Aptiv PLC (APTV) 2013 Q1 法說會逐字稿

Good morning. My name is Lisa, and I will be your conference facilitator. At this time I would like to welcome everyone to Delphi's first-quarter 2013 conference call. (Operator Instructions).

I would now like to turn the call over to Jack Monti, Delphi's Director of Investor Relations. Sir, you may now begin your conference.

Thank you, Lisa, and thanks so much, everyone, for joining Delphi's first-quarter earnings call. To follow along with today's presentation, our slides can be found at delphi.com under the Investor section of the website.

Please see slide two for a disclosure on forward-looking statements, which we will be making on today's call, and only reflect Delphi's current view of future financial performance, which may be materially different from our actual performance.

Joining today's call will be Rod O'Neal, Delphi's CEO and President; and Kevin Clark, our CFO.

As seen on slide three, Rod O'Neal will begin the call with an overview of our first quarter, followed by Kevin Clark who will review our financial result in greater detail, discuss our 2013 outlook and then open the line for Q&A.

With that, I will now turn the call over to Rod.

Thank you, Jack. Good morning, everyone. I am very pleased with our performance in Q1 especially in light of the challenges we all faced in Europe.

If you move to slide five, you will see that as expected we had a very, very solid quarter. I would like to share some of the highlights with you. We had adjusted earnings of $1.07 per share compared to $1.05 last year, and we continued our initiates to further optimize our cost structure and expand margins. We continue to invest in our bright future by increasing our investment in advance engineering to support the development of new technologies in the areas of Safe, Green and Connected.

We also bought back $122 million of stock in the first quarter. Now this brings our total share repurchases to just over $0.5 billion in the last 12 months of the $1 billion in total that had been authorized by our Board of Directors. We also initiated a quarterly dividend of $0.17 a share, which amounts to a little over $200 million of capital returned to our shareholders each year. These combined activities show that our management team remains laser focused on increasing shareholder value, even in this very challenging environment.

Turning to slide six. This slide shows validation of our ability to execute flawlessly as we continue to receive accolades from our customers for exceeding their expectations on quality, delivery and launch. If you look at the chart, you will see a diverse group of customers who have recognized us with awards in the last quarter.

It is also important to note the number of awards from our Chinese customers. That region is very important to our growth strategy, so recognition from our customers there is very, very key to our success. All of these awards reinforce that Delphi is providing customers with advance game-changing technologies that consumers want.

Which brings us to slide seven. I am extremely proud to share that Delphi recently won another prestigious PACE award and was finalist for three other products. We won a game-changing common rail for heavy duty diesel. This award highlights our commitment to providing leading edge technology solutions for the marketplace. Delphi now has 16 PACE awards, more than any other company, which is testament to the culture of innovation our team embodies.

Moving to slide eight. We are coming off of a record year in new bookings, last year in 2012, and we are off to a great start in 2013 and we expect this trend to continue. In Q1 we received bookings from key customers that include a Nissan award for electric architecture in North America, a Honda award for flex engine management systems in South America, a renewal award for radar camera system in Europe. We won a significant electrical architecture win in China, and we won a major award for our GDi technology in North America. So, over the last 17 quarters we generated almost $90 billion in bookings. As you can see from the pie chart in Q1, we continue to increase the geographic diversification of our business with Asia representing 34% of the bookings.

Before I turn it over to Kevin, I would like you to go to slide nine. To sum it up, we have great products and I have a great management team that executes flawlessly. Our priorities for the future, where they remain unchanged, and they are focused on creating value for the customer and for the shareholder. We will achieve disciplined revenue growth. We will further optimize our European footprint and rotate to lower cost countries. We will continue to delight our customers with award-winning technologies. We will further expand margins and increase earnings per share, and we will continue to deploy capital in a very disciplined manner.

I am extremely optimistic about the future of Delphi.

And with that, I will turn it over to Kevin who will cover the numbers. Kevin?

Great. Thanks, Rod. Good morning, everyone. As Jack mentioned, I will begin by covering our first-quarter results and then provide second-quarter and full year guidance. In order to provide a clearer view into the underlying fundamentals of the business, today's review of the actual and forecasted results will exclude all restructuring and other non-recurring costs. The reconciliation between GAAP and non-GAAP numbers are included at the back of both the press releases as well as this presentation for your reference.

Let me start on slide 11 for a snap shot of our first-quarter financial performance which, as Rod already mentioned, was in line with our expectations and impacted by continued weakness in the European market most notably for us in Western Europe, as well as a continued slowdown in the global commercial vehicle market. Despite the challenging environment that impacted revenue, we delivered very solid EBITDA and operating margins as well as earnings per share growth.

Reported revenue totaled $4 billion. It is down 1.7%. If you adjust for foreign exchange, commodities, acquisitions and divestitures, revenues actually declined 6%.

As I mentioned, the weakness in European production continued to be a significant headwind across each of our segments, resulting in a 17% decline in European revenues versus an IHS estimate of a 9% reduction in European light vehicle production, which includes a 14% decline in Western European production. However, the result of our lean cost structure and continued very strong operating execution we delivered very solid double-digit EBITDA margins in Europe and consolidated EBITDA margins of 14%.

During the quarter, net income totaled $336 million, and earnings per share was $1.07; that is up almost 2% on lower revenues.

Lastly free cash flow totaled a negative $56 million. That is down from the prior year, as a result of lower EBITDA, increased restructuring spend and dividend payments received from joint ventures in the prior period.

With that as a backdrop, let's move to slide 12, and I will review our first-quarter review in more detail. As I mentioned, reported revenue declined 1.7% to just over $4 billion. Volume and mix principally in our powertrain and E&S segments resulted in a decline of $207 million or 5%. Foreign exchange and commodity prices created a $14 million headwind or roughly 30 basis points to our growth rate.

Pricedowns were 1.3%, slightly below our forecast range of 1.5% to 2% annually, and acquisitions net of divestitures added $207 million of revenue or 5 points to our growth rate. If you look at our revenue on a regional basis, as I mentioned earlier, European revenues were down 17%, the result of continued weakness in light vehicle production, further impacted by a labor disruption at one of our OE assembly plants in Belgium during the quarter, as well as the continued decline in commercial vehicle production.

Asia was our fastest growing region. Revenues increased 8%. Within that region, revenues in China increased 11%, primarily the result of favorable customer mix.

Revenues in North America declined 2%, primarily due to lower production by our largest customer in the region on key platforms including the full size truck, the slow down in commercial vehicle market, as well as continued weakness in the automotive aftermarket.

And then lastly in South America, revenues increased 7% year over year, due to an increase in vehicle production as well as customer mix, which also translated into an acceleration of our sequential growth.

Slide 13 reconciles the year-over-year change in EBITDA. For the quarter, EBITDA totaled $562 million, reflecting the negative effect of lower revenue and less favorable product mix, principally in Europe, pricedowns, foreign exchange and increase investment in advance engineering, partially offset by very strong material and manufacturing performance as well as a reduction in SG&A spend, benefit from the MVL acquisition and lower long-term incentive compensation expense. EBITDA margins declined 30 basis points to 14%.

Slide 14 includes our segment results. Electrical architecture's adjusted revenue which excludes the impact of MVL totaled just over $1.7 billion. That is down 1% from the prior period driven by a double-digit decline in European revenues, almost entirely offset by single-digit growth in North American and very strong double-digit growth in both Asia and South America.

Segment EBITDA totaled $285 million representing 14.8% EBITDA margins. That is up 40 basis points from the prior year, primarily the result of the MVL acquisition and strong material manufacturing performance, partially offset by investments in engineering and information systems, as well the FX impact of the stronger Mexican peso.

Revenue in our powertrain segment totaled just over $1.1 billion. That is down 12%, reflecting a double-digit decline in European revenues as a result of continued weakness in the light vehicle and commercial vehicle markets and the related unfavorable product mix, and mid single-digit declines in both North and South America, reflecting customer mix and weakness in the automotive aftermarket, partially offset by solid revenue growth in Asia. Segment EBITDA margins declined 140 basis points to 14.6%, reflecting lower revenues principally in Europe and the related lower sales of higher margin diesel fuel injection systems, as well as increased investment in advanced engineering.

In our electronics and safety segment, revenue totaled just under $700 million. That represents a 7% reduction from the prior period principally the result of lower revenues in Europe and North America. Segment EBITDA margins declined 40 basis points to 13%, the result of lower revenues, increased investment in engineering as well as the timing of engineering rebuilds, primarily offset by strong manufacturing and material performance.

Thermal revenues declined 8%, driven by a double-digit decline in European revenues and a mid single-digit decline in North America, partially offset by very strong growth in Asia. EBITDA margins increased on a sequential basis over 200 basis points to 6.9%, but we are down 120 basis points versus the prior year period, the result of lower volumes partially offset by benefits from recent restructuring initiatives.

Turning to slide 15. Earnings per share increased to $1.07 driven by lower revenues, the impact of increased depreciation and amortization, the negative effect of foreign exchange more than offset by accretion related to the MVL acquisition and benefits associated with a lower tax rate, roughly 11% in the quarter versus 18% in the prior year, as well as share repurchases.

Moving to cash flow on slide 16. We continued to do a great job converting earnings into cash flow. Q1 cash flow reflected the normal seasonality of our business and the associated investment in working capital, as well as lower EBITDA and increased restructuring expense. Over the last 12 months, we generated over $2.1 billion of EBITDA which was converted into over $1.3 billion of operating cash flow, which we used to fund organic growth initiative, dividend and share repurchase. To drive further shareholder value we used balance sheet cash and raised debt to acquire MVL, which continues to deliver very solid financial results.

As we outlined in a recent Analyst Day, the disciplined long-term allocation of capital remains a top priority. On a normalized basis we expect operating cash flow to average roughly 75% to 80% of EBITDA. We will continue to use 35% to 40% of operating cash flow for CapEx, two-thirds of which will support growth initiatives, 10% to 15% will fund our dividend program and the balance will fund opportunistic share repurchases and strategic M&A.

Turning to slide 17. We highlight the strength of our cash flow conversion, relative to our peer group. On a LTM basis, our operating cash flow as a percent of sales was 10% and free cash flow as a percent of net of income was roughly 88%, reflecting industry-leading metrics.

Moving to slide 18. We ended the quarter with a strong balance sheet, with solid investment grade metrics, providing multiple levers that continue to drive shareholder value. Balance sheet cash totaled $834 million, and total debt outstanding increased slightly, reflecting working capital seasonality, restructuring spend, dividend payments and $122 million of share repurchases during the quarter.

Net debt was just over $1.6 billion roughly 0.8 times LTM EBITDA, and as you can see, following our capital markets activity in the first quarter we have no meaningful debt maturities until 2018, and total liquidity remained very strong at over $2.3 billion.

Moving to slide 19 to talk about our restructuring program, we increased the size of our restructuring program from the $300 million we discussed on our Q4 call to $375 million. We continue to optimize our cost structure by rotating our manufacturing and engineering footprints to lower cost regions and further streamlining administrative functions. Our activities continue to remain largely targeted at high-cost Western Europe, which comprises over 80% of total restructuring spend and almost the entire increase since we announced the initial restructuring program. We expect savings of $80 million in 2013, which includes MVL synergies and approximately $200 million of cumulative benefits in 2014.

Now slide 20 details some of the assumptions underlying our 2013 guidance. Based on several sources, including customer schedules and his, we are forecasting global production of just over 86 million units, a slight increase versus our prior forecast and just under a 2% increase from the current IHS estimate for 2012 production.

Our current forecast assumes a 3% increase in year-over-year North America production, a 2-point improvement from our prior forecast. However year-over-year production for our largest customer in the region is now forecast to be down over 0.5%, a 1 point deterioration from our prior forecast.

Production in the China market is now forecasted to increase 10% versus the prior year, roughly 0.5 point increase from our prior outlook. We are forecasting European production of just over 19 million units. That is a slight increase from our prior forecast, but roughly a 5% decline in year-over-year production versus the current IHS estimate for 2012. It is important to note that this forecast assumes Western European production will be down almost 7%, a slight deterioration versus our prior outlook.

Stepping back and considering the various puts and takes in each region that affects Delphi, we believe the overall impact of the current forecast for global production on our prior outlook for revenue is really negligible.

Turning to slide 21 to discuss our 2013 guidance. In total our outlook remains largely unchanged, but reflects a more balanced mix of revenue and profitability between the first and second half of the year. We continue to expect full-year revenues in the range of $16.2 billion to $16.6 billion, full year EBITDA is expected to be in the range of $2.325 billion to $2.425 billion with EBITDA margins in the range of 14.4% to 14.6%.

We continue to expect a tax rate of 16% for the full year, and we have increased our EPS guidance slightly, reflecting a share count of 314 million for the year to a range of $4.15 to $4.41. Cash flow before financing will total $1 billion with CapEx expected to be roughly $750 million.

Turning to the second quarter, we expect revenues to be in the range of $4.15 billion to $4.25 billion, reflecting roughly a 4% increase on a sequential basis, primarily the result of an increase in the number of production days in the quarter. EBITDA will be in the range of $600 million to $630 million, representing EBITDA margins of 14.5% to 14.8%, and EPS will be in the range of $1.05 to $1.15, assuming 314 million shares outstanding and an effective tax rate of 18% in the quarter.

With that, we would like to open the line up to questions.

(Operator Instructions). Your first question comes from the line of Brian Johnson with Barclays.

Good morning. Just wanted to go in a couple of segments in terms of the margin trends. In powertrain, how much of a drag was the CV falloff, and as you look to full year given your production forecast, are you looking for any recovery there?

Yes. As it relates to the impact of the CV falloff, I think, Brian, as you know, the forecast for the first quarter or the actual results for the first quarter for commercial vehicle market globally was roughly down 12%, 12% in North America, slightly less than that in Europe. As you know, we have a heavy duty diesel product within our powertrain segment, so any slowdown in that segment does have a material impact on product mix, revenue and inherent profitability in that segment.

As we look at the full year, we expect the commercial vehicle market in North America and Europe to continue to be down in Q2, but for the balance of the year in Q3 and Q4 to actually improve. And we would expect commercial vehicle market globally to be up mid single digits for the full year.

Okay. On E&S you warned us last quarter not to extrapolate margins out. Can you give us any more color, given the software-intensive nature at engineering, intensive nature of their business, on the seasonal pace of engineering recoveries and hence margins in that unit, or is it just depends and there is no seasonality?

There is a little bit of seasonality in terms of waiting. There tends to more engineering rebuilds and recoveries in the fourth quarter versus the balance of the year. However, dependent on specific development programs with specific customers there is variability between quarter to quarter throughout the year.

And in terms of a range of variability is it plus or minus 200 basis points or is there?

200 basis points is reasonable.

Okay. Thanks.

Your next question comes from the line of Rod Lache with Deutsche Bank.

Good morning, everybody.

Good morning.

A couple of things. One is your prior guidance suggested that you would start with EBITDA margins in the 13.2% to 13.5% range and then accelerate into average 14.4% to 14.6%, presumably there were a few things that you did not anticipate that gave you that -- a much higher start in the 14% range. Could you talk a little about what those were, and in that context you didn't raise the full year. Are you de-risking the year or is it possible that there are a few elements here that are coming in better than expected?

I would say the primary drivers as it relates to Q1 is we had more volume, relative to our prior guidance which we efficiently generated EBITDA on, so $75 million more in revenue if you take a look at the midpoint of our guidance for Q1 which translated into $25 million of EBITDA. I think that was the real driver, slightly better built schedules primarily in Asia.

As you look at the balance of the year, I think there is a mix of two things, Rod. I think it is, one, we are very committed to hitting the guidance we have laid out, or committed to you folks. It is early. We from a management team standpoint have not really seen a catalyst as it relates to Europe to get confidence that that market has actually improved. And third, to be quite candid, to the extent that we do see healing in the market and we do see stronger revenues we are going to use a portion of that stronger revenue to basically invest in the business, further invest in the business and growth initiatives and system investments.

Great. Thanks for that. Pricing for the longest time has been ranging from 1.5% to 2%. I think it was 1.8% in the fourth quarter, but it seems to be moderating. Is there anything unusual here or sustainable about this lower level?

We are still confident that, for us, price downs will average 1.5% to 2% on an annual basis, and there is a little bit of seasonality within any given year based on launch timing of certain programs.

Okay. Lastly, obviously there has been some media reports suggesting you are maybe in the running for a fairly sizable acquisition in electronics. Could you just give us some thoughts on what the vision is there, what would be attractive as far as acquisition you might be considering and whether or not that might have an effect on your capital deployment plans?

We don't comment on specific M&A items as you can imagine. However, what we have said, is strategically we are interested in areas that are in and around powertrain electronics. That if we are to do M&A transactions, they are transactions that are accretive to our earnings growth, accretive to our margins and are effectively bolt on from an integration standpoint. So from a strategy standpoint, nothing has changed.

All right. Thank you.

Your next question comes from the line of John Murphy with Bank of America.

Good morning, guys.

Good morning.

Just a first question and clarification on the guidance. There are not additional share buybacks that are encompassed in your Ford EPS guidance; is that correct?

That is correct.

Okay. And second question on CapEx, a little bit lower than the quarterly average run rate that you would expect going through the course of the year. I am sure some seasonality that works in there. But we have heard from some other suppliers that there have been some program delays. I am just curious if your CapEx is being impacted by that, and if you are seeing any program delays from -- it sounds like a broad swath of auto makers are pushing back some programs? Just curious if there is any correlation there of what you are seeing on delays?

There is nothing material in our CapEx number in terms of the customer moving things out. I think what you are seeing is that in the noise of the macros, we try to just to be a little bit more judicial around what it is we are doing in terms of capital spend. Nothing that would impact us long term going forward from a customer perspective.

But also from a customer perspective, are you seeing any delays in programs, this being driven by them, not you necessarily?

Not really. Nothing material.

Lastly, we have seen a pretty big pull back in copper this year, year-to-date, certainly a decent pull back last year. I am just curious how that would ultimately funnel through your P&L and if you would see the benefit or because you are seeing such indexing with your customers that the customers would actually receive the benefit? Just trying to understand the dynamics there.

It is Kevin, John. As you know, most of the changes in copper prices it is over 80% now. Our index are passed on to our customer on a slight lag basis. So from a net FP&L standpoint, there is very little impact. Where it does show up for us is on a revenue impact, given the fact we pass that on to our customer in terms of higher price.

Great, thank you very much.

Your next question comes from the line of David Leiker with Baird.

Good morning. I have two questions here. First on Asia if we look at slide 12, you have Asia reported revenues up 27%, the adjusted up only 8%. Can you separate that a bit in terms of currency and I am guessing there is MVL falls in there a little bit as well?

There is a little bit of currency, but it is mostly the impact of MVL. At the end of the day that is the biggest effect.

Okay. As you look that performance in China, I think you said China was up 11% or 12%; is that right?

Yes.

Can you talk about are those new launches or is it more customer mix or content mix-related? Is there any additional color you can offer there in terms of the sustainability of running revenue at that level?

First of all let's just go back and look at history. That level of performance is basically what we have done over the last decade, so it is nothing new there in terms of that number. It is just more of the same.

A couple of things, the reason I would state to you that we feel pretty confident about it being sustainable is the market is rotating into our space so more contented vehicles. And we see shift not only where the international OEs continue to offer very heavily contented but you are seeing the shift with the local Chinese brand also rotating in that direction.

So it is just really more of what we have experienced over the last several years so we feel pretty good about it.

Across the segments is that impacting one of the segments more than the others or is it pretty evenly spread?

It is more directly in electric architecture and our powertrain, but as the market matures into our direction, we are now starting to see more content in other product offerings. We have about 21 of our 33 product lines there. Starting to see more electronics and those types of offerings now coming into the vehicle too, primarily big driver is powertrain and electric architecture.

Second question is if you look at the European restructuring, when we get to the end of this in 2014, I'm guessing, what portion of your European footprint is going to be manufacturing engineering overhead, will be Eastern Europe versus Western Europe?

I would say -- we can come back to you and give you another number, but I am going to say off the top of my head going to be in the low 80s. The low 80%.

Great, thank you.

Your next question comes from the line of Ravi Shanker with Morgan Stanley.

Thanks, good morning. The year-on-year improvement on the electrical margin is pretty impressive. Kevin, you listed a series of drivers behind that. Can you help quantify some of those so we can get a sense of exactly what drove that margin higher?

Ravi, at the end of the day I don't want to go through line item on a year-over-year variances by line item. Clearly the division, as you can imagine, had the benefit of MVL which was a big driver of the overall year-over-year improvement. The division has done a very good job managing manufacturing as well as material productivity, doing an extremely strong job on that as well as managing the SG&A line.

Offsetting that we have made incremental investments in what we call advance engineering, which is product development as well as information systems to enhance the productivity of the business.

Understood. Can you give us a little bit more color on why you underperformed the market in Europe in the quarter, what platform and diesel mix was like and also how big that labor disruption was?

The labor disruption, relative to the market, were roughly $40 million and 2 points of growth on a year-over-year basis. And it affected a couple of our segments.

As it relates to the European market our guidance in Q4 for the first quarter was, we expected the European market, at least the customers we serve, to be down roughly 15% on a year-over-year basis based on our visibility. That is in fact what we saw, based on our customer mix and our platform mix. And on a year-over-year basis, there has been a unit volume effect. And as we have been talking about for the last couple of quarters there is also a product mix effect as it related to diesel fuel injection systems as well as higher end Infotainment Systems that makes the year-over-year revenue comp and margin, explains the year-over-year revenue comp and margin.

Got it. And the labor disruption is now resolved?

Pardon me?

The labor disruption is resolved?

The labor disruption, yes, that is resolved.

And finally, I don't know if you have detail on this, it may be early, but did the Verizon plug-in model that you launched for the aftermarket do you have a sense on how that has taken off?

We just launched it a few weeks ago, there has been demand, we are selling the product, but we will see how it plays out. Still early.

Thank you.

Your next question comes from the line of Patrick Archambault with Goldman Sachs.

Thank you. Good morning.

Good morning.

I just wanted to follow up actually on one of those last questions there. It seems just on a very simple nominal level you underperformed global production slightly or came actually very close to it. Your guidance has you outperforming it by 300 basis points, again just keeping things nominal and simple. There has been a few things you have mentioned here; the labor disruption, sounds like mix ought to get better. Can you tell us if we are forgetting anything, why should you go from underperforming to outperforming in subsequent quarters?

Listen, just to be clear I would say in the first quarter we were below our Delphi weighted market or IHS global production so we underperformed. Part of that relates to regional and customer mix, part of that relates to, quite frankly, the product mix we have been talking about as it relates to diesel and the Infotainment business. We expect that underperformance relative to both our weighted market and IHS to continue into Q2.

I think you will see a reduction in that underperformance in Q2 and beginning in Q3 and Q4, you will see outperformance, relative to the market. That is due to a couple of things, Patrick, one product, that deterioration of product mix annualizes, one, and two, we are going to see product launches in the back half of the year that drive incremental revenue growth.

But I would say for the full year our current outlook, depending whether you pick the low end or high end of the range, at the low end we would be roughly a point below overall market, at the high end we would be roughly a point above.

That is a helpful way to frame it. As a follow-up on the new business piece, I guess just more longer dated. On slide eight you have the new business bookings of $5.7 billion for the first quarter that annualizes to $22.8 billion, which is a little bit below the run rate. Is there some seasonality there that makes for bigger bookings in subsequent quarters?

It is not smooth and linear like that. What we had in the Q1 was just a smaller pot, so to speak, in terms of what we could actually win. Our win rate is actually as good or better than it has been in the past. It was just a matter of what was out there. We will see that pick up in relationship to the numbers. We expect to have a year equal to or better than the one we had last year.

Okay, great. That is helpful. Thank a lot, guys.

Your next question comes from the line of [Eki Micalli].

Great, thanks. Good morning. A question on the restructuring. It looks like you are still finding new opportunities. Kevin, can you talk about how we should maybe think about the payback of the new restructuring and perhaps do you an early read on what we should think about for structuring savings in 2014?

Yes, let me answer the first part of your question. The paybacks on the newer programs that have been implemented could be as short as 12 months, as long as 30 months. I would say we would average 20 months to 24 months when you mix those out. When you look at overall benefits associated with the restructuring program, we talked about run rate savings and/or cumulative savings in 2014 of roughly $200 million. That is off of a base in 2013 of 80, so an incremental 120.

That is very helpful. And then two housekeeping questions. One, can you share what you are assuming for Q2 European light vehicle production on a year-over-year basis? And then did I hear you correctly, that you are expecting an 18% tax rate in the quarter?

Right. For European production our outlook is European production will be down 6% in Q2 on a year-over-year basis, up slightly on a sequential basis, and then I'm not sure I understood the second part of your question, but our guidance does assume an 18% tax rate in Q2.

Just wanted to confirm that. That is all I had. Thanks, guys. Congrats.

Your next question comes from the line of Chris Ceraso with Crédit Suisse.

Thank you. Good morning.

Good morning.

Just a couple of items. I wanted to come back to the comment about some potential program delays with global OEM platforms. We have heard about this from some other suppliers stuff shifting, instead of launching in 2013 or 2014 it might launch in 2014 or 2015. Are you saying you haven't picked up evidence of that, and is there any change to your backlog over the next couple of years?

I haven't picked up on that. I have not heard anything about customers shifting their global programs out two or three years. We haven't seen it.

Chris, nothing since we gave guidance on our Q4 call.

Okay. And then the other question, you compete head to head against some of the bigger Japanese suppliers; Denso and Yazaki and so forth. Has there been any change in their behavior? A lot of the discussion about the yen has been about the OEMs and pricing and so forth. But I am interested if you are seeing even any subtle changes in the way that those players are behaving with respect to contract bids or anything like that or if you anticipate any changes on a go-forward basis.

I haven't seen anything and I don't anticipate anything.

In reality, Chris, to add a little bit more color we have talked about in the past and we will see how it plays out ultimately in revenue and awards, that we have actually benefited from the opportunity, to see more opportunities that those suppliers have historically been able to lock up. So, from a positive standpoint we have seen an increase in opportunity.

Okay.

But lastly the way we, the way our model is put together kind of products is really hard to beat us on [or advertising] FX, on the yen perspective you are going to try to land something out of Japan into the regions we are operating in, we are shipping, producing product engineering it locally. You are going to be hard to beat us from a cost perspective, so (Inaudible) on an FX just doesn't work in the long run when you are competing against Delphi.

Just a last point of clarification you mentioned about the Infotainment, some of the high-end Infotainment hurting your mix in Europe and you talked about this last quarter. Just to be clear is this a take rate issue, where customers are not selecting that option as often on the vehicles you supply or is it related to specific business you have and maybe there was a loss or a change in a contract that was specific to Delphi?

No, it is option take rate.

It was just option.

Okay. Thank you very much.

Your next question comes from the line of Brett Hoselton with KeyBanc Capital Mangement.

Good morning. This is [Anthony Dean] in for Brett Hoselton today.

Good morning.

Good morning. Two questions. First, I would like to hit on the margins and the progress you plan to make throughout the rest of the year. Using the mid point of your 2013 guidance I am looking at a 14.7% EBITDA margin in the back half and first half at about 14.3%. Typical seasonality would be higher margins in the first half like what you saw last year. It looks like the absolute level of sales implied within your guidance is actually slightly lower in the back half albeit not much.

So my question is simply what are the big drivers to the better margin performance in the back half? Is it restructuring or synergies picking up?

It is the benefit of the restructuring initiatives and the MVL synergies.

Okay. This is a reminder that 80 million for 2013 -- is that mostly back half loaded then, so assume 80 million for the back half?

It is mostly back half loaded. It is not all back half, so I wouldn't plug 80 million into Q4.

Okay. That is helpful. Thanks. Secondly on share buybacks, I understand they are not incorporated into your EPS forecast, but I was wondering if you could share some thoughts on the cadence of the share repurchase, $122 million in the first quarter here, have $525 million authorized for future repurchase. Do you have a specific target in mind for 2013 as to how much will be potentially spent, assuming that a significant acquisition might not occur?

I wouldn't say we have a specific target. We would like to remain opportunistic as it relates to share repurchases, so there are given points in a quarter where we want the flexibility to buy more or less. We have said to the extent we don't deploy free cash flow to pursue M&A opportunities, we will use that cash to repurchase stock.

I think, sitting in your seats, it is fair to assume we continue to buy stock on an annualized basis at roughly the same level we have over the last 12 months. What we have told people is in the range of $400 million to $500 million, but to the extent there are not some interesting M&A opportunities that amount would be more. What I caution you on is the timing as it relates to deploying that capital and at what price.

Thank you.

Your next question comes from the line of [Manuel Rosner] with CLSA.

Good morning.

Good morning.

First one quick point of follow-up on an earlier question on the new business bookings. So in the quarter you booked $5.7 billion of new bookings that seems to compare to $7.7 billion that you had reported in last year's slide, so that is down 25%, 26%. What gives you strong confidence this will pick up? I realize it is very long period of timing of signing contracts, but is it something you see in your quoting activity that gives you confidence that it will pick up materially?

I tried to address that in an earlier question. I apologize if I did not do a very good job, so I will try once again.

Basically what it was is how much was sitting out there on a global opportunity perspective. Our win rate was equal to or better than any win rate that we have ever had, so it was just opportunity. And we expect our ultimate bookings for the year to equal or exceed what we had last year which was a record year. So it was just what was out there from the OE perspective in terms of the opportunity in the first quarter, that was it.

Okay. And then just one question on your decremental margins in the quarter, if I just base myself on those slides of the revenue and EBITDA work you provide, it looks like the impact from the sales contraction was $77 million on the EBITDA level and $207 million on sales. That is about a 37% decremental margin.

That seems fairly high. Was there anything in particular that explains this, and can we expect such high level of incremental margins when the production actually turns on and becomes a tailwind?

That decremental margin reflects the mix effect that we have talked to you about previously, primarily as it relates to loss volume in our powertrain business, specifically diesel systems in Europe which are higher margins as well as lower sales of those higher end Infotainment systems, which tend to have higher margins as well.

So I guess in the back half when you would expect some of that mix to turn around, you should benefit from that on the incremental margin as well?

Let me be clear, when we look at our full-year guidance in the back half we are not assuming that mix actually improves from the current run rate. What actually happens is we started to see a mix deterioration late in the third quarter of last year. What you are seeing is the effect of it annualizing, so you have a simpler comp.

If the market does improve, (Inaudible) volume does improve and we see higher mix of diesel fuel injection systems as well as higher take rates on some of the higher end Infotainment systems that we just talked about, you would see an improvement in margins.

However, we have not assumed a change in those take rates for the back half of the year.

All right. Thank you.

Your next question comes from the line of Ryan Brinkman with JPMorgan.

Congratulations on the quarter and thanks for taking my call. A lot of my questions have been answered but maybe just some on the thermal segment.

I know that you have committed to fixing this business and obviously you have earned a lot of credibility with regard to your ability to turn businesses around, but when do you think we might reasonably expect to start to see some margin stabilization? What are the actions you are taking there to improve margin?

And then lastly, do you think that scale might be an issue here at all? Could thermal benefit from partnering with another market participant whatever form that partnership might take? Thanks.

I think if you look at the expansion sequentially on thermal, our first quarter actually did start moving north, so we are not satisfied with where we are. But we are pleased that we do have now our upward trajectory that we always thought we would have.

That comes from a lot of hard work by the team in terms of removing costs and restructuring itself and getting ahead of the volume takedown. The volume comes back, we feel we are going to get some nice leverage from a margin perspective. So, I think we are on track now.

In terms of M&A activity with thermal we don't comment on that. The business is the [$1.5 billion] so it has a lot of scale.

Great. I appreciate that color. Then I would appreciate the color too on how your European business tracked the reasons for it relative to the industry? Maybe just a follow up on that. As we look out a year or two as things have started to normalize there hopefully, how do you see your organic revenues in Europe tracking relative to the industry longer term in a more normalized environment?

In a more normalized environment we are confident we outgrow the market in each of the regions we operate.

Thanks, guys. I'm sorry. Go ahead.

Excuse me for one minute here. Operator, at this time we only have time for one more question.

And your final question comes from the line of Colin Langan with UBS.

Thanks for taking my question. Most of mine have been answered, but any additional color on the restructuring in terms of how much of the actual actions have been complete, and maybe the cash impact going out how much cash costs should we expect in the second half of the year when some of it gets further depleted?

This is Kevin Clark. A number of the initiatives have been put in place from a cash standpoint. For full-year 2013, we are estimating roughly $200 million of the $375 million will be spent. Most of that will be in the back half of the year. A little bit of it was spent in this first quarter.

Okay. In the electronics and safety segment, you have mentioned in the past that you have been rolling off lower margin business and it seemed like the market under performance was not that bad this quarter. Is most of that roll-off business complete or is there still more to come this year?

There is a little more to come for the balance of the year, but we are reaching a point where it is close to being complete.

Okay. Thank you very much.

Operator, I am going to close out and then we will close the call, okay?

Yes, sir, thank you.

Thank you for joining. I am really pleased with the results that the team created in Q1. Delphi continues to change the game with our products and are focused on strong financial and creating shareholder value.

Again, I appreciate you joining the call. We will see you in the next quarter. Please stay safe.

That concludes the Delphi's first-quarter 2013 earnings release conference call. Thank you for joining. You may now disconnect.