Visteon Corporation Reports Second Quarter Net Income of $72 Million
DEARBORN, Mich., July 19 -- Visteon Corporation today announced net income of $72 million for the Second Quarter or $0.56 per share -- in line with consensus expectations. In the Second Quarter of 2001, Visteon posted a net loss of $40 million or $0.31 per share, including a $100 million after-tax restructuring charge. Excluding the restructuring charge Visteon earned $60 million or $0.46 per share in the Second Quarter of 2001.
"Our results reflected stronger North American production volumes and continued solid cost performance," said Pete Pestillo, Chairman and Chief Executive Officer. "We are particularly pleased with the $850 million in new business we've won this year from new customers." Visteon announced a major restructuring of European manufacturing operations, which Pestillo said would significantly improve Visteon's cost base and ability to win new business.
First Half Results
For the First Half of 2002, Visteon earned $73 million or $0.57 per share compared with $91 million or $0.70 per share for the same period a year ago; both periods exclude special items. Including special items, which consist of previously reported restructuring charges of $74 million and $100 million in the First Quarter of 2002 and Second Quarter of 2001, respectively, and the non-cash write-off for the value of goodwill of $265 million after-tax associated with the adoption of SFAS No. 142 during the First Quarter of 2002, Visteon reported a net loss of $266 million in the First Half of 2002 and a net loss of $9 million in the First Half of 2001.
Sales and Non-Ford Business Wins
Second Quarter 2002 sales totaled $5.0 billion, compared with $4.9 billion in the Second Quarter 2001. The increase compared with a year ago reflects primarily new business and stronger production volumes in North America, offset partially by price reductions provided to our customers and the divestiture of our restraint electronics business. Non-Ford sales during the Second Quarter 2002 increased 9% to over $900 million and represent 18% of total sales.
Sales for the First Half of 2002 totaled $9.5 billion, down $120 million from the same period a year ago. The decline was more than accounted for by a reduction in Ford revenue of $206 million, offset partially by an $86 million increase in Non-Ford sales.
The strong customer reception to Visteon products continued. Visteon won more than $650 million in net new Non-Ford business during the quarter, including substantial wins with Nissan, General Motors, DaimlerChrysler, Volkswagen, PSA Peugeot Citroen and Renault. During the First Half of 2002, the company has won more than $850 million of net new Non-Ford business.
Cash and Debt-to-Capital
During the Second Quarter of 2002, Visteon generated $227 million in operating cash flow. Additionally, the company ended the quarter with $1.2 billion in cash and marketable securities. Over the same period, the company's debt-to-capital ratio improved nearly 3 percentage points and ended the quarter at 36.7%.
European Restructuring
As part of the company's ongoing restructuring efforts to improve operations, the company is implementing a comprehensive plan in Europe. Under the plan, Visteon and its unions in Europe have committed to restructuring actions of manufacturing operations in the UK, Germany and France. The plan seeks to improve the company's cost base in Europe, allowing it to be more competitive and improve financial results in the future. Implementation of the plan will begin in the Second Half of this year and is expected to generate ongoing annual pre-tax savings of about $100 million by 2004. The company expects to incur total pre-tax charges of up to $150 million relating to the plan, of which $80-95 million is expected in the Second Half of 2002.
Outlook
The company affirmed an estimate of full year net income of $50-80 million, excluding special items. For the Third Quarter, Visteon projected a net loss of $30-45 million excluding special items, based on seasonally lower Third Quarter volumes. Full year net income, including previously announced and new restructuring actions as well as the First Quarter $265 million writeoff of goodwill, is projected to be a loss of $310-350 million.
Visteon Corporation is a leading full-service supplier that delivers consumer-driven technology solutions to automotive manufacturers worldwide and through multiple channels within the global automotive aftermarket. Visteon has about 79,000 employees and a global delivery system of more than 180 technical, manufacturing, sales, and service facilities located in 25 countries.
This press release contains forward-looking statements made pursuant to
the Private Securities Litigation Reform Act of 1995. Words such as
"anticipate" and "projected" signify forward-looking statements.
Forward-looking statements are not guarantees of future results and conditions
but rather are subject to various risks and uncertainties. Some of these
risks and uncertainties are identified in our Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 29, 2002. Should any
risks or uncertainties develop into actual events, these developments could
have material adverse effects on Visteon's business, financial condition and
results of operations.
VISTEON CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DATA
(in millions, except per share amounts, percentages and as noted)
2002
over/(under)
2002 2001*
Second First Second First
Quarter Half Quarter Half
Sales (unaudited)
Ford and affiliates $4,128 $7,774 $61 $(206)
Other customers 911 1,734 73 86
Total sales $5,039 $9,508 $134 $(120)
Depreciation and
amortization
Depreciation $140 $280 $(2) $(2)
Amortization 20 41 (6) (15)
Total depreciation and
amortization $160 $321 $(8) $(17)
Selling, administrative
and other expenses
Amount** $216 $418 $15 $10
Percent of revenue 4.3% 4.4% 0.2pts 0.2pts
Income (loss) before
income taxes
As reported $117 $10 $174 $12
Excluding special items** 117 126 16 (30)
Net income (loss)
As reported $72 $(266) $112 $(257)
Before cumulative
effect of change in
accounting principle 72 (1) 112 8
Excluding special items** 72 73 12 (18)
Earnings (loss) per
share (diluted)
As reported $0.56 $(2.07) $0.87 $(2.00)
Before cumulative effect
of change in accounting
principle 0.56 (0.01) 0.87 0.06
Excluding special items** 0.56 0.57 0.10 (0.13)
Effective tax rate 36% 36% (1)pts (1)pts
EBITDA, as adjusted**
Amount $287 $475 $3 $(47)
Percent of revenue 5.7% 5.0% (0.1)pts (0.4)pts
After tax returns**
On sales 1.6% 0.9% 0.3pts (0.2)pts
On assets 2.8 1.5 0.5 (0.3)
On equity 9.5 4.6 2.6 (0.7)
Capital expenditures
Amount $159 $299 $(9) $(41)
Percent of revenue 3.2% 3.1% (0.2)pts (0.4)pts
Operating cash flow*** $227 $182 $(6) $308
Cash and borrowing
(at end of period)
Cash and marketable
securities $1,219 $(44)
Borrowing 1,809 (162)
- - - - -
* Second Quarter and First Half 2001 comparable amounts include
amortization of goodwill of $6 million ($5 million after-tax) and
$12 million ($9 million after-tax), respectively.
** First Half 2002 amounts exclude costs related to restructuring and
other items of $116 million ($74 million after-tax) and the write-down
in the value of goodwill associated with the adoption of SFAS 142 of
$265 million after-tax. Second Quarter and First Half 2001 amounts
exclude costs related to restructuring items of $158 million
($100 million after-tax), of which $42 million was recorded as
selling, administrative and other expenses.
*** Includes capital expenditures; excludes $32 million related to the
sale of receivables for the Second Quarter and First Half 2002;
excludes $23 million, $60 million, $32 million and $32 million related
to restructuring actions for Second Quarter 2002, First Half 2002,
Second Quarter 2001 and First Half 2001, respectively.
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended June 30, 2002 and 2001
(in millions, except per share amounts)
Second Quarter First Half
2002 2001 2002 2001
(unaudited) (unaudited)
Sales
Ford and affiliates $4,128 $4,067 $7,774 $7,980
Other customers 911 838 1,734 1,648
Total sales 5,039 4,905 9,508 9,628
Costs and expenses
(Notes 2 and 3)
Costs of sales 4,696 4,704 9,052 9,152
Selling, administrative
and other expenses 216 243 418 450
Total costs and
expenses 4,912 4,947 9,470 9,602
Operating income (loss) 127 (42) 38 26
Interest income 5 14 11 33
Interest expense 24 36 53 72
Net interest expense (19) (22) (42) (39)
Equity in net income of
affiliated companies 9 7 14 11
Income (loss) before
income taxes 117 (57) 10 (2)
Provision (benefit) for
income taxes 38 (23) (2) (4)
Income (loss) before
minority interests 79 (34) 12 2
Minority interests in
net income of subsidiaries 7 6 13 11
Income (loss) before
cumulative effect of change
in accounting principle 72 (40) (1) (9)
Cumulative effect of change
in accounting principle,
net of tax (Note 10) -- -- (265) --
Net income (loss) $72 $(40) $(266) $(9)
Average number of shares
of Common Stock
outstanding 131 131 131 131
Basic and diluted earnings
(loss) per share (Note 4)
Before cumulative effect of
change in accounting
principle $0.56 $(0.31) $(0.01) $(0.07)
Cumulative effect of
change in accounting
principle -- -- (2.06) --
Basic and diluted $0.56 $(0.31) $(2.07) $(0.07)
Cash dividends per share $0.06 $0.06 $0.12 $0.12
The accompanying notes are part of the financial statements.
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
June 30, December 31,
2002 2001
(unaudited)
Assets
Cash and cash equivalents $876 $1,024
Marketable securities 343 157
Total cash and marketable securities 1,219 1,181
Accounts receivable - Ford and affiliates 1,803 1,560
Accounts receivable - other customers 886 834
Total receivables 2,689 2,394
Inventories (Note 7) 987 858
Deferred income taxes 167 167
Prepaid expenses and other current assets 150 153
Total current assets 5,212 4,753
Equity in net assets of affiliated companies 164 158
Net property 5,375 5,329
Deferred income taxes 485 322
Goodwill (Note 10) -- 363
Other assets 176 153
Total assets $11,412 $11,078
Liabilities and Stockholders' Equity
Trade payables (Note 7) $2,174 $1,831
Accrued liabilities 1,026 945
Income taxes payable 29 30
Debt payable within one year 504 629
Total current liabilities 3,733 3,435
Long-term debt 1,305 1,293
Postretirement benefits other than pensions 2,196 2,079
Other liabilities 1,045 967
Deferred income taxes 14 13
Total liabilities 8,293 7,787
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00, 50 million
shares authorized, none outstanding -- --
Common Stock, par value $1.00, 500 million
shares authorized, 131 million shares issued,
131 million and 130 million shares outstanding,
respectively 131 131
Capital in excess of par value of stock 3,311 3,311
Accumulated other comprehensive income (loss) (114) (231)
Other (32) (25)
Earnings retained for use in business
(accumulated deficit) (177) 105
Total stockholders' equity 3,119 3,291
Total liabilities and stockholders' equity $11,412 $11,078
The accompanying notes are part of the financial statements.
See Note 7 - Inventories and Related Pending Adjustments.
VISTEON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended June 30, 2002 and 2001
(in millions)
First Half
2002 2001
(unaudited)
Cash and cash equivalents at January 1 $1,024 $1,412
Cash flows provided by operating activities 453 182
Cash flows from investing activities
Capital expenditures (299) (340)
Purchases of securities (437) (148)
Sales and maturities of securities 250 145
Other 26 35
Net cash used in investing activities (460) (308)
Cash flows from financing activities
Commercial paper repayments, net (111) (9)
Short-term debt, net -- 1
Proceeds from issuance of other debt 66 54
Principal payments on other debt (77) (97)
Purchase of treasury stock (11) (20)
Cash dividends (16) (16)
Net cash used in financing activities (149) (87)
Effect of exchange rate changes on cash 8 (4)
Net decrease in cash and cash equivalents (148) (217)
Cash and cash equivalents at June 30 $876 $1,195
The accompanying notes are part of the financial statements.
VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Financial Statements - The financial data presented herein are
unaudited, but in the opinion of management reflect those adjustments,
including normal recurring adjustments, necessary for a fair statement
of such information. Results for interim periods should not be
considered indicative of results for a full year. Reference should be
made to the consolidated financial statements and accompanying notes
included in the company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, as filed with the Securities and
Exchange Commission on March 29, 2002. Certain amounts for prior
periods were reclassified to conform with present period presentation.
Visteon Corporation ("Visteon") is a leading, global supplier of
automotive systems, modules and components. Visteon sells products
primarily to global vehicle manufacturers, and also sells to the
worldwide aftermarket for replacement and vehicle appearance
enhancement parts. Visteon became an independent company when Ford
Motor Company ("Ford") established Visteon as a wholly-owned
subsidiary in January 2000 and subsequently transferred to Visteon the
assets and liabilities comprising Ford's automotive components and
systems business. Ford completed its spin-off of Visteon on June 28,
2000 (the "spin-off"). Prior to incorporation, Visteon operated as
Ford's automotive components and systems business.
2. Selected costs and expenses are summarized as follows:
Second Quarter First Half
2002 2001 2002 2001
(in millions)
Depreciation $140 $142 $280 $282
Amortization 20 26 41 56
Total $160 $168 $321 $338
Amortization amounts for 2001 include amortization of goodwill of
$6 million and $12 million for the second quarter and first half of 2001,
respectively.
3. Special Charges - In the first quarter of 2002, Visteon recorded in
costs of sales pre-tax charges of $116 million ($74 million
after-tax), as summarized below:
Pre-tax After-tax
(in millions)
Restructuring and other charges:
First quarter 2002 actions* $95 $61
Adjustments to prior year's expenses (5) (3)
Total restructuring and other charges 90 58
Loss related to sale of restraint
electronics business 26 16
Total special charges $116 $74
* Includes $5 million related to the write-down of inventory.
In the first quarter of 2002, Visteon recorded pre-tax charges of
$95 million related to the separation of 820 employees at Markham, Ontario
as the company moves nearly all of the non-restraint electronics business
to facilities in Mexico, the elimination of about 215 engineering
positions in the United States to reduce research and development costs,
the closure of our Visteon Technologies facility in California and the
related discontinuation of support for our aftermarket navigation systems
product line, the closure of our Leatherworks facility in Michigan and the
elimination of about 240 manufacturing positions in Mexico. The
engineering-related and Mexican manufacturing-related separations, and the
closure of Visteon Technologies, were completed in the first quarter of
2002. The separation of approximately 85 Markham employees occurred in
the second quarter of 2002, with the remaining separations expected to be
completed by the end of 2002.
VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited)
3. Special Charges - (Continued) - Also in the first quarter of 2002,
$5 million of accrued restructuring liabilities relating to prior year
restructuring plans were reversed reflecting a change in estimated
costs to complete these activities.
Effective April 1, 2002, Visteon completed the sale of its restraint
electronics business to Autoliv, Inc. for $25 million. The sale
includes Visteon's North American and European order book of
approximately $150 million in annual sales to Ford Motor Company and
its affiliates, including associated manufacturing operations in
Markham, Ontario, as well as related assets and liabilities. As part
of the sale, approximately 270 employees from Markham and about 95
engineers from Dearborn, Michigan transferred to Autoliv.
The following table summarizes the activity related to the remaining
restructuring reserves from the 2001 actions, as well as restructuring
reserve activity related to the 2002 actions. This table does not
include the loss related to the sale of the electronics restraint
business.
Automotive Operations Glass Operations
Employee-Related Other Employee-Related Total
(in millions)
December 31, 2001
reserve balance $16 $-- $7 $23
Pre-tax charges
recorded in costs
of sales:
First quarter 2002
actions 81 14 -- 95
Adjustments to prior
year's expenses (3) -- (2) (5)
Total net expense 78 14 (2) 90
Utilization (56) (12) (2) (70)
Foreign exchange
translation 2 -- -- 2
June 30, 2002
reserve balance $40 $2 $3 $45
During the second quarter of 2001, Visteon recorded pre-tax charges of
$158 million ($100 million after-tax), of which $146 million related to
the elimination of more than 2,000 salaried positions worldwide and
$12 million related to the closure of two European facilities, ZEM in
Poland and Wickford in the U.K., and other actions. Of the total pre-tax
charges, $42 million is recorded in selling, administrative and other
expenses and $116 million is recorded in cost of sales, and $142 million
is recorded by the Automotive Operations segment and $16 million is
recorded by the Glass Operations segment.
Reserve balances of $23 million and $45 million at December 31, 2001 and
June 30, 2002, respectively, are included in current accrued liabilities
on the accompanying balance sheets. The June 30, 2002 reserve balance of
$45 million includes $11 million related to 2001 restructuring activities.
The company currently anticipates that the restructuring activities to
which all of the above charges relate will be substantially completed in
2002.
4. Income Per Share of Common Stock - Basic income per share of common
stock is calculated by dividing the income attributable to common
stock by the average number of shares of common stock outstanding
during the applicable period, adjusted for restricted stock. The
average number of shares of restricted stock outstanding was about
2,780,000, 2,420,000, 1,370,000 and 1,210,000 for the second quarter
of 2002, first half of 2002, second quarter of 2001 and first half of
2001, respectively. The calculation of diluted income per share takes
into account the effect of dilutive potential common stock, such as
stock options and restricted stock. For the second quarter of 2002,
1,106,000 shares were included as potentially dilutive. For the first
half of 2002, second quarter of 2001 and first half of 2001 potential
common stock of about 712,000, 404,000 and 202,000 shares,
respectively, are excluded as the effect would have been antidilutive.
VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited)
5. Transactions with Ford and its Affiliates - Visteon's supply agreement
and related pricing letter with Ford Motor Company required Visteon to
provide Ford with productivity price adjustments for 2001, 2002 and
2003. In March 2002, Visteon and Ford reached an agreement resolving
North American pricing for 2001 that was consistent with Visteon's
previously established reserves. In June 2002, Visteon and Ford
reached an agreement resolving European pricing for 2001 and 2002
that, together with resolution of other commercial matters, was
consistent with Visteon's previously established reserves.
6. Land Lease - In January 2002, Visteon completed an arrangement with a
special-purpose entity, owned by an affiliate of a bank, to lease land
in Southeast Michigan for a headquarters facility. The lease had an
initial lease term through June 30, 2002, which was subsequently
extended through September 30, 2002, at which time Visteon has the
option to renew the lease on terms mutually acceptable to Visteon and
the lessor, purchase the land or arrange for the sale of the property.
Visteon has a contingent liability for up to about $23 million in the
event the property is sold for less than full cost.
As of June 30, 2002, the assets, liabilities, results of operations
and cash flows of the special-purpose entity are included in Visteon's
consolidated financial statements, based on an assessment made when
the lease was extended, that substantially all of the expected
residual risks and rewards of the leased land reside with Visteon.
This assessment included consideration of the terms of the lease
agreement, the amount of the owner's equity capital investment, and
that as part of the extension of the lease all of the special-purpose
entity's debt was financed by Visteon.
7. Inventories and Related Pending Adjustments - Inventories are
summarized as follows:
June 30, December 31,
2002 2001
(in millions)
Raw materials, work-in-process and supplies $ 845 $ 728
Finished products 142 130
Total inventories $ 987 $ 858
U.S. inventories $ 621 $ 525
During the second quarter of 2002, Visteon became aware that the terms of
its purchase orders did not adequately reflect its understanding of the
terms of its pay on production agreements with certain suppliers.
Generally, Visteon's policy is to organize arrangements with suppliers to
support its production inventory needs with just-in-time deliveries of
materials and not take ownership from or authorize payment to suppliers
until such time as the materials have been consumed in the production
process. Because of these circumstances, the company has revised its
inventory recognition practices to reflect these receipts as an increase
in raw materials inventory and trade payables of $107 million at June 30,
2002. In addition, the company is in the process of measuring the
revision required to adjust the December 31, 2001 inventory and trade
payables balances. The amount of this adjustment is expected to be
generally consistent with the June 30, 2002 adjustment. The process for
measuring this adjustment is expected to be completed prior to filing the
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2002.
Company management is in the process of obtaining formal documentation of
these pay on production terms from our vendors and we will reflect these
vendor agreements when obtained, on a prospective basis.
VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited)
8. Debt - During the second quarter of 2002, Visteon renewed its
financing arrangements with third-party lenders that provide
contractually committed, unsecured revolving credit facilities. The
new financing arrangements are with a syndicate of lenders providing
for a maximum of $1.8 billion in committed, unsecured credit
facilities (the "Credit Facilities"). The terms of the Credit
Facilities provide for a 364-day revolving credit line in the amount
of $775 million, which expires June 2003, and a five-year revolving credit
line in the amount of $775 million, which expires June 2007. The Credit
Facilities also provide for a five-year delayed draw term loan in the
amount of $250 million, which will be used primarily to finance
construction of a headquarters facility in Southeast Michigan. Consistent
with the prior financing arrangements, the Credit Facilities would bear
interest based on a variable interest rate option selected at the time of
borrowing and the Credit Facilities contain certain affirmative and
negative covenants including a covenant not to exceed a specified leverage
ratio. As of June 30, 2002, there were no amounts outstanding under the
Credit Facilities.
9. Comprehensive Income (Loss) - Other comprehensive income (loss) mainly
includes foreign currency translation adjustments. Total comprehensive
income (loss) is summarized as follows:
Second Quarter First Half
2002 2001 2002 2001
(in millions)
Net income (loss) $72 $(40) $(266) $(9)
Other comprehensive
income (loss) 126 (47) 117 (67)
Total comprehensive
income (loss) $198 $(87) $(149) $(76)
10. Accounting Change - In 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"),
"Goodwill and Other Intangible Assets". SFAS 142 no longer permits
amortization of goodwill and establishes a new method of testing goodwill
for impairment by using a fair-value based approach. Under this statement
goodwill is to be evaluated for possible impairment as of January 1, 2002,
and periodically thereafter.
Visteon adopted SFAS 142 on January 1, 2002. As required by this
standard, an initial test for goodwill impairment was performed which
compared the fair value of our Automotive Operations segment to the
segment's net book value. Visteon's stock market capitalization, as well
as market multiples and other factors, were used as the basis for
determining the fair value of the Automotive Operations segment. Because
the fair value of the Automotive Operations segment was less than its net
book value, Visteon recorded an impairment loss on goodwill of
$363 million ($265 million after-tax) as a cumulative effect of change in
accounting principle in the first quarter of 2002. The pre-tax impairment
loss consists of $357 million of net goodwill as of December 31, 2001 and
$6 million reclassified to goodwill related to certain acquired intangible
assets, as required by SFAS 142.
The following presents net income and earnings per share, adjusted to
reflect the adoption of the non-amortization provisions of SFAS 142, as of
the beginning of the periods presented:
2001 2000
First Second Third Fourth Full Full
Quarter Quarter Quarter Quarter Year Year
(in millions, except per share amounts)
Net Income (Loss)
Reported net
income (loss) $31 $(40) $(95) $(14) $(118) $270
Goodwill
amortization, net
of tax 4 5 4 4 17 18
Adjusted net income
(loss) $35 $(35) $(91) $(10) $(101) $288
Earnings (Loss) Per
Share - Basic and
Diluted
Reported earnings
(loss) per share $0.24 $(0.31) $(0.74) $(0.11) $(0.91) $2.08
Goodwill
amortization, net
of tax 0.03 0.04 0.03 0.03 0.13 0.14
Adjusted earnings
(loss) per
share $0.27 $(0.27) $(0.71) $(0.08) $(0.78) $2.22
VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited)
11. Segment Information - Visteon's reportable operating segments are
Automotive Operations and Glass Operations. Financial information for the
reportable operating segments is summarized as follows:
Automotive Glass Total
Operations Operations Visteon
(in millions)
Second Quarter
2002
Sales $4,876 $163 $5,039
Income before taxes 108 9 117
Net income 66 6 72
Average assets 10,867 294 11,161
Goodwill, end of period -- -- --
2001
Sales $4,730 $175 $4,905
Income (loss) before taxes (45) (12) (57)
Net income (loss) (33) (7) (40)
Average assets 11,113 309 11,422
Goodwill, end of period 357 -- 357
First Half
2002
Sales $9,197 $311 $9,508
Income (loss) before taxes (8) 18 10
Net income (loss) (278) 12 (266)
Average assets 10,958 287 11,245
Goodwill, end of period -- -- --
2001
Sales $9,288 $340 $9,628
Income (loss) before taxes 15 (17) (2)
Net income (loss) -- (9) (9)
Average assets 11,069 304 11,373
Goodwill, end of period 357 -- 357
VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited)
12. Litigation and Claims - Various legal actions, governmental
investigations and proceedings and claims are pending or may be instituted
or asserted in the future against Visteon, including those arising out of
alleged defects in Visteon's products; governmental regulations relating
to safety; employment-related matters; customer, supplier and other
contractual relationships; intellectual property rights; product
warranties; and environmental matters. Some of the foregoing matters
involve or 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.
Litigation is subject to many uncertainties, and the outcome of individual
litigated matters is not predictable with assurance. Reserves have been
established by Visteon for matters discussed in the foregoing paragraph
where losses are deemed probable; these reserves are adjusted periodically
to reflect estimates of ultimate probable outcomes. It is reasonably
possible, however, that some of the matters discussed in the foregoing
paragraph for which reserves have not been established could be decided
unfavorably to Visteon and could require Visteon to pay damages or make
other expenditures in amounts, or a range of amounts, that cannot be
estimated at June 30, 2002. Visteon does not reasonably expect, based on
its analysis, that any adverse outcome from such matters would have a
material effect on future consolidated financial statements for a
particular year, although such an outcome is possible.
Visteon has resolved a number of commercial issues with Ford. See Note 5
for further discussion of some of the commercial issues resolved with Ford
under the supply agreement and pricing letter agreement.
13. Subsequent Event - As part of Visteon's ongoing restructuring efforts
to improve operations, the company is implementing a comprehensive plan in
Europe. Under the plan, Visteon and its unions in Europe have committed
to restructuring actions of manufacturing operations in the UK, Germany
and France. The plan seeks to improve Visteon's cost base in Europe,
allowing it to be more competitive and improve financial results in the
future. Implementation of the plan will begin in the second half of this
year and is expected to generate ongoing annual pre-tax savings of about
$100 million by 2004. The company expects to incur total pre-tax charges
of up to $150 million relating to the plan, of which $80-95 million is
expected in the second half of 2002.