Visteon Corporation (NASDAQ: VC) today announced full-year 2017 results, reporting net income attributable to Visteon of $176 million, or $5.47 per diluted share, including $14 million of restructuring expenses and $31 million of other net expenses, partially offset by $17 million of net income associated with discontinued operations.
Full-year sales were $3,146 million, a decrease of $15 million compared with 2016, primarily attributable to the exit of Other operations, partially offset by an increase in Electronics Product Group sales. Net cash provided from operating activities was $217 million for full year 2017.
In 2017, global vehicle manufacturers awarded Visteon new business of $7.0 billion in lifetime revenue, with a record $2.4 billion in the fourth quarter. Fourth-quarter wins included all-digital instrument cluster wins with three global automakers – including the company’s first all-digital cluster win in Japan – as well as a software-only Phoenix™ win in Europe. The ongoing backlog, defined as cumulative remaining life-of-program booked sales, was $19.4 billion as of Dec. 31, 2017, up from $16.5 billion at the end of 2016, an increase of 18 percent.
“We finished the year strong, delivering our 12th consecutive quarter of year-over-year improvement in adjusted EBITDA margin,” said President and CEO Sachin Lawande. “We accomplished our key strategic priorities for 2017, including strengthening the core business, achieving double-digit sales growth in China, and developing the DriveCore™ Level 3-plus autonomous driving platform. By winning a record $7 billion in new business, we made excellent progress toward our 2017-18 target of $12 billion in new business. Our 2017 performance keeps us on track to meet our long-term growth targets.”
Fourth Quarter in Review
Fourth-quarter sales were $797 million, compared with $816 million for the same period in 2016. The $19 million decrease is primarily related to the exit of Other operations and customer pricing, partially offset by Electronics product launches and favorable currency.
Gross margin was $140 million, compared with $129 million a year earlier. The $11 million increase reflected higher gross margin related to the Electronics Product Group. Selling, general and administrative expenses were $64 million for the fourth quarter of 2017, compared with $57 million for the fourth quarter of 2016, driven primarily by higher information technology investments.
Net income attributable to Visteon was $25 million or $0.79 per diluted share, compared with $2 million or $0.06 per diluted share for the same period in 2016. 2017 fourth-quarter net income included $4 million of restructuring and $34 million of other expense primarily related to the divestiture of certain European assets, partially offset by $9 million in income associated with discontinued operations including a non-income tax settlement.
Electronics Product Group
Sales for the Electronics Product Group totaled $797 million, a decrease of $6 million from the fourth quarter of 2016. The year-over-year decrease was primarily related to customer pricing reductions, partially offset by new product launches and favorable currency impacts. On a regional basis, Asia accounted for 43 percent of sales, Europe 31 percent, North America 23 percent, and South America 3 percent.
Gross margin for the fourth quarter of 2017 was $140 million, compared with $129 million a year earlier. The $11 million increase reflected the impact of improved engineering and material efficiencies, partially offset by customer pricing and unfavorable currency impacts.
Adjusted EBITDA, as defined below, for the Electronics Product Group was $102 million for the fourth quarter of 2017, compared with $98 million for the same quarter last year. The improvement was primarily driven by favorable cost performance including material and engineering cost efficiencies, partially offset by customer pricing and unfavorable product mix. Adjusted EBITDA margin was 12.8 percent for the fourth quarter of 2017, 60 basis points higher than the prior-year.
For the fourth quarter of 2017, net income was $16 million or $0.51 per diluted share, compared with net income of $20 million or $0.60 per diluted share for the same period in 2016. The decrease in net income included the 2017 loss on divestiture of certain assets in Europe, partially offset by a decrease in restructuring expenses year over year. Adjusted net income (as defined below), which excludes these items, was $52 million or $1.64 per diluted share for the fourth quarter of 2017, compared with $52 million or $1.55 per diluted share for the same period in 2016.
By the end of 2016, Visteon exited its Other operations, consisting of climate operations in South America and South Africa. The company did not have sales or adjusted EBITDA related to the Other operations in 2017. The fourth quarter of 2016 included sales of $13 million and net income of $7 million. Going forward, the company does not expect sales or adjusted EBITDA for the Other operations.
Cash and Debt Balances
As of Dec. 31, 2017, Visteon had cash and equivalents totaling $709 million. Total debt as of Dec. 31 was $393 million.
For the fourth quarter of 2017, cash from operations was $86 million and capital expenditures were $30 million. Total Visteon adjusted free cash flow, as defined below, for the fourth quarter of 2017 was $58 million, compared with $82 million during the fourth quarter of 2016. Year-to-date, adjusted free cash flow was $148 million.
On Jan. 9, 2017, Visteon’s board of directors authorized the purchase of up to $400 million of the company’s shares outstanding. During 2017, the company completed $200 million of the authorized repurchases by acquiring 1,978,144 shares at an average price of $101.10. As of Dec. 31, 2017, the company had 31.5 million diluted shares of common stock outstanding.
On Jan. 15, 2018, the company’s board of directors authorized an additional $500 million, for a total of $700 million of share repurchases to be completed over a period expiring on Dec. 31, 2020.
Visteon is a global technology company that designs, engineers and manufactures innovative cockpit electronics products and connected car solutions for most of the world’s major vehicle manufacturers. Visteon is a leading provider of instrument clusters, head-up displays, information displays, infotainment, audio systems, SmartCore™ cockpit domain controllers, vehicle connectivity and the DriveCore™ autonomous driving platform. Visteon also supplies embedded multimedia and smartphone connectivity software solutions to the global automotive industry. Headquartered in Van Buren Township, Michigan, Visteon has approximately 10,000 employees at more than 40 facilities in 18 countries. Visteon had sales of $3.15 billion in 2017. Learn more at www.visteon.com.
Conference Call and Presentation
Today, Thursday, Feb. 22, 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:
Outside U.S./Canada: 970-297-2404
(Call approximately 10 minutes before the start of the conference.)
The conference call and live audio webcast, related presentation materials and other supplemental information will be accessible in the investors section of Visteon’s website. A news release on Visteon’s first-quarter results will be available in the news section of the website.
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 1775019. The phone replay will be available for one week following the conference call.
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, but not limited to: (1) conditions within the automotive industry, including (i) the automotive vehicle production volumes and schedules of our customers, (ii) the financial condition of our customers and the effects of any restructuring or reorganization plans that may be undertaken by our customers or suppliers, including work stoppages, and (iii) possible disruptions in the supply of commodities to us or our customers due to financial distress, work stoppages, natural disasters or civil unrest; (2) our ability to satisfy future capital and liquidity requirements; including our ability to access the credit and capital markets at the times and in the amounts needed and on terms acceptable to us; our ability to comply with financial and other covenants in our credit agreements; and the continuation of acceptable supplier payment terms; (3) our ability to satisfy pension and other post-employment benefit obligations; (4) our ability to access funds generated by foreign subsidiaries and joint ventures on a timely and cost-effective basis; (5) our ability to execute on our transformational plans and cost-reduction initiatives in the amounts and on the timing contemplated; (6) general economic conditions, including changes in interest rates, currency exchange rates and fuel prices; (7) the timing and expenses related to internal restructurings, employee reductions, acquisitions or dispositions and the effect of pension and other post-employment benefit obligations; (8) increases in raw material and energy costs and our ability to offset or recover these costs, increases in our warranty, product liability and recall costs or the outcome of legal or regulatory proceedings to which we are or may become a party; and (9) those factors identified in our filings with the SEC (including our Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2017).
Caution should be taken not to place undue reliance on our forward-looking statements, which represent our view only as of the date of this release, and which we assume no obligation to update. The financial results presented herein are preliminary and unaudited; final financial results will be included in the company’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2017. New business wins and rewins do not represent firm orders or firm commitments from customers, but are based on various assumptions, including the timing and duration of product launches, vehicle production levels, customer price reductions and currency exchange rates.
Use of Non-GAAP Financial Information
This press release contains information about Visteon’s financial results which is not presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Such non-GAAP financial measures are reconciled to their closest GAAP financial measures at the end of this press release. The provision of these comparable GAAP financial measures for 2017 is not intended to indicate that Visteon is explicitly or implicitly providing projections on those GAAP financial measures, and actual results for such measures are likely to vary from those presented. The reconciliations include all information reasonably available to the company at the date of this press release and the adjustments that management can reasonably predict.