- Customer diversification continues; significant new business wins
"Our third quarter results show the fundamental improvement we have achieved across our business," said Michael F. Johnston, chairman and chief executive officer. "We are making progress in every aspect of our improvement plan by implementing our restructuring actions as planned and continuing to improve and grow our operations to position Visteon for long-term success."
Restructuring
Visteon has completed 17 of the 30 previously identified restructuring activities under its three-year improvement plan and has announced three additional actions.
During the third quarter 2007, Visteon completed the sale of its non-core powertrain operation located in Chennai, India for cash proceeds of $30 million. The Chennai operation generated 2007 sales of approximately $60 million and employed approximately 800 people. Visteon made progress implementing the previously announced closures of its Connersville and Bedford, Ind., facilities. During the third quarter of 2007, the company reached an agreement with the local labor union at Bedford to cease operations by mid-2008. The company remains on track to cease production at Connersville in December of this year.
On Oct. 18, 2007, Visteon announced that it had entered into a non-binding memorandum of understanding for the sale its non-core chassis facility located in Swansea, Wales, United Kingdom. The completion of the transaction is subject to customary agreements and approvals and is expected to close by the end of 2007.
Upon the completion of the Bedford, Connersville and Swansea actions, 20 of the 30 facilities actions included in the company's restructuring plan will have been addressed.
New Business Wins
Visteon continues to win new business from a diverse group of customers across each of its key product lines. Year-to-date new business wins are approximately $750 million, about two-thirds of which are related to business outside of North America. Half of the wins are in climate, with the remainder evenly distributed between electronics and interiors.
"Our continued success in winning new business from customers around the world speaks to the strength of Visteon's product capability and global engineering and manufacturing footprints," said Donald J. Stebbins, president and chief operating officer.
Third Quarter 2007 Results
For the third quarter 2007, total sales were $2.55 billion, including favorable foreign currency of approximately $100 million. Sales from continuing operations for the third quarter 2006 were $2.58 billion. Product sales to Ford Motor Co. declined 15 percent, or $163 million, to $893 million, primarily reflecting divestitures, sourcing actions and product mix. Product sales to other customers increased 9 percent, or $126 million, to $1.52 billion and represented 63 percent of total product sales.
Third quarter 2007 net loss of $109 million, or $0.84 per share, was reduced by $68 million compared to the third quarter 2006 net loss of $177 million, or $1.38 per share. Third quarter 2007 results include $14 million of non-cash asset impairments. EBIT-R of negative $33 million was an improvement of $94 million over the negative $127 million EBIT-R reported in the third quarter 2006. These improvements were primarily driven by favorable cost performance resulting from the company's ongoing restructuring and cost- reduction efforts.
Nine Month 2007 Results
For the first nine months of 2007, sales from continuing operations were $8.41 billion including favorable foreign currency of approximately $400 million. Sales from continuing operations for the same period in 2006 were $8.45 billion. During 2007, product sales to Ford declined 14 percent, or $525 million, to $3.15 billion, reflecting lower North American production volumes, divestitures, sourcing actions and product mix. Sales to other customers increased 11 percent, or $494 million, to $4.85 billion and represented 61 percent of total product sales.
Visteon reported a net loss of $329 million, or $2.54 per share, for the first nine months of 2007 compared with a net loss of $124 million, or $0.97 per share, for the same period a year ago. 2007 results include $77 million of non-cash asset impairments compared with $22 million in the same period a year ago. EBIT-R of negative $64 million for the first nine months of 2007 was lower by $128 million when compared to positive $64 million in the same period of 2006. Lower 2007 EBIT-R primarily reflects the non-recurrence of 2006 benefits attributable to the settlement of various post-retirement benefit obligations and customer commercial negotiations, 2007 costs associated with the company's restructuring activities and lower customer volumes and product mix, principally in North America. These factors were partially offset by cost performance and benefits from restructuring actions.
Cash Flow and Liquidity
Cash used by operating activities totaled $53 million for the third quarter 2007 compared with $34 million a year ago. The increase in cash used by operating activities is primarily a result of an approximately $70 million reduction in receivable sales under the company's European securitization facility. Free cash flow was negative $141 million for third quarter 2007 compared with negative $116 million for the same period in 2006.
Visteon used $38 million of cash from operations for the first nine months of 2007 compared with $42 million of cash provided by operations for the first nine months of 2006. For the first nine months of 2007, free cash flow was a use of $270 million, compared with a use of $223 million for the same period a year ago.
As of Sept. 30, 2007, Visteon had cash balances totaling $1.4 billion and total debt of $2.7 billion. Additionally, no amounts were drawn on the company's $350 million asset-based U.S. revolving credit facility, and the company had availability under its $325 million European receivables securitization facility of about $140 million.
Full Year 2007 Outlook
Visteon expects EBIT-R for the full year 2007 to be in the range of negative $50 million to negative $80 million on product sales of $10.6 billion. Free cash flow is projected to be in the range of negative $200 million to negative $260 million.
"The progress we are making, as well as the actions we will execute in 2008, are laying the foundation for Visteon to be free cash flow positive in 2009," Johnston said.
Visteon Corporation 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 Kerpen, Germany; the company has facilities in 26 countries and employs approximately 43,000 people.
Forward-looking Information
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements are not guarantees of future results and conditions but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these forward-looking statements, including general economic conditions, changes in interest rates and fuel prices; the automotive vehicle production volumes and schedules of our customers, and in particular Ford's vehicle production volumes; work stoppages at our customers; our ability to satisfy our future capital and liquidity requirements and comply with the terms of our existing credit agreements and indentures; the financial distress of our suppliers, or other significant suppliers to our customers, and possible disruptions in the supply of commodities to us or our customers due to financial distress or work stoppages; our ability to timely implement, and realize the anticipated benefits of restructuring and other cost-reduction initiatives, including our multi-year improvement plan, and our successful execution of internal performance plans and other productivity efforts; the timing and expenses related to restructurings, employee reductions, acquisitions or dispositions; increases in raw material and energy costs and our ability to offset or recover these costs; the effects of reorganization and/or restructuring plans announced by our customers; the effect of pension and other post-employment benefit obligations; increases in our warranty, product liability and recall costs; the outcome of legal or regulatory proceedings to which we are or may become a party; as well as those factors identified in our filings with the SEC (including our Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2006). We assume no obligation to update these forward-looking statements. The financial results presented herein are preliminary and unaudited; final interim financial results will be included in the company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007.
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