Visteon Corporation today announced first-quarter 2014 results, reporting sales of $1.98 billion and net income attributable to the company of $19 million, or $0.38 per diluted share. Adjusted EBITDA, a non-GAAP financial measure was $170 million, compared with $141 million in the same period last year.
“We delivered solid financial results in the first quarter while announcing or completing key transactions in support of our value creation plan,” said Tim Leuliette, president and CEO. “The new Visteon is well-positioned to address changing market dynamics and regulatory trends, and to continue delivering value to customers and shareholders through our focus on vehicle thermal management and cockpit electronic ecosystems.”
Cash from operating activities in the first quarter totaled $96 million, decreasing $26 million from the same period in 2013, primarily driven by the timing of working capital. Adjusted free cash flow, a non-GAAP financial measure as defined below, was $64 million for the first quarter of 2014.
Interiors Exit
Visteon announced two transactions in connection with its previously stated intention to divest its non-core interiors business. On May 2, Visteon announced ( https://autocomponentsindia.com/visteon-signs-agreement-to-divest-majority-of-automotive-interiors-business-to-an-affiliate-of-cerberus-capital-management/ ) an agreement to divest the majority of its global automotive interiors business to an affiliate of Cerberus Capital Management, L.P. The transaction, which is subject to regulatory reviews and other conditions, is expected to be completed by Dec 31, 2014. Visteon also completed the sale of its 50 percent ownership stake in a Korean automotive interiors joint venture, Duckyang Industry Company Limited, to certain management shareholders of Duckyang and associated parties for total cash payments of $31 million (32.2 billion Korean Won), including $6 million (6.3 billion Korean Won) in dividends. These transactions are in line with Visteon’s prior guidance to exit all of interiors with aggregate neutral value impact to the company.
JCI Electronics Acquisition
Visteon on Jan 13 announced an agreement to purchase the automotive electronics business of Johnson Controls in a cash transaction valued at $265 million, subject to adjustment. The acquisition is subject to certain regulatory and other consents and approvals, and is expected to be completed in the second quarter of 2014.
Refinancing Actions
In April, Visteon entered into a credit agreement for a total commitment of $800 million, including a $600 million seven-year delayed draw term loan B with a final maturity date of April 9, 2021, and a $200 million five-year revolving credit facility with a maturity date of April 9, 2019. Visteon also called all of its outstanding 6.75 percent senior notes due April 15, 2019 for redemption.
Share Repurchase Program
The company also announced that it has entered into agreements with a third-party financial institution to repurchase $500 million of its common shares under an accelerated stock buyback (ASB) program. The company will acquire these common shares under the existing $1 billion authorized share repurchase program. The company expects to receive approximately 80 percent of the shares by the end of May, with 62.5 percent of the shares to be delivered at the inception of the ASB program. The specific number of shares that the company ultimately will repurchase will be determined when the ASB program is completed, based generally on the daily volume-weighted average share price of the company’s common stock during a period of up to approximately 12 months, minus an agreed discount, 50 percent of which will be subject to a maximum per share price. At settlement, the company will either be entitled to receive additional shares of common stock or, under certain circumstances, be required to remit a settlement amount, payable, at the company’s option, in cash or common stock.
Q1 in Review
Visteon reported first-quarter sales of $1.98 billion, an increase of $126 million compared with the same quarter a year earlier. Hyundai-Kia accounted for approximately 34 percent of Visteon’s first-quarter sales and Ford Motor Company accounted for 26 percent. On a regional basis, Asia accounted for 49 percent of sales, including the impacts of Yanfeng Visteon Electronics Company Limited (YFVE), in which Visteon acquired a controlling ownership interest effective in November 2013; Europe represented 31 percent; North America 17 percent; and South America 3 percent.
Gross margin for the first quarter of 2014 was $195 million, compared with $154 million a year earlier. The $41 million increase included $27 million for YFVE, higher sales volume and new business impacts, partially offset by exchange. Selling, general and administrative (SG&A) expenses were $94 million, or 4.7 percent of sales, for the first quarter of 2014 compared with $86 million, or 4.6 percent of sales, a year earlier. Equity in net income of non-consolidated affiliates decreased by $42 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 first quarter of 2014, the company reported net income attributable to Visteon of $19 million, or $0.38 per diluted share. Net income attributable to Visteon decreased $50 million compared with the same period a year ago, reflecting the non-recurrence of a $54 million tax benefit recorded in the first quarter of 2013. Adjusted EBITDA for the first quarter of 2014 was $170 million, compared with $141 million for the same period a year earlier, primarily reflecting the impact of YFVE, favorable volume and new business, partially offset by currency impacts.
Results by Segment
Climate sales totaled $1.3 billion during the first quarter of 2014, an increase of $40 million compared with the same quarter last year. Higher production volumes and new business increased sales year-over-year, with the largest increases in Asia Pacific and Europe.
Electronics sales were $439 million during the first quarter, an increase of $74 million compared with the same period in 2013, primarily reflecting the consolidation of YFVE.
Interiors sales were $303 million during the first quarter, a decrease of $14 million, compared with the first quarter of 2013. The sales decrease relates to the wind down of certain South America business, partially offset by volume increases in Europe.
2014 Outlook
Visteon reaffirmed its full-year 2014 guidance for its key financial metrics: sales, adjusted EBITDA, adjusted free cash flow, and adjusted earnings per share. The company projects 2014 sales of $7.8 billion, adjusted EBITDA in the range of $660 million to $700 million, adjusted free cash flow in the range of $75 million to $175 million, and adjusted earnings per share in the range of $2.21 to $3.09. The guidance reflects a full year of Interiors business and excludes the impact of the Johnson Controls electronics acquisition.
