First quarter brings year-over-year improvements for Visteon

Visteon Corporation recently announced a significant year-over-year improvement in its results for first quarter 2008. The company attributes this improvement to the increased diversification of its customer and geographic sales, as well as to significant operating improvement within its business.

"We expanded our margins and remain focused on additional cost reduction through the implementation of our restructuring plan and our overhead cost reduction initiative," says Michael F. Johnston, chairman and chief executive officer, in explaining these operating improvements.

For first quarter 2008, Visteon reported a net loss of $105 million, or $0.81 per share, on total sales of $2.86 billion. These results include a $40 million loss associated with the sale of North American aftermarket facilities, including a $21 million asset impairment. For the first quarter 2007, Visteon reported a net loss of $153 million, or $1.19 per share, on total sales from continuing operations of $2.89 billion. First quarter 2007 results included $40 million of asset impairments. EBIT-R, as defined below, for first quarter 2008 was $51 million, an improvement of $97 million over first quarter 2007.

Total sales for first quarter 2008 were $2.86 billion, a decrease of $28 million from the same period a year ago. First quarter 2008 product sales were $2.74 billion, a decrease of $19 million from first quarter 2007. Divestitures and plant closures decreased product sales by $340 million; favorable currency of $181 million and higher Asian sales were partial offsets. Services revenue was $121 million, a decrease of $9 million from the same period in 2007.

North American product sales declined $144 million year-over-year to $750 million, or 26 percent of total product sales. The impact of divestitures and plant closures, which decreased sales by $153 million, and lower Ford and Nissan truck production were partially offset by new business. European product sales decreased $25 million year-over-year to $1.17 billion, or 41 percent of product sales. Divestitures and plant closures decreased European sales by $153 million, while favorable currency of $139 million, production volumes and new business were partial offsets. Asian product sales increased $158 million year-over-year to $843 million, or 29 percent of total product sales. The increase is attributable to higher production volumes and new business, favorable currency of $23 million, partially offset by the divestiture of businesses that accounted for $26 million in sales in the first quarter last year. South American product sales were $107 million, essentially unchanged from a year ago.

Visteon's operating lossfor the first quarter 2008 was $15 million, an improvement of $67 million from the same period in 2007, reflecting improved gross margin and lower SG&A spending. The year-over-year improvement was driven by cost performance, restructuring savings and favorable currency in excess of customer pricing.

First quarter 2008 results included a $40 million charge associated with the sale of North American aftermarket operations. Restructuring expense for the quarter was $46 million and reimbursement from the escrow account totaled $24 million. First quarter 2007 results from continuing operations included $40 million of asset impairments, $25 million of restructuring expenses and $35 million in reimbursement from the escrow account.

Visteon reduced its net loss by $48 million, or $0.38 per share, to $105 million, or $0.81 per share, for first quarter 2008. EBIT-R for first quarter 2008 was positive $51 million, an increase of $97 million from the negative $46 million reported in first quarter 2007.

Cash used by operating activities for first quarter 2008 was $126 million, a $5 million improvement over the $131 million in first quarter 2007. First quarter 2008 cash from operations was negatively impacted on a year-over-year basis by a number of factors including cash restructuring costs, pension, OPEB and recoverable tax assets.

Capital expenditures for first quarter 2008 were $74 million, $10 million higher than the same period a year ago, reflecting investments to support future business. Free cash flow, as defined below, for first quarter of 2008 was negative $200 million, compared with negative $195 million in the same period of 2007.

According to a company spokesperson, Visteon continues to make solid progress on the implementation of its three-year plan. During the first quarter of the year, Visteon addressed a number of facilities as part of its restructuring initiatives. Visteon sold its non-core North American-based aftermarket underhood and remanufacturing operations which included two facilities in Mexico and one in Tennessee. The businesses generated approximately $130 million of sales in 2007 and had a negative gross margin of approximately $16 million. In Feb. 2008, Visteon closed its interiors facility in Bellignat, France, resulting in the separation of approximately 300 employees. A significant majority of the production at this facility was consolidated into other manufacturing facilities. Additionally, Visteon remains on track to exit its Bedford, Ind., and Concordia, Mo., facilities later this year.

During the first quarter of this year Visteon recorded $46 million of restructuring charges. These charges were primarily related to three facilities in continental Europe, which are being addressed as part of the company's three-year plan, and related cost-reduction actions associated with the company's drive to reduce overhead costs, through the reduction of general administrative and engineering related expenses. In January, Visteon stated it expects to generate cumulative savings of approximately $215 million over the next three years as part of the overhead cost reduction initiative. To date approximately 250 salaried employees have been separated from the company in conjunction with this initiative, and Visteon remains on track to generate the expected savings.

Visteon continues to address its operations in the United Kingdom. Visteon has a non-binding memorandum of understanding with Linamar Corporation for the sale of its Swansea, Wales, facility. Although the transaction has yet to be finalized and negotiations continue, Visteon has been able to mitigate the losses associated with the facility through agreements reached with customers supplied by the Swansea facility.

"We continue to improve our operations on a global basis as demonstrated in our first quarter results," says Donald J. Stebbins, the company's president and chief operating officer. "We are driving operational excellence and performance improvement throughout our global organization."

Primarily due to a weaker U.S. dollar and the timing of divestitures, full-year 2008 product sales currently are expected to be in the range of $10.0 billion to $10.2 billion. Visteon also affirmed that it expects EBIT-R for full-year 2008 to be in the range of negative $25 million to positive $25 million and free cash flow for full-year 2008 to be in the range of negative $350 million to negative $250 million.

"The progress Visteon is making, combined with the additional actions we will execute in 2008, lays the foundation for Visteon to be free cash flow positive in 2009," Johnston adds. "With $1.6 billion of cash at March 31, 2008, and additional available liquidity, we have the flexibility to execute our plans."

For more information about Visteon, visit the company's Web site.