Visteon Reports Improved First Quarter Earnings and Increases
Full-Year Guidance Highlights * Net income of $30 million reflects
$45 million improvement over first quarter 2003 * First quarter
revenue increased $268 million to $5 billion * Non-Ford sales
increased 36% over first quarter 2003 to $1.3 billion * Significant
new business wins with Hyundai, DaimlerChrysler, PSA and Nissan *
Cash provided by operating activities was $105 million * Revised
full-year guidance upward DEARBORN, Mich., April 22
/PRNewswire-FirstCall/ -- Visteon Corporation today reported first
quarter 2004 net income of $30 million, or $0.23 per share. These
results are an improvement of $45 million, or $0.35 per share,
compared to a net loss of $15 million, or $0.12 per share, in the
first quarter 2003. First quarter results include after-tax special
charges of $7 million in 2004 and $20 million in 2003. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO ) Revenue
for the first quarter 2004 was $5 billion, up $268 million from
first quarter 2003. The increase, compared to a year ago, reflects
primarily growth in non-Ford revenue and the favorable impact of
exchange rates. Non- Ford revenue totaled $1.3 billion for the
quarter, up 36% or about $350 million from the first quarter of
2003. "The path to profitability that Visteon has been traveling is
starting to deliver the results we intended," said Peter J.
Pestillo, Visteon's chairman and chief executive officer. "Our
performance improvement reflects the actions we have taken and the
hard work of our dedicated employees who devote each day to serving
our customers with speed, focus and discipline. We're pleased with
our new business wins. 2004 will be the year that defines our
character as a competitive, global Tier one supplier." First
quarter earnings reflect the benefits from improved operating
performance, increased non-Ford business, earlier restructuring
actions, and decreased post-retirement health care and life
insurance expenses, offset partially by price reductions. Visteon's
first quarter earnings were above the company's previous guidance
of $0.05 to $0.15 per share primarily due to lower than anticipated
post-retirement health care and life insurance benefit expenses.
Cash provided by operating activities was $105 million, a $240
million improvement in performance from first quarter 2003. Visteon
ended the quarter with $1.2 billion in cash and marketable
securities. Second Quarter and Full Year 2004 Outlook Revenue for
second quarter 2004 is projected to be in the range of $4.7 to $4.8
billion, up from $4.6 billion in 2003, reflecting primarily
non-Ford revenue growth. Visteon expects second quarter net income
of $13 million to $25 million, or $0.10 to $0.20 per share. Visteon
expects full year revenue to be between $18.6 billion and $18.8
billion in 2004. This estimate is based on full year Ford North
American vehicle production of 3.7 million units. Non-Ford revenue
is expected to exceed $5 billion for the full year. Visteon expects
net income of $90 to $140 million, or $0.70 to $1.10 per share.
This is higher than the company's previous guidance of $0.50 to
$1.00 per share. Full year 2004 projected results include
anticipated pre-tax special charges of up to $50 million. Visteon
expects cash from operations to be higher than capital spending for
the full year. Quarterly Conference Call Scheduled at 9 a.m. EDT
Today Visteon will host a conference call at 9 a.m. EDT today,
Thursday, April 22, to discuss the first 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 prior to the start of the conference.
For a replay of the conference, those in the U.S. should call
800-642-1687; outside the U.S., callers should dial 706-645-9291.
The pass code to access the replay is 6547210. 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 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. Words such as
"anticipate," "estimate," "expect," "projects," "outlook" and
similar words and phrases signify forward-looking statements.
Forward-looking statements are not guarantees of future results and
conditions but rather are subject to various factors, risks and
uncertainties which could cause our results to differ materially
from those expressed in these forward-looking statements. These
factors, risks and uncertainties include the automotive vehicle
production volumes and schedules of our customers, the effect of
pension and other post-employment benefit obligations, our ability
to recover our remaining deferred tax asset, the need to recognize
restructuring and other special items, as well as those factors
identified in our filings with the Securities and Exchange
Commission (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 and percentages) First Quarter 2004 over/(under) 2004
2003 Sales Ford and affiliates $3,637 $(84) Other customers 1,335
352 Total sales $4,972 $268 Depreciation and amortization
Depreciation $140 $- Amortization 26 3 Total depreciation and
amortization $166 $3 Selling, administrative and other expenses
$263 $21 Income before income taxes $56 $75 Net income $30 $45 Net
income per share Basic $0.24 $0.36 Diluted 0.23 0.35 Average shares
outstanding Basic 125.3 (0.7) Diluted 128.5 2.5 Special charges (1)
Included in costs of sales $11 $(15) Included in selling,
administrative and other expenses - (5) Total pre-tax special
charges $11 $(20) Special charges above, after-tax $7 $(13) Special
charges per share, based on average diluted shares outstanding
above $0.05 $(0.11) Effective tax rate 38% 2 pts Capital
expenditures $198 $17 Cash provided by operating activities $105
$240 Cash and borrowing (at end of period) Cash and marketable
securities $1,188 $241 Borrowing 2,221 534 - - - - - 1 - Special
charges relate to restructuring and other actions discussed further
in Note 4. VISTEON CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF INCOME For the Periods Ended March 31, 2004 and 2003
(in millions, except per share amounts) First Quarter 2004 2003
(unaudited) Sales Ford and affiliates $3,637 $3,721 Other customers
1,335 983 Total sales 4,972 4,704 Costs and expenses (Notes 2 and
4) Costs of sales 4,645 4,477 Selling, administrative and other
expenses 263 242 Total costs and expenses 4,908 4,719 Operating
income (loss) 64 (15) Interest income 4 4 Interest expense 23 23
Net interest expense (19) (19) Equity in net income of affiliated
companies (Note 2) 11 15 Income (loss) before income taxes 56 (19)
Provision (benefit) for income taxes 17 (12) Income (loss) before
minority interests 39 (7) Minority interests in net income of
subsidiaries 9 8 Net income (loss) $30 $(15) Earnings (loss) per
share (Note 8) Basic $0.24 $(0.12) Diluted 0.23 (0.12) Cash
dividends per share $0.06 $0.06 The accompanying notes are part of
the financial statements. VISTEON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (in millions) March 31, December 31,
2004 2003 (unaudited) Assets Cash and cash equivalents $1,187 $953
Marketable securities 1 3 Total cash and marketable securities
1,188 956 Accounts receivable - Ford and affiliates 1,499 1,198
Accounts receivable - other customers (Note 6) 1,163 1,164 Total
receivables, net (Note 2) 2,662 2,362 Inventories (Note 11) 828 761
Deferred income taxes 163 163 Prepaid expenses and other current
assets 211 168 Total current assets 5,052 4,410 Equity in net
assets of affiliated companies 225 215 Net property 5,386 5,369
Deferred income taxes 713 700 Other assets 277 270 Total assets
$11,653 $10,964 Liabilities and Stockholders' Equity Trade payables
$2,457 $2,270 Accrued liabilities 994 924 Income taxes payable 35
27 Debt payable within one year 276 351 Total current liabilities
3,762 3,572 Long-term debt 1,945 1,467 Postretirement benefits
other than pensions 527 469 Postretirement benefits payable to Ford
2,079 2,090 Other liabilities 1,491 1,508 Total liabilities 9,804
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, 129 million and 131 million shares outstanding,
respectively 131 131 Capital in excess of par value of stock 3,297
3,288 Accumulated other comprehensive (loss) (Note 12) (46) (21)
Other (34) (19) Accumulated deficit (1,499) (1,521) Total
stockholders' equity 1,849 1,858 Total liabilities and
stockholders' equity $11,653 $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 March 31, 2004 and 2003 (in millions) First Quarter
2004 2003 (unaudited) Cash and cash equivalents at January 1 $953
$1,204 Cash flows provided by (used in) operating activities 105
(135) Cash flows from investing activities Capital expenditures
(198) (181) Purchases of securities - (48) Sales and maturities of
securities 3 70 Other - 6 Net cash used in investing activities
(195) (153) Cash flows from financing activities Commercial paper
repayments, net (54) (17) Other short-term debt, net (19) -
Proceeds from issuance of other debt, net of issuance costs 474 36
Principal payments on other debt (12) (27) Purchase of treasury
stock (11) (5) Cash dividends (8) (8) Other, including book
overdrafts (42) (1) Net cash provided by (used in) financing
activities 328 (22) Effect of exchange rate changes on cash (4) 2
Net increase (decrease) in cash and cash equivalents 234 (308) Cash
and cash equivalents at March 31 $1,187 $896 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, 2003, as filed
with the Securities and Exchange Commission on February 13, 2004.
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 2004 2003 (in millions) Depreciation $140
$140 Amortization 26 23 Total $166 $163 Investments in Affiliates
The following table presents summarized financial data for those
affiliates accounted for under the equity method. 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 2004 2003 (in millions) Net
sales $334 $291 Gross profit 61 67 Net income 21 30 VISTEON
CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
(unaudited) NOTE 2. Selected Costs, Income and Other Information -
(Continued) Purchase and Supply Agreement with Ford Under the terms
of the new purchase and supply agreement entered into with Ford on
December 19, 2003, Visteon agreed to pay Ford $150 million in lieu
of additional productivity price reductions on components supplied
by Visteon in North America during 2003. This payment was accrued
for in 2003 as a reduction to sales. Visteon paid $50 million in
December 2003 and $100 million during the first quarter of 2004.
Accounts Receivable The allowance for doubtful accounts was $39
million at March 31, 2004 and $35 million at December 31, 2003.
Income Taxes Visteon's provision (benefit) for income taxes, which
is computed based upon income (loss) before income taxes excluding
equity in net income of affiliated companies, reflects an effective
tax rate of 38% for the first quarter of 2004, compared with 36%
for the first quarter of 2003. The change in our effective tax rate
is due primarily to the need to maintain full valuation allowances
against deferred tax assets in certain foreign jurisdictions. We
expect our full year 2004 effective tax rate to be 38%; however,
the rate could vary quarter-to-quarter. Further, the rate is
largely dependent on pre-tax income (loss) by country, and any
changes in our forecast or actual results could have a significant
impact on our effective tax rate for a given quarter or for the
full year. VISTEON CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL
STATEMENTS (unaudited) NOTE 3. Stock-Based Awards 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." This standard 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
income (loss) and income (loss) per share would have changed to the
pro forma amounts indicated below: First Quarter 2004 2003 (in
millions, except per share amounts) Net income (loss), as reported
$30 $(15) Add: Stock-based employee compensation expense included
in reported net income (loss), net of related tax effects 2 1
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax
effects (4) (3) Pro forma net income (loss) $28 $(17) Income (loss)
per share: As reported: Basic $0.24 $(0.12) Diluted 0.23 (0.12) Pro
forma: Basic $0.22 $(0.13) Diluted 0.21 (0.13) NOTE 4. Special
Charges First Quarter 2004 Actions In the first quarter of 2004,
Visteon recorded pre-tax charges of $11 million in costs of sales
($7 million after-tax) which includes $6 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 220 employees as a result of the
planned closure of our La Verpilliere, France manufacturing
facility by the end of 2004. The involuntary separations of the
employees at the La Verpilliere facility are expected to occur at
various times throughout 2004. Additional charges, if any, as a
result of the finalization of employee termination benefits above
those legally required, will be recorded during the remainder of
2004 based on the estimated dates of the employee separations. All
of the other actions were substantially completed in the first
quarter of 2004. VISTEON CORPORATION AND SUBSIDIARIES NOTES TO
FINANCIAL STATEMENTS - (Continued) (unaudited) NOTE 4. Special
Charges - (Continued) During the first quarter of 2004, Visteon
paid Ford about $23 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 is expected to implement. First
Quarter 2003 Actions In the first quarter of 2003, Visteon recorded
pre-tax charges of $31 million ($20 million after-tax), with $26
million recorded in costs of sales and $5 million in selling,
administrative and other expenses. This includes $27 million
related to the involuntary separation of about 135 U.S. salaried
employees, the separation of about 35 hourly employees located at
Visteon's plants in Europe through a continuation of a special
voluntary retirement and separation program started in 2002, and
the elimination of about 120 manufacturing positions in Mexico and
other minor actions. Included in the $31 million pre-tax charge are
$4 million of non-cash charges related to the write-down of a group
of coiled spring and stamping equipment at our Monroe, Michigan,
plant for which production activities were discontinued and the
future undiscounted cash flows were less than the carrying value of
these fixed assets held for use. Visteon measured the impairment
loss by comparing the carrying value of these fixed assets to the
expected proceeds from disposal of the assets after completion of
remaining production commitments. The above actions were
substantially completed during the first quarter of 2003. Reserve
Activity Reserve balances of $32 million and $45 million at March
31, 2004 and December 31, 2003, respectively, are included in
current accrued liabilities on the accompanying balance sheets. The
March 31, 2004 reserve balance of $32 million includes $23 million
related primarily to 2003 restructuring activities. Visteon
currently anticipates that the restructuring activities to which
all of the above charges relate will be substantially completed by
the end of 2004. Automotive Glass Total Operations Operations
Visteon (in millions) December 31, 2003 reserve balance $45 $- $45
First quarter 2004 actions: Included in costs of sales 11 - 11
Total net expense 56 - 56 Utilization (24) - (24) March 31, 2004
reserve balance $32 $- $32 Utilization in the first quarter of 2004
of $24 million was primarily related to severance pay. On April 14,
2004, Visteon announced its intention to move a portion of its
Bedford, Indiana plant operations to an undetermined,
cost-competitive manufacturing site. This action could affect about
600 of the plant's 1,150 hourly and salaried employees. Timing of
this intended move has not been determined. Charges related to this
move, if any, will be recognized as appropriate when detailed move
plans are completed and the terms of any termination benefit
arrangements are established. 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 2004 and 2003 are summarized as follows:
Retirement Plans Health Care and Life U.S. Plans Non-U.S. Plans
Insurance Benefits 2004 2003 2004 2003 2004 2003 (in millions)
First Quarter Service cost $14 $13 $9 $8 $9 $7 Interest cost 17 15
17 13 13 11 Expected return on plan assets (16) (14) (15) (13) - -
Amortization of: Plan amendments 2 2 3 2 (5) (2) (Gains) losses and
other 1 - - - 8 3 Special termination benefits - - - 7 - - Expense
for Visteon-assigned Ford-UAW and certain salaried employees 31 21
- - 37 83 Net pension/postretirement expense $49 $37 $14 $17 $62
$102 As discussed in our 2003 Annual Report on Form 10-K, Visteon's
expected contributions during 2004 to U.S. retirement plans and
postretirement health care and life insurance plans are $193
million and $72 million, respectively, including payments to Ford
of $115 million and $38 million, respectively. As of March 31,
2004, contributions to U.S. retirement plans and postretirement
health care and life insurance plans were $23 million and $15
million, respectively, including payments to Ford of $17 million
and $14 million, respectively. 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, pending further definition of the criteria
used to determine equivalence. This subsidy is estimated to reduce
the benefit obligation for Visteon plans by $95 million as of March
31, 2004, and will be recognized through reduced retiree healthcare
expense over the related employee future service lives, subject to
final accounting guidance to be issued by the Financial Accounting
Standards Board. As a result of charges during the period as well
as the effect of the Medicare Act, the portion of the
postretirement benefit obligation payable to Ford considered
contingently payable is $1,079 million and $1,138 million at March
31, 2004 and December 31, 2003, respectively. VISTEON CORPORATION
AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited) NOTE 6. Asset Securitization In the first quarter of
2004, Visteon established a $100 million 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 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. The conduit typically finances the
purchases through the issuance of commercial paper, with back-up
purchase commitments from the conduit's financial institution. The
sale of the undivided interest in the receivables from VRL to the
conduit will be accounted for as a sale under the provisions of
Statement of Financial Accounting Standards No. 140, "Accounting
for the Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." When VRL sells an undivided
interest to the conduit, VRL retains the remaining undivided
interest. The value of the undivided interest sold to the conduit
will be excluded from our consolidated balance sheet and will
reduce our accounts receivable balance. This facility expires in
March 2005 and can be extended annually through March 2008 based
upon the mutual agreement of the parties. Additionally, this
facility contains financial covenants similar to our unsecured
revolving credit facilities. In April 2004, VRL made an initial
sale of a $25 million undivided interest in about $300 million of
total receivables. As of March 31, 2004, Visteon has sold euro 35
million ($43 million) of trade receivables under a European sale of
receivables agreement with a bank. This agreement provides for the
sale of up to euro 40 million in trade receivables. NOTE 7. Debt
March 31, December 31, 2004 2003 (in millions) Debt payable within
one year Commercial paper $27 $81 Other - short-term 214 234
Current portion of long-term debt 35 36 Total debt payable within
one year 276 351 Long-term debt 8.25% notes due August 1, 2010 723
716 7.95% notes due August 1, 2005 516 518 7.00% notes due March
10, 2014 452 - Other 254 233 Total long-term debt 1,945 1,467 Total
debt $2,221 $1,818 VISTEON CORPORATION AND SUBSIDIARIES NOTES TO
FINANCIAL STATEMENTS - (Continued) (unaudited) NOTE 7. Debt -
(Continued) On March 10, 2004, Visteon completed a public offering
of unsecured fixed- rate term debt securities totaling $450 million
with a maturity of ten years. The securities bear interest at a
stated rate of 7.00%, with interest payable semi-annually on March
10 and September 10, beginning on September 10, 2004. The
securities rank equally with Visteon's existing and future
unsecured fixed-rate term debt securities and senior to any future
subordinated debt. The unsecured term debt securities agreement
contains certain restrictions, including, among others, a
limitation relating to liens and sale-leaseback transactions, as
defined in the agreement. In the opinion of management, Visteon was
in compliance with all of these restrictions. In addition, an
interest rate swap has been entered into for a portion of this debt
($225 million). This swap effectively converts the securities from
fixed interest rate to variable interest rate instruments. On April
6, 2004, Visteon repurchased $250 million of Visteon's existing
7.95% five-year notes maturing on August 1, 2005. In the second
quarter of 2004, Visteon will record a pre-tax debt extinguishment
charge of $11 million, which consists of redemption premiums and
transaction costs ($19 million), offset partially by the
accelerated recognition of gains from interest rate swaps
associated with the repurchased debt ($8 million). 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 2004 2003 (in millions, except per share
amounts) Numerator: Net income (loss) $30 $(15) Denominator:
Average common stock outstanding 129.9 129.9 Less: Average
restricted stock outstanding (4.6) (3.9) Basic shares 125.3 126.0
Net dilutive effect of restricted stock and stock options 3.2 -
Diluted shares 128.5 126.0 Income (loss) per share: Basic $0.24
$(0.12) Diluted 0.23 (0.12) For the first quarter of 2003 potential
common stock of about 515,000 shares are excluded from the
calculation of diluted income (loss) per share because the effect
of including them would have been antidulitive. VISTEON CORPORATION
AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - (Continued)
(unaudited) NOTE 9. Variable Interest Entities In December 2003,
the FASB issued revised Interpretation No. 46 ("FIN 46")
"Consolidation of Variable Interest Entities." Until this
interpretation, a company generally included another entity in its
consolidated financial statements only if it controlled the entity
through voting interests. FIN 46 requires a variable interest
entity to be consolidated by a company if that company is subject
to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the
entity's residual returns. Application of FIN 46 was required
during the fourth quarter of 2003 for interests in structures that
are commonly referred to as special-purpose entities and for all
other types of variable interest entities in the first quarter of
2004. During the first quarter of 2004, Visteon began to
consolidate Lextron/Visteon Automotive Systems, a joint venture
with Lextron Corporation located in Canton Mississippi, which
started to supply integrated cockpit modules and front-end modules
to Nissan in late 2003. Visteon owns 49% of this joint venture.
Consolidation of this entity was based on an assessment of the
amount of equity investment at risk, the subordinated financial
support provided by Visteon, and that Visteon supplies the joint
venture's inventory. The effect of consolidating this entity on
Visteon's results of operations or financial position as of March
31, 2004 was not significant as substantially all of the joint
venture's liabilities and costs are related to activity with
Visteon. From June 30, 2002, a variable interest entity owned by an
affiliate of a bank is included in Visteon's consolidated financial
statements. This entity was established in early 2002 to build a
leased facility for Visteon to centralize customer support
functions, research and development and administrative operations.
Construction of the facility is planned to be completed in 2004 at
a cost of about $250 million, with initial occupancy starting in
mid-2004. The lease agreement requires Visteon to make lease
payments after construction is substantially completed equal to all
interest then due and payable by the variable interest entity under
the related credit agreement. The lease term expires in 2017, at
which time Visteon is required to either purchase the facility at a
price equal to the sum of all borrowings under the related credit
agreement, less certain proceeds and other amounts applied against
the balance, or renew the lease upon the mutual agreement of
Visteon and the lessor. As of March 31, 2004, this entity has
incurred about $159 million in expenditures related to this
facility. NOTE 10. Product Warranty A reconciliation of changes in
the product warranty liability is summarized as follows: March 31,
2004 (in millions) Beginning Balance $22 Accruals for products
shipped 7 Accruals for pre-existing warranties (including changes
in estimates) 9 Settlements (8) Ending Balance $30 VISTEON
CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -
(Continued) (unaudited) NOTE 11. Inventories Inventories are
summarized as follows: March 31, December 31, 2004 2003 (in
millions) Raw materials, work-in-process and supplies $699 $630
Finished products 129 131 Total inventories $828 $761 U.S.
inventories $472 $436 NOTE 12. Comprehensive Income Comprehensive
income is summarized as follows: First Quarter 2004 2003 (in
millions) Net income (loss) $30 $(15) Change in foreign currency
translation adjustments (27) 21 Other 2 7 Total comprehensive
income $5 $13 Accumulated other comprehensive loss is comprised of
the following: March 31, December 31, 2004 2003 (in millions)
Foreign currency translation adjustments $103 $130 Realized and
unrealized gains on derivatives, net of tax 9 8 Unrealized loss on
marketable securities, net of tax - (1) Minimum pension liability,
net of tax (158) (158) Total accumulated other comprehensive loss
$(46) $(21) 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 2004:
Sales $4,833 $139 $4,972 Income (loss) before taxes 47 9 56 Net
income (loss) 24 6 30 Special charges before taxes 11 - 11 Special
charges after taxes 7 - 7 Total assets, end of period 11,385 268
11,653 2003: Sales $4,551 $153 $4,704 Income (loss) before taxes
(23) 4 (19) Net income (loss) (18) 3 (15) Special charges before
taxes 30 1 31 Special charges after taxes 19 1 20 Total assets, end
of period 11,164 285 11,449 NOTE 14. Litigation and Claims Various
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 involve or 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 foregoing paragraph where losses are
deemed probable; these reserves are adjusted periodically to
reflect estimates of ultimate probable outcomes. 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, 2004. Visteon does
not reasonably expect, 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,
+1-313-755-3537, , Jim Fisher, +1-313-755-0635, , or Investor
Inquiries: Derek Fiebig, +1-313-755-3699, , all of Visteon
Corporation Web site: http://www.visteon.com/
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