* Took Additional Financing Actions; Year-End Cash Balance of Approximately $1 Billion
"Our full year results demonstrate solid progress in achieving our multi- year improvement plan, even while facing significant production declines from a number of our customers," said Michael F. Johnston, chairman and chief executive officer. "We're leaner, more efficient and better positioned from a product, customer and footprint perspective than we were a year ago."
Fourth Quarter 2006
Sales for fourth quarter 2006 totaled $2.84 billion. Fourth quarter 2006 product sales were $2.7 billion, essentially unchanged from fourth quarter 2005, as favorable currency and increased sales in Asia were offset by lower production volumes, principally in North America. Product sales to non-Ford customers of $1.62 billion rose 13 percent, or $188 million, over fourth quarter 2005 and represented 60 percent of total product sales. Services sales of $131 million decreased $33 million from the same period in 2005, reflecting the transfer of about 1,000 Visteon salaried employees associated with two Automotive Components Holdings (ACH) manufacturing facilities to Ford in early 2006.
Visteon reported a net loss of $39 million, or $0.30 per share, for the fourth quarter of 2006, which included reimbursable restructuring expenses and other qualified costs of $71 million and a net tax benefit of $32 million. The net tax benefit resulted primarily from tax effecting current year U.S. operating losses to the extent of increases in other comprehensive income in 2006, principally attributable to favorable foreign currency translation. EBIT-R for the fourth quarter 2006 was a loss of $37 million.
For the fourth quarter 2005, Visteon reported net income of $1.3 billion, or $10.25 per diluted share, which included a gain of $1.8 billion related to the ACH transactions, $335 million of non-cash asset impairments, $34 million of restructuring expenses and other qualified reimbursable costs. Reimbursements from the escrow account totaled $51 million, which included reimbursements for qualified costs recognized in previous periods. EBIT-R for the fourth quarter 2005 was a loss of $119 million.
Cash provided by operating activities for the fourth quarter of 2006 was $239 million, an increase of $197 million over the same period a year ago. Fourth quarter 2005 was adversely impacted by the unwinding of the retained negative working capital associated with the ACH transactions. Capital expenditures for the fourth quarter of 2006 of $108 million were $77 million lower than the same period a year ago. Free cash flow, as defined below, for the fourth quarter of 2006 was positive $131 million, compared with negative $143 million in the same period of 2005.
Full Year 2006
Sales for full year 2006 totaled $11.4 billion, including product sales of $10.9 billion and services sales of $547 million. Product sales to non-Ford customers totaled $6.0 billion, or 55 percent of total product sales. Sales for the same period a year ago totaled $17.0 billion, including product sales of $16.8 billion and services sales of $164 million. Of the total product sales for 2005, 62 percent were to Ford and 38 percent were to non-Ford customers. The transfer of 23 North American facilities on Oct. 1, 2005 as part of the ACH transactions decreased year-over-year product sales by $6.1 billion.
Visteon's net loss of $163 million, or $1.28 per share, for full year 2006 represents an improvement of $107 million over 2005's net loss of $270 million, or $2.14 per share, despite lower sales levels.
The net loss for full year 2006 included $22 million of non-cash asset impairments related to the company's restructuring actions and an extraordinary gain of $8 million associated with the acquisition of a lighting facility in Mexico. Restructuring expenses for full year 2006 were $95 million, all of which qualified for reimbursement from the escrow account. EBIT-R for full year 2006 was $27 million.
The net loss of $270 million for full year 2005 included asset impairments of $1.5 billion, a $1.8 billion gain on the ACH transactions, and $26 million of restructuring expenses, partially offset by $51 million of reimbursements from the escrow account. EBIT-R for the full year 2005 was a loss of $388 million.
Cash provided by operating activities was $281 million for full year 2006 compared with $417 million for full year 2005. Capital expenditures of $373 million for the full year 2006 were $212 million lower than 2005. Free cash flow for full year 2006 was negative $92 million compared with negative $168 million for full year 2005.
Cash and Debt
As of Dec. 31, 2006, cash and equivalents totaled $1.057 billion as compared to $865 million at the end of 2005. Total debt of $2.2 billion as of Dec. 31, 2006 compared with $2.0 billion at the end of 2005, principally reflecting the closing of an additional $200 million secured term loan under its existing term loan credit agreement in November 2006.
In connection with the company's salaried reduction program announced in October 2006, about 800 salaried positions have been identified as of Dec. 31, 2006. Restructuring expenses in the fourth quarter of 2006 for these salaried reductions were $19 million and qualified for reimbursement from the escrow account. The company expects to complete the salaried reduction program by the end of March 2007 and anticipates achieving per annum savings of about $65 million.
Visteon also recognized $20 million of restructuring expenses and $8 million of pension curtailment losses during the fourth quarter of 2006 related to the company's plan to close a U.S. climate control manufacturing facility in 2007 in response to lower sales volumes and cost pressures.
In addition to the above actions, in 2006 the company completed 11 restructuring actions in connection with its multi-year improvement plan. Reimbursable restructuring expenses and other qualified costs from the escrow account totaled $106 million for the full year 2006.
As of Dec. 31, 2006, the escrow account had a balance of $319 million, $55 million of which related to expenses incurred in the fourth quarter of 2006 which were reimbursed from the escrow account in February 2007.
New Business Wins
In the fourth quarter of 2006, Visteon was awarded new business wins (expected annual sales value of awarded program) of about $200 million resulting in full year 2006 new business wins of $1.0 billion.
"This new business reflects the strength of our product portfolio and our manufacturing and engineering footprints, which are already among the best in the industry," said Donald J. Stebbins, president and chief operating officer. "We also continued to diversify our customer base which will enable us to better withstand global production shifts."
Full Year 2007 Outlook
2007 is expected to be a challenging period for the automotive industry with anticipated production declines for certain of the company's key customers. Visteon currently estimates that its 2007 full year EBIT-R will be in the range of breakeven to a loss of $100 million on anticipated 2007 product sales of $11.1 billion. In addition, Visteon expects free cash flow for 2007 to be in the range of negative $125 million to negative $225 million, assuming a constant level of receivables sales.