Visteon Profit Rises After Climate Control Sale

VAN BUREN TWP. — The auto supplier Visteon Corp. (NYSE: VC) reported net income of $2.2 billion or $49.73 a share in the second quarter, including a significant gain related to the sale of Visteon’s interest in Halla Visteon Climate Control Corp.

As a result of the previously announced divestiture of the majority of its climate business, Visteon reclassified a significant portion of climate results to discontinued operations, and recast prior periods accordingly.

Revenue was $812 million, up from $503 million a year earlier.An additional $933 million of sales was classified as discontinued operations.

The company also released a figure for adjusted earnings before interest, taxes, depreciation and amortization of $60 million, up from $29 million in the second quarter a year earlier.

“Visteon continued its momentum in the second quarter with solid performance in sales, adjusted EBITDA and growth,” said Sachin Lawande, president and CEO, who joined Visteon on June 29. “As a result of our strong performance in the first half, we have reaffirmed full-year guidance. With the sale of our 70 percent ownership interest in Halla Visteon Climate Control on June 9, Visteon is now focused on driving value for customers and shareholders as a technology-focused enterprise dedicated to vehicle cockpit electronics and the connected car – one of the fastest-growing segments in the automotive industry. As a result of that sale, we expect to deliver significant returns to our shareholders over the coming months through a series of actions including stock buybacks and special distributions.”

Electronics sales totaled $780 million, an increase of $337 million from the second quarter last year. The increase is primarily attributable to the acquisition of the global automotive electronics business of Johnson Controls Inc., effective July 1, 2014. For the Electronics Product Group, on a regional basis, Asia accounted for 37 percent of sales, Europe 33 percent, North America 28 percent, and South America 2 percent.

Gross margin for the second quarter of 2015 was $99 million, compared with $57 million a year earlier. Selling, general and administrative expenses were $65 million, or 8 percent of sales, for the second quarter, compared with $48 million, or 9.5 percent of sales, a year earlier. Year-over-year results for gross margin and SG&A were both impacted by the Johnson Controls electronics acquisition. The $42 million increase in gross margin also included higher sales volume and new business impacts, along with cost efficiencies, partially offset by the impact of unfavorable currency.

For the second quarter of 2015, the company reported net income attributable to Visteon of $2.21 billion, or earnings per share of $49.73 per diluted share. Second-quarter net income included $2.16 million related to income from discontinued operations, net of tax; a $62 million gain from the disposition of its ownership in Yanfeng Visteon Jinqiao Automotive Trim Systems Co., Ltd.; and $30 million of restructuring, transformation integration and related costs. Adjusted net income, which excludes these gains and costs, was $17 million, or 38 cents per diluted share.

On June 9, Visteon completed the previously announced sale of its approximate 70 percent ownership interest in Halla Visteon Climate Control Corp. to an affiliate of Hahn & Co., a South Korea-based private equity company, and Hankook Tire Co. Ltd., following the approval of Visteon’s shareholders at a special meeting May 18.

On June 10, Visteon announced the appointment of Sachin Lawande as president and CEO, effective June 29, succeeding Timothy D. Leuliette. Lawande also joined Visteon’s board of directors. Lawande is an accomplished automotive electronics leader who had been with Harman International Industries since 2005, most recently as president of the infotainment division, the company’s largest with nearly $3 billion in annual sales.

On June 16, Visteon entered into an accelerated stock buyback with a third party to purchase shares of its common stock for an initial payment of $500 million. The company entered into the ASB agreement as part of its previously announced capital return program.

Also during the second quarter, Visteon reduced its term loan by $246 million to $300 million outstanding.

As of June 30, Visteon had global cash balances totaling $2.87 billion. Total debt as of June 30 was $378 million.

For the second quarter of 2015, Visteon generated $31 million of cash from operations, consistent with $31 million in the same period a year earlier. Capital expenditures in the quarter were $67 million — $8 million lower than in the second quarter of 2014.

Visteon reaffirmed its full-year 2015 guidance for key financial metrics. The company projects 2015 sales for the Electronics Product Group of $3.0 billion. Adjusted EBITDA for the Electronics Product Group and Corporate costs is projected in the range of $245 million to $265 million. Adjusted free cash flow, as defined below, for the Electronics Product Group an

Visteon designs, engineers and manufactures innovative cockpit electronics products and connected car systems for most of the world’s major vehicle manufacturers.

A replay of the conference call discussing these results is at www.visteon.com, or by calling (855) 859-2056 (toll-free from the United States and Canada) or (404) 537-3406 (international). The conference ID for the phone replay is 85650283. The phone replay will be available for one week following the conference call.

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