931
|
)
|
|
1,162
|
|
Inventories, net
|
15
|
|
|
23
|
|
|
347
|
|
|
—
|
|
|
385
|
|
Other current assets
|
24
|
|
|
32
|
|
|
235
|
|
|
—
|
|
|
291
|
|
Total current assets
|
509
|
|
|
785
|
|
|
2,300
|
|
|
(931
|
)
|
|
2,663
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
20
|
|
|
62
|
|
|
1,244
|
|
|
—
|
|
|
1,326
|
|
Investment in affiliates
|
2,024
|
|
|
1,587
|
|
|
—
|
|
|
(3,611
|
)
|
|
—
|
|
Equity in net assets of non-consolidated affiliates
|
—
|
|
|
—
|
|
|
756
|
|
|
—
|
|
|
756
|
|
Intangible assets, net
|
86
|
|
|
45
|
|
|
201
|
|
|
—
|
|
|
332
|
|
Other non-current assets
|
14
|
|
|
—
|
|
|
70
|
|
|
(5
|
)
|
|
79
|
|
Total assets
|
$
|
2,653
|
|
|
$
|
2,479
|
|
|
$
|
4,571
|
|
|
$
|
(4,547
|
)
|
|
$
|
5,156
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Short-term debt, including current portion of long-term debt
|
$
|
266
|
|
|
$
|
24
|
|
|
$
|
225
|
|
|
$
|
(419
|
)
|
|
$
|
96
|
|
Accounts payable
|
172
|
|
|
159
|
|
|
1,204
|
|
|
(508
|
)
|
|
1,027
|
|
Other current liabilities
|
76
|
|
|
27
|
|
|
326
|
|
|
—
|
|
|
429
|
|
Total current liabilities
|
514
|
|
|
210
|
|
|
1,755
|
|
|
(927
|
)
|
|
1,552
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
450
|
|
|
—
|
|
|
29
|
|
|
(6
|
)
|
|
473
|
|
Employee benefits
|
258
|
|
|
34
|
|
|
279
|
|
|
—
|
|
|
571
|
|
Other non-current liabilities
|
46
|
|
|
7
|
|
|
366
|
|
|
—
|
|
|
419
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Total Visteon Corporation stockholders’ equity
|
1,385
|
|
|
2,228
|
|
|
1,386
|
|
|
(3,614
|
)
|
|
1,385
|
|
Non-controlling interests
|
—
|
|
|
—
|
|
|
756
|
|
|
—
|
|
|
756
|
|
Total equity
|
1,385
|
|
|
2,228
|
|
|
2,142
|
|
|
(3,614
|
)
|
|
2,141
|
|
Total liabilities and equity
|
$
|
2,653
|
|
|
$
|
2,479
|
|
|
$
|
4,571
|
|
|
$
|
(4,547
|
)
|
|
$
|
5,156
|
|
VISTEON CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net cash (used by) provided from operating activities
|
$
|
(242
|
)
|
|
$
|
1,244
|
|
|
$
|
(382
|
)
|
|
$
|
(308
|
)
|
|
$
|
312
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(1
|
)
|
|
(6
|
)
|
|
(262
|
)
|
|
—
|
|
|
(269
|
)
|
Dividends received from consolidated affiliates
|
1,464
|
|
|
437
|
|
|
—
|
|
|
(1,901
|
)
|
|
—
|
|
Cash acquired in consolidation of YFVE
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
38
|
|
Proceeds from asset sales and business divestitures
|
—
|
|
|
—
|
|
|
977
|
|
|
—
|
|
|
977
|
|
Payments to acquire interest in joint venture
|
—
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
(48
|
)
|
Net cash provided from investing activities
|
1,463
|
|
|
431
|
|
|
705
|
|
|
(1,901
|
)
|
|
698
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Short-term debt, net
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
(20
|
)
|
Proceeds from issuance of debt, net of issuance costs
|
—
|
|
|
—
|
|
|
204
|
|
|
—
|
|
|
204
|
|
Principal payments on debt
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Repurchase of long-term notes
|
(52
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52
|
)
|
Repurchase of common stock
|
(250
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(250
|
)
|
Dividends paid to consolidated affiliates
|
—
|
|
|
(1,718
|
)
|
|
(491
|
)
|
|
2,209
|
|
|
—
|
|
Dividends paid to non-controlling interests
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
Other
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
Net cash used by financing activities
|
(297
|
)
|
|
(1,718
|
)
|
|
(335
|
)
|
|
2,209
|
|
|
(141
|
)
|
Effect of exchange rate changes on cash and equivalents
|
—
|
|
|
1
|
|
|
(18
|
)
|
|
—
|
|
|
(17
|
)
|
Net increase (decrease) in cash and equivalents
|
924
|
|
|
(42
|
)
|
|
(30
|
)
|
|
—
|
|
|
852
|
|
Cash and equivalents at beginning of period
|
191
|
|
|
54
|
|
|
580
|
|
|
—
|
|
|
825
|
|
Cash and equivalents at end of period
|
$
|
1,115
|
|
|
$
|
12
|
|
|
$
|
550
|
|
|
$
|
—
|
|
|
$
|
1,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net cash (used by) provided from operating activities
|
$
|
(143
|
)
|
|
$
|
121
|
|
|
$
|
261
|
|
|
$
|
—
|
|
|
$
|
239
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(5
|
)
|
|
(11
|
)
|
|
(213
|
)
|
|
—
|
|
|
(229
|
)
|
Dividends received from consolidated affiliates
|
233
|
|
|
108
|
|
|
—
|
|
|
(341
|
)
|
|
—
|
|
Proceeds from divestitures and asset sales
|
93
|
|
|
11
|
|
|
87
|
|
|
—
|
|
|
191
|
|
Other
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Net cash provided from (used by) investing activities
|
321
|
|
|
108
|
|
|
(128
|
)
|
|
(341
|
)
|
|
(40
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Short term debt, net
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Proceeds from issuance of debt, net of issuance costs
|
—
|
|
|
—
|
|
|
831
|
|
|
—
|
|
|
831
|
|
Principal payments on debt
|
(1
|
)
|
|
—
|
|
|
(823
|
)
|
|
—
|
|
|
(824
|
)
|
Repurchase of long-term notes
|
(52
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52
|
)
|
Repurchase of common stock
|
(50
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
Dividends paid to consolidated affiliates
|
—
|
|
|
(232
|
)
|
|
(109
|
)
|
|
341
|
|
|
—
|
|
Dividends paid to non-controlling interests
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
(27
|
)
|
Other
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Net cash (used by) provided from financing activities
|
(101
|
)
|
|
(232
|
)
|
|
(123
|
)
|
|
341
|
|
|
(115
|
)
|
Effect of exchange rate changes on cash and equivalents
|
—
|
|
|
2
|
|
|
16
|
|
|
—
|
|
|
18
|
|
Net increase (decrease) in cash and equivalents
|
77
|
|
|
(1
|
)
|
|
26
|
|
|
—
|
|
|
102
|
|
Cash and equivalents at beginning of period
|
114
|
|
|
55
|
|
|
554
|
|
|
—
|
|
|
723
|
|
Cash and equivalents at end of period
|
$
|
191
|
|
|
$
|
54
|
|
|
$
|
580
|
|
|
$
|
—
|
|
|
$
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
(Dollars in Millions)
|
Net cash (used by) provided from operating activities
|
$
|
(163
|
)
|
|
$
|
(75
|
)
|
|
$
|
413
|
|
|
$
|
—
|
|
|
$
|
175
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(4
|
)
|
|
(12
|
)
|
|
(242
|
)
|
|
—
|
|
|
(258
|
)
|
Proceeds from divestitures and asset sales
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
Dividends received from consolidated affiliates
|
109
|
|
|
173
|
|
|
—
|
|
|
(282
|
)
|
|
—
|
|
Cash associated with deconsolidations
|
—
|
|
|
—
|
|
|
(52
|
)
|
|
—
|
|
|
(52
|
)
|
Payments to acquire interest in joint ventures
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
Other
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Net cash provided from (used by) investing activities
|
105
|
|
|
161
|
|
|
(315
|
)
|
|
(282
|
)
|
|
(331
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Cash restriction, net
|
58
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
51
|
|
Short term debt, net
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
Proceeds from issuance of debt, net of issuance costs
|
492
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
503
|
|
Rights offering fees
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
Principal payments on debt
|
(501
|
)
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(513
|
)
|
Dividends paid to consolidated affiliates
|
—
|
|
|
(109
|
)
|
|
(173
|
)
|
|
282
|
|
|
—
|
|
Dividends paid to non-controlling interests
|
—
|
|
|
—
|
|
|
(31
|
)
|
|
—
|
|
|
(31
|
)
|
Other
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Net cash provided from (used by) financing activities
|
19
|
|
|
(109
|
)
|
|
(195
|
)
|
|
282
|
|
|
(3
|
)
|
Effect of exchange rate changes on cash and equivalents
|
—
|
|
|
(3
|
)
|
|
(20
|
)
|
|
—
|
|
|
(23
|
)
|
Net (decrease) increase in cash and equivalents
|
(39
|
)
|
|
(26
|
)
|
|
(117
|
)
|
|
—
|
|
|
(182
|
)
|
Cash and equivalents at beginning of period
|
153
|
|
|
81
|
|
|
671
|
|
|
—
|
|
|
905
|
|
Cash and equivalents at end of period
|
$
|
114
|
|
|
$
|
55
|
|
|
$
|
554
|
|
|
$
|
—
|
|
|
$
|
723
|
|
NOTE 21. Summary Quarterly Financial Data (Unaudited)
The following table presents summary quarterly financial data for continuing operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
(Dollars in Millions, Except Per Share Amounts)
|
Net sales
|
$
|
1,856
|
|
|
$
|
1,892
|
|
|
$
|
1,733
|
|
|
$
|
1,958
|
|
|
$
|
1,717
|
|
|
$
|
1,693
|
|
|
$
|
1,624
|
|
|
$
|
1,823
|
|
Gross margin
|
154
|
|
|
185
|
|
|
143
|
|
|
202
|
|
|
134
|
|
|
128
|
|
|
129
|
|
|
198
|
|
Income before income taxes
|
66
|
|
|
125
|
|
|
80
|
|
|
611
|
|
|
13
|
|
|
127
|
|
|
72
|
|
|
79
|
|
Income (loss) from continuing operations
|
84
|
|
|
86
|
|
|
60
|
|
|
545
|
|
|
(14
|
)
|
|
85
|
|
|
39
|
|
|
60
|
|
Net income (loss)
|
84
|
|
|
86
|
|
|
60
|
|
|
545
|
|
|
(11
|
)
|
|
84
|
|
|
34
|
|
|
60
|
|
Net income (loss) attributable to Visteon Corporation
|
$
|
69
|
|
|
$
|
65
|
|
|
$
|
43
|
|
|
$
|
513
|
|
|
$
|
(29
|
)
|
|
$
|
75
|
|
|
$
|
15
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Visteon Corporation
|
$
|
1.34
|
|
|
$
|
1.30
|
|
|
$
|
0.87
|
|
|
$
|
10.56
|
|
|
$
|
(0.56
|
)
|
|
$
|
1.41
|
|
|
$
|
0.28
|
|
|
$
|
0.74
|
|
Diluted earnings (loss) per share attributable to Visteon Corporation
|
$
|
1.33
|
|
|
$
|
1.29
|
|
|
$
|
0.85
|
|
|
$
|
10.32
|
|
|
$
|
(0.56
|
)
|
|
$
|
1.40
|
|
|
$
|
0.28
|
|
|
$
|
0.74
|
|
Income before income taxes, income (loss) from continuing operations, and net income (loss) attributable to Visteon Corporation for the quarter ended December 31, 2013 included a total gain of
$465 million
, including a gain of
$413 million
from the sale of its 50% equity interest in Yanfeng and a gain of
$52 million
from the remeasurement of Visteon's previous
40%
equity interest in YFVE to fair value in connection with a step acquisition that resulted in a
51%
controlling ownership interest in YFVE. Additionally,
during the fourth quarter of 2013, Visteon recorded equity earnings of
$27 million
, representing its
50%
share of a
$54 million
non-cash gain at Yanfeng. The gain resulted from the deconsolidation of YFVE at Yanfeng pursuant to Visteon's November 2013 step acquisition.
Net income (loss) attributable to Visteon Corporation for the quarter ended March 31, 2012 included
$41 million
of restructuring expenses, in which
$36 million
was recorded in connection with the previously announced closure of the Company's Cadiz Electronics operation in El Puerto de Santa Maria, Spain. Net income (loss) attributable to Visteon Corporation for the quarter ended June 30, 2012 included
$63 million
representing Visteon's equity interest in a non-cash gain recorded by Yanfeng, a
50%
owned non-consolidated affiliate of the Company. Net income (loss) attributable to Visteon Corporation for the quarter ended December 31, 2012 included
$35 million
of restructuring expenses, including
$30 million
of employee severance and termination benefits attributable to the Company's Interiors operations in Europe and
$4 million
of employee severance and termination benefits attributable to realignment of corporate and administrative functions to product group operations.