Visteon Releases Preliminary Fourth Quarter and Full Year 2004
Results 2004 Highlights VAN BUREN TOWNSHIP, Mich., Jan. 31
/PRNewswire-FirstCall/ -- Visteon Corporation (NYSE:VC) today
announced preliminary fourth quarter and full year results for
2004. For the fourth quarter 2004, Visteon reported revenue of $4.7
billion, up 5 percent compared with the same period in 2003. These
results were driven by a 35 percent increase in non-Ford revenue.
Non-Ford revenue for the quarter totaled a record $1.6 billion, up
more than 7 percentage points from the same period last year.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO )
For the full year 2004, revenue totaled $18.7 billion, up $1
billion compared to 2003, despite a $460 million decline in Ford
revenue. Full-year non-Ford revenue reached a record $5.7 billion,
up 36 percent over 2003. Full-year non-Ford revenue represented 30
percent of total revenue. "Our record non-Ford revenue growth in
2004 exceeded our expectations and serves as testament to the
innovative products customers are counting on us to deliver," said
Mike Johnston, president and chief executive officer. "Our new
business wins in 2004 continue to be in the growth products that
are core to our success - interiors, climate and electronics,
including lighting. We've strengthened our competitive position to
serve customers around the globe by opening and expanding technical
centers in every region. "We have implemented programs to reduce
headcount and costs in the United States, but material surcharges
and lower North American Ford production have put significant
pressure on our operating results. As we announced last September,
we are exploring strategic and structural changes to our U.S.
operations to achieve a sustainable and competitive business. We
are having constructive and ongoing discussions with Ford about
such changes." Visteon's results are preliminary because, during
the course of the year- end closing process, errors were discovered
in the company's accounting for certain retiree health care and
pension benefits, and income taxes. Management has made an initial
evaluation of the impact of these errors and has included
preliminary financial results reflecting these estimates. Because
of these errors, Visteon is, in consultation with its independent
registered public accounting firm, PricewaterhouseCoopers LLP,
reviewing prior reports filed with the Securities and Exchange
Commission to determine if any other adjustments or corrections are
necessary. Visteon has not identified any other necessary
adjustments at this time. Fourth Quarter 2004 During the fourth
quarter of 2004, Visteon changed the method of determining the cost
of production inventory for U.S. locations from the last- in,
first-out (LIFO) method to the first-in, first-out (FIFO) method.
Visteon believes the FIFO method of inventory costing will provide
more meaningful information to investors and conforms all
inventories to the same FIFO basis. In accordance with Accounting
Principles Board Opinion No. 20, "Accounting Changes", a change
from the LIFO method of inventory costing to another method is
considered a change in accounting principle that should be applied
by retroactively restating all prior periods. For the fourth
quarter 2004 Visteon reported a net loss of $115 million, or $0.92
per share. These results include $41 million of after-tax special
charges, or $0.33 per share, primarily related to costs associated
with a U.S. salaried employee voluntary termination incentive
program that will result in a reduction of approximately 400
employees by March 31, 2005. For the fourth quarter 2003, as
restated, Visteon reported a net loss of $829 million, or $6.60 per
share. These results included asset impairment write-downs, an
increase in deferred tax asset valuation allowances, and special
charges totaling $720 million after-tax, or $5.73 per share. Full
Year 2004 For the full year 2004, Visteon recorded a net loss of
$1.489 billion, or $11.88 per share. These results include non-cash
write-downs of $871 million for increased valuation allowances
against Visteon's deferred taxes, $314 million for asset impairment
write-downs, and $78 million for other special charges. In
aggregate these items totaled $1.263 billion after tax, or $10.08
per share. For the full year 2003, as restated, Visteon recorded a
net loss of $1.190 billion or $9.46 per share. These results
include the asset impairment write- downs, an increase in deferred
tax asset valuation allowances and other special charges. In
aggregate, after-tax, these items totaled $911 million, or $7.24
per share. For the full year 2004, cash flow from operations was
$427 million, a $57 million increase from 2003. Cash payments
related to capital expenditures were $836 million for the full year
2004, $43 million lower than 2003. At year end 2004, Visteon had
$752 million of cash and marketable securities, down $204 million
from the previous year end. 2005 Outlook Visteon is exploring
strategic and structural changes to its business in the United
States that would involve Ford and Visteon's legacy businesses.
Visteon is seeking a comprehensive agreement that could address a
number of items. The discussions with Ford have been constructive
and are ongoing. Because of the uncertainty surrounding future
market and economic conditions, combined with Visteon's ongoing
discussions with Ford, Visteon is not providing specific guidance
at this time. "In light of mounting challenges facing our business,
we are identifying actions to improve the company's cost structure
and cash position," said Johnston. "In addition to our strategic
and structural discussions with Ford, we are taking actions to
focus capital and engineering resources to growth areas only, and
minimize the impact of material surcharges." The Board of Directors
considers each quarter whether to declare a cash dividend, and has
declared and paid a cash dividend each quarter since its spin off
from Ford in 2000. In light of the uncertainty regarding future
market conditions, Visteon's current financial conditions and the
ongoing discussions with Ford, the Board intends to discuss its
options regarding the cash dividend at its regularly scheduled
February 9, 2005 meeting, including modification or suspension of
the dividend. Accounting Restatements Effective in January 2002,
Visteon amended its retiree health care benefits plan for certain
of its U.S. employees. Effective in January 2004, a Visteon wholly
owned subsidiary amended its retiree health care benefits plan for
its employees. These amendments changed the eligibility
requirements for participants in the plan. As a result of these
amendments, Visteon changed the expense attribution periods, which
eliminated cost accruals for younger employees and increased
accrual rates for older participating employees. Prior to these
amendments, Visteon accrued for the cost of the benefit from a
participating employee's date of hire, regardless of age. During
the course of preparing Visteon's 2004 financial statements, it was
determined that the requirement to properly communicate these
benefit changes to affected employees was not satisfied. Further,
analysis of the annual United Kingdom pension valuation identified
pension expense related to special termination benefits provided
under Visteon's European Plan for Growth were not fully recognized
in the company's previous financial statements. In addition to the
employee benefit matters described above, Visteon also corrected
the amount and timing of the recognition of certain tax adjustments
made during the periods. As the company expects to repatriate
earnings of foreign subsidiaries, adjustments were made to provide
for the tax effects of foreign currency movements against the U.S.
dollar. These adjustments impacted the timing of the recognition of
deferred tax asset valuation allowances in the fourth quarter of
2003 and the third quarter of 2004. Further, the company recognized
an additional valuation allowance for certain deferred tax assets
that had previously been misclassified and not considered in the
company's 2003 deferred tax assessment. As a result of these
errors, Visteon's management has recommended, and the Audit
Committee has approved, the review and preliminary restatement of
its financial statements for 2002, 2003 and the first three fiscal
quarters of 2004. The restatements presented in the accompanying
financial information include adjustments that had resulted from
the changes described above. The preliminary restatements and
adjustments reflected in the attached financial information are
being reviewed and could change. Accordingly, investors are
cautioned not to rely on the company's historical financial
statements for such periods. A preliminary summary of adjustments
identified, including related tax effects, is set forth in the
"Note to Financial Information." "Although the OPEB plan changes
were disclosed in our public filings, we did not properly
communicate these changes to employees who were affected,"
explained Jim Palmer, executive vice president and chief financial
officer. "Because of this lapse in communication, the action cannot
be considered effective and we are reversing the change. This is a
non-cash item and is unrelated to Ford's recent OPEB reserve
announcement. We are hopeful the review of this matter and other
identified issues will be concluded shortly, allowing for a timely
filing of our 2004 10-K." Visteon has concluded that the
deficiencies in internal controls that led to the errors constitute
a "material weakness," as defined by the Public Company Accounting
Oversight Board's Auditing Standard No. 2. Consequently, management
will be unable to conclude that Visteon's internal controls over
financial reporting are effective as of December 31, 2004.
Furthermore, Visteon expects that PricewaterhouseCoopers LLP will
issue an adverse opinion with respect to the company's internal
controls over financial reporting, which opinion will be included
in Visteon's 2004 Form 10-K. Quarterly Conference Call Scheduled at
10 a.m. EST Today A conference call will be hosted today, Monday,
January 31 at 10 a.m. EST to discuss Visteon's fourth quarter and
full year 2004 financial results in further detail, as well as
other related matters. To participate in the 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 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 1098115 (domestic and international). 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 web cast.
The conference call, along with the financial results 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 about 70,000 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; the successful completion of our discussions
with Ford and, if successful, implementing structural changes that
result from those discussions; 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 completion of the review of our prior period financial
statements referred to in this press release and any adjustments
that may result from such review; 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 (Preliminary and
Unaudited) (in millions, except per share amounts) 2004
over/(under) 2004 Restated 2003 * Fourth Full Fourth Full Quarter
Year Quarter Year Sales Ford and affiliates $3,115 $13,015 $(174)
$(460) Other customers 1,580 5,676 410 1,491 Total sales $4,695
$18,691 $236 $1,031 Depreciation and amortization Depreciation $146
$580 $ -- $8 Amortization 24 102 (2) -- Total depreciation and
amortization $170 $682 $(2) $8 Selling, administrative and other
expenses $266 $994 $6 $(14) (Loss) before income taxes and minority
interests $(123) $(489) $496 $687 Net (loss) $(115) $(1,489) $714
$(299) Net (loss) per share Basic and Diluted $(0.92) $(11.88)
$5.68 $(2.42) Average shares outstanding Basic and diluted 125.3
125.3 (0.4) (0.5) Special charges (1)(2) Included in costs of sales
$(27) $(382) $(414) $(352) Included in selling, administrative and
other expenses (14) (14) -- (6) Total pre-tax special charges $(41)
$(396) $(414) $(358) Special charges above, after-tax $(41) $(392)
$(252) $(92) Deferred tax asset valuation allowance -- (871) (427)
444 Total after-tax special charges $(41) $(1,263) $(679) $352
Special charges per share, based on average diluted shares
outstanding above $(0.33) $(10.08) $(5.40) $2.84 Capital
expenditures(3) $274 $854 $36 $(25) Cash provided by operating
activities $200 $427 $(138) $57 Cash and borrowing (compared to
December 2003 year-end) Cash and marketable securities $752 $(204)
Borrowing 2,021 203 * See Note to Financial Information which
describes the restatement of previously reported financial
information. ------ 1 - Fourth Quarter 2004 amounts include $41
million ($41 million after- tax) related to restructuring and other
actions. Full Year 2004 amounts include $82 million ($78 million
after-tax) related to restructuring and other actions and $314
million ($314 million after- tax) related to fixed asset impairment
write-downs. 2 - Fourth Quarter 2003 restated amounts include $48
million ($33 million after-tax) related to restructuring and other
actions and $407 million ($260 million after-tax) related to
non-cash fixed asset impairment write-downs. Full Year 2003
restated amounts include $318 million ($205 million after-tax)
related to restructuring and other actions and $436 million ($279
million after-tax) related to fixed asset impairment write-downs. 3
- Includes amounts related to capital leases. Visteon Corporation
And Subsidiaries Consolidated Statement Of Operations (Preliminary
And Unaudited) For the Years Ended December 31, Fourth Quarter
Restated Restated Restated 2004 2003* 2002* 2004 2003* (in
millions, except per share amounts) Sales Ford and affiliates
$13,015 $13,475 $14,779 $3,115 $3,289 Other customers 5,676 4,185
3,616 1,580 1,170 Total sales 18,691 17,660 18,395 4,695 4,459
Costs and expense Costs of sales 18,135 17,806 17,612 4,535 4,812
Selling, administrative and other expenses 994 1,008 893 266 260
Total costs and expenses 19,129 18,814 18,505 4,801 5,072 Operating
(loss) (438) (1,154) (110) (106) (613) Interest income 19 17 23 5 4
Bond extinguishment costs 11 -- -- -- -- Interest expense 104 94
103 29 23 Net interest expense (96) (77) (80) (24) (19) Equity in
net income of affiliated companies 45 55 44 7 13 (Loss) before
income taxes, minority interests and change in accounting (489)
(1,176) (146) (123) (619) Provision (benefit) for income taxes 965
(15) (69) (15) 201 (Loss) before minority interests and change in
accounting (1,454) (1,161) (77) (108) (820) Minority interests in
net income of subsidiaries 35 29 28 7 9 (Loss) before change in
accounting (1,489) (1,190) (105) (115) (829) Cumulative effect of
change in accounting, net of tax -- -- (265) -- -- Net (Loss)
$(1,489) $(1,190) $(370) $(115) $(829) Basic and diluted (Loss) per
share Before cumulative effect of change in accounting $ (11.88)
$(9.46) $(0.82) $(0.92) $(6.60) Cumulative effect of change in
accounting -- -- (2.07) -- -- Basic and diluted $(11.88) $(9.46)
$(2.89) $(0.92) $(6.60) Cash dividends per share $0.24 $0.24 $0.24
$0.06 $0.06 * See Note to Financial Information which describes the
restatement of previously reported financial information. Visteon
Corporation And Subsidiaries Consolidated Balance Sheet
(Preliminary And Unaudited) December 31, Restated 2004 2003* (in
millions) Assets Cash and cash equivalents $752 $953 Marketable
securities -- 3 Total cash and marketable securities 752 956
Accounts receivable - Ford and affiliates 1,276 1,198 Accounts
receivable - other customers 1,263 1,164 Total receivables 2,539
2,362 Inventories 889 852 Deferred income taxes 51 163 Prepaid
expenses and other current assets 231 160 Total current assets
4,462 4,493 Equity in net assets of affiliated companies 227 215
Net property 5,319 5,369 Deferred income taxes 132 700 Other assets
203 270 Total assets $10,343 $11,047 Liabilities and Stockholders'
Equity Trade payables $2,403 $2,270 Accrued liabilities 893 929
Income taxes payable 34 27 Debt payable within one year 508 351
Total current liabilities 3,838 3,577 Long-term debt 1,513 1,467
Postretirement benefits other than pensions 636 513 Postretirement
benefits payable to Ford 2,135 2,090 Deferred income taxes 296 3
Other liabilities 1,491 1,505 Total liabilities 9,909 9,155
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 3,365
3,358 Accumulated other comprehensive (loss) 8 (53) Other (26) (19)
Earnings retained for use in business (accumulated deficit) (3,044)
(1,525) Total stockholders' equity 434 1,892 Total liabilities and
stockholders' equity $10,343 $11,047 * See Note to Financial
Information which describes the restatement of previously reported
financial information. Visteon Corporation And Subsidiaries
Consolidated Statement Of Cash Flows (Preliminary And Unaudited)
For the Years Ended December 31, Restated Restated 2004 2003* 2002*
(in millions) Cash and cash equivalents at January 1 $953 $1,204
$1,024 Cash flows provided by operating activities 427 370 1,101
Cash flows from investing activities Capital expenditures (836)
(879) (723) Acquisitions and investments in joint ventures, net --
(4) -- Purchases of securities -- (48) (508) Sales and maturities
of securities 11 118 588 Other 34 25 36 Net cash used in investing
activities (791) (788) (607) Cash flows from financing activities
Commercial paper (repayments) issuances, net (81) (85) (194) Other
short-term debt, net (20) 55 45 Proceeds from issuance of other
debt, net of issuance costs 576 238 115 Principal payments on other
debt (32) (121) (245) Repurchase of unsecured debt securities (269)
-- -- Purchase of treasury stock (11) (5) (24) Cash dividends (31)
(31) (31) Other, including book overdrafts 3 77 (4) Net cash
provided by (used in) financing activities 135 128 (338) Effect of
exchange rate changes on cash 28 39 24 Net (decrease) increase in
cash and cash equivalents (201) (251) 180 Cash and cash equivalents
at December 31 $752 $953 $1,204 * See Note to Financial Information
which describes the restatement of previously reported financial
information. Visteon Corporation And Subsidiaries NOTE TO FINANCIAL
INFORMATION The following table summarizes the anticipated
adjustments to the previously reported financial information
announced by Visteon. These adjustments impacted previously
reported costs of sales, selling, general and other expenses and
income tax expense on the statement of operations. Full Fourth Full
First Nine Year Quarter Year Months 2002 2003 2003 2004 (in
millions) Net (loss), as originally reported $ (352) $ (863) $
(1,213) $ (1,299) Accounting for change in inventory costing
methodology (pre-tax)(1) (9) 3 3 -- Accounting corrections for
postretirement health care costs and pension costs (pre-tax)(2)
(20) (11) (29) (28) Tax impact of above (3) 11 18 25 -- Accounting
correction for taxes (4) -- 32 32 (39) Accounting correction for
taxes (5) -- (8) (8) (8) Net (loss), as restated $ (370) $ (829) $
(1,190) $ (1,374) Net (loss) per share - basic and diluted As
originally reported $ (2.75) $ (6.87) $ (9.65) $ (10.37) As
restated $ (2.89) $ (6.60) $ (9.46) $ (10.97) ------ 1 - During the
fourth quarter of 2004, Visteon changed the method of determining
the cost of production inventory for U.S. locations from the last-
in, first-out ("LIFO") method to the first-in, first-out ("FIFO")
method. Visteon believes the FIFO method of inventory costing
provides more meaningful information to investors and conforms all
inventories to the same FIFO basis. In accordance with Accounting
Principles Board Opinion No. 20, "Accounting Changes", a change
from the LIFO method of inventory costing to another method is
considered a change in accounting principle that should be applied
by retroactively restating all prior periods. 2 - Includes
accounting corrections for U.S. postretirement life and health care
costs to reverse the cumulative expense reductions that had been
recorded from plan amendments which changed eligibility
requirements for the retiree health care benefits for participating
employees. As a result of these amendments, Visteon changed the
expense attribution periods, which eliminated cost accruals for
younger employees and increased the accrual rate for older
participating employees. It was determined that the requirement of
Statement of Financial Accounting Standards No. 106 to properly
communicate these benefit changes to affected employees was not
satisfied and that such expense reductions should not have been
recorded. Further, based on an analysis of the annual United
Kingdom pension actuarial valuation, amounts also include $5
million for the full year 2003 and fourth quarter of 2003 and $4
million for the first nine months of 2004 related to special
termination benefits provided under Visteon's European Plan for
Growth which were not fully recognized in Visteon's previous
financial statements. 3 - Represents the deferred tax benefit of
the pre-tax expense adjustments, net of any valuation allowances.
The fourth quarter and full year 2003 amounts include $17 million
to adjust the valuation allowance for the cumulative impact on
deferred tax assets of the pre-tax adjustments. 4 - Represents an
adjustment to provide U.S. deferred taxes for the impact of
currency fluctuations on retained earnings of non-U.S. subsidiaries
and the related adjustments to the required deferred tax asset
valuation allowances in the fourth quarter of 2003 and the third
quarter of 2004. Visteon expects to repatriate earnings of non-U.S.
subsidiaries and must provide for the expected U.S. tax impact of
the assumed future repatriation, including the impact of currency
fluctuations. These amounts were originally provided for in the
second quarter of 2004 in conjunction with Visteon's completion of
a full analysis and assessment of the Other Comprehensive Income
balances, including the pre-spin periods. This adjustment was
recorded to fully recognize the tax amounts as they arose in prior
periods and to account for the related impact on the deferred tax
asset valuation allowances recorded in the fourth quarter of 2003
and the third quarter of 2004. 5 - Represents accounting
corrections to adjust the valuation allowance recorded against
Visteon's deferred tax assets. The fourth quarter and full year
2003 adjustment relates to certain foreign deferred tax assets that
had been previously misclassified. The adjustment for the first
nine months of 2004 relates to the impact of changes in foreign
currency exchange rates on Visteon's U.S. deferred tax liabilities
for withholding taxes on unremitted foreign earnings.
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGODATASOURCE:
Visteon Corporation CONTACT: Media: Kimberly A. Welch, Corporate
Communications, +1-734-710-5593, or , Analyst: Derek Fiebig,
+1-734-710-5800, or Web site: http://www.visteon.com/
http://www.visteon.com/earnings
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