Visteon Announces First Quarter 2008 Results
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Highlights
- Significant year-over-year improvement
- Net loss narrows by $48 million
- EBIT-R improves $97 million
- SG&A reduced by $21 million
- Affirms full-year 2008 EBIT-R and free cash flow guidance
VAN BUREN TOWNSHIP, Mich., April 30, 2008 -- Visteon Corporation today announced results for first quarter 2008. For first quarter 2008, Visteon reported a net loss of $105 million, or $0.81 per share, on total sales of $2.86 billion. These results include a $40 million loss associated with the sale of North American aftermarket facilities, including a $21 million asset impairment. For the first quarter 2007, Visteon reported a net loss of $153 million, or $1.19 per share, on total sales from continuing operations of $2.89 billion. First quarter 2007 results included $40 million of asset impairments. EBIT-R, as defined below, for first quarter 2008 was $51 million, an improvement of $97 million over first quarter 2007.
"Our first quarter results demonstrate the benefit of Visteon's increased diversification of customer and geographic sales as well as significant operating improvement in our business," said Michael F. Johnston, chairman and chief executive officer. "We expanded our margins and remain focused on additional cost reduction through the implementation of our restructuring plan and our overhead cost reduction initiative."
First Quarter 2008
Total sales for first quarter 2008 were $2.86 billion, a decrease of $28 million from the same period a year ago. First quarter 2008 product sales were $2.74 billion, a decrease of $19 million from first quarter 2007. Divestitures and plant closures decreased product sales by $340 million; favorable currency of $181 million and higher Asian sales were partial offsets. Services revenue was $121 million, a decrease of $9 million from the same period in 2007.
North American product sales declined $144 million year-over-year to $750 million, or 26 percent of total product sales. The impact of divestitures and plant closures, which decreased sales by $153 million, and lower Ford and Nissan truck production were partially offset by new business. European product sales decreased $25 million year-over-year to $1.17 billion, or 41 percent of product sales. Divestitures and plant closures decreased European sales by $153 million, while favorable currency of $139 million, production volumes and new business were partial offsets. Asian product sales increased $158 million year-over-year to $843 million, or 29 percent of total product sales. The increase is attributable to higher production volumes and new business, favorable currency of $23 million, partially offset by the divestiture of businesses that accounted for $26 million in sales in the first quarter last year. South American product sales were $107 million, essentially unchanged from a year ago.
For first quarter 2008, Visteon's operating loss was $15 million, an improvement of $67 million from the same period in 2007, reflecting improved gross margin and lower SG&A spending. The year-over-year improvement was driven by cost performance, restructuring savings and favorable currency in excess of customer pricing.
First quarter 2008 results included a $40 million charge associated with the sale of North American aftermarket operations. Restructuring expense for the quarter was $46 million and reimbursement from the escrow account totaled $24 million. First quarter 2007 results from continuing operations included $40 million of asset impairments, $25 million of restructuring expenses and $35 million in reimbursement from the escrow account.
Visteon reduced its net loss by $48 million, or $0.38 per share, to $105 million, or $0.81 per share, for first quarter 2008. EBIT-R for first quarter 2008 was positive $51 million, an increase of $97 million from the negative $46 million reported in first quarter 2007.
Cash used by operating activities for first quarter 2008 was $126 million, a $5 million improvement over the $131 million in first quarter 2007. First quarter 2008 cash from operations was negatively impacted on a year-over-year basis by a number of factors including cash restructuring costs, pension, OPEB and recoverable tax assets.
Capital expenditures for first quarter 2008 were $74 million, $10 million higher than the same period a year ago, reflecting investments to support future business. Free cash flow, as defined below, for first quarter of 2008 was negative $200 million, compared with negative $195 million in the same period of 2007.
As of March 31, 2008, cash balances totaled $1.613 billion compared to $1.758 billion as of Dec. 31, 2007, and total debt was $2.8 billion, essentially unchanged from year-end 2007.
Restructuring and Divestitures
Visteon continues to make solid progress on the implementation of its three-year plan. During the first quarter, Visteon addressed a number of facilities as part of its restructuring initiatives. Visteon sold its non-core North American-based aftermarket underhood and remanufacturing operations which included two facilities in Mexico and one in Tennessee. The businesses generated approximately $130 million of sales in 2007 and had a negative gross margin of approximately $16 million. In February 2008, Visteon closed its interiors facility in Bellignat, France, resulting in the separation of approximately 300 employees. A significant majority of the production at this facility was consolidated into other manufacturing facilities. Additionally, Visteon remains on track to exit its Bedford, Ind., and Concordia, Mo., facilities later this year.
During the first quarter of this year Visteon recorded $46 million of restructuring charges. These charges were primarily related to three facilities in continental Europe, which are being addressed as part of the company's three-year plan, and related cost-reduction actions associated with the company's drive to reduce overhead costs, through the reduction of general administrative and engineering related expenses. In January Visteon stated it expects to generate cumulative savings of approximately $215 million over the next three years as part of the overhead cost reduction initiative. To date approximately 250 salaried employees have been separated from the company in conjunction with this initiative, and Visteon remains on track to generate the expected savings.
Visteon continues to address its operations in the United Kingdom. Visteon has a non-binding memorandum of understanding with Linamar Corporation for the sale of its Swansea, Wales, facility. Although the transaction has yet to be finalized and negotiations continue, Visteon has been able to mitigate the losses associated with the facility through agreements reached with customers supplied by the Swansea facility.
"We continue to improve our operations on a global basis as demonstrated in our first quarter results," said Donald J. Stebbins, president and chief operating officer. "We are driving operational excellence and performance improvement throughout our global organization."
Full Year 2008 Outlook
Primarily due to a weaker U.S. dollar and the timing of divestitures, full-year 2008 product sales currently are expected to be in the range of $10.0 billion to $10.2 billion. Visteon also affirmed that it expects EBIT-R for full-year 2008 to be in the range of negative $25 million to positive $25 million and free cash flow for full-year 2008 to be in the range of negative $350 million to negative $250 million.
"The progress Visteon is making, combined with the additional actions we will execute in 2008, lays the foundation for Visteon to be free cash flow positive in 2009," Johnston said. "With $1.6 billion of cash at March 31, 2008, and additional available liquidity, we have the flexibility to execute our plans."
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 facilities in 26 countries and employs approximately 40,000 people.
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share Data)
(Unaudited)
Three-Months Ended
March 31
2008 2007
Net sales
Products $2,739 $2,758
Services 121 130
2,860 2,888
Cost of sales
Products 2,545 2,643
Services 120 128
2,665 2,771
Gross margin 195 117
Selling, general and administrative expenses 148 169
Restructuring expenses 46 25
Reimbursement from Escrow Account 24 35
Asset impairments and loss on divestiture 40 40
Operating loss (15) (82)
Interest expense 57 49
Interest income 15 9
Equity in net income of non-consolidated affiliates 15 9
Loss from continuing operations before income
taxes and minority interests (42) (113)
Provision for income taxes 51 17
Minority interests in consolidated subsidiaries 12 6
Net loss from continuing operations (105) (136)
Loss from discontinued operations, net of tax - 17
Net loss $(105) $(153)
Per share data:
Basic and diluted loss per share from
continuing operations $(0.81) $(1.06)
Loss from discontinued operations, net of tax - (0.13)
Basic and diluted loss per share $(0.81) $(1.19)
Average shares outstanding (millions)
Basic 129.5 128.9
Diluted 129.5 128.9
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
March 31 December 31
2008 2007
ASSETS
Cash and equivalents $1,613 $1,758
Accounts receivable, net 1,215 1,150
Interests in accounts receivable transferred 491 434
Inventories, net 484 495
Other current assets 281 235
Total current assets 4,084 4,072
Property and equipment, net 2,778 2,793
Equity in net assets of non-consolidated
affiliates 240 218
Other non-current assets 126 122
Total assets $7,228 $7,205
LIABILITIES AND SHAREHOLDERS' DEFICIT
Short-term debt, including current portion of
long-term debt $103 $95
Accounts payable 1,851 1,766
Accrued employee liabilities 270 316
Other current liabilities 400 351
Total current liabilities 2,624 2,528
Long-term debt 2,741 2,745
Postretirement benefits other than pensions 622 624
Employee benefits, including pensions 523 530
Deferred tax liabilities 160 147
Other non-current liabilities 409 428
Minority interests in consolidated subsidiaries 285 293
Shareholders' deficit:
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
Stock warrants 127 127
Additional paid-in capital 3,406 3,406
Accumulated deficit (4,128) (4,016)
Accumulated other comprehensive income 333 275
Other (5) (13)
Total shareholders' deficit (136) (90)
Total liabilities and shareholders' deficit $7,228 $ 7,205
VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Three-Months Ended
March 31
2008 2007
Operating activities
Net loss $(105) $(153)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 115 121
Asset impairments and loss on divestiture 40 50
(Gain) loss on asset sales (14) 3
Equity in net income of non-consolidated
affiliates, net of dividends remitted (15) (9)
Other non-cash items (7) 16
Changes in assets and liabilities:
Accounts receivable and retained interests (96) (153)
Inventories (30) (23)
Accounts payable 80 63
Other assets and other liabilities (94) (46)
Net cash used by operating activities (126) (131)
Investing activities
Capital expenditures (74) (64)
Proceeds from divestiture and asset sales 52 7
Net cash used by investing activities (22) (57)
Financing activities
Short-term debt, net - 2
Proceeds from debt, net of issuance costs 12 1
Principal payments on debt (15) (4)
Other, including book overdrafts (9) 2
Net cash (used by) provided from financing
activities (12) 1
Effect of exchange rate changes on cash 15 2
Net decrease in cash and equivalents (145) (185)
Cash and equivalents at beginning of year 1,758 1,057
Cash and equivalents at end of period $1,613 $872
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 "EBIT-R "and "free cash flow." Such non-GAAP financial measures are reconciled to their closest US GAAP financial measure in the schedules below.
EBIT-R: EBIT-R represents net (loss) income before net interest expense and provision for income taxes and excludes asset impairments, gains and losses on business divestitures and net unreimbursed restructuring expenses and other reimbursable costs. Related amounts included in loss from discontinued operations are reflected in the totals below. Management believes EBIT-R is useful to investors because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company's continuing operating activities.
Three-Months Ended 2008
March 31 Estimate
2008 2007
Net loss $(105) $(153) $(440) to (390)
Interest expense, net 42 40 175
Provision for income taxes 51 17 120
Asset impairments and loss on
divestiture 40 50 40
Restructuring and other
reimbursable costs 47 41 160
Reimbursement from escrow account (24) (41) (80)
EBIT-R $51 $(46) $(25) to 25
EBIT-R is not a recognized term under GAAP and does not purport to be an alternative to net (loss) income 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 cash flow available for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements.
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, for planning and forecasting future periods and as a measure for compensation purposes.
Three-Months Ended 2008
March 31 Estimate
2008 2007
Cash used by operating
activities* $(126) $(131) $(40) to 60
Capital expenditures (74) (64) (310)
Free cash flow $(200) $(195) $(350) to (250)
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.
*As of March 31, 2008 Visteon had $105 million of total receivable sales, which is equal to the balance at December 31, 2007 after adjusting for exchange. Full year 2008 estimates are based on receivables sales equal to the December 31, 2007 level.
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