Visteon Announces Fourth-Quarter and Full-Year 2005 Results
Highlights: * 2005 net loss narrows; cash flow improves * Multi-year action plan for year-over-year improvements through 2008 and beyond * Customer diversification continues
VAN BUREN TOWNSHIP, Mich., Feb. 10 -- Visteon Corporation today announced fourth-quarter and full-year results for 2005. For the fourth quarter of 2005, Visteon reported net income of $1.338 billion, or $10.25 per diluted share, on total sales of $2.9 billion. For full year 2005, Visteon reported a net loss of $270 million, or $2.14 per share, on total sales of $17.0 billion.
"With the Ford transaction completed, we are now focused on implementing our multi-year plan to restructure Visteon and improve our earnings and free cash flow," said Michael F. Johnston, chairman and chief executive officer. "We are looking at every opportunity to accelerate our actions to achieve continued year-over-year improvements. For 2006, we are increasing our outlook for earnings and reaffirming our outlook for positive free cash flow. We are also reiterating our expectation for continued improvement in 2007 and beyond."
Fourth Quarter 2005
For the fourth quarter of 2005, product sales were $2.7 billion and services revenues were $164 million. More than 50 percent of total product sales were generated from customers other than Ford, a significant increase over prior year. Sales for the same period a year ago totaled $4.7 billion, of which non-Ford sales were 33 percent. Product sales were lower primarily due to the sale of 23 North American facilities on Oct. 1, 2005, as part of the Automotive Components Holdings, LLC (ACH) transactions, lower production volumes by Ford in North America and price reductions to customers. Services revenues of $164 million represent billings for employee and related costs for business support activities provided to ACH under terms of various agreements between Visteon and ACH that took effect Oct. 1, 2005.
Visteon's net income of $1.338 billion for the fourth quarter of 2005 included a gain of $1.8 billion related to the ACH transactions, and non-cash asset impairment charges of $335 million related to product lines manufactured principally at plants in the United States and the United Kingdom. These manufacturing operations are addressed by Visteon's multi-year restructuring program. This impairment charge is expected to decrease depreciation and amortization expense by approximately $25 million annually. Visteon also incurred $28 million of restructuring expenses in the quarter related to various personnel and other cost-reduction actions. Reimbursements from the restructuring escrow account for qualified expenses incurred by Visteon in both the fourth quarter and prior quarters of 2005 totaled $51 million. For the fourth quarter of 2004, Visteon reported a net loss of $138 million, which included restructuring expenses of $41 million.
Cash provided by operating activities was $42 million for the fourth quarter of 2005, down about $150 million from the same period a year ago, as favorable performance in trade working capital was offset by an estimated $300 million net working capital run-off associated with retained receivables and payables of the business that transferred as part of the ACH transactions. Capital expenditures for the quarter of $185 million were $73 million lower than fourth quarter 2004. Free cash flow was negative $143 million in the fourth quarter 2005, compared with negative $63 million in the same period of 2004.
Full Year 2005
Sales for full year 2005 totaled $17.0 billion, including product sales of $16.8 billion and services revenues of $164 million. Of the product sales, 62 percent were Ford-related with 38 percent from other customers. Sales for the same period a year ago totaled $18.7 billion, of which Ford-related sales were 70 percent and sales from other customers were 30 percent. Sales were lower primarily due to the sale of 23 North American facilities on Oct. 1, 2005 as part of the ACH transactions, lower production volumes by Ford in North America and price reductions to customers.
2005 results include the operations of the businesses and facilities that were sold as part of the ACH transactions for the nine months for which they were owned by Visteon. Sales generated by these former facilities as reported in Visteon's 2005 results were nearly $6.1 billion, including $611 million of sales to customers other than Ford. For 2004, these former facilities accounted for nearly $9.0 billion of sales, including $677 million of sales to customers other than Ford.
Visteon's net loss of $270 million for the full year 2005 represents an improvement over 2004's net loss of $1.5 billion. The results for 2005 include the fourth quarter non-cash charges discussed above, the gain on the ACH transactions, as well as previously announced non-cash asset impairment charges of about $1.2 billion and $46 million of restructuring expenses, partially offset by $51 million of reimbursements from the restructuring escrow account. For 2004, Visteon's net loss included restructuring expenses of $82 million, non-cash asset impairment charges of $314 million and a non- cash charge of $871 million related to deferred tax assets.
Cash provided by operating activities was $417 million for full year 2005, about the same as 2004 full-year results. Free cash flow for full year 2005 was negative $168 million compared with a negative $409 million for full year 2004. Capital expenditures for the year of $585 million were $242 million lower than for the full year 2004.
Cash and Debt
As of Dec. 31, 2005, Visteon had cash of $865 million, an improvement over 2004's $752 million. Visteon's 2005 debt position also improved, with total borrowings of $1.994 billion as of Dec. 31, 2005, compared with total borrowings of $2.021 billion at the end of 2004.
On Jan. 9, 2006, Visteon closed on a new 18-month secured term loan of $350 million. The new loan expires on June 20, 2007, and replaced Visteon's $300 million secured short-term revolving credit facility that expired on Dec. 15, 2005. The term loan was made part of Visteon's existing $772 million five-year facility agreement. The terms and conditions of the agreement were also modified to align various covenants with Visteon's restructuring initiatives and to make changes to the consolidated leverage ratios. Visteon also amended its $241 million delayed draw term loan agreement, which also expires in June 2007, to reflect substantially the same terms and conditions.
Outlook
Visteon is raising its estimate for 2006 full-year earnings before net interest expense and the provision for income taxes, excluding net unreimbursed restructuring expenses and non-cash asset impairments (EBIT-R) to a range of $45 million to $75 million, reflecting reduced depreciation and amortization expense estimates. Additionally, Visteon expects to generate about $50 million of free cash flow and expects 2006 full-year product sales of approximately $11.2 billion, with 58 percent coming from non-Ford sales.
"Visteon is a global leader in our core product areas of climate, interior and electronic systems, with the global reach and diverse customer mix to continue delivering year-over-year improvements," Johnston said. "We have established a sustainable business model and solid action plans to strengthen our results and create value for our customers, employees and shareholders."
Visteon Corporation is a leading global automotive supplier that designs, engineers and manufactures innovative climate, interior, electronic and lighting products for vehicle manufacturers, and also provides a range of products and services to aftermarket customers. With corporate offices in Van Buren Township, Mich. (U.S.); Shanghai, China; and Kerpen, Germany; the company has more than 170 facilities in 24 countries and employs approximately 50,000 people.
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except share and per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Net sales
Product $2,701 $4,679 $16,812 $18,657
Services 164 - 164 -
2,865 4,679 16,976 18,657
Cost of sales
Product 2,638 4,521 16,259 17,769
Services 163 - 163 -
2,801 4,521 16,422 17,769
Gross margin 64 158 554 888
Selling, general and
administrative expenses 183 252 946 980
Restructuring expenses 28 41 46 82
Reimbursement from
Escrow Account 51 - 51 -
Impairment of
long-lived assets 335 - 1,511 314
Gain on ACH transactions 1,832 - 1,832 -
Operating income (loss) 1,401 (135) (66) (488)
Interest expense, net 34 24 132 96
Equity in net income of
non-consolidated affiliates 3 7 25 45
Income (loss) before
income taxes and minority
interests in consolidated
subsidiaries 1,370 (152) (173) (539)
Provision (benefit) for
income taxes 23 (21) 64 962
Minority interests in
consolidated subsidiaries 9 7 33 35
Net income (loss) $1,338 $(138) $(270) $(1,536)
Basic and diluted income
(loss) per common share:
Basic income (loss)
per share $10.58 $(1.10) $(2.14) $(12.26)
Basic average shares
outstanding (millions) 126.5 125.3 126.0 125.3
Diluted income (loss)
per share $10.25 $(1.10) $(2.14) $(12.26)
Diluted average shares
outstanding (millions) 130.6 125.3 126.0 125.3
Cash dividends per share $ - $0.06 $ - $0.24
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
December 31,
Unaudited
2005 2004
ASSETS
Cash and cash equivalents $865 $752
Accounts receivable, net
Ford Motor Company 618 1,255
Non-Ford Motor Company 1,120 1,285
Inventories, net 537 889
Prepaid expenses and other current assets 205 249
Total current assets 3,345 4,430
Property, plant and equipment, net 2,973 5,303
Other assets 418 559
Total assets $6,736 $10,292
LIABILITIES AND SHAREHOLDERS' (DEFICIT) / EQUITY
Short-term debt, including current portion
of long-term debt $485 $508
Accounts payable 1,803 2,493
Employee benefits, including pensions 233 341
Accrued expenses and other current liabilities 438 580
Total current liabilities 2,959 3,922
Long-term debt 1,509 1,513
Postretirement benefits other than pensions 724 639
Postretirement benefits payable to
Ford Motor Company 154 2,135
Employee benefits, including pensions 647 751
Deferred income taxes 175 287
Other liabilities 382 516
Minority interests in consolidated subsidiaries 234 209
Shareholders' (deficit) / equity
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, 129 million
and 130 million shares outstanding,
respectively) 131 131
Stock warrants 127 -
Capital in excess of par value of stock 3,394 3,380
Accumulated other comprehensive
income (loss) (232) 5
Other (28) (26)
Accumulated deficit (3,440) (3,170)
Total shareholders' (deficit) / equity (48) 320
Total liabilities and shareholders'
(deficit) / equity $6,736 $10,292
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Cash provided from (used by)
operating activities
Net income (loss) $1,338 $(138) $(270) $(1,536)
Adjustments to reconcile net
income (loss) to net cash
provided from operating
activities:
Gain on ACH transactions (1,832) - (1,832) -
Depreciation and amortization 122 171 595 685
Impairment of long-lived assets 335 - 1,511 314
Equity in net income of
non-consolidated affiliates,
net of dividends remitted 12 (6) 23 (2)
Other non-cash items 15 12 44 40
Changes in assets and liabilities:
Accounts receivable 577 258 684 (52)
Inventories 33 125 34 3
Accounts payable (579) (74) (593) 82
Postretirement benefits
other than pensions 8 33 227 180
Income taxes deferred
and payable, net 1 (42) (40) 869
Other assets and
other liabilities 12 (144) 34 (165)
Net cash provided from
operating activities 42 195 417 418
Cash provided from (used by)
investing activities
Capital expenditures (185) (258) (585) (827)
Acquisitions and investments
in joint ventures, net (1) - (21) -
Net cash proceeds from
ACH transactions (12) - 299 -
Sales and maturities of securities - 8 - 11
Other, including proceeds from
asset disposals 37 16 76 34
Net cash used by
investing activities (161) (234) (231) (782)
Cash provided from (used by)
financing activities
Commercial paper repayments, net - (50) - (81)
Other short-term debt, net 48 10 239 (20)
Proceeds from issuance of
other debt, net of issuance costs 10 28 50 576
Maturity/repurchase of
unsecured debt securities - - (250) (269)
Principal payments on other debt (30) - (69) (32)
Treasury stock activity - - (2) (11)
Cash dividends - (7) - (31)
Other, including book overdrafts 57 51 (19) 3
Net cash provided from (used by)
financing activities 85 32 (51) 135
Effect of exchange rate changes
on cash 1 30 (22) 28
Net (decrease) increase in
cash and cash equivalents (33) 23 113 (201)
Cash and cash equivalents at
beginning of period 898 729 752 953
Cash and cash equivalents
at end of year $865 $752 $865 $752
VISTEON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Dollars in millions)
(Unaudited)
In this press release the Company has provided information regarding certain non-GAAP financial measures including "free cash flow" and "EBIT-R." Such non-GAAP financial measures are reconciled to their closest US GAAP financial measure in the schedules below.
EBIT-R: EBIT-R represents net income (loss) before net interest expense and provision for income taxes and excludes impairment and net unreimbursed restructuring charges as well as the gain on the ACH transactions. Management believes EBIT-R is useful to investors because it provides meaningful supplemental information regarding the Company's operating results because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company's continuing operating activities.
Three Months Ended Year Ended 2006
December 31, December 31, Estimate
2005 2004 2005 2004
Net Income (Loss) $1,338 $(138) $(270) $(1,536) $(250) - $(220)
Interest
expense, net 34 24 132 96 160
Provision (benefit)
for income taxes 23 (21) 64 962 105
Impairment of
long-lived assets 335 - 1,511 314 30
Net unreimbursed
restructuring
expense - 41 7 82 -
Gain on ACH
transactions (1,832) - (1,832) - -
EBIT-R $(102) $(94) $(388) $(82) $45 - $75
EBIT-R is not a recognized term under GAAP and does not purport to be an alternative to net income (loss) as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation of EBIT-R may not be comparable to other similarly titled measures of other companies. Additionally, EBIT-R is not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements.
Free Cash Flow: Free cash flow represents cash flow from operating activities less capital expenditures. Management believes that free cash flow is useful in analyzing the Company's ability to service and repay its debt and it uses the measure for planning and forecasting in future periods, as well as in management compensation decisions.
Three Months Ended Year Ended 2006
December 31, December 31, Estimate
2005 2004 2005 2004
Cash provided from
operating activities $42 $195 $417 $418 $500
Capital expenditures (185) (258) (585) (827) (450)
Free cash flow $(143) $(63) $(168) $(409) $50
Free cash flow is not a recognized term under GAAP and does not reflect cash used to service debt and does not reflect funds available for investment or other discretionary uses.