Visteon Corporation (NYSE: VC) today announced third-quarter 2014 results, reporting sales of $1.97 billion and a net loss attributable to Visteon of $21 million, or a loss of $0.46 per diluted share. Adjusted EBITDA excluding discontinued operations, a non-GAAP financial measure as defined below, was $142 million, compared with $126 million in the same period last year.
“We had a solid quarter and are on track to achieve our full-year 2014 financial guidance,” said Timothy D. Leuliette, president and CEO. “On Nov. 1, we completed the sale of the majority of our interiors business, underscoring our focus on our two core growth businesses – cockpit electronics and thermal energy management. We expect record incremental new business wins and rewins of $2.4 billion to $2.8 billion this year, reflecting market support of our recent acquisition of Johnson Controls’ electronics business and the inherent strength of our thermal energy product portfolio. We are focused on introducing disruptive technologies that will drive growth in each of our core businesses.”
Cash from operating activities including discontinued operations in the third quarter totaled $53 million, compared with $21 million from the same period in 2013. Adjusted free cash flow, a non-GAAP financial measure as defined below, including discontinued operations, was $18 million for the third quarter of 2014.
Continued Progress on Shareholder Value Creation Plan
Johnson Controls Electronics Acquisition
On July 1, Visteon completed the purchase of the automotive electronics business of Johnson Controls in a cash transaction valued at $265 million, subject to adjustment. The combined electronics enterprise has annual sales of more than $3 billion and holds the No. 2 global position in driver information, with above-average growth rates for the cockpit electronics segment.
HVCC Acquisition of Thermal and Emissions Product Line of Cooper-Standard Automotive
On July 31, Halla Visteon Climate Control Corp. (HVCC), which is 70 percent owned by Visteon, completed the purchase of the automotive thermal and emissions product line of Cooper-Standard Automotive Inc., a subsidiary of Cooper-Standard Holdings Inc. The transaction, valued at $46 million, expanded HVCC’s thermal energy management product portfolio and diversified its customer base.
Interiors Divestiture
On Nov. 1, Visteon completed the previously announced divestiture of a majority of its interiors business to Reydel Automotive Holdings B.V., an affiliate of Cerberus Capital Management, L.P. This is the first in a series of transaction closings with the Cerberus affiliate, with timing dictated by government approvals and expected to continue through the end of the first quarter of 2015. Terms of the sale are consistent with those announced by Visteon on May 2, 2014. The transaction supports Visteon’s focus on its two global core automotive businesses: cockpit electronics and thermal energy management.
Third Quarter in Review
Visteon reported third-quarter sales of $1.97 billion, an increase of $486 million compared with the same quarter a year earlier. Climate sales totaled $1.21 billion, an increase of $80 million from the third quarter last year. Electronics sales of $760 million were up $420 million year-over-year, primarily attributable to the acquisition of the global automotive electronics business of Johnson Controls Inc., effective July 1, 2014, and the acquisition of a controlling ownership interest in Yanfeng Visteon Automotive Electronics Co., Ltd. (YFVE), effective Nov. 7, 2013.
Hyundai-Kia accounted for approximately 32 percent of Visteon’s third-quarter sales and Ford Motor Company accounted for 25 percent. On a regional basis, Asia accounted for 47 percent of sales, Europe represented 28 percent, North America 22 percent, and South America 3 percent. An additional $208 million of sales were reclassified as discontinued operations.
Gross margin for the third quarter was $192 million, compared with $135 million a year earlier. The $57 million increase included the impact of a $25 million pension settlement gain related to the company’s purchase of a non-participating annuity contract resulting in the settlement of approximately $350 million of the U.S. defined benefit pension plan’s outstanding pension benefit obligation. Selling, general and administrative (SG&A) expenses were $107 million, or 5.4 percent of sales, for the third quarter of 2014, compared with $73 million a year earlier. Year-over-year results for gross margin and SG&A were both impacted by the Johnson Controls electronics business acquisition and the YFVE consolidation.
Equity in net income of non-consolidated affiliates decreased by $46 million as a result of the 2013 sale of the company’s 50 percent ownership interest in Yanfeng Automotive Trim Systems Co., Ltd.
For the third quarter of 2014, the company reported a net loss attributable to Visteon of $21 million, or a loss of $0.46 per diluted share. Net income attributable to Visteon decreased $64 million compared with the same period a year ago, reflecting lower equity in net income of non-consolidated affiliates of $46 million. The $25 million pension settlement gain was offset by increased losses related to the company’s discontinued operations. Adjusted EBITDA excluding discontinued operations for the third quarter of 2014 was $142 million, compared with $126 million for the same period a year earlier, primarily reflecting the impact of the Johnson Controls electronics and YFVE acquisitions. Increased volume, including new business, and positive cost performance were offset by $21 million of unfavorable currency impacts and higher engineering expenditures to support future growth.
Cash and Debt Balances
As of Sept. 30, 2014, Visteon had global cash balances totaling $1.06 billion, including restricted cash of $12 million, cash held for sale of $99 million, and restricted cash held for sale of $13 million. Total debt as of Sept. 30 was $994 million, including debt held for sale of $13 million.
For the third quarter of 2014, Visteon generated $53 million of cash from operations including discontinued operations, compared with $21 million in the same period a year earlier. The $32 million increase was primarily driven by timing of working capital, partially offset by lower non-consolidated affiliate dividends and increased transformation costs. Capital expenditures including discontinued operations in the quarter were $82 million, up from $50 million in the third quarter of 2013. Adjusted free cash flow including discontinued operations was $18 million in the quarter, compared with a use of $1 million in the third quarter of 2013.
Full-Year 2014 Outlook
Visteon affirmed its full-year 2014 guidance for its key financial metrics to reflect improved performance and the impact of discontinued operations and several transactions, including the Johnson Controls electronics acquisition. The company projects 2014 sales of $7.6 billion, adjusted EBITDA including discontinued operations in the range of $700 million to $730 million, adjusted free cash flow in the range of $125 million to $165 million, and adjusted earnings per share in the range of $2.98 to $3.62.
About Visteon
Visteon is a global automotive supplier delivering value for vehicle manufacturers and shareholders through two high-growth core businesses: automotive cockpit electronics and thermal management. Visteon owns 70 percent of Halla Visteon Climate Control Corp., the world’s second largest provider of vehicle thermal management solutions. Visteon designs, engineers and manufactures innovative components and systems for virtually every vehicle manufacturer worldwide. With corporate offices in Van Buren Township, Mich. (U.S.); Shanghai, China; and Chelmsford, UK; Visteon has facilities in 31 countries and about 29,000 people as of Sept. 30, 2014. Visteon had sales of $7.4 billion in 2013. Learn more at www.visteon.com.
Conference Call and Presentation
Today, Thursday, Nov. 6 at 9 a.m. ET, the company will host a conference call for the investment community to discuss the quarter’s results and other related items. The conference call is available to the general public via a live audio webcast.
The dial-in numbers to participate in the call are:
U.S./Canada: 
800-326-9418
Outside U.S./Canada: 706-643-3752
(Call approximately 10 minutes before the start of the conference.)
The conference call and live audio webcast, the financial results news release, related presentation materials and other supplemental information will be accessible through Visteon’s website at www.visteon.com.
A replay of the conference call will be available through the company’s website or by dialing 855-859-2056 (toll-free from the U.S. and Canada) or 404-537-3406 (international). The conference ID for the phone replay is 21376213. The phone replay will be available for one week following the conference call.
