Visteon Announces First Quarter 2005 Results Highlights * First
quarter revenue of $5.0 billion * Record non-Ford revenue $1.7
billion, up 30 percent * Non-Ford customers account for 35 percent
of total revenue * Positive cash flow * Financial Agreement with
Ford * Discussions with Ford continue VAN BUREN TOWNSHIP, Mich.,
April 27 /PRNewswire-FirstCall/ -- Visteon Corporation (NYSE:VC)
today announced first quarter results for 2005 reporting revenue of
$5.0 billion, essentially flat year-over-year. Non-Ford sales
reached $1.7 billion, an increase of 30 percent over first quarter
2004. Non-Ford revenue for the quarter represented 35 percent of
total revenue, an 8 percentage point increase from the same period
in 2004. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO ) Ford
revenue for the quarter was $3.3 billion, down $383 million versus
a year ago. The decrease was attributable to a 10 percent reduction
in North American production, and price reductions, partially
offset by favorable currency. The nearly $400 million increase in
non-Ford revenue was attributable to new business and favorable
currency, partially offset by price reductions. For the first
quarter 2005, Visteon reported a net loss of $188 million, or $1.49
per share, compared to net income of $20 million, or $0.16 per
share, for the same period in 2004. Results for 2005 were adversely
impacted by lower sales to Ford; higher steel, aluminum, copper and
resin costs; price reductions; and increased post retirement
benefit costs. These adverse factors were partially offset by
non-Ford sales growth, cost efficiencies, and lower labor costs.
For the first quarter 2005, cash flow from operations was $178
million, a $75 million increase from the same period in 2004. Cash
payments related to capital expenditures were $127 million for the
quarter, a $69 million decrease from the first quarter 2004,
primarily reflecting focused spending on growth product areas, and
reduced spending on facilities consolidation and information
technology. This was partially offset by spending in China and
Mexico for previously announced new facilities to support Visteon's
growing climate business. "Focusing our resources on our growth
products of interiors, climate and electronics is strengthening our
innovation portfolio and allowing us to bring new technologies to
the market faster," said Mike Johnston, president and chief
executive officer. "Our new business wins remain solid and we are
continuing to strengthen our competitive advantage in our growth
products." As of March 31, 2005, Visteon had $809 million of cash,
a $57 million increase over the 2004 year-end balance. Total debt
for the company as of March 31, 2005 was $2.0 billion, essentially
unchanged from year-end 2004. As of March 31, 2005, Visteon was in
compliance with the financial covenants in its existing credit
facilities. However, due to current market conditions and the need
to complete our strategic and structural discussions with Ford,
there can be no assurance that Visteon will remain in compliance
with such financial covenants in the future. The company is
actively exploring its financing alternatives absent a conclusion
to the Ford negotiations. Given current market conditions, the
company's financial performance and its credit ratings, any
alternative would likely require significantly more restrictive
covenants and collateralization. Ford Financial Agreement and
Ongoing Discussions On March 10, Visteon entered into financial
agreements with Ford to support the operations that directly serve
the automaker. Under the financial agreements, Ford agreed to
reduced wage reimbursements from Visteon for hourly Ford-UAW
workers assigned to Visteon facilities, accelerated payment terms
to Visteon and to fund capital expenditures at certain Visteon
plants in North America. Visteon agreed to, among other things,
continue the uninterrupted supply of certain components to Ford and
to comply with other contractual agreements with Ford and the UAW.
The agreements may be terminated by either party on or after
January 1, 2006. Visteon has been 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 restructuring of its agreements with Ford that could
address a number of items. The discussions with Ford have been
constructive and are ongoing. The goal remains to ensure the
long-term competitiveness of Visteon and a continued supply of
components to Ford. "The complexity of the discussions is reflected
in the time we are taking to ensure we develop a comprehensive
solution that is mutually agreeable," said Johnston. "Our work
continues on an identified concept that would achieve the goal from
which we started these discussions." 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. Quarterly Conference Call Scheduled
at 10 a.m. EDT Today A conference call will be hosted today,
Wednesday, April 27, at 10 a.m. EDT to discuss Visteon's first
quarter 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 5447984
(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 to achieve a competitive and
sustained business; our ability to satisfy our future capital and
liquidity requirements; our successful execution of internal
performance plans and other cost-reduction and productivity
efforts; charges resulting from 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, 2004).
We assume no obligation to update these forward- looking
statements. VISTEON CORPORATION AND SUBSIDIARIES SUPPLEMENTAL DATA
(unaudited) (in millions, except per share amounts) First Quarter
2005 over/(under) 2005 2004 2004 Sales Ford and affiliates $3,254
$3,637 $(383) Other customers 1,733 1,335 398 Total sales $4,987
$4,972 $15 Depreciation and amortization Depreciation $150 $140 $10
Amortization 26 26 - Total depreciation and amortization $176 $166
$10 Selling, administrative and other expenses $250 $265 $(15)
(Loss) income before income taxes and minority interests $(160) $43
$(203) Net (loss) income $(188) $20 $(208) Net (loss) income per
share Basic and Diluted $(1.49) $0.16 $(1.65) Average shares
outstanding Basic 125.6 125.3 0.3 Diluted 125.6 128.5 (2.9) Special
charges (1) Included in costs of sales $(7) $(14) $7 Total pre-tax
special charges $(7) $(14) $7 Special charges above, after-tax $(7)
$(10) $3 Special charges per share, based on average diluted shares
outstanding above $(0.06) $(0.08) $0.02 Capital expenditures (2)
$136 $196 $(60) Cash provided by operating activities $178 $103 $75
Cash and borrowing (compared to year-end 2004) Cash $809 $57
Borrowing 2,035 14 - - - - - 1 - Special charges relate to
restructuring and other actions discussed further in Note 4. 2 -
First Quarter 2005 amount includes $9 million related to capital
leases. VISTEON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT
OF INCOME For the Periods Ended March 31, 2005 and 2004 (in
millions, except per share amounts) First Quarter 2005 2004
(unaudited) Sales Ford and affiliates $3,254 $3,637 Other customers
1,733 1,335 Total sales 4,987 4,972 Costs and expenses (Notes 2 and
4) Costs of sales 4,874 4,656 Selling, administrative and other
expenses 250 265 Total costs and expenses 5,124 4,921 Operating
(loss) income (137) 51 Interest income 5 4 Interest expense 34 23
Net interest expense (29) (19) Equity in net income of affiliated
companies (Note 2) 6 11 (Loss) income before income taxes and
minority interests (160) 43 Provision for income taxes 20 14 (Loss)
income before minority interests (180) 29 Minority interests in net
income of subsidiaries 8 9 Net (loss) income $(188) $20 (Loss)
income per share (Note 8) Basic and diluted $(1.49) $0.16 Cash
dividends per share $ - $0.06 The accompanying notes are part of
the financial statements. VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (in millions) March 31, December 31,
2005 2004 (unaudited) Assets Cash and cash equivalents $809 $752
Accounts receivable - Ford and affiliates 1,323 1,255 Accounts
receivable - other customers (Note 6) 1,201 1,285 Total
receivables, net (Note 2) 2,524 2,540 Inventories (Note 11) 939 889
Deferred income taxes 51 51 Prepaid expenses and other current
assets 227 212 Total current assets 4,550 4,444 Equity in net
assets of affiliated companies 232 227 Net property 5,173 5,303
Deferred income taxes 132 132 Other assets 195 203 Total assets
$10,282 $10,309 Liabilities and Stockholders' Equity Trade payables
$2,550 $2,403 Accrued liabilities 872 894 Income taxes payable 41
38 Debt payable within one year (Note 7) 522 508 Total current
liabilities 3,985 3,843 Long-term debt (Note 7) 1,513 1,513
Postretirement benefits other than pensions 669 639 Postretirement
benefits payable to Ford 2,181 2,135 Deferred income taxes 289 296
Other liabilities 1,468 1,476 Total liabilities 10,105 9,902
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, 129 million and 130 million shares outstanding,
respectively 131 131 Capital in excess of par value of stock 3,393
3,380 Accumulated other comprehensive (loss) income (Note 12) (41)
5 Other (35) (26) Accumulated deficit (3,271) (3,083) Total
stockholders' equity 177 407 Total liabilities and stockholders'
equity $10,282 $10,309 The accompanying notes are part of the
financial statements. VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS For the Periods Ended March
31, 2005 and 2004 (in millions) First Quarter 2005 2004 (unaudited)
Cash and cash equivalents at January 1 $752 $953 Cash flows from
operating activities Net (loss) income (188) 20 Depreciation and
amortization 176 166 Earnings of affiliated companies less than (in
excess of) dividends remitted 3 (8) Sale of receivables 74 28
Changes in assets and liabilities: Increase in accounts receivable
and other assets (94) (397) Increase in inventories (57) (60)
Increase in accounts payable, accrued and other liabilities 171 296
Increase in postretirement benefits other than pensions 80 58
Income taxes deferred and payable, net (2) (9) Other 15 9 Net cash
provided by operating activities 178 103 Cash flows from investing
activities Capital expenditures (Note 7) (127) (196) Acquisitions
and investments in joint ventures (9) - Sales and maturities of
securities - 3 Other, including proceeds from asset disposals 19 -
Net cash used in investing activities (117) (193) Cash flows from
financing activities Commercial paper repayments, net - (54) Other
short-term debt, net 21 (19) Proceeds from issuance of other debt,
net of issuance costs 12 474 Principal payments on other debt (13)
(12) Treasury stock activity (1) (11) Cash dividends - (8) Other,
including book overdrafts (16) (42) Net cash provided by financing
activities 3 328 Effect of exchange rate changes on cash (7) (4)
Net increase in cash and cash equivalents 57 234 Cash and cash
equivalents at March 31 $809 $1,187 The accompanying notes are part
of the financial statements. VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (unaudited) NOTE 1. Financial
Statements The financial data presented herein are unaudited, but
in the opinion of management reflect those adjustments, including
normal recurring adjustments, necessary for a fair statement of
such information. Results for interim periods should not be
considered indicative of results for a full year. Reference should
be made to the consolidated financial statements and accompanying
notes included in the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004, as filed with the Securities
and Exchange Commission on March 16, 2005. Visteon Corporation
("Visteon") is a leading, global supplier of automotive systems,
modules and components. Visteon sells products primarily to global
vehicle manufacturers, and also sells to the worldwide aftermarket
for replacement and vehicle appearance enhancement parts. Visteon
became an independent company when Ford Motor Company ("Ford")
established Visteon as a wholly-owned subsidiary in January 2000
and subsequently transferred to Visteon the assets and liabilities
comprising Ford's automotive components and systems business. Ford
completed its spin-off of Visteon on June 28, 2000 (the
"spin-off"). Prior to incorporation, Visteon operated as Ford's
automotive components and systems business. NOTE 2. Selected Costs,
Income and Other Information Depreciation and Amortization
Depreciation and amortization expenses are summarized as follows:
First Quarter 2005 2004 (in millions) Depreciation $150 $140
Amortization 26 26 Total $176 $166 Investments in Affiliates The
following table presents summarized financial data for those
affiliates accounted for under the equity method, and includes
YanFeng Visteon Automotive Trim Systems Co., Ltd., in which Visteon
has a 50% ownership interest. The amounts represent 100% of the
results of operations of these affiliates. Visteon reports its
share of their net income in the line "Equity in net income of
affiliated companies" on the Consolidated Statement of Income.
First Quarter 2005 2004 (in millions) Net sales $341 $334 Gross
profit 48 61 Net income 12 21 VISTEON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (Continued) (unaudited) NOTE 2.
Selected Costs, Income and Other Information - (Continued) Accounts
Receivable The allowance for doubtful accounts was $47 million at
March 31, 2005 and $44 million at December 31, 2004. Allowance for
doubtful accounts is determined considering factors such as length
of time accounts are past due, historical experience of write-offs,
and our customers' financial condition. Accounts receivable are
written-off when they are deemed uncollectible. Income Taxes
Visteon's provision for income taxes in interim periods is computed
by applying an estimated annual effective tax rate against income
(loss) before income taxes, excluding related equity in net income
of affiliated companies, for the period. Effective tax rates vary
from period to period as separate calculations are performed for
those countries where Visteon's operations are profitable and whose
results continue to be tax-effected and for those countries where
full deferred tax valuation allowances exist and are maintained.
Visteon recorded a provision of $20 million for the first quarter
of 2005, compared with $14 million for the first quarter of 2004.
The first quarter of 2005 tax expense is higher than the comparable
prior year period due to the inability to record a tax benefit for
pre-tax losses incurred in the U.S. and certain foreign countries,
including Germany, where full valuation allowances against our
deferred tax assets have been maintained since the third quarter of
2004. The first quarter of 2005 provision reflects primarily income
tax expense related to those countries that are profitable and
whose results continue to be tax-effected, as well as withholding
taxes on royalties and unremitted foreign earnings. In addition,
the provision for the first quarter of 2005 includes a benefit of
$3 million related to the favorable resolution of tax matters in
Mexico and a benefit of $7 million related to a reduction in
accrued withholding taxes on unremitted earnings in Hungary
resulting from a reduction in the statutory withholding tax rate on
dividends. Included in the provision for income taxes for the first
quarter of 2004 was a benefit of $4 million related to a reduction
in income tax reserves as a result of the conclusion of an income
tax audit in Canada. The need to maintain valuation allowances
against deferred tax assets in the U.S. and other affected
countries will continue to cause variability in the quarterly and
annual effective tax rates. Full valuation allowances against
deferred tax assets in the U.S. and applicable foreign countries,
which include the U.K. and Germany, will be maintained until
sufficient positive evidence exists to reduce or eliminate them.
Other Costs Costs of sales for the first quarter of 2005 include
$13 million of adjustments to correct previously established
accruals for freight costs primarily related to U.S. inventory
purchases. VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL
STATEMENTS- (Continued) (unaudited) NOTE 3. Stock-Based Awards In
December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123 (Revised 2004) ("SFAS 123(R)"), "Share-Based
Payments." This revised statement requires the fair-value based
method to be used and eliminates the alternative use of the
intrinsic value method. SFAS 123(R) is required to be adopted as of
the beginning of the first annual period that begins after June 15,
2005. Visteon does not expect the requirements of SFAS 123(R) to
have a material effect on its results of operations, as starting
January 1, 2003, Visteon began expensing the fair value of
stock-based awards granted to employees pursuant to Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation." SFAS 123 was adopted on a
prospective method basis for stock-based awards granted, modified
or settled after December 31, 2002. For stock options and
restricted stock awards granted prior to January 1, 2003, Visteon
measures compensation cost using the intrinsic value method. If
compensation cost for all stock-based awards had been determined
based on the estimated fair value of stock options and the fair
value set at the date of grant for restricted stock awards, in
accordance with the provisions of SFAS 123, Visteon's reported net
(loss) income and (loss) income per share would have changed to the
pro forma amounts indicated below: First Quarter 2005 2004 (in
millions, except per share amounts) Net (loss) income, as reported
$(188) $20 Add: Stock-based employee compensation expense included
in reported net (loss) income, net of related tax effects 3 2
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax
effects (4) (4) Pro forma net (loss) income $(189) $18 Basic and
diluted (loss) income per share: As reported $(1.49) $0.16 Pro
forma $(1.50) $0.14 During the first quarter of 2005, Visteon
granted under the Visteon Corporation 2004 Incentive Plan and the
Visteon Corporation Employees Equity Incentive Plan about 4.3
million stock appreciation rights ("SARs"), 2.7 million restricted
stock units ("RSUs"), and 2.0 million stock options. Stock options
and stock appreciation rights granted have an exercise price equal
to the average of the highest and lowest prices at which Visteon
common stock was traded on the New York Stock Exchange on the date
of grant, expire five years after the date on which they were
granted and become exercisable one-third after one year from the
date of grant, an additional one-third after two years and in full
after three years. SARs granted entitle the participant to receive
a cash amount equal to the appreciation in the underlying share of
common stock, which is equal to the difference in fair market value
of Visteon common stock on the date the SAR is granted and the fair
market value of Visteon common stock on the date the SAR is
exercised. RSUs granted consist of units valued based upon the fair
market value of Visteon common stock and are settled in cash upon
vesting after a designated period of time, which is generally three
years. In addition, treasury stock increased $12 million during the
first quarter of 2005 primarily from the forfeiture of about
700,000 shares of restricted stock awards, originally granted in
2002, that did not vest as certain performance goals were not
achieved. VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL
STATEMENTS - (Continued) (unaudited) NOTE 4. Special Charges First
Quarter 2005 Actions - During the first quarter of 2005, Visteon
recorded pre-tax special charges of $7 million in costs of sales
($7 million after-tax) related to a continuation of an incentive
program offered during the fourth quarter of 2004 to eligible U.S.
salaried employees to voluntarily separate employment. Through
March 31, 2005, 409 employees have voluntarily elected to separate
employment under this program, comprised of 374 during the fourth
quarter of 2004 and 35 employees during the first quarter of 2005.
Of this group of employees, 388 have terminated employment as of
March 31, 2005, with the remainder expected to terminate employment
at various times throughout the year. First Quarter 2004 Actions -
During the first quarter of 2004, Visteon recorded pre-tax charges
of $14 million in costs of sales ($10 million after- tax) which
includes $9 million for the separation of about 50 hourly employees
located at Visteon's plants in Europe through a continuation of a
special voluntary retirement and separation program started in
2002, and $5 million related to the involuntary separation of about
200 employees as a result of the planned closure of our La
Verpilliere, France manufacturing facility. The closure of the La
Verpilliere facility and the related involuntary employee
separations were substantially completed during 2004. Reserve
Activity - Reserve balances, excluding those related to seating
operations, of $41 million and $55 million at March 31, 2005 and
December 31, 2004, respectively, are included in current accrued
liabilities on the accompanying balance sheets. Automotive Glass
Total Operations Operations Visteon (in millions) December 31, 2004
reserve balance $52 $3 $55 First quarter 2005 expense 7 - 7
Utilization (21) - (21) March 31, 2005 reserve balance $38 $3 $41
Utilization in the first quarter of 2005 includes $11 million of
cash payments and $3 million incurred related to special pension
and other postretirement benefits related to the U.S. salaried
voluntary separations program; and $7 million of cash payments
related to other actions. Reserves related to the U.S. salaried
voluntary separation program were $27 million and $34 million at
March 31, 2005 and December 31, 2004, respectively. In addition,
during the first quarter of 2005, Visteon paid Ford about $9
million of previously accrued amounts related to an agreement
entered into in 2003 to reimburse Ford for the actual net costs of
transferring seating production, including costs related to Ford
hourly employee voluntary retirement and separation programs that
Ford implemented. We continue to assess the recoverability of our
long-lived assets in light of the challenging environment in which
we operate and as part of our business planning process. If
conditions, including the results of any discussions with Ford,
indicate that any of these assets are impaired, impairment charges
will be required, although we cannot predict the timing or range of
amounts, if any, which may result. Visteon considers projected
future undiscounted cash flows, trends and other circumstances in
making such estimates and evaluations. While we believe that our
estimates of future cash flows are reasonable, different
assumptions regarding such factors as future automotive production
volumes (primarily for Ford), selling price changes, labor cost
changes, material cost changes, productivity and other cost savings
and capital expenditures could significantly affect our
evaluations. VISTEON CORPORATION AND SUBSIDIARIES NOTES TO
FINANCIAL STATEMENTS - (Continued) (unaudited) NOTE 5. Employee
Retirement Benefits Visteon's retirement plans' expense for the
first quarter of 2005 and 2004 are summarized as follows:
Retirement Plans Health Care and Life U.S. Plans Non-U.S. Plans
Insurance Benefits 2005 2004 2005 2004 2005 2004 (in millions)
First Quarter Service cost $15 $14 $9 $9 $12 $11 Interest cost 18
17 16 17 17 16 Expected return on plan assets (17) (16) (15) (15) -
- Amortization of: Plan amendments 2 2 2 3 (1) - (Gains) losses and
other 2 1 2 - 7 6 Special termination benefits - - - 3 - - Net
pension/ postretirement expense related to Visteon sponsored plans
20 18 14 17 35 33 Expense for Visteon- assigned Ford-UAW and
certain salaried employees 30 31 - - 55 37 Net pension/
postretirement expense $50 $49 $14 $17 $90 $70 During the first
quarter of 2005, contributions to Visteon U.S. retirement plans and
postretirement health care and life insurance plans were $7 million
and $4 million, respectively, and contributions to non-U.S.
retirement plans were $19 million. Visteon presently anticipates
additional contributions to its U.S. retirement plans and
postretirement health care and life insurance plans of $38 million
and $37 million, respectively in 2005 for a total of $45 million
and $41 million, respectively. Visteon also anticipates additional
2005 contributions to non-U.S. retirement plans of $26 million for
a total of $45 million. These are expected contributions and may be
revised later in 2005. The Medicare Drug Improvement and
Modernization Act of 2003 was signed into law on December 8, 2003.
This legislation provides for a federal subsidy beginning in 2006
to sponsors of retiree healthcare benefit plans that provide a
benefit at least actuarially equivalent to the benefit established
by the law. Visteon's plans generally provide retiree drug benefits
that exceed the value of the benefit that will be provided by
Medicare Part D, and we have concluded that our plans are
actuarially equivalent based on the standard presented in the
Medicare Modernization Act Final Rule published in January 2005 and
further clarifying guidelines published by the Centers for Medicare
and Medicaid Services in April 2005. This subsidy reduced the
benefit obligation for Visteon plans by $87 million as of March 31,
2004, and will be recognized through reduced retiree health care
expense over the related employee future service lives. VISTEON
CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -
(Continued) (unaudited) NOTE 6. Asset Securitization United States
During 2004, Visteon established a revolving accounts receivable
securitization facility in the United States ("facility
agreement"). Under this facility agreement, Visteon can sell a
portion of its U.S. trade receivables from customers other than
Ford to Visteon Receivables LLC ("VRL"), a wholly-owned
consolidated special purpose entity. VRL may then sell, on a
non-recourse basis (subject to certain limited exceptions), an
undivided interest in the receivables to an asset-backed,
multi-seller commercial paper conduit, which is unrelated to
Visteon or VRL. As of March 31, 2005, the amount of undivided
interest that VRL could sell to the conduit was about $82 million.
During the first quarter of 2005, gross proceeds from new
securitizations were $120 million; and collections and repayments
to the conduit were $110 million, resulting in net proceeds of $10
million and an increase in the undivided interest sold to $65
million at March 31, 2005. The retained interest of $220 million
and $178 million at March 31, 2005 and December 31, 2004,
respectively, is included in Accounts receivable - other customers
on the Consolidated Balance Sheet. The loss on sale of receivables
was less than $1 million and the loss on customer delinquencies was
about $2 million for the first quarter of 2005. The facility was
extended during the first quarter of 2005 to expire in March 2006,
and can be extended annually through March 2008 based upon the
mutual agreement of the parties. Additionally, the agreement
contains financial covenants similar to our unsecured revolving
credit facilities, and a mechanism which considers changes in
Visteon's credit ratings in determining the maximum amount of
undivided interests that VRL could sell to the conduit. In April
2005, Visteon's credit ratings were lowered, which will reduce the
maximum amount of undivided interests that VRL could sell to the
conduit under the present agreement. Europe As of March 31, 2005
and December 31, 2004, Visteon has sold euro 70 million ($90
million) and euro 19 million ($26 million), respectively, of trade
receivables without recourse, under European sale of receivables
agreements that are renewable on an annual basis with certain
banks. These agreements currently provide for the sale of up to
euro 80 million in trade receivables. VISTEON CORPORATION AND
SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited) NOTE 7. Debt Debt, including the fair market value of
related interest rate swaps, was as follows: March 31, December 31,
2005 2004 (in millions) Debt payable within one year Revolving
credit facility - 364-day $80 $- Other - short-term 158 221 7.95%
notes due August 1, 2005 252 253 Current portion of long-term debt
32 34 Total debt payable within one year 522 508 Long-term debt
8.25% notes due August 1, 2010 703 707 7.00% notes due March 10,
2014 442 446 Term loan due June 25, 2007 234 223 Other 134 137
Total long-term debt 1,513 1,513 Total debt $2,035 $2,021 Visteon
has financing arrangements with a syndicate of third-party lenders
that provide contractually committed, unsecured revolving credit
facilities (the "credit facilities"). Our 364-day revolving credit
facility, in the amount of $565 million expires in June 2005. In
addition to our 364-day revolving facility, Visteon continues to
have a revolving credit facility in the amount of $775 million that
expires in June 2007. The credit facilities also provide for a
delayed draw term loan in the amount of $250 million, expiring in
June 2007, which was used primarily to finance new construction for
facilities consolidation in Southeast Michigan. Borrowings under
the credit facilities bear interest based on a variable rate
interest option selected at the time of borrowing. The credit
facilities contain certain affirmative and negative covenants
including a covenant not to exceed a certain leverage ratio of
consolidated EBITDA (as defined in the agreement) of 3.5 to 1.
Visteon has maintained a trade payables program through General
Electric Capital Corporation ("GECC") that provides financial
flexibility to Visteon and its suppliers. When a supplier
participates in the program, GECC pays the supplier the amount due
from Visteon in advance of the original due date. In exchange for
the earlier payment, our suppliers accept a discounted payment.
Visteon pays GECC the full amount. Approximately $22 million and
$69 million was outstanding to GECC under this program at March 31,
2005 and December 31, 2004, respectively, which is included in our
reported debt balance, and supported by a standby letter of credit.
Although this agreement with GECC is scheduled to expire in
December 2005, Visteon has notified participating suppliers of its
intention to exit the program beginning in March 2005. Non-cash
investing and financing activities are excluded from the
accompanying Consolidated Statement of Cash Flows. For the first
quarter of 2005, non-cash transactions include $9 million in
capital lease agreements entered into during the period. During the
first quarter of 2005, Visteon terminated interest rate swaps with
a notional amount of $200 million related to the 8.25% notes due
August 1, 2010 and received $7 million in cash. The fair value of
the interest rate swaps at termination will be deferred as part of
the underlying debt balance and amortized as a reduction in
interest expense over the remaining term of the debt. VISTEON
CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -
(Continued) (unaudited) NOTE 8. Income (Loss) Per Share of Common
Stock Basic income (loss) per share of common stock is calculated
by dividing reported net income (loss) by the average number of
shares of common stock outstanding during the applicable period,
adjusted for restricted stock. The calculation of diluted income
(loss) per share takes into account the effect of dilutive
potential common stock, such as stock options, and contingently
returnable shares, such as restricted stock. First Quarter 2005
2004 (in millions, except per share amounts) Numerator: Net (loss)
income $(188) $20 Denominator: Average common stock outstanding
128.7 129.9 Less: Average restricted stock outstanding (3.1) (4.6)
Basic shares 125.6 125.3 Net dilutive effect of restricted stock
and stock options - 3.2 Diluted shares 125.6 128.5 (Loss) Income
per share: Basic and diluted $(1.49) $0.16 For the first quarter of
2005, potential common stock of about 2,718,000 shares are excluded
from the calculation of diluted (loss) per share because the effect
of including them would have been antidilutive due to the losses
incurred during the period. In addition, options to purchase about
8,686,000 shares of common stock at exercise prices ranging from
about $7.50 per share to $22 per share, and which expire at various
dates between 2009 and 2012, were outstanding during the first
quarter of 2005 but were not included in the computation of diluted
(loss) per share because the options' exercise price was greater
than the average market price of the common shares. VISTEON
CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -
(Continued) (unaudited) NOTE 9. Arrangements with Ford and its
Affiliates On March 10, 2005, Visteon and Ford entered into a
funding agreement, effective as of March 1, 2005, under which Ford
has agreed (a) to accelerate the payment on or prior to March 31,
2005 of not less than $120 million of payables that were not
required to be paid to Visteon until after March 31, 2005; (b) to
accelerate the payment terms for certain payables to Visteon
arising on or after April 1, 2005 from an average of 33 days after
the date of sale to an average of 26 days; (c) to reduce the amount
of wages, as defined, by 23.75% that Visteon is currently obligated
to reimburse Ford with respect to Visteon-assigned Ford-UAW hourly
employees that work at Visteon facilities, beginning with the pay
period commencing February 21, 2005 (approximately $25 million per
month at current staffing levels); and (d) to release Visteon from
its obligation to reimburse Ford for Ford profit sharing payments
with respect to Visteon-assigned Ford-UAW hourly employees that
accrue in 2005. Under the funding agreement, Visteon has agreed to
(a) continue to provide an uninterrupted supply of components to
Ford in accordance with applicable purchase orders and to continue
to comply with its other contractual agreements with Ford and the
UAW, including continuing to use its best efforts to quote
competitive prices for new business to be produced for Ford at
certain of Visteon's plants located in North America; (b) not to
request reimbursement from Ford for any material cost surcharges
for any component that is produced for Ford at certain of Visteon's
plants located in North America, and (c) that, except with respect
to sales of inventory or the disposal of obsolete equipment in the
ordinary course of business, Visteon will not sell, close or
otherwise dispose of any of the assets at certain of Visteon's
plants located in North America, without Ford's consent. During the
first quarter of 2005, costs of sales were reduced by about $43
million as a result of the funding agreement's impact on labor
costs for Visteon-assigned Ford-UAW hourly employees, comprised of
$31 million in reduced charges from Ford, a one-time reduction of
$17 million in previously established vacation accruals; offset
partially by $5 million from reduced inventory valuations. Cash
flows provided by operating activities for the first quarter of
2005 were favorably impacted from the reduced wage reimbursements
to Ford and by about $120 million from the accelerated payments
from Ford under the funding agreement. Also on March 10, 2005, Ford
and Visteon entered into a master equipment bailment agreement,
effective as of January 1, 2005, pursuant to which Ford has agreed
to pay third-party suppliers for certain machinery, equipment,
tooling and fixtures and related assets, which may be acquired
during the term of the agreement to be held by Visteon, which are
primarily used to produce components for Ford at some of Visteon's
plants located in North America. The agreement covers (a) certain
capital expenditure project commitments made by Visteon before
January 1, 2005, where less than one-half of the full amount of the
project cost was paid by Visteon as of January 1, 2005; and (b)
capital expenditures for equipment where the expenditure has not
yet been committed by Visteon and which is subsequently approved by
Ford. To the extent approved capital expenditures are related to
the modification of existing equipment, title of the modified
equipment would transfer to Ford. During the first quarter of 2005,
Visteon recognized a charge in costs of sales of about $17 million
related to capitalized costs of $27 million for projects that were
less than one-half complete which will be transferred to Ford. The
loss represents costs incurred and capitalized by Visteon at
December 31, 2004 associated with these projects. Cash proceeds of
$10 million from these sales are expected to be received in the
second quarter of 2005. Either Ford or Visteon may terminate the
funding agreement or the master bailment agreement at anytime on or
after January 1, 2006 upon 10 business days' notice or upon the
occurrence of certain customary events of default, including the
uncured default in the performance by a party of its obligations
under the agreement or under certain other agreements between the
parties. VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL
STATEMENTS - (Continued) (unaudited) NOTE 10. Product Warranty A
reconciliation of changes in the product warranty liability is
summarized as follows: First Quarter 2005 2004 (in millions)
Beginning balance $41 $22 Accruals for products shipped 12 7
Accruals for pre-existing warranties (including changes in
estimates) 8 9 Settlements (8) (8) Ending balance $53 $30 NOTE 11.
Inventories Financial statement amounts have been restated to
reflect Visteon's change in 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 during
the fourth quarter of 2004. This change had no significant impact
on the results of operations for the first quarter of 2004.
Inventories are summarized as follows: March 31, December 31, 2005
2004 (in millions) Raw materials, work-in-process and supplies $649
$621 Finished products 290 268 Total inventories $939 $889 In
November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151 ("SFAS 151"), "Inventory Costs - an amendment of
ARB No. 43, Chapter 4." This statement clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs,
and wasted material (spoilage), and is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005.
Visteon has not determined the effect the adoption of SFAS 151 will
have on either its results of operations or financial position.
VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
- (Continued) (unaudited) NOTE 12. Comprehensive Income (Loss)
Comprehensive loss is summarized as follows: First Quarter 2005
2004 (in millions) Net (loss) income $(188) $20 Change in foreign
currency translation adjustments (48) (28) Other 2 2 Total
comprehensive loss $(234) $(6) Accumulated other comprehensive
(loss) income is comprised of the following: March 31, December 31,
2005 2004 (in millions) Foreign currency translation adjustments,
net of tax $151 $199 Realized and unrealized gains on derivatives,
net of tax 18 16 Minimum pension liability, net of tax (210) (210)
Total accumulated other comprehensive (loss) income $(41) $5
VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
- (Continued) (unaudited) NOTE 13. Segment Information Visteon's
reportable operating segments are Automotive Operations and Glass
Operations. Financial information for the reportable operating
segments is summarized as follows: Automotive Glass Total
Operations Operations Visteon (in millions) First Quarter 2005:
Sales $4,849 $138 $4,987 (Loss) before taxes and minority interests
(150) (10) (160) Net (loss) (178) (10) (188) Special charges:
Before taxes (7) - (7) After taxes (7) - (7) 2004: Sales $4,833
$139 $4,972 Income before taxes and minority interests 34 9 43 Net
income 14 6 20 Special charges: Before taxes (14) - (14) After
taxes (10) - (10) NOTE 14. Litigation and Claims Securities and
Related Matters In February 2005, a shareholder lawsuit was filed
in the U.S. District Court for the Eastern District of Michigan
against Visteon and certain current and former officers of the
company. The lawsuit alleges, among other things, that Visteon made
misleading statements of material fact or omitted to state material
facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading. The
named individual plaintiff seeks to represent a class consisting of
purchasers of Visteon's securities during the period between
January 23, 2004 and January 31, 2005. Class action status has not
yet been certified in this litigation. In March 2005, a number of
current and former directors and officers were named as defendants
in two shareholder derivative suits pending in the State of
Michigan Circuit Court for the County of Wayne. As is customary in
derivative suits, Visteon has been named as a defendant in these
actions. As a nominal defendant, Visteon is not liable for any
damages in these suits nor is any specific relief sought against
Visteon. The complaints allege that, among other things, the
individual defendants breached their fiduciary duties of good faith
and loyalty and aided and abetted such breaches during the period
between January 23, 2004 and January 31, 2005 in connection with
Visteon's conduct concerning, among other things, the matters
alleged in the securities class action discussed immediately above.
VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
- (Continued) (unaudited) NOTE 14. Litigation and Claims -
(Continued) In March 2005, Visteon and a number of current and
former employees, officers and directors were named as defendants
in a class action lawsuit brought under ERISA in the U.S. District
Court for the Eastern District of Michigan. The complaint was
brought on behalf of a named plaintiff and a putative class
consisting of all participants or beneficiaries of the Visteon
Investment Plan (and the Visteon Savings Plan for Hourly Employees,
together the "Plans") whose accounts included Visteon stock at any
time between September 18, 2001 and the present. The named
defendants are Visteon, the Organization and Compensation Committee
of the Board of Directors (the "Compensation Committee"), seven
individual current and past directors that serve, or have served,
on the Compensation Committee, the Visteon Investment Plan
Administrative Committee, two individual employees of Visteon who
presently serve on the Administrative Committee, the chairman and
former chief executive officer, the president and chief executive
officer, as well as unknown and unidentified fiduciaries of the
Plans. The complaint generally alleges that the defendants breached
their fiduciary duties under ERISA during the class period by,
among other things, continuing to offer Visteon stock as an
investment alternative under the Plans, failing to disclose
complete and accurate information regarding the prudence of
investing in Visteon stock, failing to monitor the actions of
certain of the defendants, and failing to avoid conflicts of
interest or promptly resolve them. These ERISA claims are
predicated upon factual allegations similar to those raised in the
derivative and securities class actions described immediately
above. Class action status has not yet been certified in this
litigation. Visteon and its current and former directors and
officers intend to contest the foregoing lawsuits vigorously.
However, it is not possible at this time reasonably to assess the
final outcome of each of the foregoing lawsuits or reasonably to
estimate the possible loss or range of loss with respect to each
such lawsuit. In the event of an unfavorable resolution of any of
these matters, Visteon's earnings and cash flows in one or more
periods could be materially affected. Other Matters Various other
legal actions, governmental investigations and proceedings and
claims are pending or may be instituted or asserted in the future
against Visteon, including those arising out of alleged defects in
Visteon's products; governmental regulations relating to safety;
employment-related matters; customer, supplier and other
contractual relationships; intellectual property rights; product
warranties; product recalls; and environmental matters. Some of the
foregoing matters may involve compensatory, punitive or antitrust
or other treble damage claims in very large amounts, or demands for
recall campaigns, environmental remediation programs, sanctions, or
other relief which, if granted, would require very large
expenditures. Litigation is subject to many uncertainties, and the
outcome of individual litigated matters is not predictable with
assurance. Reserves have been established by Visteon for matters
discussed in the immediately foregoing paragraph where losses are
deemed probable and reasonably estimable. It is reasonably
possible, however, that some of the matters discussed in the
foregoing paragraph for which reserves have not been established
could be decided unfavorably to Visteon and could require Visteon
to pay damages or make other expenditures in amounts, or a range of
amounts, that cannot be estimated at March 31, 2005. Visteon does
not reasonably expect, except as otherwise described herein, based
on its analysis, that any adverse outcome from such matters would
have a material effect on our financial condition, results of
operations or cash flows, although such an outcome is possible.
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO DATASOURCE:
Visteon Corporation CONTACT: Media Inquiries: Kimberly A. Welch,
+1-734-710-5593, , or Analyst Inquiries: Derek Fiebig,
+1-734-710-5800, , both of Visteon Corporation Web site:
http://www.visteon.com/
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