- Product sales of $1.7 billion, up $26 million from third quarter 2009
- Net loss of $140 million, includes costs related to certain post-retirement employee benefits and reorganization expenses of $169 million
- Adjusted EBITDA of $149 million, up 16 percent from third quarter 2009
- Cash from operations of $50 million
- Cash balances of approximately $1.1 billion
On Oct. 1, Visteon completed all conditions to the effectiveness of its Plan of Reorganization and emerged from Chapter 11 with a significantly deleveraged capital structure
Visteon Corporation (OTC: VSTO) today announced its third quarter 2010 results, reporting a net loss of $140 million, or $1.08 per share, on product sales of $1.7 billion. These results included a net charge of $115 million for obligations related to certain U.S. other post-retirement employee benefit (OPEB) plans and $54 million in reorganization expenses. For the third quarter of 2009, Visteon reported a net loss of $38 million, or 29 cents per share, on product sales of $1.68 billion; the net loss included $23 million in reorganization expenses. Adjusted EBITDA, as defined below, was $149 million for the third quarter of 2010, or 8.8 percent of product sales, an improvement of $20 million compared with the third quarter of 2009.
Hyundai-Kia accounted for approximately 30 percent of Visteon’s third-quarter product sales, with Ford Motor Co. generating 25 percent, Renault-Nissan 8 percent and PSA Peugeot-Citroen 6 percent. On a regional basis, Asia accounted for 42 percent of Visteon’s total product sales − up from 36 percent a year earlier − with Europe representing 34 percent, North America 17 percent and South America 7 percent.
“Our record percentage of sales to customers in Asia demonstrates Visteon’s global breadth and the strength of our global product lines,” said Donald J. Stebbins, chairman, chief executive officer and president. “As a result of our restructuring actions and continued focus on cost control, our adjusted EBITDA was up 16 percent on essentially flat sales.”
Third Quarter 2010 Results
For the third quarter, total sales were approximately $1.73 billion, including product sales of more than $1.70 billion and services revenue of $28 million. Product sales in the third quarter increased by $26 million year-over-year, or approximately 2 percent, reflecting slightly higher production volumes tempered by currency movements and the impact of previously completed plant divestitures and closures. On Sept. 1, Visteon also concluded its leasing agreements with, and transferred about 2,100 employees to, Automotive Components Holdings, LLC, ending services provided under these arrangements.
Gross margin for the third quarter of $40 million, compared with $120 million a year earlier, included a $111 million charge related to obligations under certain OPEB plans. On a year-over-year basis, unfavorable currency movements and the impact of plant closures and divestitures of about $37 million were more than offset by increased production volumes and continued manufacturing and net cost efficiencies.
Selling, general and administrative expense for the third quarter of $91 million included $4 million of charges related to OPEB plans. Adjusting for the impact of these charges, selling, general and administrative expense was lower by $8 million compared with 2009, reflecting the company’s ongoing efforts to maintain a globally competitive cost structure.
Reorganization expenses of $54 million in the third quarter consisted of professional fees and other costs. Compared with the same period in 2009, these expenses were higher by $31 million, reflecting the significant increase in activities associated with the company’s plan of reorganization and emergence.
Interest expense, net for the third quarter, totaled $31 million compared with $6 million in the same period in 2009. This increase is principally attributable to interest expense associated with the company’s $1.5 billion seven-year secured term loan; such amounts were not provided for in the same period a year earlier. Commensurate with the company’s emergence from Chapter 11 on Oct. 1, 2010, $1.66 billion in outstanding principle and interest payable under this secured lending was paid in full.
For the third quarter, the company reported a net loss of $140 million, or $1.08 per share. This compared with a net loss of $38 million, or 29 cents per share, in the same period a year ago.
First Nine Months of 2010
For the first nine months of 2010, total sales of $5.58 billion were higher by $921 million, or 20 percent, compared with the same period a year earlier. For the first nine months, Visteon reported a net loss of $108 million, or 83 cents per share, compared with a net loss of $148 million, or $1.14 per share, during the first nine months of 2009. Adjusted EBITDA for the first nine months of 2010 was $476 million, or 8.8 percent of product sales, compared with $224 million, or 5 percent of product sales, in the first nine months of 2009.
The company experienced higher sales in each of the major regions in which it operates, reflecting increased production volumes by all customers as vehicle sales rebounded in response to stronger global economic conditions. For the first nine months, Visteon won approximately $633 million of future business, with 42 percent generated in Asia and 39 percent in Europe.
“Our diversified customer base and strong global manufacturing and engineering capabilities, combined with our now significantly improved capital structure, position Visteon extremely well for growth and success in key global markets,” Stebbins said.
Cash Flow and Liquidity
For the third quarter of 2010, Visteon generated $50 million in cash from operating activities, compared with $84 million for the third quarter of 2009. Cash from operating activities was lower in the quarter compared with the same period a year earlier, principally due to increased reorganization cash payments.
Capital expenditures in the third quarter were $51 million, compared with $29 million in the same period a year earlier. Free cash flow, as defined below, was a use of $1 million in the third quarter, compared with positive $55 million in the third quarter of 2009. In the third quarter of 2010, the company also paid in full $75 million of borrowings under its DIP credit agreement.
As of Sept. 30, 2010, Visteon had global cash balances, including restricted cash, of $1.1 billion, nearly $300 million higher than on Sept. 30, 2009.
Emergence from Chapter 11
On Oct. 1, 2010, Visteon emerged from Chapter 11 after completing all conditions required for its plan of reorganization to become effective. The financial results for the period ended Sept. 30, 2010, do not include the effect of any changes in Visteon’s capital structure nor changes in the fair value of assets and liabilities as a result of the adoption of fresh start accounting relating to Visteon’s emergence from Chapter 11 on Oct. 1, 2010 . These adjustments will be effective Oct. 1, 2010 , and reflected in the company’s financial results for the three months from Oct. 1 through Dec. 31, 2010 , and thereafter.