Visteon Earns $48 Million in Third Quarter - 37 Cents Per Share
19 October 2000
Visteon Corporation Earns $48 Million in Third Quarter - 37 Cents Per Share
DEARBORN, Mich., Oct. 19 Visteon Corporation
today announced that it earned $48 million or $0.37 cents per share during the
Third Quarter of 2000. This compares with record third quarter earnings of
$155 million a year ago. This is Visteon's first full quarterly results
announcement since becoming an independent, publicly traded company in June.
Adjusting 1999 for the effects of a one-time price realignment of 5
percent that resulted from Visteon's separation from Ford Motor Company, and
other independence-related costs, third quarter 2000 earnings would have been
up $2 million versus 1999 on a pro forma basis.
Third quarter revenue was $4.4 billion in 2000, down 4.3 percent compared
with 1999, and the after-tax return on sales was 1.2 percent.
Visteon's net income for the first nine months of 2000 totaled $357
million. Revenue for the first three quarters was $14.9 billion and after-tax
return on sales was 2.5 percent.
Visteon has secured $2.3 billion in annual, incremental new business
through the first nine months of 2000. The new business comes from customers
such as the VW Group, General Motors, DaimlerChrysler, PSA Peugeot Citroen,
Renault, Nissan, Honda, Fiat, Kia and Ford.
"We had a solid third quarter as a newly independent company," said
Visteon Executive Vice President and Chief Financial Officer Dan Coulson.
"We have strong cash flow, good operating results and continued business
growth despite the weakness of the Euro and production cutbacks from Ford
Motor Company. We will continue to focus on these areas in order to deliver
solid fourth quarter results and achieve all of our milestones."
Visteon also focused on several key initiatives in the third quarter
including:
* Through the first nine months of 2000, Visteon continued to make
progress toward its goal of achieving 20 percent of non-Ford business by 2002.
Thirty-three percent of the new business contracts won in the first three
quarters of 2000 were with non-Ford customers and one-quarter of those were
with customers outside of North America.
* Visteon reduced costs by about $170 million dollars, which brings total
cost savings to $320 million through the first nine months of the year.
Visteon's milestone for cost reductions in 2000 is $450 million.
* Visteon has run more than $200 million in goods and services through
on-line auctions and intends to increase that to $400 million for the full
year. Visteon also has joined Covisint, the global online automotive
purchasing exchange formed by Ford, General Motors, DaimlerChrysler, Nissan
and Renault.
* During the third quarter, Visteon's operating cash flow before
acquisitions and dividends was $471 million positive.
* Visteon appointed Mike Johnston as President and Chief Operating
Officer. Johnston has extensive experience in the automotive supplier and
aerospace industries.
* Visteon formed a new Telematics/Multimedia business system dedicated to
developing and delivering mobile wireless information, entertainment, audio,
safety, security and convenience products for the rapidly evolving worldwide
market.
* Visteon sold $1.2 billion in global notes offered in five and 10-year
maturities. The proceeds of the sale were used to repay outstanding debt
incurred as the result of Visteon's recent separation from Ford Motor Company.
* Visteon formed a number of strategic partnerships and alliances
including: a joint venture with The Budd Company to provide chassis systems to
General Motors; an alliance with iBiquity Digital Corporation to develop radio
broadcast technology; and a relationship with Raytheon Company to develop
radar-based sensor technology for vehicle "cocoon" safety products.
* Products introduced include: a totally-integrated plastic fuel tank
that will help manufacturers meet Zero Emission standards; Driver Vision at
Night that uses near-infrared technology to enhance the driver's view of the
road; and the MACH(R) multimedia brand of products to deliver the best in
technology and innovation in multimedia systems.
* Later this month, the U.S. Environmental Protection Agency (EPA) will
present Visteon its 2000 Climate Protection Award for Superintegration(TM).
Superintegration(TM) is Visteon's systems approach that combines components
into modules that result in improved packaging, reduced weight and lower cost.
Visteon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended September 30, 2000 and 1999
(in millions, except per share amounts)
Third Quarter First Nine Months
2000 1999 2000 1999
(unaudited) (unaudited)
Sales
Ford and affiliates $3,675 $3,840 $12,722 $12,809
Other customers 729 760 2,216 1,626
Total sales 4,404 4,600 14,938 14,435
Costs and expenses (Note 2)
Costs of sales 4,128 4,146 13,772 12,917
Selling, administrative
and other expenses 183 174 552 479
Total costs and expenses 4,311 4,320 14,324 13,396
Operating income 93 280 614 1,039
Interest income 21 26 73 50
Interest expense 40 50 127 99
Net interest expense (19) (24) (54) (49)
Equity in net income
of affiliated companies 8 4 25 32
Income before income taxes 82 260 585 1,022
Provision for income taxes 27 96 209 372
Income before minority
interests 55 164 376 650
Minority interests in net income
of subsidiaries 7 9 19 10
Net income $ 48 $ 155 $ 357 $ 640
Average number of shares of Common Stock
outstanding (Note 5) 131 130 130 130
Earnings and dividends per share (Note 5)
Basic and diluted $ 0.37 $ 1.19 $ 2.75 $ 4.92
Cash dividends $ 0.06 $ - $ 0.06 $ -
The accompanying notes are part of the financial statements.
Visteon Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions)
September 30, December 31,
2000 1999
(unaudited)
ASSETS
Cash and cash equivalents $ 1,190 $ 1,849
Marketable securities 126 -
Total cash and marketable securities 1,316 1,849
Accounts and notes receivable --
Ford and affiliates 1,661 1,578
Accounts receivable -- other customers 801 613
Total receivables 2,462 2,191
Inventories (Note 6) 838 751
Deferred income taxes 34 110
Prepaid expenses and other current assets 164 295
Total current assets 4,814 5,196
Equity in net assets of
affiliated companies 212 205
Net property 5,638 5,789
Deferred income taxes 39 362
Other assets 524 897
Total assets $11,227 $12,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade payables $ 1,879 $ 3,150
Accrued liabilities 1,304 1,211
Income taxes payable 43 153
Debt payable within one year (Note 3) 642 961
Total current liabilities 3,868 5,475
Long-term debt (Note 3) 1,364 1,358
Other liabilities (Note 4) 2,407 3,964
Deferred income taxes 19 153
Total liabilities 7,658 10,950
Stockholders' equity (Notes 7,8 and 10)
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 3,311 -
Prior owner's net investment - 1,566
Accumulated other comprehensive income (210) (67)
Other (12) -
Earnings retained for use in business 349 -
Total stockholders' equity 3,569 1,499
Total liabilities and
stockholders' equity $11,227 $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 September 30, 2000 and 1999
(in millions)
First Nine First Nine
Months 2000 Months 1999
(unaudited)
Cash and cash equivalents at January 1 $ 1,849 $ 542
Cash flows (used in)/provided
by operating activities (922) 1,782
Cash flows from investing activities
Capital expenditures (503) (503)
Acquisitions and investments
in joint ventures, net (30) (534)
Purchases of securities (126) -
Other (14) (28)
Net cash used in investing activities (673) (1,065)
Cash flows from financing activities
Cash distributions from/(to) prior owner 85 (291)
Commercial paper issuances, net 302 -
Payments of short-term debt (1,775) (17)
Proceeds from issuance of short-term debt 1,374 -
Proceeds from issuance of other debt 1,212 1,297
Principal payments on other debt (185) (261)
Dividends paid (8) -
Other (86) 3
Net cash provided by financing activities 919 731
Effect of exchange rate changes on cash 17 (8)
Net (decrease)/increase in cash
and cash equivalents (659) 1,440
Cash and cash equivalents at September 30 $ 1,190 $ 1,982
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 shares of
Visteon common stock then outstanding to the holders of record of Ford common
and Class B stock on June 28, 2000 (the "spin-off").
2. Selected costs and expenses are summarized as follows (in millions):
Third Quarter First Nine Months
2000 1999 2000 1999
Depreciation $147 $160 $446 $423
Amortization 24 26 67 63
Visteon recorded a pre-tax charge of approximately $13 million ($8 million
after-tax) and $5 million ($3 million after-tax) in the second and third
quarters of 2000, respectively, for Visteon-designated employees that are part
of special voluntary retirement and separation programs announced previously
by Visteon.
3. Debt - On August 3, 2000, Visteon completed a public offering of
unsecured term debt securities totaling $1.2 billion with maturities of five
years and ten years. The offering included $500 million of securities
maturing on August 1, 2005 bearing interest at a rate of 7.95% per annum and
$700 million of securities maturing on August 1, 2010 bearing interest at a
rate of 8.25% per annum. The proceeds of the offering were used to refinance
$1.2 billion previously outstanding under an unsecured financing arrangement
with a third-party lender.
In the second quarter of 2000, Visteon established a commercial paper
program under which, at September 30, 2000, $302 million was outstanding with
a weighted average maturity of 23 days and a weighted average interest rate of
about 6.8%. In addition, Visteon entered into financing arrangements in the
second quarter with third-party lenders to provide up to $2.0 billion of
contractually committed, unsecured revolving credit facilities. The revolving
credit facilities are evenly split 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. As of September 30, 2000, there
were no amounts outstanding under the revolving credit facilities.
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 pension and other
postretirement benefit plans reduced Visteon's net pension and other
postretirement related liabilities by about $1.5 billion. 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):
Third Quarter 2000 Third Quarter 1999
Income Shares Income Shares
Net income $ 48 130 $ 155 130
Basic income per share $0.37 $1.19
Basic income and shares $ 48 130 $ 155 130
Net dilutive effect of
options - - - -
Diluted income and shares $ 48 130 $ 155 130
Diluted income per share $0.37 $1.19
First Nine Months 2000 First Nine Months 1999
Income Shares Income Shares
Net income $ 357 130 $ 640 130
Basic income
per share $2.75 $4.92
Basic income
and shares $ 357 130 $ 640 130
Net dilutive effect
of options - - - -
Diluted income
and shares $ 357 130 $ 640 130
Diluted income
per share $2.75 $4.92
Visteon sponsors a stock-based incentive plan ("Long-Term Incentive Plan"
or "LTIP"). Effective at the date of the spin-off and subject to stockholder
approval, 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. Net issuances of
restricted stock during the third quarter of 2000 were about 133,000 shares.
Restricted stock awards will vest on the fifth anniversary of the date of
grant. 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):
September 30, December 31,
2000 1999
Raw materials, work in process and supplies $731 $653
Finished products 107 98
Total inventories $838 $751
U.S. inventories $513 $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):
Third Quarter First Nine
Months
2000 1999 2000 1999
Net income $ 48 $155 $357 $640
Other comprehensive income/(loss) (85) 45 (143) (15)
Total comprehensive income/(loss) $(37) $200 $214 $625
8. Stockholders' Equity - Changes in stockholders' equity for the first
nine months of 2000 are summarized as follows (in millions):
Common Stock Capital in Earnings Other
Shares Amount Excess of Retained
Par Value for Use
in Business
Balances at
January 1, 2000
Net transfers and settlements of
balances with prior owner
Capitalization/
reclassification of
prior owner's net
investment 130 $130 $3,300
Issuance of
restricted stock 1 1 11 $(12)
Net income $357
Dividends (8)
Foreign currency
translation
adjustments
Balances at
September 30, 2000 131 $131 $3,311 $349 $(12)
Accumulated Prior Total
Other Owner's Net
Comprehensive Investment
Income
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) 0
Issuance of
restricted stock 0
Net income 357
Dividends (8)
Foreign currency
translation
adjustments (143) (143)
Balances at
September 30, 2000 $(210) $ 0 $3,569
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, Total
Energy Conversion Communication Glass Visteon
& Safety
Third Quarter
2000
Sales $2,032 $2,192 $180 $ 4,404
Income before taxes 7 90 2 82
Net income 5 52 2 48
Average assets 5,053 5,834 574 11,461
1999
Sales $2,074 $2,344 $182 $ 4,600
Income/(loss)
before taxes 97 181 (1) 260
Net income/(loss) 61 105 (1) 155
Average assets 5,357 5,520 703 11,580
Dynamics & Comfort, Total
Energy Conversion Communication Glass Visteon
& Safety
First Nine Months
2000
Sales $6,912 $7,445 $581 $14,938
Income/(loss)
before taxes 208 441 (18) 585
Net income/(loss) 132 265 (10) 357
Average assets 5,182 5,987 668 11,837
1999
Sales $6,899 $6,952 $584 $14,435
Income before taxes 391 657 16 1,022
Net income 246 408 12 640
Average assets 5,148 4,819 690 10,657
Total income before taxes in the table above includes $17 million, $46
million, $17 million and $42 million of net interest expense not allocated to
the reportable operating segments for the third quarter 2000, first nine
months of 2000, third quarter 1999 and first nine months of 1999,
respectively. Total net income in the table above includes $11 million, $30
million, $10 million and $26 million of expense related to net interest
expense not allocated to the reportable operating segments for the third
quarter 2000, first nine months 2000, third quarter 1999 and first nine months
1999, respectively. Segment financial information for the first nine months
of 2000 reflects a revised allocation within the reportable operating segments
of certain costs incurred during the first half of 2000.
10. Other - On October 11, 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 December 1, 2000 to shareholders of record
as of November 1, 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, to be owned 80.1% by
Pilkington and 19.9% by Visteon, which would acquire Visteon's Glass business
for cash consideration and assumption of certain liabilities and would assume
operational management of that business.
For the year ended December 31, 1999, the Glass segment represented about
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 as it relates to the Glass segment. If a definitive
agreement is reached, then, depending upon its terms, this transaction would
likely result in Visteon incurring a significant charge to earnings. There
can be no assurance, however, that a definitive agreement will be reached at
any particular time, or at all, or that it will not differ materially from the
description above.