Visteon Corporation Reports Second Quarter Earnings of $162 Million
18 July 2000
Visteon Corporation Reports Second Quarter Earnings of $162 Million
DEARBORN, Mich. - Visteon Corporation , the world's second largest
automotive supplier, announced today that it earned $162 million during the
second quarter of 2000, compared with record second quarter earnings of $280
million a year ago. The reduction in earnings was accounted for by a one-time
price realignment of 5 percent that resulted from a joint Ford-Visteon
competitive pricing study.
Adjusting 1999 for the effects of the price realignment and other
independence-related costs, Second Quarter 2000 earnings would have been down
$8 million versus 1999 on a pro forma basis. This year's results included a
one-time charge of $8 million connected with employee separation programs.
Second quarter revenue was $5.3 billion in 2000, up 5 percent compared
with 1999, and the after-tax return on sales was 3.2 percent.
Combined with strong First Quarter 2000 results, net income for the first
half 2000 totaled $309 million. Revenue for the first six months was
$10.5 billion and after-tax return on sales was 3.0 percent.
"We are encouraged by these results -- our second quarter builds on a
strong first quarter adding up to more than $500 million in profit before
taxes," said Visteon Corporation Chairman, CEO and President Peter J.
Pestillo. "Our operating improvements in the second quarter show that we are
positioned well to meet our objectives for the year and deliver good
shareholder value."
In addition to Visteon's independence, there have been several highlights
during the second quarter 2000:
* Visteon signed a letter of intent with Pilkington plc, one of the
world's leading glass manufacturers to form a new glass company. Pilkington
will assume management responsibility and provide technology leadership for
the new company. Visteon is working with Pilkington to finalize the
transaction, with completion targeted by the end of the year.
* Visteon continues to deliver on its commitment to secure new business
in 2000. Through the first half of 2000, Visteon has booked $1.6 billion in
new business. More than 33 percent of the new business contracts won in the
first half of 2000 were with non-Ford customers and 28 percent were with
customers outside of North America. Of that new business, more than
$500 million is in multimedia and telematics, an area that offers Visteon
significant opportunities for future growth.
* Visteon has formed an affiliation with Samsung Electronics, Co., Ltd.,
to develop fully integrated high-quality telematics products. The association
between the two companies will allow Visteon to incorporate Samsung's CDMA
Voice and Data Module into a variety of Visteon telematics products for the
2002 automotive model year and beyond.
* Visteon has joined forces with Sirius Satellite Radio to develop
innovative products that would combine Visteon's multimedia expertise with
Sirius' 100-channel audio entertainment service.
* Visteon will work with PSA Peugeot-Citroen to develop a next generation
climate control system. The two-year program will enable the two companies to
develop a system aimed at improving passenger comfort and optimizing
in-vehicle global thermal systems management.
* Visteon has announced a $62 million investment in its Alba Plant in
Hungary to provide state-of-the-art technology for the production of
compressors, which will be supplied to the corporation's growing European
customer base.
* Visteon was recognized recently by industry leaders for its excellence
in design and technology at the Fifth Annual Design and Technology awards,
sponsored by Auto Interiors magazine. In all, Visteon received five awards
for such technologies as ICES, Superintegration(TM), RPID(TM), Visteon Voice
Technology(TM), and Visteon Laminate Insert Molding (VLIM(TM)).
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 a global delivery system of more than 130 technical, manufacturing, sales,
and service facilities located in 23 countries. It has 81,000 employees
working in three business segments: Dynamics and Energy Conversion; Comfort,
Communication and Safety; and Glass.
Visteon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended June 30, 2000 and 1999
(in millions, except per share amounts)
Second Quarter First Half
2000 1999 2000 1999
(unaudited) (unaudited)
Sales
Ford and affiliates $4,571 $4,614 $ 9,047 $ 8,969
Other customers 738 449 1,487 866
Total sales 5,309 5,063 10,534 9,835
Costs and expenses (Note 2)
Costs of sales 4,849 4,430 9,644 8,771
Selling, administrative
and other expenses 192 172 369 305
Total costs
and expenses 5,041 4,602 10,013 9,076
Operating income 268 461 521 759
Interest income 18 2 52 24
Interest expense 30 26 87 49
Net interest expense (12) (24) (35) (25)
Equity in net income of
affiliated companies 10 12 17 28
Income before income taxes 266 449 503 762
Provision for income taxes 96 164 182 276
Income before minority
interests 170 285 321 486
Minority interests in
net income of subsidiaries 8 5 12 1
Net income $162 $280 $309 $485
Average number of shares of Common Stock
outstanding (Note 5) 130 130 130 130
Earnings per share (Note 5)
Basic and diluted $1.25 $2.15 $2.38 $3.73
The accompanying notes are part of the financial statements.
Visteon Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions)
June 30, December 31,
2000 1999
(unaudited)
ASSETS
Cash and cash equivalents $965 $1,849
Accounts and notes receivable --
Ford and affiliates 2,367 1,578
Accounts receivable -- other customers 1,002 613
Total receivables 3,369 2,191
Inventories (Note 6) 781 751
Deferred income taxes 72 110
Prepaid expenses and other current assets 41 295
Total current assets 5,228 5,196
Equity in net assets of affiliated companies 216 205
Net property 5,796 5,789
Deferred income taxes - 362
Other assets 455 897
Total assets $11,695 $12,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade payables $2,270 $3,150
Accrued liabilities 1,221 1,211
Income taxes payable 43 153
Debt payable within one year 906 961
Total current liabilities 4,440 5,475
Long-term debt 1,174 1,358
Other liabilities 2,438 3,964
Deferred income taxes 29 153
Total liabilities 8,081 10,950
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 and outstanding 131 -
Capital in excess of par value of stock 3,309 -
Prior owner's net investment - 1,566
Accumulated other comprehensive income (125) (67)
Other (10) -
Earnings retained for use in business 309 -
Total stockholders' equity 3,614 1,499
Total liabilities and
stockholders' equity $11,695 $12,449
The accompanying notes are part of the financial statements.
Visteon Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended June 30, 2000 and 1999
(in millions)
First Half 2000 First Half 1999
(Unaudited)
Cash and cash equivalents at January 1 $1,849 $542
Cash flows provided by/(used in)
operating activities (1,619) 1,234
Cash flows from investing activities
Capital expenditures (284) (384)
Acquisitions and investments in
joint ventures, net (3) (508)
Other (10) (35)
Net cash used in investing activities (297) (927)
Cash flows from financing activities
Cash distributions from/(to) prior owner 85 (232)
Commercial paper issuances, net 410 -
Payments of short-term debt, net (509) (18)
Proceeds from issuance of short-term debt 1,200 -
Proceeds from issuance of other debt 14 1,054
Principal payments on other debt (200) (84)
Other 21 5
Net cash provided by
financing activities 1,021 725
Effect of exchange rate changes on cash 11 (10)
Net increase/(decrease) in cash
and cash equivalents (884) 1,022
Cash and cash equivalents at June 30 $965 $1,564
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
necessary for a fair presentation of such information. Results for interim
periods should not be considered indicative of results for a full year.
Reference should be made to the financial statements contained in the
registrant's prospectus dated June 13, 2000 as filed with the Securities and
Exchange Commission on June 14, 2000. For purposes of Notes to Financial
Statements, "Visteon" or the "Company" means Visteon Corporation and its
majority owned subsidiaries unless the context requires otherwise.
Visteon is the world's second largest supplier of automotive systems,
modules and components to global vehicle manufacturers. Ford Motor Company
("Ford") established Visteon as a wholly-owned subsidiary in January 2000, and
subsequently contributed or otherwise transferred to Visteon the assets and
liabilities comprising Ford's automotive components and systems business.
Visteon became an independent company when Ford distributed all of the shares
(130 million) of Visteon common stock to the holders of record on June 12,
2000 of Ford common and Class B stock (the "spin-off").
2. Selected costs and expenses are summarized as follows (in millions):
Second Quarter First Half
2000 1999 2000 1999
Depreciation $155 $132 $299 $263
Amortization 21 19 43 37
Visteon recorded a pre-tax charge of approximately $13 million ($8 million
after-tax) in the second quarter of 2000 for Visteon-designated employees that
are part of special voluntary retirement and separation programs announced
previously by Visteon.
3. Debt - During the second quarter of 2000, Visteon established a
commercial paper program under which, at June 30, 2000, about $410 million was
outstanding with maturities ranging up to 35 days and a weighted average
interest rate of 6.9%. In addition, Visteon entered into financing
arrangements with third-party lenders to provide up to $2.0 billion of
contractually committed, unsecured revolving credit. The revolving credit
facilities are divided evenly between 364-day and 5-year commitments, maturing
in June 2001 and June 2005, respectively. Borrowings under the revolving
credit facilities bear interest based on a variable interest rate option
selected at the time of borrowing. No amounts were outstanding under the
revolving credit facilities at June 30, 2000.
In June 2000, Visteon borrowed $1.2 billion under a short-term, unsecured
financing arrangement with a third-party lender. Obligations under this
arrangement mature in December 2000. Interest is paid based on a variable
interest rate option selected at the time of borrowing (approximately 7% at
June 30, 2000). Based on management's intent and capability to refinance this
obligation through a long-term financing arrangement, $1.0 billion of this
obligation has been classified as long-term debt on the accompanying June 30,
2000 balance sheet.
4. Pension and Other Postretirement Benefits - Under the terms of
Visteon's separation from Ford, Ford has retained the pension, postretirement
health care and postretirement retiree life insurance obligations for most
Visteon-designated employees of Ford who retired prior to the spin-off. Ford
also retained the related Voluntary Employees' Beneficiary Association assets.
The asset and liability transfers between Ford and Visteon postretirement
benefit plans reduced Visteon's net postretirement related liabilities by
about $1.5 billion to about $2 billion at June 30, 2000. Demographic and
actuarial assumptions were used in estimating liability transfers at
separation.
Visteon Corporation and Subsidiaries
NOTES TO FINANCIAL STATEMENTS - Continued
(unaudited)
5. 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. For purposes of the earnings per share
calculations, 130 million shares of common stock are treated as outstanding
for periods prior to our spin-off from Ford. The calculation of diluted
income per share of Common Stock takes into account the effect of dilutive
potential common stock, such as stock options and other stock-based awards.
Income per share of Common Stock was as follows (in millions, except per
share amounts):
Second Quarter 2000 Second Quarter 1999
Income Shares Income Shares
Net income $162 130 $280 130
Basic income per share $1.25 $2.15
Basic income and shares $162 130 $280 130
Net dilutive effect
of options - - - -
Diluted income and shares $162 130 $280 130
Diluted income per share $1.25 $2.15
First Half 2000 First Half 1999
Income Shares Income Shares
Net income $309 130 $485 130
Basic income per share $2.38 $3.73
Basic income and shares $309 130 $485 130
Net dilutive effect
of options - - - -
Diluted income and shares $309 130 $485 130
Diluted income per share $2.38 $3.73
Visteon sponsors a stock-based incentive plan ("Long-Term Incentive
Compensation Plan" or "LTIP"). Effective at the date of the spin-off, Visteon
granted to employees about 800,000 shares of restricted stock and about
2 million stock options with an exercise price equal to the average of the
highest and lowest prices at which Visteon common stock was traded on the New
York Stock Exchange on that date. The restricted stock will vest on the fifth
anniversary of the date of grant. Such stock is considered compensation for
services to be provided by employees and the related expense will be
recognized over the term of the services provided. Stock options will become
exercisable 33% after one year from the date of grant, an additional 33% after
two years and in full after three years, and expire after 10 years from the
date of grant.
6. Inventories are summarized as follows (in millions):
June 30, December 31,
2000 1999
Raw materials, work in process and supplies $687 $653
Finished products 94 98
Total inventories $781 $751
U.S. inventories $486 $434
Visteon Corporation and Subsidiaries
NOTES TO FINANCIAL STATEMENTS - Continued
(unaudited)
7. Comprehensive Income - Other comprehensive income includes foreign
currency translation adjustments. Total comprehensive income is summarized as
follows (in millions):
Second Quarter First Half
2000 1999 2000 1999
Net income $162 $280 $309 $485
Other comprehensive income (21) (18) (58) (60)
Total comprehensive income $141 $262 $251 $425
8. Stockholders' Equity - Changes in stockholders' equity for the first
half of 2000 are summarized as follows (in millions):
Earnings
Capital in Retained
Common Stock Excess of for Use in
Balances at Shares Amount Par Value Business Other
January 1, 2000 --- --- --- --- ---
Net transfers and
settlements of
balances with
prior owner --- --- --- --- ---
Capitalization/
reclassification
of prior owner's
net investment 130 $130 $3,300 --- ---
Net income --- --- --- $309 ---
Issuance of
restricted stock 1 1 9 --- $(10)
Foreign currency
translation
adjustments --- --- --- --- ---
Balances at
June 30, 2000 131 $131 $3,309 $309 $(10)
Accumulated Prior
Other Owner's
Comprehensive Net
Income Investment Total
Balances at
January 1, 2000 $(67) $1,566 $1,499
Net transfers and
settlements of
balances with
prior owner --- 1,864 1,864
Capitalization/
reclassification
of prior owner's
net investment --- (3,430) ---
Net income --- --- 309
Issuance of
restricted stock --- --- ---
Foreign currency
translation
adjustments (58) --- (58)
Balances at
June 30, 2000 $(125) --- $3,614
Net transfers and settlements of balances are primarily related to Ford
converting $1,120 million of debt owed to it by Visteon under an intracompany
revolving loan arrangement into an equity investment in Visteon, Ford
retaining about $573 million of prepaid health care amounts related to active
employees, and asset and liability transfers between Ford and Visteon
postretirement benefit plans, net of related deferred taxes.
Visteon Corporation and Subsidiaries
NOTES TO FINANCIAL STATEMENTS - Continued
(unaudited)
9. Segment Information - Visteon's reportable operating segments are
Dynamics & Energy Conversion; Comfort, Communication & Safety; and Glass.
Financial information for the reportable operating segments is summarized as
follows (in millions):
Dynamics & Comfort,
Energy Communication Total
Conversion & Safety Glass Visteon
Second Quarter
2000
Sales $2,455 $2,650 $204 $5,309
Income/(loss) before
taxes 66 234 (25) 266
Net income/(loss) 42 141 (15) 162
Average assets 5,222 5,912 609 11,743
1999
Sales $2,456 $2,405 $202 $5,063
Income before taxes 169 294 10 449
Net income 106 182 8 280
Average assets 4,868 5,113 629 10,610
Dynamics & Comfort,
Energy Communication Total
Conversion & Safety Glass Visteon
First Half
2000
Sales $4,880 $5,253 $401 $10,534
Income/(loss) before
taxes 145 418 (31) 503
Net income/(loss) 92 255 (19) 309
Average assets 5,308 6,087 677 12,072
1999
Sales $4,825 $4,608 $402 $9,835
Income before taxes 294 476 17 762
Net income 185 303 13 485
Average assets 4,808 4,826 662 10,296
Total income before taxes in the table above includes $9 million, $29
million, $24 million and $25 million of net interest expense not allocated
to the reportable operating segments for the second quarter 2000, first half
2000, second quarter 1999 and first half 1999, respectively. Total net income
in the table above includes $6 million, $19 million, $16 million and $16
million of expense related to net interest expense not allocated to the
reportable operating segments for the second quarter 2000, first half 2000,
second quarter 1999 and first half 1999, respectively.
10. Other - On July 13, 2000, the Board of Directors of Visteon declared
a quarterly dividend of $0.06 per share on the Company's common stock. The
dividend is payable on September 1, 2000 to shareholders of record as of
August 2, 2000.
On June 2, 2000, Visteon and Ford signed a non-binding letter of intent
with Pilkington plc, relating to Visteon's Glass business. The parties have
agreed to negotiate the terms of a joint venture, pursuant to which Pilkington
would acquire about 81% of Visteon's Glass business for cash consideration and
would assume operational management of that business.
For the year ended December 31, 1999, the Glass segment represented 6% of
Visteon's average assets, 4% of Visteon's total sales and less than one half
of one percent of Visteon's net income. Visteon's Carlite(R) aftermarket
operations would be included in the business to be transferred to the joint
venture. In connection with the transaction, Ford would enter into a separate
supply agreement with the joint venture, which would supersede Ford's supply
agreement with Visteon. If a definitive agreement is reached, we expect to
complete this transaction during 2000. If completed, and dependent upon the
terms ultimately agreed to, this transaction would likely result in Visteon
incurring a significant charge to earnings. However, the letter of intent is
non-binding, and we cannot assure you that a definitive agreement will be
reached, or that it will not differ materially from the description above.