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No. of Recommendations: 4

Visteon Corporation is a global supplier of automotive systems, modules and components to global vehicle manufacturers and the automotive aftermarket. Visteon operates in two business segments: Automotive Operations and Glass Operations. Through its Automotive Operations, the Company is involved in climate control, interior, exterior, powertrain, chassis and electronics. Its products are featured on vehicles built by automotive manufacturers including Ford Motor Company, General Motors, Toyota, Daimler-Chrysler, Volkswagen, Honda, Renault, Nissan, Hyundai, Peugeot, Mazda and BMW. Visteon's Glass Operations segment is composed of its vehicle glazing product group, which produces glass products for Ford and aftermarket customers, and its commercial glass product group, which produces float glass for commercial architecture. Incorporated in 2000 as a wholly owned subsidiary of Ford, six months later it separated and became it's own entity.


Visteon sells its products primarily to global vehicle manufacturers.
In addition, they sell products for use as aftermarket and service parts to automotive original equipment manufacturers and others for resale through their own independent distribution networks.

Vehicle Manufacturers

Visteon does business with all of the world's largest vehicle
manufacturers including Ford, General Motors, Toyota, Daimler-Chrysler,
Honda, Volkswagen, Renault, Nissan, Hyundai, Peugeot, Mazda and BMW. Ford is the largest customer, and in 2002 sales to Ford accounted for about 80% of 2002 total sales. The top five customers other than Ford accounted for approximately 8% of total 2002 sales, which includes
certain sales to Mazda Motor Corporation, of which Ford owns a 33.4% equity interest. In 2002, they secured over $1 billion of net new non-Ford business.

Principal competitors in the Automotive Operations segment include the following: American Axle & Manufacturing Holdings, Inc., Behr GmbH, Robert Bosch GmbH, Dana Corporation, Delphi Corporation, Denso Corporation, Faurecia Group, Johnson Controls, Inc., Lear Corporation, Magna International, Inc., Siemens VDO, TRW Inc. and Valeo S.A. There is a lot of competition.

Income Statement 2002 2001 2000 1999

Gross Profit 8% 8% 11% 13%
Operating Margin 3% 3% 7% 10%
Net Margin -2% -1% 1% 4%
Growth in Revenue 3% -8% 1% --
Growth in Net Income 198% -144% -63% --
Growth in COGS 3% -5% 3% --
Change in Marketing Costs 0.09 0.04 0.16 --

**Slim margins
**negative net income

Balance Sheet

Current ratio 1.37 1.38 1.32 0.95
Quick Ratio 0.35 0.30 0.37 0.34
Receivable growth -6.89% 9.32% -0.05% --

DSO 44.23 80.65 138.01 336.02

Days Inventory on hand 18.90 19.00 19.94 16.27

Day Payable Outstanding 44.84 40.55 41.00 68.23

ROA -0.78% -1.07% 2.38% 5.90%
ROE -2.92% -3.59% 7.70% 49.03
ROIC -1.75% -2.26% 11.97% 31.14%

Fixed asset turnover 3.38 3.35 3.54 3.35
Debt to equity 55.27% 58.40% 57.60% 154.70%

Debt to capitalization 35.60% 36.87% 36.55% 60.74%
Book value 23.09 25.12 26.76 11.53
Cash per share 9.33 7.82 10.78 14.22
Working capital 1271 1318 1201 -279
Non Cash Working Capital 415 923 411 -1167
Cash Conversion Cycle 18.29 59.10 116.95 284.06

**excellent DSO and cash conversion cycle
**payables increased 4 days—able to collect money before paying it out
**fairly high debt
**huge amount of cash
**decreasing working capital—where are the assts going since debt is decreasing
**debt being paid off
**terrible returns to investors last 3 years
**high book value
**PBV is 0.74—very low

There are some things to like about the balance sheet—they do a great job of turning inventory and the cash conversion cycle is great. They are efficient and maybe they are going to turn around in the next year with the cost cutting and restructuring. Returns to shareholder are poor. Collecting accounts very good-decreasing. Lots of debt and pension shortfall may work its way to the balance sheet as more liability in the future.

There are good and bad aspects to the balance sheet. Cash per share is amazing!

Current Selected Financials

Market Cap (intraday): 1.35B borderline small cap
Forward P/E 11.71 Low
Price/Sales (ttm): 0.08 very low
Price/Book (mrq): 0.74 low
Profit Margin (ttm): -6.70% not profitable—reflects some charges
Diluted EPS (ttm): -9.651 negative
Total Cash (mrq): 956.00M large amounts of cash
Total Cash Per Share (mrq): 7.3
Total Debt (mrq)_: 1.82B fairly high debt

Beta: 1.34 volatile
52-Week High (22-Jan-04): 12.50
52-Week Low (17-Mar-03): 5.34

Shares Outstanding: 131.00M
% Held by Insiders: 1.76% very poor
% Held by Institutions: 61.22%
Dividend Yield: 2.28% high

Conference Call
2004 Jan 23 8:30 AM
Visteon Corporation reiterated its full year 2004 guidance of $0.50 to $1.00 per share, and announced that it expects revenue to be up substantially compared with full year 2003. The Company reported full year 2003 revenue of $17.66 billion. For first quarter 2004, the Company expects revenue to be between $4.8 and $4.9 billion, up about 4% from first quarter 2003, and net income in the range of $0.05 to $0.15 per share. According to Reuters Research, analysts on average are expecting the Company to report first quarter earnings of $0.23 per share on revenue of $4.72 billion, and full year 2004 earnings of $0.58 per share on revenue of $18.29 billion.

Visteon Corporation Issues FY 2003 and FY 2004 Guidance
2004 Jan 8 9:26 AM
Visteon Corporation announced that it expects GAAP net income in the range of $65 to $130 million or $0.50 to $1.00 per share for the full year 2004. For the full year 2003, the Company anticipates a GAAP net loss in the range of ($1.13) to ($1.25) billion or ($9.00) to ($9.95) per share, including significant special charges.

Ford Motor Company Announces New Agreements With Visteon Corporation
2003 Dec 22 7:00 AM

Ford Motor Company announced that it has signed new agreements with Visteon Corporation -- its largest supplier and former automotive components subsidiary -- that improve the competitiveness of both companies. The agreements primarily address pricing and sourcing arrangements between Ford and Visteon, as well as costs related to approximately 20,000 UAW-represented Ford employees working at Visteon. These employees were assigned to Visteon as part of Visteon's June 2000 spin off from Ford.

Looking at the last 4 quarters they are down at the end of September and down again in January. Cost of revenue is huge. The unusual expenses are present every quarter and are putting them into negative operating income. Net income is increasingly negative over the last 4 quarters. Revenue is down for the quarter ending in September..Guidance for 2004 puts them in positive EPS territory. They are counting on Ford to accomplish this and Ford may not be doing as well as it should to pull Visteon up.

The news releases would indicate the last quarter was also a loser. I looked at their chart and noted the huge jump from $7 to $12 and wonder why? They have said that earnings will be better in 2004:

Results in 2003 included charges totaling $947 million, or $7.53 a share. In 2002, the company booked $142 million in charges and a write-off of $265 million related to the adoption of new accounting standards.

Revenue for the year fell 4% to $17.66 billion from $18.4 billion in 2002.

Looking ahead, Visteon said it expects to post first-quarter net income between five cents and 15 cents a share on revenue of $4.8 billion to $4.9 billion. In the year-earlier first quarter, Visteon posted a net loss of $15 million, or 12 cents a share, on revenue of $4.7 billion

They would have been losing even without the charges, so it's not like minus this event they would have been profitable. And they are taking a lot of charges. These would ideally be one-time events but seem to be a way of life at Visteon:

Auto supplier Visteon Corp. said its loss widened to $863 million in the fourth quarter as revenue slipped and it absorbed more big charges related to restructuring its operations.

The company also said Friday it expects this quarter's earnings will fall short of Wall Street's current estimates. Its shares sank 11 percent, dropping $1.32 to close at $11.03 on the New York Stock Exchange.

Dearborn-based Visteon said its net loss amounted to $6.87 per share for the three months ended Dec. 31 compared with a loss of $34 million, or 27 cents per share, in the same quarter a year earlier.

Excluding special charges of $756 million, or $6.02 a share, the company lost 85 cents per share. The consensus forecast of analysts polled by Thomson First Call was for a loss of 59 cents a share before one-time items.

They claim the restructuring is about done and will enhance profitability:

"We've completed many significant actions during the course of 2003 to improve our performance in 2004 and beyond," chairman and chief executive Peter J. Pestillo said in a statement. "Our agreements with Ford and the UAW, the exit of seating and other restructuring activities, combined with new business revenue, enable us to substantially improve our results going forward."

Last quarter:

Visteon Corp.'s net loss widened significantly in the fourth quarter amid hefty charges and a decline in revenue from its largest customer, Ford Motor CoThe auto-parts supplier, however, expects to swing to a profit in the first quarter.

Visteon Friday reported a net loss of $863 million, or $6.87 a share, compared with a year-earlier net loss of $34 million, or 27 cents a share.

The latest quarter was weighed down by charges totaling $756 million, or $6.02 a share, primarily for an increase in deferred tax asset valuation allowance and fixed asset write-downs. Last year's results included $51 million in restructuring and other charges.

Revenue slipped 1.8% to $4.46 billion from $4.54 billion a year earlier, as revenue at Ford and affiliates dropped 7.6%. Non-Ford revenue, which represents 26% of the company's total revenue, surged 19% to $1.17 billion.

I can't find any reason for the spike in price to around $12 per share in November. It's a total mystery. They have a huge amount of cash per share-about $9 at that time (down to $7 now). Maybe buying $9 for $7 was the impetus??

If they can do better and swing to positive earnings in 2004 they may go up again. I worry about their heavy reliance on Ford. Ford hasn't done real well lately. GM is doing better. All automakers are on tenuous ground if the consumer quits spending and the rebates don't bring them in.

VC is a company that is too unprofitable and on unstable ground for me to want to invest. There is also some shortfall in the pension fund that will take away financial flexibility if hard times hit. There are probably better investments. I don't know if buying their cash per share is going to help the individual investor. They may do better in 2004.

Things to watch if looking to buy:

**What are they doing with the cash? Paying down debt, making good acquisitions, balancing the pension fund, increasing dividends? Or something stupid.

**How is Ford doing? Since 80% of Visteon's business is from Ford, its important.

**Car sales are cyclical. Watch the sector and keep track of how the competitors are doing.

**Are they still taking charges in 2004 after management said they were done? Are they meeting guidance or continuing to disappoint? How realistic is management or are they just spinning out good news for the street?

**Are they increasing sales to other carmakers beyond Ford? I would like to see them increase distribution to someone like Toyota, which is a very strong car manufacturer.

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