Visteon/Ford Transaction on Track to Close by September 30
01 August 2005 - 11:00PM
PR Newswire (US)
Visteon/Ford Transaction on Track to Close by September 30 Visteon
Provides Update on Internal Accounting Review VAN BUREN TOWNSHIP,
Mich., Aug. 1 /PRNewswire-FirstCall/ -- Visteon Corporation
(NYSE:VC) today announced that the transaction with Ford Motor
Company remains on schedule to close on or before Sept. 30, 2005,
as contemplated by the memorandum of understanding (MOU) announced
on May 25, 2005. Visteon also reported on the status of the
independent review being directed by the Audit Committee of the
Board of Directors, as previously announced on May 10, 2005. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO ) Update on
Ford Agreements Since announcing their MOU, Visteon and Ford have
worked diligently to finalize the definitive agreements that will
effectuate the transfer of approximately 24 North American
facilities to a Ford managed entity. The parties have made
significant progress toward signing definitive agreements,
including resolving most of the significant transactional issues
and receiving U.S. anti-trust and union approvals. Visteon and Ford
remain committed to the goal of closing the transactions by Sept.
30, 2005, and both anticipate doing so. "We are very pleased with
the progress we've made and we are working to complete the
definitive agreements as quickly as possible," said Jim Palmer,
Visteon executive vice president and chief financial officer. "Ford
and Visteon have been working hard to define how Visteon will
support the new entity, and have made significant progress. We
still have some additional items that need to be resolved, and both
parties are committed to resolving them. "Visteon's bank lines are
in place to provide funds until definitive agreements are
finalized. We are looking forward to completing the negotiations
and turning our attention to the future of our core operations,"
said Palmer. Visteon has also concluded, based on the probable
successful outcome of its discussions with Ford, it is necessary to
impair assets in both North America and Europe, which will result
in a non-cash charge of approximately $1.1 billion in the second
quarter 2005. In North America, charges of nearly $900 million will
be recognized as the company reduces, to estimated fair value, the
carrying value of assets related to the 24 facilities that will be
transferred to Ford in conjunction with the pending transaction. In
addition, Visteon will record a non-cash charge of approximately
$250 million to reduce the carrying value of certain non-core fixed
assets for drive line and engine air fuel systems primarily in
Europe. Both of these charges will be recognized in Visteon's cost
of sales. Visteon had previously announced that it anticipated a
second quarter, non-cash charge of approximately $1.3 billion
related to the transaction with Ford. The amount to be recognized
in the second quarter is lower due to higher than expected fair
values for the assets to be transferred. The company still expects
to recognize a significant gain related to the closing of the
transaction with Ford well in excess of these second quarter
charges. Although a secured loan from Ford was not yet available
due to the delay in finalizing the definitive agreements, Visteon
recently drew on its revised bank lines to fund today's maturity of
its $250 million of 7.95 percent notes and to provide additional
liquidity for working capital needs associated with summer shut
down at its primary customers. Visteon expects to repay a portion
of the amount drawn on the bank lines when it receives the $250
million short term loan from Ford upon reaching the definitive
agreements. Update on Independent Review On May 10, 2005, Visteon
announced that the Audit Committee of the Board of Directors had
initiated an independent review of the accounting for certain
transactions originating in the company's North American purchasing
activity as a result of errors identified by management in its
accruals for costs principally associated with freight and material
surcharges that relate to prior periods and allegations regarding
the conduct of a former senior finance employee responsible for the
accounting oversight of these activities. The Audit Committee
engaged Paul, Weiss, Rifkind, Wharton & Garrison LLP as its
outside counsel to advise it regarding the review. Navigant
Consulting, forensic accountants, has been engaged by outside
counsel to assist in the review. The transactions that have been
the primary focus of the review to date, and the preliminary
conclusions with respect to those transactions, are as follows: --
It is the preliminary conclusion of this review that approximately
$44 million of additional freight expenses should have been
recorded in periods prior to December 31, 2004 for freight expenses
payable to third parties for services provided prior to that time.
These expenses include $13 million initially identified by the
company in its May 10, 2005 release. Visteon's unaudited pre-tax
loss for the first quarter 2005 as presented in its press release
dated April 27, 2005 were negatively impacted by approximately $26
million, net of required first quarter 2005 accruals, relating to
adjustments for these prior period expenses. -- It is the
preliminary conclusion of this review that approximately $27
million of additional expenses for material surcharges should have
been recorded in periods prior to December 31, 2004 for costs
incurred prior to that time. These expenses include $18 million
initially identified by the company in its May 10, 2005 release.
Visteon's unaudited pre-tax loss for the first quarter 2005 as
presented in its press release dated April 27, 2005 included
approximately $26 million relating to these 2004 expenses. -- Other
supplier expenses totaling approximately $6 million were recorded
in the first quarter 2005 that should have been included in periods
prior to first quarter 2005. The review is not complete, and it is
possible that the preliminary conclusions will change. The Audit
Committee is continuing to review the accounting treatment of
transactions originating in its North American purchasing activity
and allegations regarding the conduct of a former senior finance
employee responsible for the accounting oversight for these North
American purchasing activities. It should also be noted that the
preliminary and partial estimates of the accounting for the
transactions noted above have not been the subject of a review or
audit by Visteon's independent registered public accounting firm,
PricewaterhouseCoopers LLP. Further, as a result of the review,
Visteon has not filed its Form 10-Q for the first quarter of 2005,
nor does it expect to file its Form 10-Q for the second quarter of
2005 prior to the August 9th deadline. Visteon is not yet able to
determine whether these items or any other adjustments that may be
identified will require restatement of prior period results or
further adjustments to the previously reported first quarter 2005
financial results. Therefore, Visteon is not currently able to
determine the effects of all potential adjustments to its results
of operations for any particular period, or whether these or other
errors will result in the determination that one or more additional
material weaknesses in the company's internal control over
financial reporting exist for purposes of Section 404 of the
Sarbanes-Oxley Act. As a result of Visteon's inability to file its
Forms 10-Q, it is not currently eligible to use Form S-3 to
register its securities. In addition, it is not in compliance with
its obligations to deliver to relevant parties its filings with the
SEC as required under the indentures covering Visteon's public
debt. This delay does not result in an automatic event of default
and acceleration of the long-term debt of Visteon. Visteon expects
to release preliminary unaudited financial information for the
second quarter of 2005 at 7 a.m. on Aug. 8, 2005, based on the
preliminary conclusions and assessments reached to date. A
conference call is scheduled at 9 a.m. on the same day. 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 70,000 employees
and a global delivery system of more than 200 technical,
manufacturing, sales and service facilities located in 24
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 ability to enter into definitive
agreements that reflect the terms of the memorandum of
understanding with Ford and close the transactions that are
contemplated in the memorandum of understanding; implementing
structural changes that result from the closing of the transactions
contemplated by the memorandum of understanding in order to achieve
a competitive and sustained business; our ability to satisfy our
future capital and liquidity requirements and comply with the terms
of our credit agreements; the results of the investigation being
conducted by Visteon's Audit Committee and the company's inability
to make timely filings with the SEC; the financial distress of our
suppliers; 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.
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO
http://photoarchive.ap.org/ DATASOURCE: Visteon Corporation
CONTACT: Media Inquiries: Jim Fisher, +1-734-710-5557, , Investor
Inquiries: Derek Fiebig, +1-734-710-5800, , both of Visteon
Corporation Web site: http://www.visteon.com/
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