Visteon Announces First-Quarter 2009 Results
VAN BUREN TOWNSHIP, Mich., May 11, 2009 -- First Quarter Summary -- Product sales of $1.30 billion, down 53 percent from first quarter 2008 -- Net income of $2 million, compared with a loss of $105 million in first quarter 2008 -- Cash used by operating activities of $275 million -- Quarter-end cash balance of $767 million -- New business wins of $240 million
Visteon Corporation (Pink Sheets: VSTN) today announced its first-quarter 2009 results, reporting net income of $2 million, or 2 cents per share, on sales of $1.35 billion. The first-quarter 2009 profit includes a one-time, non-cash gain of $95 million related to the deconsolidation of the net assets associated with Visteon UK Ltd. For first quarter 2008, Visteon reported a net loss of $105 million, or 81 cents per share, on sales of $2.86 billion. Adjusted EBITDA, as defined below, for first quarter 2009 was $22 million, compared with $166 million in first quarter 2008.
"Our first-quarter results were significantly affected by the global reduction in vehicle production," said Donald J. Stebbins, chairman and chief executive officer. "Visteon is taking the necessary steps to protect capital, maintain viable operations and position our global business for future success."
Visteon continues to execute cost-reduction actions in response to the current market conditions beyond those associated with the recently completed three-year improvement plan. These additional cost-reduction actions include previously announced global salaried and hourly workforce reductions, shortened work weeks, temporary reductions in pay and elimination of 401(k) matching contributions and merit increases, and other measures. Additionally, Visteon successfully completed the salaried employee reduction plan initiated in third quarter 2008. Savings from this program are expected to be about $90 million annually.
Visteon's first-quarter product sales remain diversified among customers and across regions. Approximately 31 percent of first quarter product sales were to Ford Motor Co., while Hyundai-Kia accounted for 25 percent. Renault-Nissan and PSA/Peugeot-Citroen accounted for about 7 percent and 6 percent of sales, respectively. On a regional basis, Europe accounted for about 38 percent of total product sales, with Asia representing 32 percent, North America representing 24 percent and the balance in South America.
As announced on March 31, 2009, administrators were appointed for an affiliate of Visteon Corporation, Visteon UK Ltd., in accordance with the United Kingdom Insolvency Act 1986. This decision to place this subsidiary into administration was reached after all options were exhausted to address the continued substantial loss-making operations of the three Visteon UK Ltd. facilities. The effect of the administration of Visteon UK Ltd. was to place the management, affairs, business and property under the direct control of representatives from KPMG as administrators. Consequently, the net assets of Visteon UK Ltd. have been deconsolidated from those of Visteon Corporation. Visteon UK Ltd. had liabilities in excess of assets, and a negative net worth. The administration proceedings do not include Visteon Corporation or any of its other subsidiaries.
"The actions undertaken with respect to our UK operations were a difficult, but necessary step to address a history of losses in these operations, and to support our goal of positioning Visteon as a competitive and viable company in this challenging environment," added Stebbins.
First Quarter 2009 Results
For first quarter 2009, total sales were $1.35 billion, including product sales of $1.30 billion and services revenue of $57 million. Product sales decreased by about $1.44 billion, or 53 percent, year-over-year as lower production, net of new business, reduced sales by about $1.1 billion. Divestitures and closures and foreign currency further reduced sales by about $210 million and $170 million, respectively. The company experienced lower sales in each of the major regions in which it operates, reflecting decreased production volumes by all customers as vehicle sales declined in response to weak global economic conditions.
Product gross margin for first quarter 2009 was $44 million, compared with $194 million for the same period a year ago, a decline of 77 percent. The impact of lower production levels along with divestitures and closures more than offset savings from favorable net cost performance and restructuring activities.
Selling, general and administrative expense for first quarter 2009 totaled $108 million, a decrease of $40 million, or 27 percent, compared with the same period a year ago.
For first quarter 2009, the company reported net income of $2 million, or 2 cents per share. This compares with a net loss of $105 million, or 81 cents per share, in the same period a year ago. First-quarter 2009 results include a non-cash gain of $95 million related to deconsolidation of Visteon UK Ltd. net liabilities, as well as $34 million in restructuring and other reimbursable expenses. Additionally, there were $62 million of reimbursable costs from the escrow account, which included certain amounts related to the Visteon UK Ltd. administration. First-quarter 2008 results included $40 million of asset impairments and loss on divestiture and $47 million of restructuring and other reimbursable expenses, of which $24 million was reimbursed from the escrow account. Income tax expense for first quarter 2009 was $14 million, compared with $51 million for the same period a year earlier. Adjusted EBITDA for first quarter 2009 was $22 million, compared with $166 million for the same period a year ago.
Cash Flow and Liquidity
As of March 31, 2009, Visteon had cash balances totaling $767 million, of which $163 million is classified as restricted cash under the recently negotiated waivers for the company's secured lending facilities.
Cash used by operating activities totaled $275 million for first quarter 2009, compared with $126 million used during the same period a year earlier. The increase was attributable to higher net losses, as adjusted for non-cash items, and higher trade working capital outflows. Trade working capital outflows in first quarter 2009 reflect the impact of lower customer sales in late 2008 and early 2009, and the settlement of year-end 2008 supplier payables in the first quarter 2009. Capital expenditures were $25 million for first quarter 2009, compared with $74 million in first quarter 2008, reflecting aggressive program management. Free cash flow, as defined below, was a use of $300 million for first quarter 2009, compared with a use of $200 million for the same period in 2008.
Cash used by financing activities was $240 million during first quarter 2009, an increase of $228 million compared with first quarter 2008. The increase includes $163 million of cash restricted pursuant to the March 31, 2009, amendments and waivers to the secured lending facilities and a $44 million reduction in outstanding European accounts receivable securitization borrowings.
Total debt was $2.72 billion, which included $105 million drawn on the company's asset-based U.S. revolving credit facility and $43 million outstanding under its European receivables securitization facility. Additional borrowing under these facilities, taking into account letters of credit issued under the U.S. facility, is limited.
Visteon remains in compliance with the requirements of the temporary waivers provided by its secured lenders, the earliest of which expires on May 30, 2009, and continues to work with both lenders and customers to seek a longer-term solution.
New Business Wins
Visteon continues to win new business despite the difficult economic environment. During first quarter 2009, Visteon won approximately $240 million of new business. On a regional basis the new business wins were well-balanced, with Europe accounting for 37 percent, Asia 36 percent and North America 27 percent.
"While the current production environment remains very challenging, Visteon continues to demonstrate our commitment to product and technology leadership," Stebbins said. "Our continued success in winning and retaining business from customers around the world speaks to the strength of Visteon's product capability and global engineering and manufacturing footprint."
Visteon 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 Basildon, UK; the company has facilities in 27 countries and employs approximately 31,000 people.