VEONEER : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

February 21, 2020 at 10:05 am EST

Introduction

The following MD&A is intended to help you understand the business operations
and financial condition of the Company. This MD&A is presented in the following
sections:

•Executive Overview
•Trends, Uncertainties and Opportunities
•Market Overview
•Non-U.S. GAAP Financial Measures
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance Sheet Arrangements
•Contractual Obligations and Commitments
•Significant Accounting Policies and Critical Accounting Estimates
Veoneer is a Delaware corporation with its principal executive offices in
Stockholm, Sweden. The Company functions as a holding corporation and owns two
principal operating subsidiaries, Veoneer AB and Veoneer US, Inc. On June 29,
2018, the Spin-Off of Veoneer from Autoliv, Inc. ("Autoliv") was completed
through the distribution by Autoliv of all the outstanding shares of common
stock of Veoneer to Autoliv's stockholders as of the close of business on June
12, 2018, the common stock record date for the distribution, in a tax-free, pro
rata distribution (the "Spin-Off"). On July 2, 2018, the shares of Veoneer
common stock commenced trading on the New York Stock Exchange under the symbol
"VNE" and the Veoneer Swedish Depository Receipts representing shares of Veoneer
common stock commenced trading on Nasdaq Stockholm under the symbol "VNE SDB."
Veoneer is a global leader in the design, development, manufacture, and sale of
automotive safety electronics with a focus on innovation, quality and
manufacturing excellence. Prior to the Spin-Off, Veoneer operated for almost
four years as an operating segment within Autoliv. Veoneer's safety systems are
designed to make driving safer and easier, more comfortable and convenient for
the end consumer and to intervene before a potential collision. Veoneer
endeavors to prevent vehicle accidents or reduce the severity of impact in the
event a crash is unavoidable. Through our customer focus, being an expert
partner with our customers, we intend to develop human centric systems that
benefit automotive light vehicle occupants.
Veoneer's current product offering includes automotive radars, mono-and
stereo-vision cameras, night driving assist (thermal sensing) systems,
positioning systems, ADAS (advanced driver assist systems) electronic control
units, passive safety electronics (airbag control units and crash sensors),
brake control systems and a complete ADAS software offering towards highly
automated driving (HAD) and eventually autonomous driving (AD). In addition, we
offer driver monitoring systems, LiDAR sensors, RoadScape positioning and other
technologies critical for HAD and AD solutions by leveraging our partnership
network and internally developed intellectual property.

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Executive Overview
Organic sales in the quarter were in-line with our expectations at the beginning
of the quarter, despite some weakness in the LVP. Our operating loss was lower
than expected at the beginning of the quarter, primarily due to continuing cost
control activities across the company, particularly with respect to customer
reimbursements and control of our RD&E costs. In general, our market adjustment
initiatives are continuing to positively impact our cost structure.
During 2020 we intend to take further actions under our market adjustment
initiative program. These actions include: further partnering, further focusing
our product portfolio, reviewing certain customer contracts, and a continued
focus on other cost improvement initiatives.
We are also continuing to define the scope and priorities of Zenuity, where the
Polestar 2 and the Volvo XC 40 Recharge, both launching in the upcoming months,
will be the first two vehicles with the full Zenuity software suite for
collaborative driving. This is a major milestone and achievement for Zenuity.
2020 is a major customer launch year for Veoneer and we are gearing up for the
launch of our fourth-generation vision systems during the first half of the
year. The bulk of the launches, and importantly the higher delivery volumes, are
concentrated toward the second half of the year which is when we expect Veoneer
to return to organic sales growth.
We are basing our 2020 outlook on our core Active Safety and Restraint Control
Systems businesses and our VBS US operations Brake Systems business, as we
completed the divestiture of the Asian operations of our VNBS joint venture on
February 3, 2020 as part of an on-going strategic review of our brake business.
In the early part of January, we participated to the Consumer Electronics Show
where we showcased our latest solutions in Collaborative Driving, which further
confirmed our decision to focus our sales, operations and development on Active
Safety solutions where the driver remains involved. Customer feedback to our
approach is very positive and we expect to win significant, profitable orders
with our focused, refined Active Safety portfolio throughout 2020.
We are currently monitoring and taking appropriate actions on a daily basis
related to the effects from the Coronavirus outbreak in China. As always, the
health and safety of our employees is our primary focus. To date we are not
aware of any cases of the virus with our employees, however it is too early to
assess the effects on our China business as this is an on-going situation.
For the next several quarters our focus is on preparing for: successful customer
launches in 2020 and heading into 2021, market adjustment initiatives to
continue to drive efficiencies and improve cash flow, and continuing to win
profitable new business.
2020 Outlook and Targets
Our 2020 outlook includes our core Active Safety and Restraint Control Systems
business (Electronics segment) and the VBS US operations since we completed the
VNBS JV divestiture on February 3, 2020.
Our current customer call-offs and deliveries point to a weak first quarter,
mostly in China and Europe, both sequentially from the previous quarter and
year-over-year. This leads us to expect a LVP decline for the first six months
and a decline in the low single digits for 2020, both as compared to 2019.
Veoneer expects to return to organic sales growth in the mid-single digits in
2020. This expected sales growth is driven by new program launches, mostly in
Active Safety, during the second half of the year. During the first half of 2020
our net sales are expected to remain relatively flat sequentially from the
second half of 2019, and then ramp-up sequentially during the second half of
2020.
During 2020, our market adjustment initiatives are expected to generate further
cost structure and balance sheet improvements. We expect RD&E, net along with
the operating loss and cash flow before financing to improve in 2020 from 2019
levels, on a comparable basis, although most of the improvement is expected to
come during the second half of the year. This excludes any one-time effects
related to our strategic reviews. Based on the market opportunities we currently
foresee in 2020, we estimate our order intake to be approximately $1 billion of
average annual sales for our core Electronics segment.
Lastly, our medium-term targets are based on our approximately $19 billion order
book, of which approximately 80% is for the Electronics segment (Active Safety
and Restraint Control Systems). We estimate the net sales of this segment will
increase to approximately $2.5 billion in 2022, which is a CAGR of approximately
19% from 2019. During this same period Active Safety net sales are expected to
approximately double.

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Financial Results
Significant aspects of the Company's financial results for the year ended
December 31, 2019, include the following.
Net Sales - Veoneer's net sales for the full year of 2019 declined by 15% to
$1,902 million as compared to 2018.
Gross Profit - The gross profit of $311 million for the full year of 2019 was
$119 million lower as compared to 2018. The negative volume and product mix
effects that caused the lower organic sales were the main contributors to the
gross profit decline. Net currency effects on the gross profit were
approximately $28 million unfavorable for the same period as compared to 2018,
primarily due to the stronger US dollar.
Operating Loss - The operating loss of $460 million for the full year of 2019
increased by $263 million as compared to 2018. Net currency effects on the
operating loss were negative $8 million for the same period as compared to 2018.
Net Loss - The net loss for the full year of 2019 increased by $228 million to
$522 million as compared to 2018. Veoneer's net loss from its equity method
investment (Zenuity) of $70 million for the full year of 2019 increased by $7
million as compared to 2018. This increase is mainly attributable to the hiring
and continued build-up of software engineers through the first half of 2019.
The increase in equity method investment loss was partially offset by interest
income, net of $8 million, which was an increase of $2 million as compared to
2018. Interest expense related to the convertible debt issuance in 2019 was
approximately $10 million for the full year of 2019.
The Income tax expense for the full year of 2019 decreased by $41 million as
compared to 2018, mainly due to a $10 million tax benefit from the convertible
debt and $26 million of discrete tax items in 2018.
The non-controlling interest loss of $22 million in the VNBS JV for the full
year of 2019 was $3 million higher as compared to 2018. The increase is mainly
due to the organic sales impact on earnings.
Loss per Share - The loss per share of $4.92 for the full year of 2019 increased
by $1.75 per share as compared to 2018 mainly due to the increase in the
operating loss. The share count increase from the common stock issuance in 2019
reduced the loss by $0.80 per share.
Trends, Uncertainties and Opportunities
Trend toward Collaborative Driving
The environment around us continues to be rapidly changing and we currently see
a shift across the automotive and autotech industries. The industry developments
during 2019 have further strengthened the trend toward advanced driver support -
Collaborative Driving - and away from fully autonomous cars for the consumer
based vehicle mass market.
New technologies, creating new levels of interaction and driver support are
starting to revolutionize driving, but we also see the driver being actively
involved for many years to come. While the industry refers to "Level 2+" or even
"Level 2++" Veoneer calls this Collaborative Driving, and includes any SAE level
of automation. At the same time there is a growing realization that the
introduction of truly self-driving cars will likely take longer and be more
expensive than previously anticipated. This fundamental insight opens up new
opportunities for companies, including Veoneer, but it also requires a
reprioritization of resources. As such, we believe that the market will stay
mainly focused on Level 1-Level 2+ autonomous driving solutions for the next
decade.
Global Regulatory and Test Rating Developments
Europe continues to take a proactive role in promoting or requiring Active
Safety technologies. The European New Car Assessment Program ("NCAP")
continuously updates its test rating program to include more active safety
technologies to help the European Union reach its target of cutting road
fatalities by 50% by 2030, as compared to 2020. We anticipate strong global
sensor adoption rate increases (forward, side and rear) due to the European
NCAP's push for crash avoidance, increased adoption rates due to growing demand
around ADAS software features, volume growth due to redundant sensing concepts
needed for higher levels of autonomy, potential opportunities in relation to
compliance with cyber-security and software updates and step-by-step increased
demand for connectivity components as a result.
On May 17, 2018, the European Commission proposed a new mandate, as party of the
EU General Safety Regulation road-map through 2028, to make certain Active
Safety features compulsory in light vehicles by 2022. During March of 2019 the
EU mandate was adopted as initially proposed by the European Commission. We
believe that adoption of the mandate will significantly expand demand for our
Active Safety products. Indeed, with respect to sensors and Advanced Driver

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Assistance Systems (ADAS) software features, our order intake since the adoption
of the mandate seems to reflect the anticipated increase in demand. However,
during 2019 we have seen OEM delays in the sourcing of these technologies as
customers reconsider how they want to architect and design, in a scalable way to
include these new standard technologies. In addition, we believe that the
mandate and the EU General Safety Regulations (GSR) generally will influence
other market regulators as they evaluate their respective vehicle test rating
programs and safety legislation.
In China, the Ministry of Industry and Information Technology issued the Key
Working Points of Intelligent Connected Vehicle Standardization for 2018 to
promote and facilitate the development of the intelligent connected vehicles
industry, and advance the development of fundamental standards and those that
are in urgent demand. The guideline has pointed out that more than 30 key
standards will be defined by 2020 to fund the systems for (ADAS) and low-level
autonomous driving, and a system of over 100 standards will be set up by 2025
for higher level autonomous driving. During the third quarter of 2018, the
Chinese government commenced testing of new vehicles according to the new China
New Car Assessment Program (CNCAP) where active safety features like Autonomous
Emergency Braking (AEB) are required to achieve the maximum safety rating.
On October 4, 2018, the U.S. Department of Transportation (DoT) issued new
voluntary guidelines on automated driving systems (ADS) under its "Preparing for
the Future of Transportation: Automated Vehicles 3.0" initiative, building on
its "Vision for Safety 2.0" from September 2017, which prioritized aligning
federal guidance around twelve safety design elements of interest to the auto
industry. This initiative should have a positive impact on the adoption of ADAS
and Highly Automated Driving (HAD) on the road towards Autonomous Vehicles (AV).
In 2018 the UN Economic Commission for Europe (ECE) created a new Working Party
to deal with regulations for Automated/Autonomous and Connected Vehicles (GRVA).
In addition to the EU and Japan, which have both started to work closely
together to develop ADAS regulations, in the last three years, the U.S. and
China have both indicated a willingness to be active in several working groups
towards harmonization of future regulations for ADAS and AV. This would create a
common umbrella for countries which follow type-approval rules (EU, Japan,
Australia) and countries which are outside of type-approval system, e.g., under
self-certification regimes (U.S., Korea) or specific national rules (China).
Key future potential regulations are expected for (i) safety critical
ADAS-features (e.g. AEB); (ii) Highway AV-features (Physical Tests + Real World
Test Drive + Audit); (iii) Cyber-security and Software updates; and (iv)
Connected Vehicles. On one hand, the agreement on minimal common base
requirements for the industry will take a longer time and therefore may postpone
introduction of regulations. On the other hand, the harmonization with base
requirements would help the industry while a more active position from China may
help to pull forward some safety critical ADAS technologies which are not yet
considered as relevant for regulation in EU and Japan (e.g. Blind Spot or Night
Vision).
Market Overview
Millions (except where specified) Light Vehicle Production by Region - 2019
IHS as of January 16, 2020 China Japan Rest of Asia Americas Europe Other Total
Full Year 2019 23.3 9.0 12.2 18.3 21.0 2.0 85.9
Change vs. 2018 (9) % 0 % (6) % (4) % (4) % (23) % (6) %

For the full year of 2019, the global light vehicle production (according to
IHS) declined by approximately 6% as the expected second half improvement for
2019 did not materialize as expected at the beginning of 2019, mainly due to a
continued deterioration in China, RoA and Western Europe throughout 2019. This
decline is approximately 7 percentage points lower than expected at the
beginning of 2019. This is the largest single year decline since the financial
crisis in 2009. Despite the overall light vehicle production decline as compared
to 2018, North America remained relatively stable, and near peak levels, where
the decline in 2019 was 4% to 15.1 million vehicles, as compared to 2018.
This is the second consecutive annual decline in light vehicle production from
2017 when a record 92 million vehicles were produced. The IHS outlook for global
light vehicle production in 2020 is for a 1% decline from 2019 levels to 85
million vehicles. China, Japan and Western Europe are expected to be the main
drivers of the decline in 2020 as compared to 2019.
Non-U.S. GAAP Financial Measures
Non-U.S. GAAP financial measures are reconciled throughout this report.
In this report we refer to organic sales or changes in organic sales growth, a
non-U.S. GAAP financial measure that we, investors and analysts use to analyze
the Company's sales trends and performance. We believe that this measure assists
investors and management in analyzing trends in the Company's business because
the Company generates approximately 68%

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of its sales in currencies other than in U.S. dollars (its reporting currency)
and currency rates have been and can be rather volatile. The Company has
historically made several acquisitions and divestitures, although none that
impacted the reporting periods in question. Organic sales and organic sales
growth represent the increase or decrease in the overall U.S. dollar net sales
on a comparable basis, allowing separate discussions of the impact of
acquisitions/divestitures and exchange rates on the Company's performance. The
tables in this report present the reconciliation of changes in the total U.S.
GAAP net sales to changes in organic sales growth.
The Company uses in this report EBITDA, a non-U.S. GAAP financial measure, which
represents the Company's net income excluding interest expense, income taxes,
depreciation and amortization and including loss from equity method investment.
The Company also uses Segment EBITDA, a non-U.S. GAAP financial measure, which
represents the Company's EBITDA which has been further adjusted on a segment
basis to exclude certain corporate and other items. We believe that EBITDA and
Segment EBITDA are useful measures for management, analysts and investors to
evaluate operating performance on a consolidated and reportable segment basis,
because it assists in comparing our performance on a consistent basis. The
tables below provide reconciliations of net income (loss) to EBITDA and Segment
EBITDA.
The Company uses in this report net working capital, a non-U.S. GAAP financial
measure, which is defined as current assets (excluding cash and cash
equivalents) minus current liabilities excluding short-term debt and net assets
and liabilities held for sale. The Company also uses in this report cash flow
before financing activities, a non-U.S. GAAP financial measure, which is defined
as net cash used in operating activities plus net cash used in investing
activities. Management uses these measures to improve its ability to assess
operating performance at a point in time as well as the trends over time. The
tables below provide a reconciliation of current assets and liabilities to net
working capital and cash flow before financing activities.
Investors should not consider these non-U.S. GAAP measures as substitutes, but
rather as additions, to financial reporting measures prepared in accordance with
U.S. GAAP. These measures, as defined, may not be comparable to similarly titled
measures used by other companies.
Forward-looking non-U.S. GAAP financial measures used in this report are
provided on a non-U.S. GAAP basis. Veoneer has not provided a U.S. GAAP
reconciliation of these measures because items that impact these measures, such
as foreign currency exchange rates and future investing activities, cannot be
reasonably predicted or determined. As a result, such reconciliations are not
available without unreasonable efforts and Veoneer is unable to determine the
probable significance of the unavailable information.
Results of Operations
Fiscal Year 2019 compared to 2018
The following tables show Veoneer's performance by segment for the years ended
December 31, 2019 and 2018 along with components of change compared to the prior
year.
Electronics Segment Year Ended December 31 Components of Change vs. Prior Year
Dollars in millions, (except 2019 2018 U.S. GAAP Reported Currency Organic1
where specified) $ % $ % Chg. $ Chg. % $ % $ %
Net Sales $ 1,530 $ 1,800 $ (270) (15) % $ (66) (4) % $ (204) (11) %
Operating Loss / Margin $ (324) (21.2) % $ (116) (6.4) % $ (208)
EBITDA1 / % $ (242) (15.8) % $ (43) (2.4) % $ (199)
Associates 7,384 7,105 279

1 Non-U.S. GAAP measure reconciliation for Organic Sales and EBITDA
Net Sales - The net sales in the Electronics segment decreased by $270 million
to $1,530 million for the full year of 2019 as compared to 2018. This decline
was mainly due to the organic sales1 decline in Active Safety and Restraint
Control Systems of $81 million and $123 million, respectively, along with the
currency translation effects of $66 million.
Operating Loss - The operating loss for the Electronics segment of $324 million
for the full year of 2019 increased by $208 million as compared to 2018. This
increase was mainly due to the negative volume and product mix effects causing
lower organic sales in Active Safety and Restraint Control Systems and an
increase in RD&E cost to support future organic sales growth and current
development programs.
EBITDA1 - The EBITDA loss for the Electronics segment decreased by $199 million
to negative $242 million for the full year of 2019 as compared to 2018. This was
mainly due to the increase in operating loss as depreciation and amortization
increased by $9 million.

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Associates - The number of associates in the Electronics segment increased by
279 to 7,384 as compared to 2018. This increase is primarily due to the hiring
of engineers to support the strong order intake for future sales growth.
Deliveries - The quantities delivered during the full year of 2019 were 16.0 and
8.3 million units for Restraint Controls Systems and Active Safety,
respectively.
Brake Systems Segment Year Ended December 31 Components of Change vs. Prior Year
Dollars in millions, 2019 2018 U.S. GAAP Reported Currency Organic1
(except where specified) $ % $ % Chg. $ Chg. % $ % $ %
Net Sales $ 372 $ 428 $ (56) (13) % $ (3) (1) % $ (53) (12) %
Operating Loss / Margin $ (64) (17.0) % $ (30) (7.1) % $ (34)
EBITDA1/ % $ (32) (8.5) % $ 7 1.7 % $ (39)
Associates 1,447 1,452 (5)

1 Non-U.S. GAAP measure reconciliation for Organic Sales and EBITDA
Net Sales - The net sales in the Brake Systems segment decreased by $56 million
to $372 million for the full year of 2019 as compared to 2018. This sales
decline was mainly attributable to temporary lower volumes on certain Honda
vehicle models, mainly in China and Japan. Operating Loss - The operating loss
for the Brake Systems segment increased by $34 million to $64 million for the
full year of 2019 as compared to 2018. This increase was mainly due to the
negative volume and product mix effects causing lower organic sales and a slight
increase in RD&E, net to support future organic sales growth.
Within the Brake Systems segment, the VNBS JV Asia operations (including China
and Japan) generated Net Sales of $313 million for the full year of 2019 and
$370 million for the full year of 2018. The RD&E, net for the VNBS JV Asia
operations (including China and Japan) was approximately $25 million in 2019.
EBITDA1 - The EBITDA loss for Brake Systems segment decreased to negative $32
million for the full year of 2019 as compared to $7 million in 2018, mainly due
to the increase in the operating loss for the segment. Associates - The number
of associates in the Brake Systems segment declined slightly to 1,447 as
compared to 2018. An increase in RD&E was mostly offset by reductions in direct
and indirect labor associates. Deliveries - The quantities delivered during the
full year of 2019 were 1.7 million units for Brake Systems.
Corporate and Other Year Ended December 31
Dollars in millions, 2019 2018 U.S. GAAP Reported
(except where specified) $ % $ % Chg. $ Chg.%
Net Sales $ - $ - $ -
Operating Loss / Margin $ (72) - % $ (51) - % $ (21)
Segment EBITDA1 / Margin $ (71) - % $ (51) - % $ (20)
Associates 43 43 -

1 Non-U.S. GAAP measure reconciliation for EBITDA
Operating Loss and EBITDA1 - The operating and EBITDA loss for Corporate and
other for the full year of 2019 increased to $72 and $71 million, respectively,
as compared to $51 million in 2018, mainly due to additional costs associated
with being a standalone listed company.
Associates - The number of associates remained unchanged at 43 as compared to
2018 mainly due to the hiring of personnel to support a standalone listed
company that was completed in 2018.
The Veoneer associates and financial figures for the full year of 2019 are not
comparable since the first half of 2018 is based on carve-out reporting.

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Net Sales by Product
The following tables show Veoneer's consolidated net sales by product for the
years ended December 31, 2019 and 2018 along with components of change compared
to the prior year.
Consolidated Net Sales Year Ended December 31 Components of Change vs. Prior Year
Dollars in millions, 2019 2018 U.S. GAAP Reported Currency Organic1
(except where specified) $ $ Chg. $ Chg. % $ % $ %
Restraint Control Systems 822 974 (152) (16) % (29) (3) % (123) (13) %
Active Safety 708 825 (118) (14) % (37) (4) % (81) (10) %
Brake Systems 372 428 (56) (13) % (3) (1) % (53) (12) %
Total $ 1,902 $ 2,228 $ (326) (15) % $ (69) (3) % $ (257) (12) %

1 Non-U.S. GAAP measure reconciliation for Organic Sales
Veoneer Performance
The following table shows Veoneer's performance for the year ended December 31,
2019 and 2018 along with components of change compared to the prior year.
Net Sales - Veoneer's net sales for the full year of 2019 declined by 15% to
$1,902 million as compared to 2018. Organic sales1 declined by 12% while the
combined currency translation effects were 3%. More than half of the organic
sales decline for the full year of 2019 was in North America, and was related to
both the Restraint Control Systems and the Active Safety product areas.
The LVP, according to IHS, declined by close to 6% for the full year of 2019 as
compared to 2018. This decrease was mainly attributable to China, Western
Europe, North America, South Korea and India. The global LVP of close to 86
million vehicles for 2019 is the lowest level since 2015 when the global LVP was
approximately 86 million.
Restraint Control Systems - Net sales for the full year of 2019 decreased by 16%
to $822 million as compared to 2018. The organic sales1 decline of 13% was due
to lower volumes in North America, China and South Korea, where we have a
temporary phase-out of our products on certain vehicle models, and lower
underlying LVP.
Active Safety - Net sales for the full year of 2019 decreased by 14% to $708
million as compared to 2018. This decline was driven by currency translation
effects of 4% while organic sales1 declined by 10%. The LVP in our major markets
for Active Safety (Western Europe, North America, China and Japan), where we
have a relatively higher CPV on premium brands produced in those markets,
declined by close to 6%.
Strong demand for mono, stereo and night vision (thermal sensing) systems and
ADAS ECUs on several models drove an increase in organic sales. This growth was
more than offset by the negative product mix impact from 24GHz to 77GHz radar
technology and the phase-out of mono vision cameras on certain BMW models.
Brake Systems - Net sales for the full year of 2019 decreased by 13% to $372
million as compared to 2018. The organic sales¹ decline of 12% was mainly due to
lower volumes in China and Japan, where we have a temporary phase-out of our
products on certain Honda vehicle models.

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Income Statement                                                     Year Ended December 31
Dollars in millions,                                2019                                               2018 3
(except per share data)                            $                   %              $                   %               Change
Net sales                               $ 1,902                            $ 2,228                            $  (326)
Cost of sales                            (1,591)            (83.6) %        (1,798)            (80.7) %           207
Gross profit                                311              16.4  %           430              19.3  %          (119)
Selling, general & administrative          (189)             (9.9) %          (156)             (7.0) %           (33)

expenses


Research, development & engineering        (562)            (29.5) %          (466)            (20.9) %           (96)
expenses, net

Amortization of intangibles                 (20)             (1.1) %           (23)             (1.0) %             3
Other income                                  -                 -  %            18               0.8  %           (18)
Operating loss                             (460)            (24.2) %          (197)             (8.8) %          (263)
Loss from equity method investments         (70)             (3.7) %           (63)             (2.8) %            (7)
Interest income                              20               1.1  %             7               0.3  %            13
Interest (expense)                          (12)             (0.6) %            (1)              0.0  %           (11)
Other non-operating items, net                1               0.0  %             -                 -  %             1
Loss before income taxes                   (521)            (27.4) %          (253)            (11.4) %          (268)
Income tax expense                           (1)              0.0  %           (42)             (1.9) %            41
Net loss1                                  (522)            (27.4) %          (294)            (13.2) %          (228)
Less: Net loss attributable to              (22)             (1.2) %           (19)             (0.9) %            (3)
non-controlling interest
Net loss attributable to controlling    $  (500)            (26.3) %       $  (276)            (12.4) %       $  (224)

interest


Net loss per share - basic2             $ (4.92)                           $ (3.17)                           $ (1.75)
Weighted average number of shares        101.62                              87.16                              14.46

outstanding in millions2




1 Including Corporate and other sales.
2 Basic number of shares used to compute net loss per share. Participating share
awards with right to receive dividend equivalents are (under the two class
method) excluded from EPS calculation.
3 The first half of 2018 are according to Carve-out reporting from Autoliv
Spin-Off of Veoneer.
Gross Profit - The gross profit of $311 million for the full year of 2019 was
$119 million lower as compared to 2018. The negative volume and product mix
effects that caused the lower organic sales were the main contributors to the
gross profit decline. Net currency effects on the gross profit were
approximately $28 million unfavorable for the same period as compared to 2018,
primarily due to the stronger US dollar.
Operating Loss - The operating loss of $460 million for the full year of 2019
increased by $263 million as compared to 2018. Net currency effects on the
operating loss were negative $8 million for the same period as compared to 2018.
The RD&E, net increase of $96 million for the full year of 2019 as compared to
2018 was mainly due to the ramp-up of engineering hiring during 2018 to support
future organic sales growth.
The SG&A increase of $33 million for the full year of 2019 as compared to 2018
was mostly related to the additional costs associated with being a standalone
listed company during the first half of 2019. Other income was $18 million lower
for the full year of 2019 as compared to 2018 primarily due to the reversal of
the $14 million MACOM earn-out provision.
Net Loss - The net loss for the full year of 2019 increased by $228 million to
$522 million as compared to 2018. Veoneer's net loss from its equity method
investment (Zenuity) of $70 million for the full year of 2019 increased by $7
million as compared to 2018. This increase is mainly attributable to the hiring
and continued build-up of software engineers through the first half of 2019.
The increase in equity method investment loss was partially offset by interest
income, net of $8 million, which was an increase of $2 million as compared to
2018. Interest expense related to the convertible debt issuance in 2019 was
approximately $10 million for the full year of 2019.
The Income tax expense for the full year of 2019 decreased by $41 million as
compared to 2018, mainly due to a $10 million tax benefit from the convertible
debt and $26 million of discrete tax items in 2018.The non-controlling interest
loss of $22 million in the VNBS JV for the full year of 2019 was $3 million
higher as compared to 2018. The increase is mainly due to the organic sales
impact on earnings.
Loss per Share - The loss per share of $4.92 for the full year of 2019 increased
by $1.75 per share as compared to 2018 mainly due to the increase in the
operating loss. The share count increase from the common stock issuance in 2019
reduced the loss by $0.80 per share.

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Results of Operations
Fiscal Year 2018 compared to 2017
Veoneer's results of operations for the year ended December 31, 2018 compared to
the year ended December 31, 2017 along with components of change compared to the
prior year that have been omitted under this item can be found in Part II, Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Form 10-K for the year ended December 31, 2018 filed
with the SEC on February 22, 2019.
Reconciliations of U.S. GAAP to non U.S. GAAP
Dollars in millions                                   Year Ended December 31
Net Loss to EBITDA                                   2019                   2018
Net Loss                                        $     (522)               $ (294)
Depreciation and amortization                          115                   111
Loss from equity method investment                      70


Interest and other non-operating items, net             (9)

(7)


Income tax expense / (benefit)                           1                    42
EBITDA                                          $     (345)               $  (87)



Dollars in millions               Year Ended December 31
Segment EBITDA to EBITDA        2019                     2018
Electronics                $      (242)                $ (43)
Brake Systems                      (32)                    7
Segment EBITDA                    (274)                  (36)
Corporate and other                (71)                  (51)
EBITDA                     $      (345)                $ (87)



Dollars in millions                                                            Year Ended December 31
Working Capital to Net Working Capital                                      2019                     2018
Total current assets                                                   $     1,649                $  1,543
less Total current liabilities                                                 591                     636
Working Capital                                                              1,058                     907
less Cash and cash equivalents                                                (859)                   (864)
less Short-term debt                                                             3                       -
less Net current assets and liabilities held for sale                         (199)                      -
Net Working Capital                                                    $         3                $     42



Dollars in millions                                Year Ended December 31
Cash Flow before Financing Activities             2019

2018


Net cash used in Operating Activities        $     (325)               $

(179)


plus Net cash used in Investing Activities         (265)

(185)


Cash flow before Financing Activities        $     (590)               $

(364)




Liquidity and Capital Resources
Liquidity
As of December 31, 2019, the Company had cash and cash equivalents of $894
million (includes $35 million in assets held for sale), which will be primarily
used for ongoing working capital requirements, capital expenditures and
investments in joint ventures particularly Zenuity.
As of February 3, 2020, Veoneer received approximately $170 million cash from
the sale of VNBS Asia operations.

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The Company has no material obligations other than short-term obligations
related to operations, inventory, services, tooling and property, plant and
equipment purchased in the ordinary course of business.
On June 30, 2017, Veoneer committed to make a $15 million investment in Autotech
Fund I, L.P. pursuant to a limited partnership agreement, and as a limited
partner, will periodically make capital contributions toward this total
commitment amount. As of December 31, 2019, Veoneer contributed a total of
approximately $10 million to the fund. As of December 31, 2019, the Company has
received approximately $2 million of distributions from the fund. The initial
term of the fund is set to expire on December 31, 2025. This fund focuses
broadly on the automotive industry and complements the Company's innovation
strategy, particularly in the areas of active safety and autonomous driving.
Under the limited partnership agreement, the general partner has the sole and
exclusive right to manage, control and conduct the affairs of the fund.
Cash Flow
                                                           Year Ended December 31
(Dollars in millions)                                     2019                   2018
Selected cash flow items                                   $                      $
Net working capital1                                 $        3               $    42
Net cash provided / (used) by operating activities   $     (325)              $  (179)
Capital expenditures                                 $     (213)              $  (188)
Equity method investment                             $      (58)              $   (71)
Net Cash Used in investing activities                $     (265)              $  (185)
Net Cash Provided by financing activities            $      636

$ 1,226

1 Non-U.S. GAAP measure see reconciliation for Net Working Capital
Net Working Capital1 - Net working capital of $3 million improved by $39 million
during the full year of 2019 as compared to 2018 primarily due to a reduction in
customer trade receivables and inventories, net.
Net cash used in operating activities - Net cash used in operating activities of
$325 million during the full year of 2019 was $146 million higher as compared to
2018. The higher net loss was partially offset by the positive change in net
working capital1 and other, net.
Net cash used in investing activities - Net cash used in investing activities of
$265 million during the full year of 2019 increased $80 million as compared to
2018 due to higher capital expenditures and lower related party notes receivable
partially offset by Zenuity funding.
Net Cash Provided by Financing Activities - Net cash provided by financing
activities for the year ended December 31, 2019 includes the net capital raise
of $603 million derived from the issuance of common stock and convertible debt
notes in May of 2019.
Capital Expenditures - Capital expenditures of $213 million, or 11% of sales,
for the full year of 2019 increased by $25 million as compared to 2018. We
expect the level of capital expenditures to be ~11% of sales for 2020, including
VBS, to support sales growth in 2020 and in the future.
Year Ended December 31
Associates 2019 2018
Total Associates 8,874 8,600
Whereof: Direct Manufacturing 2,002 2,083
R,D&E 4,907 4,676
Temporary 1,396 1,329

The increase in associates of 274 as compared to the same period in 2018 to
8,874 from 8,600 is primarily due to the net hiring of 231 associates to support
our investment in engineering for future growth opportunities. Temporary
associates increased by 67 as compared to 2018 due to the uncertain macro
situation and new program launches.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.

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Contractual Obligations and Commitments
The table below reflects our contractual obligations as of December 31, 2019.
The Company's future contractual obligations have not changed materially.
(Dollars in millions) Payments due by Period
Less More
than 1 1-3 3-5 than 5
Aggregate Contractual Obligations 1 Total year years years years

Operating lease obligations 118 22 33 21 42

Pension contribution requirements 27 2 4 5 16
Finance lease obligations 51 3 7 7 34
Other non-current liabilities
reflected on the balance sheet 6 1 - - 5
4.00% Convertible Senior Notes and
Financial loans 218 3 3 212 -
Fixed Interest on 4.00% Convertible
Senior Notes 37 8 17 12 -
Total $ 457 $ 39 $ 64 $ 257 $ 97

1 Excludes contingent liabilities arising from litigation, arbitration,
regulatory actions or income taxes
Contractual obligations include related party long-term debt, leases and
purchase obligations that are enforceable and legally binding on the Company.
Non-controlling interest is not included in this table.
Operating lease obligations: The Company leases certain offices, manufacturing
and research buildings, machinery, automobiles and data processing and other
equipment. Such operating leases, some of which are non-cancelable and include
renewals, expire on various dates. See Note 16, Commitments and Contingencies,
to the consolidated financial statements included herein.
Pension contribution requirements: The Company sponsors defined benefit plans
that cover eligible employees in Japan, Canada, and France. In 2020, the
expected contribution to all plans, including direct payments to retirees, is
$2 million, of which the major contribution is $1 million for our Canada pension
plans. Due to volatility associated with future changes in interest rates and
plan asset returns, the Company cannot predict with reasonable reliability the
timing and amounts of future funding requirements, and therefore the above table
shows expected contributions (to funded plans, or direct payments to retirees in
the case of unfunded plans) for 2020, but only shows benefit payments (from
funded plans, or direct to retirees in the case of unfunded plans) for 2021 and
subsequent years. We may elect to make contributions in excess of the minimum
funding requirements for the Japan, Canada, and France plans in response to
investment performance and changes in interest rates, or when we believe that it
is financially advantageous to do so and based on other capital requirements.
This contribution amount does not include plans considered to be multiemployer
with Autoliv. See Note 2, Summary of Significant Accounting Policies, and Note
17, Retirement Plans, to the consolidated financial statements included herein.
4% Convertible Senior Notes and Financial loans: On May 28, 2019, the Company
issued, in a registered public offering in the U.S., the Notes with an aggregate
principal amount of $207 million. The Notes bear interest at a rate of 4.00% per
year payable semi-annually in arrears on June 1 and December 1 of each year,
beginning on December 1, 2019. The Notes will mature on June 1, 2024, unless
repurchased, redeemed or converted in accordance with their terms prior to such
date.
Unconditional purchase obligations: There are no material obligations other than
short-term obligations related to inventory, services, tooling, and property,
plant and equipment purchased in the ordinary course of business.
Autotech Venture Fund: On June 30, 2017, Veoneer committed to make a $15 million
investment in Autotech Fund I, L.P. pursuant to a limited partnership agreement,
and, as a limited partner, will periodically make capital contributions toward
this total commitment amount. As of December 31, 2019, Veoneer has in total
contributed $10 million to the fund. As of December 31, 2019, the Company has
received approximately $2 million of distributions from the fund. The initial
term of the fund is set to expire on December 31, 2025. This fund focuses
broadly on the automotive industry and complements the Company's innovation
strategy, particularly in the areas of active safety and autonomous driving.
Under the limited partnership agreement, the general partner has the sole and
exclusive right to manage, control, and conduct the affairs of the fund.

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Significant Accounting Policies and Critical Accounting Estimates
New Accounting Pronouncements
The Company has considered all applicable recently issued accounting guidance.
The Company has summarized in Note 2, Summary of Significant Accounting Policies
to the consolidated financial statements included herein each of the recently
issued accounting pronouncements and stated the impact or whether management is
continuing to assess the impact.
Critical Accounting Estimates
The application of accounting policies necessarily requires judgments and the
use of estimates by a Company's management. Actual results could differ from
these estimates. By their nature, these judgments are subject to an inherent
degree of uncertainty. These judgments are based on our historical experience,
terms of existing contracts, and management's evaluation of trends in the
industry, information provided by our customers and information available from
other outside sources, as appropriate. Certain policies relate to estimates that
involve matters that are highly uncertain at the time the accounting estimate is
made and different estimates or changes to an estimate could have a material
impact on the reported financial position, changes in financial condition or
results of operations. Such critical estimates are discussed below. For these,
materially different amounts could be reported under varied conditions and
assumption. Other items in the Company's consolidated financial statements
require estimation, however, in our judgment, they are not as critical as those
discussed below.
Revenue Recognition
In accordance with ASC 606, Revenue from Contracts with Customers, revenue is
measured based on consideration specified in a contract with a customer,
adjusted for any variable consideration (i.e. price concessions or annual price
adjustments) and estimated at contract inception. The variable consideration
calculation involves management assumptions including the volume of light
vehicle production, future sales volumes for specific parts, or future price
concessions to be granted. The Company recognizes revenue when it satisfies a
performance obligation by transferring control over a product to a customer.
In addition, from time to time, Veoneer may make payments to customers in
connection with ongoing and future business. These payments to customers are
generally recognized as a reduction to revenue at the time of the commitment to
make these payments, unless certain criteria are met, warranting capitalization.
If the payments are capitalized, the amounts are amortized as the related goods
are transferred. As of December 31, 2019, and 2018, the Company capitalized $81
million and $62 million, respectively, in Other non-current assets related
payments to customers. The Company assesses these amounts for impairment. There
was no impairment.
Taxes assessed by a governmental authority that are both imposed on and
concurrent with a specific revenue-producing transaction, that are collected by
the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight after control of a
product has transferred to a customer are accounted for as a fulfillment cost
and are included in cost of sales.
Nature of goods and services
The following is a description of principal activities from which the Company
generates its revenue. The Company has two operating segments, Electronics and
Brake Systems. Electronics includes all of electronics resources and expertise,
restraint control systems and active safety products. Brake Systems provides
brake control and actuation systems. The principal activities are essentially
the same for each of the segments. Both of the segments generate revenue from
the sale of production parts to original equipment manufacturers ("OEMs").
The Company accounts for individual products separately if they are distinct
(i.e., if a product is separately identifiable from other items and if a
customer can benefit from it on its own or with other resources that are readily
available to the customer). The consideration, including any price concession or
annual price adjustments, is based on their stand-alone selling prices for each
of the products. The stand-alone selling prices are determined based on the
cost-plus margin approach.
The Company recognizes revenue for production parts primarily at a point in
time.

52
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For production parts with revenue recognized at a point in time, the Company
recognizes revenue upon shipment to the customers and transfer of title and risk
of loss under standard commercial terms (typically F.O.B. shipping point). There
are certain contracts where the criteria to recognize revenue over time have
been met (e.g., there is no alternative use to the Company and the Company has
an enforceable right to payment). In such cases, at period end, the Company
recognizes revenue and a related asset and associated cost of goods sold and
inventory. However, the financial impact of these contracts is immaterial
considering the very short production cycles and limited inventory days on hand,
which is typical for the automotive industry.
The amount of revenue recognized is based on the purchase order price and
adjusted for variable consideration (i.e. price concessions or annual price
adjustments). Customers typically pay for the production parts based on
customary business practices with payment terms averaging 30 days.
Contract balances
The contract assets related to the Company's rights to consideration for work
completed but not billed (generally in conjunction with contracts for which
revenue is recognized over time) at the reporting date on production parts. The
contract assets are reclassified into the receivables balance when the rights to
receive payments become unconditional. There have been no impairment losses
recognized related to contract assets arising from the Company's contracts with
customers.
As of December 31, 2019, the Company has capitalized $12 million of direct and
incremental contract costs incurred in connection with obtaining a contract with
a customer. These costs will be amortized as the related goods are transferred.
Business Combinations
In accordance with accounting guidance for the provisions in FASB ASC 805,
Business Combinations, the Company allocates the purchase price of an acquired
business to its identifiable assets and liabilities based on estimated fair
values. The excess of the purchase price over the amount allocated to the assets
and liabilities, if any, is recorded as goodwill. In addition, an acquisition
may include a contingent consideration component. The fair value of the
contingent consideration is estimated as of the date of the acquisition and is
recorded as part of the purchase price. Each quarter this contingent
consideration is re-measured using the discounted cash flow method.
The Company uses actual revenue levels as well as changes in the estimated
probability of different revenue scenarios to estimate fair values. The Company
has engaged outside appraisal firms to assist in the fair value determination of
identifiable intangible assets and any other significant assets or liabilities.
The Company adjusts the preliminary purchase price allocation, as necessary, up
to one year after the acquisition closing date as the Company obtains more
information regarding asset valuations and liabilities assumed.
The Company's purchase price allocation methodology contains uncertainties
because it requires management to make assumptions and to apply judgment to
estimate the fair value of acquired assets and liabilities. Management estimates
the fair value of assets and liabilities based upon quoted market prices, the
carrying value of the acquired assets and widely accepted valuation techniques,
including discounted cash flows and market multiple analyses. Unanticipated
events or circumstances may occur which could affect the accuracy of our fair
value estimates, including assumptions regarding industry economic factors and
business strategies.
Other estimates used in determining fair value include, but are not limited to,
future cash flows or income related to intangibles, market rate assumptions,
actuarial assumptions for benefit plans and appropriate discount rates. The
Company estimates the fair value based upon assumptions believed to be
reasonable, but these are inherently uncertain, and therefore, may not be
realized. Accordingly, there can be no assurance that the estimates,
assumptions, and values reflected in the valuations will be realized, and actual
results could vary materially.
Equity Method Investments
The Company initially accounts for an equity method investment at its fair value
on the date of acquisition. See Note 2, Summary of Significant Accounting
Policies and Note 12, Investments related to the Company's investment in
Zenuity, to the consolidated financial statements included.

53
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Inventory Reserves
Inventories are evaluated based on individual or, in some cases, groups of
inventory items. Reserves are established to reduce the value of inventories to
the lower of cost and net realizable value. Net realizable value is the
estimated selling prices in the ordinary course of business, less reasonably
predictable costs of completion, disposal and transportation. Excess inventories
are quantities of items that exceed anticipated sales or usage for a reasonable
period. The Company has guidelines for calculating provisions for excess
inventories based on the number of months of inventories on hand compared to
anticipated sales or usage. Management uses its judgment to forecast sales or
usage and to determine what constitutes a reasonable period.
There can be no assurance that the amount ultimately realized for inventories
will not be materially different than that assumed in the calculation of the
reserves.
Goodwill and Intangibles
The Company evaluates the carrying value and useful lives of long-lived assets
when indications of impairment are evident or it is likely that the useful lives
have decreased, in which case the Company depreciates the assets over the
remaining useful lives. Impairment testing is primarily performed by using the
cash flow method based on undiscounted future cash flows. Estimated undiscounted
cash flows for a long-lived asset being evaluated for recoverability are
compared with the respective carrying amount of that asset. If the estimated
undiscounted cash flows exceed the carrying amount of the assets, the carrying
amounts of the long-lived asset are considered recoverable and an impairment is
not recorded. However, if the carrying amount of a group of assets exceeds the
undiscounted cash flows, an entity must then estimate, generally using a
discounted cash flow model the long-lived assets' fair value to determine
whether an impairment loss should be recognized.
The Company reviews goodwill for impairment annually in the fourth quarter or
more frequently if events or changes in circumstances indicate the assets might
be impaired. The impairment test was performed on December 31 in 2018 but the
Company elected changed its annual impairment test date to October 31 in 2019.
In conducting its impairment testing, the Company compares the estimated fair
value of each of its reporting units to the related carrying value of the
reporting unit. If the estimated fair value of a reporting unit exceeds its
carrying value, goodwill is considered not to be impaired. If the carrying value
of a reporting unit exceeds its estimated fair value, an impairment loss is
recognized for the excess of carrying amount over the fair value of the
respective reporting unit.
The estimated fair value of the reporting unit is determined by the discounted
cash flow method taking into account expected long-term operating cash-flow
performance. The Company discounts projected operating cash flows using the
reporting unit's weighted average cost of capital, including a risk premium to
adjust for market risk. The Company's assumptions in conducting its impairment
testing include revenue growth rates, Earnings Before Income Tax ("EBIT") margin
rate in the discrete and terminal period and the discount rate applied to the
future cash flows. The estimated fair value is based on automotive industry
volume projections which are based on third-party and internally developed
forecasts and discount rate assumptions. To supplement this analysis, the
Company compares the market value of its equity, calculated by reference to the
quoted market prices of its shares, to the estimated fair values of its
reporting units.
In the fourth quarter of 2017, in connection with the annual impairment test,
the Company recorded a goodwill impairment charge of $234 million in its
Electronics Segment, relating to the VNBS acquisition. For more information, see
Note 2, Summary of Significant Accounting Policies, to the consolidated
financial statements included herein) due to lower than originally anticipated
sales development. There is no remaining goodwill related to VNBS after the
impairment. There were no goodwill impairments recognized during 2019 and 2018.
Recall Provisions and Warranty Obligations
The Company records liabilities for product recalls when probable claims are
identified and when it is possible to reasonably estimate costs. Recall costs
are costs incurred when the customer decides to formally recall a product due to
a known or suspected safety concern. Product recall costs typically include the
cost of the product being replaced as well as the customer's cost of the recall,
including labor to remove and replace the defective part. In some cases,
portions of the product recall costs are reimbursed by an insurance company.
Actual costs incurred could differ from the amounts estimated, requiring
adjustments to these reserves in future periods. It is possible that changes in
our assumptions or future product recall issues could materially affect our
financial position, results of operations or cash flows.
Estimating warranty obligations requires the Company to forecast the resolution
of existing claims and expected future claims on products sold. The Company
bases the estimate on historical trends of units sold and payment amounts,
combined with our current understanding of the status of existing claims and
discussions with our customers. These estimates are re-evaluated on

54
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an ongoing basis. Actual warranty obligations could differ from the amounts
estimated requiring adjustments to existing reserves in future periods. Due to
the uncertainty and potential volatility of the factors contributing to
developing these estimates, changes in our assumptions could materially affect
our results of operations.
Defined Benefit Pension Plans
Veoneer's employees participate in defined benefit plans sponsored by Autoliv
and certain defined benefit plans sponsored by Veoneer in Japan (the Japan
plans), France (the France plans), and Canada (the Canada plans).
For the Japan, French, and Canada plans, the amount recognized as a defined
benefit liability is the net total of projected benefit obligation (PBO) minus
the fair value of plan assets (if any). The plan assets are measured at fair
value. Net periodic benefit cost was reported within Costs of sales, Selling,
general and administrative expenses and RD&E expenses in the Consolidated
Statement of Operations.
Veoneer has considered the remaining plans to be part of a multiemployer plan
with Autoliv. Pension expense was allocated for these plans and reported within
Costs of sales, Selling, general and administrative expenses and RD&E expenses
in the Consolidated Statement of Operations.
Of the plans sponsored by Veoneer, the most significant plans are the France
plans. These plans represent approximately 33% of the Company's total pension
benefit obligation. See Note 17, Retirement Plans, to the consolidated financial
statements included herein.
The Company, in consultation with its actuarial advisors, determines certain key
assumptions to be used in calculating the projected benefit obligation and
annual pension expense. For the France plans, the assumptions used for
calculating the 2019 pension expense were a discount rate of 0.9%, expected rate
of increase in compensation levels of 2.5%.
The discount rate for the Japanese plans has been set based on the rates of
return of high-quality fixed-income investments currently available at the
measurement date and are expected to be available during the period the benefits
will be paid. The expected rate of increase in compensation levels and long-term
return on plan assets are determined based on a number of factors and must take
into account long-term expectations and reflect the financial environment in the
respective local markets. This plan does not have assets as of December 31, 2019
and 2018.
Income Taxes
Significant judgment is required in determining the worldwide provision for
income taxes. In the ordinary course of a global business, there are many
transactions for which the ultimate tax outcome is uncertain. Many of these
uncertainties arise as a consequence of intercompany transactions. See Note 1,
Basis of Presentation, Note 19, Income Taxes and Note 22, Relationship with
Parent and Related Entities, to the Consolidated Financial Statements included
herein.
Although the Company believes that its tax return positions are supportable, no
assurance can be given that the final outcome of these matters will not be
materially different than that which is reflected in the historical income tax
provisions and accruals. Such differences could have a material effect on the
income tax provisions or benefits in the periods in which such determinations
are made. See also the discussion of the determinations of valuation allowances
on our deferred tax assets in Note 19, Income Taxes, to the consolidated
financial statements included herein.
Contingent Liabilities
Various claims, lawsuits and proceedings are pending or threatened against the
Company or its subsidiaries, covering a range of matters that arise in the
ordinary course of its business activities with respect to commercial, product
liability or other matters. For a discussion of legal matters we are involved
in, see Note 16, Contingent Liabilities, to the consolidated financial
statements included herein.
The Company diligently defends itself in such matters and, in addition, carries
insurance coverage to the extent reasonably available against insurable risks.
The Company records liabilities for claims, lawsuits and proceedings when they
are probable, and it is possible to reasonably estimate the cost of such
liabilities. Legal costs expected to be incurred in connection with a loss
contingency are expensed as such costs are incurred.
A loss contingency is accrued by a charge to income if it is probable that an
asset has been impaired, or a liability has been incurred and the amount of the
loss can be reasonably estimated. In determining whether a loss should be
accrued management

55
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evaluates, among other factors, the degree of probability of an unfavorable
outcome and the ability to make a reasonable estimate of the amount of loss.
Changes in these factors could materially impact our consolidated financial
statements.
Leases
Lease Classification

The Company, as a lessee, determine the lease classification for each separate
lease component at the lease commencement date. Commencement date is defined as
the date on which a lessor makes an underlying asset available for use by the
Company. This date can be different from the stated commencement date in the
contract. This date is when Veoneer takes possession of or be given control over
the use of an underlying asset. For lessees, a lease can be classified either as
an operating lease or a finance lease.

Initial Measurement



The Company will recognize a right-of-use asset and a lease liability at lease
commencement. The lease liability for both finance and operating leases equals
the present value of the unpaid lease payments, discounted at Veoneer's
incremental borrowing rate.

Lease payment includes undiscounted fixed (including in-substance fixed)
payments plus optional payments (e.g. for purchase options, optional renewal
periods, periods subsequent to a termination option) that are reasonably certain
to be owed. Lease payments do not include variable lease payments that depend on
an index or a rate, any guarantee by the lessee of the lessor's debt; or amounts
allocated to non-lease components.

The incremental borrowing rate is the rate of interest that a lessee would have
to pay to borrow on a collateralized basis over a similar term an amount equal
to the lease payments in a similar economic environment. In general, the
discount rate will not be reassessed unless there is a change in the lease term
or in the assessment of a lessee purchase option represent a significant change
in the economics of the arrangement.

Short-term Lease & Low Value Lease Recognition Exemption



A short-term lease is a lease that, at the commencement date, has a lease term
of 12 months or less and does not include an option to purchase the underlying
asset that the lessee is reasonably certain to exercise.

For leases that meet the definition of "short-term", the Company elected the
practical expedient under ASC 842 which allows for simplified accounting. The
practical expedient will apply for all classes of underlying assets and under
the practical expedient, the Company will recognize the lease payments as lease
cost on a straight-line basis over the lease term and will disclose the costs.
In addition, the Company determined that the expenses derived from leases with
lease term of one month or less will be exempt from being assessed under lease
recognition.

Impairment test

The Company will use the long-lived assets impairment guidance (ASC 360) to
determine whether a right-of-use asset is impaired, and if so, the amount of the
impairment loss to recognize. The impairment loss related to a right-of-use
asset is presented in the same manner in the income statement as an impairment
loss recognized for any other long-lived asset.
Assets and liabilities held for sale
The Company classifies assets and liabilities (disposal groups) to be sold as
held for sale in the period in which all of the following criteria are met:
management, having the authority to approve the action, commits to a plan to
sell the disposal group; the disposal group is available for immediate sale in
its present condition subject only to terms that are usual and customary for
sales of such disposal groups; an active program to locate a buyer and other
actions required to complete the plan to sell the disposal group have been
initiated; the sale of the disposal group is probable, and transfer of the
disposal group is expected to qualify for recognition as a completed sale within
one year, except if events or circumstances beyond the Company's control extend
the period of time required to sell the disposal group beyond one year; the
disposal group is being actively marketed for sale at a price that is reasonable
in relation to its current fair value; and actions required to complete the plan
indicate that it is unlikely that significant changes to the plan will be made
or that the plan will be withdrawn.
The Company initially measures a disposal group that is classified as held for
sale at the lower of its carrying value or fair value less any costs to sell.
Any loss resulting from this measurement is recognized in the period in which
the held for sale criteria are met. Conversely, gains are not recognized on the
sale of a disposal group until the date of sale. The Company assesses the fair
value of a disposal group, less any costs to sell, each reporting period it
remains classified as held for sale and reports any subsequent changes as an
adjustment to the carrying value of the disposal group, as long as the new
carrying value does not exceed the carrying value of the disposal group at the
time it was initially classified as held for sale.

                                       56

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American Industrial Partners Capital Fund VII, L.P. managed by AIP, LLC completed the acquisition of Restraint Control Systems business from Veoneer, Inc.	Feb. 29	CI
American Industrial Partners Capital Fund VII, L.P. managed by AIP, LLC agreed to acquire Restraint Control Systems business of Veoneer from Veoneer, Inc.	Dec. 05	CI
Magna Electronics Inc. completed the acquisition of Active Safety business from Veoneer, Inc.	23-05-31	CI
Baraja Pty Ltd announced that it has received funding from Veoneer, Inc.	23-01-02	CI
Magna Electronics Inc. entered into an agreement to acquire Active Safety business from Veoneer, Inc. for $1.5 billion.	22-12-19	CI
Veoneer Awards Major Restraint Control System Business by North American OEM	22-12-16	CI
Veoneer Awards Active Safety System by Major Asian OEM	22-11-15	CI
Baraja and Veoneer Enters Advanced LiDAR Development Agreement with Global Automotive Brand	22-10-18	CI
Veoneer Partners with Arbe to Expand the Boundaries of High-Performance Perception-Level Automotive Radars	22-10-07	CI
Veoneer to Supply Cameras to BMW Group's Next Generation Vision System for Automated Driving	22-05-18	CI
Veoneer, Inc. Announces Resignation of Lars Sjobring as Executive Vice President Legal Affairs, General Counsel and Secretary	22-04-01	CI
Veoneer Says SSW Partners Closes Veoneer Acquisition; Plans Sale of Arriver Business to Qualcomm	22-04-01	MT
Veoneer, Inc.(NYSE:VNE) dropped from S&P Global BMI Index	22-04-01	CI
Veoneer, Inc.(NYSE:VNE) dropped from S&P TMI Index	22-04-01	CI
QUALCOMM Incorporated, QCAS, Inc. (collectively Qualcomm) and SSW Partners completed the acquisition of Veoneer, Inc..	22-03-31	CI
Veoneer, Inc.(OM:VNE SDB) dropped from OMX Nordic All-Share Index	22-03-31	CI
Global markets live: Nvidia, Daimler, Credit Suisse, Alphabet, Uber...	22-03-24
Veoneer's Merger With SSW Expected to Close on April 1; Jacob Svanberg to Become CEO	22-03-24	MT
Veoneer's $4.5 Billion Sale to SSW, Qualcomm to Close April 1; New CEO Expected	22-03-24	MT
Veoneer Says Takeover by Qualcomm, SSW Partners Will Close April 1	22-03-24	DJ
Veoneer says Qualcomm deal to close next week	22-03-24	RE
Veoneer, Inc. Announces Management Changes	22-03-24	CI
Veoneer, Inc. Announces Executive Changes	22-03-24	CI
Veoneer, Inc. Reports Earnings Results for the Fourth Quarter Ended December 31, 2021	22-03-08	CI
Veoneer Posts Narrower Q4 Loss, Sales Drop	22-02-02	MT

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Veoneer, Inc.

Equities

VNE.WI

US92336X1090

Auto, Truck & Motorcycle Parts

VEONEER : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

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Sector Other Auto, Truck & Motorcycle Parts