Third Quarter Highlights - Revenue of $4.15 billion, up $270 million from a year ago - Highest non-Ford sales recorded for any quarter -- $1.38 billion, up 37 percent from a year ago - After-tax loss of $1.36 billion, including non-cash write-downs of $872 million for deferred tax assets and $314 million for fixed asset impairment - Year-over-year improvement in cash flow from operations - UAW-Ford leased headcount down 9 percent year-to-date
"The diversification of our customer base has been a driving focus throughout Visteon and reaching a new record in the third quarter for non-Ford sales reflects this effort," said Mike Johnston, president and chief executive officer. "While Ford sales were down in the quarter due to their lower production volumes in the U.S., we look forward to the launch of several exciting Ford vehicles in the North American marketplace. We expect our revenues to increase in the fourth quarter, however, our current cost structure combined with escalating material surcharges will challenge our operating performance for the rest of the year."
For the third quarter, Visteon reported Ford revenue of $2.77 billion, a decrease of $101 million compared to third quarter 2003. Visteon's sales to Ford reflect the automaker's lower production volume in North America and represent the lowest sales to Ford for any quarter in Visteon's history.
For third quarter 2004, Visteon reported a net loss of $1.36 billion or $10.86 per share, which includes $1.2 billion or $9.64 per share of special charges. This compares with a net loss of $168 million or $1.34 per share for the third quarter 2003, which included expenses for the 2003 UAW labor contract ratification bonus and nominal special charges.
During the third quarter, Visteon had several special charges that adversely impacted results by $1.2 billion or $9.64 per share. As previously announced, Visteon recorded a non-cash charge of $872 million as it increased valuation allowances against its deferred tax assets. In addition, as of July 1, 2004, Visteon is no longer recording a tax benefit on losses in several jurisdictions, including the U.S., the United Kingdom and Germany. This resulted in additional tax expense for the company in the quarter, and will lead to variability in the company's tax expense going forward.
In addition, Visteon recorded a non-cash asset impairment write-down of $314 million to reduce the net book value of fixed assets related to the steering systems product group. Under accounting rules, an asset group is considered impaired if the book value is greater than the undiscounted cash flows from the use of the asset group.
The company also recognized $25 million of charges during the third quarter 2004 related to early retirement and relocation programs to reduce its Master Agreement UAW workforce that it leases from Ford. These programs resulted in reductions in the leased UAW workforce of more than 700 people. At the end of the third quarter, Visteon's leased UAW headcount was approximately 18,000, a 9 percent decrease from year-end 2003.
2004 Year-to-Date Results
Revenue for the first nine months totaled $14 billion, increasing $795 million or 6 percent year-over-year. Non-Ford sales of $4.1 billion represent a $1.1 billion or 36 percent increase year-over-year and represent 29 percent of total sales. Ford revenue for the first nine months decreased 3 percent to $9.9 billion reflecting lower North American production, the exit of seating operations, and price downs, offset partially by favorable currency, new business, and higher volumes in Europe.
For the first nine months, Visteon reported a loss of $1.3 billion, or $10.37 per share. Included in these results are special charges of $9.35 per share. This compares with a loss of $350 million or $2.78 per share for the first nine months of 2003. Included in last year's results were $191 million of after-tax special charges and the 2003 UAW ratification bonus.
Cash flow from operating activities for the first nine months was $227 million, an improvement of nearly $200 million from the same period in 2003. Cash payments related to capital expenditures were $573 million for the first nine months of the year, compared to $641 million for the same period in 2003.
As previously announced, Visteon is exploring strategic and structural changes to its business in the U.S. and these changes will involve Ford and Visteon's legacy businesses. Because of the uncertainty surrounding future market and economic conditions, combined with Visteon's on-going discussions with Ford, Visteon is not providing specific guidance at this time.
Quarterly Conference Call Scheduled at 10 a.m. EDT Today
A conference call will be hosted today, Thursday, October 21, at 10 a.m. EDT to discuss Visteon's third quarter results in further detail, as well as other related matters. To participate in the conference call, callers in the U.S. should dial 888-452-7086 and callers outside of the U.S. should dial 706-643-3752. Please call in approximately 10 minutes before the start of the conference. For a replay of the conference, those in the U.S. should dial 800-642-1687; outside the U.S., callers should dial 706-645-9291. The pass code to access the replay is 1413774. The replay will be available for one week.
Visteon will provide a broadcast of the quarterly meeting for the general public via a live audio webcast. The conference call, along with the financial results press release, presentation material and other supplemental information, can be accessed through Visteon's web site at http://www.visteon.com/earnings .
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 approximately 72,000 employees and a global delivery system of more than 200 technical, manufacturing, sales and service facilities located in 25 countries.
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 the automotive vehicle production volumes and schedules of our customers, and in particular Ford's North American vehicle production volumes; our successful execution of internal performance plans and other cost-reduction and productivity efforts; charges resulting from asset impairment reviews, restructurings, employee reductions, acquisitions or dispositions; our ability to offset or recover significant material surcharges; the effect of pension and other post-employment benefit obligations; as well as those factors identified in our filings with the SEC (including our Annual Report on Form 10-K for the year-ended December 31, 2003). We assume no obligation to update these forward-looking statements.
VISTEON CORPORATION AND SUBSIDIARIES SUPPLEMENTAL DATA (unaudited) (in millions, except per share amounts) 2004 over/(under) 2004 2003 Third First Nine Third First Nine Quarter Months Quarter Months Sales Ford and affiliates $2,772 $9,900 $(101) $(286) Other customers 1,382 4,096 371 1,081 Total sales $4,154 $13,996 $270 $795 Depreciation and amortization Depreciation $152 $434 $10 $8 Amortization 26 78 (2) 2 Total depreciation and amortization $178 $512 $8 $10 Selling, administrative and other expenses $223 $722 $(39) $(21) (Loss) before income taxes and minority interests $(449) $(338) $(185) $201 Net (loss) $(1,360) $(1,299) $(1,192) $(949) Net (loss) per share Basic and Diluted $(10.86) $(10.37) $(9.52) $(7.59) Average shares outstanding Basic and diluted 125.3 125.3 (0.4) (0.5) Special charges (1) Included in costs of sales $(336) $(352) $335 $59 Included in selling, administrative and other expenses - - (1) (6) Total pre-tax special charges $(336) $(352) $334 $53 Special charges above, after-tax $(336) $(348) $335 $157 Deferred tax asset valuation allowance (1) (872) (824) 872 824 Total after-tax special charges $(1,208) $(1,172) $1,207 $981 Special charges per share, based on average diluted shares outstanding above $(9.64) $(9.35) $9.63 $7.83 Capital expenditures(2) $210 $580 $(28) $(61) Cash (used in) provided by operating activities $(125) $227 $(268) $195 Cash and borrowing (compared to December 2003 year-end) Cash and marketable securities $734 $(222) Borrowing 2,015 197 ------ 1 - Special charges related to deferred tax asset valuation allowance, fixed asset impairment write-down, restructuring and other actions are discussed further in Notes 3 and 4. Third quarter 2004 deferred tax asset valuation allowance of $872 million includes $48 million of tax expense related to tax benefits recorded during the first half of 2004. 2 - Includes amounts related to capital leases. VISTEON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS For the Periods Ended September 30, 2004 and 2003 (in millions, except per share amounts) Third Quarter First Nine Months 2004 2003 2004 2003 (unaudited) Sales Ford and affiliates $2,772 $2,873 $9,900 $10,186 Other customers 1,382 1,011 4,096 3,015 Total sales 4,154 3,884 13,996 13,201 Costs and expenses (Notes 2 and 4) Costs of sales 4,366 3,879 13,578 12,981 Selling, administrative and other expenses 223 262 722 743 Total costs and expenses 4,589 4,141 14,300 13,724 Operating income (loss) (435) (257) (304) (523) Interest income 5 5 14 13 Debt extinguishment cost (Note 7) - - 11 - Interest expense 28 24 75 71 Net interest expense and debt extinguishment cost (23) (19) (72) (58) Equity in net income of affiliated companies (Note 2) 9 12 38 42 (Loss) before income taxes and minority interests (449) (264) (338) (539) Provision (benefit) for income taxes (Note 3) 904 (99) 933 (209) (Loss) before minority interests (1,353) (165) (1,271) (330) Minority interests in net income of subsidiaries 7 3 28 20 Net (loss) $(1,360) $(168) $(1,299) $(350) (Loss) per share (Note 8) Basic and diluted $(10.86) $(1.34) $(10.37) $(2.78) Cash dividends per share $0.06 $0.06 $0.18 $0.18 The accompanying notes are part of the financial statements. VISTEON CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions) September 30, December 31, 2004 2003 (unaudited) Assets Cash and cash equivalents $729 $953 Marketable securities 5 3 Total cash and marketable securities 734 956 Accounts receivable - Ford and affiliates 1,521 1,198 Accounts receivable - other customers (Note 6) 1,152 1,164 Total receivables, net (Note 2) 2,673 2,362 Inventories (Note 11) 891 761 Deferred income taxes (Note 3) 18 163 Prepaid expenses and other current assets (Note 2) 250 168 Total current assets 4,566 4,410 Equity in net assets of affiliated companies 213 215 Net property 5,060 5,369 Deferred income taxes (Note 3) 23 700 Other assets 231 270 Total assets $10,093 $10,964 Liabilities and Stockholders' Equity Trade payables $2,363 $2,270 Accrued liabilities 943 924 Income taxes payable 38 27 Debt payable within one year (Note 7) 535 351 Total current liabilities 3,879 3,572 Long-term debt (Note 7) 1,480 1,467 Postretirement benefits other than pensions 556 469 Postretirement benefits payable to Ford 2,123 2,090 Deferred income taxes (Note 3) 146 3 Other liabilities 1,422 1,505 Total liabilities 9,606 9,106 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, 130 million and 131 million shares outstanding, respectively 131 131 Capital in excess of par value of stock 3,294 3,288 Accumulated other comprehensive loss (Note 12) (67) (21) Other (28) (19) Accumulated deficit (2,843) (1,521) Total stockholders' equity 487 1,858 Total liabilities and stockholders' equity $10,093 $10,964 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, 2004 and 2003 (in millions) First Nine Months 2004 2003 (unaudited) Cash and cash equivalents at January 1 $953 $1,204 Cash flows provided by operating activities 227 32 Cash flows from investing activities Capital expenditures (573) (641) Purchases of securities - (48) Sales and maturities of securities 3 118 Other 18 17 Net cash used in investing activities (552) (554) Cash flows from financing activities Commercial paper repayments, net (31) (66) Other short-term debt, net (30) 85 Proceeds from issuance of other debt, net of issuance costs 548 356 Repurchase of unsecured debt securities (Note 7) (269) - Principal payments on other debt (32) (121) Purchase of treasury stock (11) (5) Cash dividends (24) (24) Other, including book overdrafts (48) 5 Net cash provided by financing activities 103 230 Effect of exchange rate changes on cash (2) 27 Net decrease in cash and cash equivalents (224) (265) Cash and cash equivalents at September 30 $729 $939 The accompanying notes are part of the financial statements. VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (unaudited) NOTE 1. Financial Statements