Dana Inc (DAN) 2010 Q1 法說會逐字稿

Good morning and welcome to the Dana Holding Corporation's first-quarter 2010 webcast and conference call. My name is Whitney and I will be your conference facilitator.

Please be advised that our meeting today, both the speakers' remarks and the Q&A session, will be recorded for replay purposes. All lines have been placed on mute to prevent any background noise.

There will be a question-and-answer period after the speakers' remarks and we will take questions from the telephone only. (Operator Instructions) At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations, Lillian Etzkorn. Please go ahead, Ms. Etzkorn.

Thank you, Whitney. Good morning, ladies and gentlemen. Welcome to all of you who are joining us either by the phone or webcast.

On behalf of the entire Dana management team, I'd like to thank you for spending time with us this morning. With me this morning are John Devine, Executive Chairman; Jim Sweetnam, President and CEO; Jim Yost, Executive Vice President and Chief Financial Officer; and Jacqui Dedo, Senior Vice President of Strategy and Business Development. Also in the room are Gary Convis, Special Advisor to the CEO; and Mark Wallace, President of Heavy Vehicle Products.

Before we begin, I'd like to review a couple of items. A copy of this morning's earnings release and the slides that we will be using have been posted on Dana's investor website for your reference.

Today's call is being recorded and the supporting materials are the property of Dana Holding Corporation. They may not be recorded, copied or rebroadcast without our written consent.

Today's call will also include a Q&A session. In order to allow as many questions as possible within our timeframe, please keep your questions brief.

Finally, today's presentation includes some forward-looking statements about our expectations for Dana's future performance. Actual results could differ materially from those suggested by our comments here. Additional information about the factors that could affect future results are summarized in our Safe Harbor Statement.

These risk factors are also detailed in our SEC filings, including our annual quarterly and current reports with the SEC. With that, I would like to turn the presentation over to Jim Sweetnam.

Good morning and thank you all for joining us today. I am pleased with the progress that our team continues to make on our plan.

We achieved another strong quarter with adjusted EBITDA of $108 million on revenues of $1.5 billion. Our free cash flow was $34 million and we ended up the quarter with over $1 billion in cash and we are delighted that this puts us into a net cash positive position of $85 million.

This quarter, we closed on the sale of the majority of our structures business and we expect to close on the final portion in Venezuela later this year. Additionally, we've combined our ceiling and thermal business into a business we are going to call power technologies.

Having them combined under one management team and within the light vehicle group will enable us to implement common processes and to gain synergies. We have continued to maintain our strong competitive position, having achieved several key business wins.

So asking you to turn to slide six, as we look to our future, our key growth priority is to create profitable and sustainable market share growth. And in order to do that, we have several key growth priorities.

First of all, geographic expansion opportunities for our commercial vehicles and our off-highway businesses. Second, is to grow our aftermarket business across the entire Dana enterprise.

Third, to pursue growth opportunities in emerging markets like in Asia Pacific. Fourth, the reinvigoration of our respective product portfolios across Dana. And finally, winning business on key automotive growth platforms.

We have been very successful in the marketplace this past quarter. About half of the business that has been awarded was taken from competitors and the other half was new product to the market. The key to this continued growth is product and I would like to now highlight some recent developments on the next few slides.

So turning to slide seven, shows some highlights from our light vehicle product introductions. We won the front-end module business with GM for the Chevrolet Aveo and and Optra. These are small passenger cars in Colombia in South America.

Additionally, we are also supplying Spicer propshafts or drive shafts to Renault for the redesigned 2010 Renault Master which goes on sale next month in European markets. This is the first rear wheel drive large van developed by Renault's LCV division.

Continuing on slide eight in our power technologies introductions, Dana will be supplying engine oil cooling technology on the all new 2011 Hyundai Sonata and the Kia Sorrento as well as the 2011 Hyundai Santa Fe.

Dana's thermal management technology helps to lower and maintain engine oil temperature, using engine coolant or airflow as the cooling mechanism. Dana has also developed a new ThermoGlide 1000 coating which is trademarked which is used on exhaust gaskets to meet the increasing challenges of modern gasoline and diesel engines and it can withstand 1000 degrees Celsius which is an industry first.

The technology is presently in production with a large diesel engine manufacturer. Turning to slide nine, it's something that we are very excited about.

We announced earlier this month that we have signed a memorandum of understanding to form a 50-50 joint venture with Bosch Rexroth to co-develop and manufacture advanced drive transmissions for the off-highway market. This planned joint venture will engineer, manufacture and market hydromechanical, variable power split transmission systems for the global off-highway market.

The systems will focus on meeting customer needs for improved fuel economy, for productivity, emissions and maneuverability and we are really very excited about the opportunities that this new joint venture represents.

Turning to slide 10, at the Mid-America truck show last month in Louisville, Kentucky; we launched the all-new Spicer S140 Drive Axle. This axle is very much focused on the medium duty, Class VI, VII market for both truck and bus application.

This axle provides the benefit our customers want by being lighter weight, quieter, high numerical ratio and it minimizes OE vehicle fit-up changes. It also reduces maintenance costs and boasts improved ground clearance. International is the first OEM to feature these axles.

Getting you to turn to slide 11. We are very honored that we have received several quality awards.

We have been awarded the Ford Motor Company's Gold World Excellence award last week for our work on the Ford Ranger compact pickup truck, which is produced in Argentina, South America.

Specifically recognized was Dana's Montevideo, Uruguay operation which assembles Spicer rear axles and ships them to Ford's facility in nearby Buenos Aires, Argentina. Ford indicated that this operation has been delivering manufacturing quality of zero parts per million for the past seven years.

Additionally, two of our facilities; one in Marion, Indiana; and the other in Toluca, Mexico were recognized by PACCAR, another one of our big customers, for achieving high standards of quality in 2009. We are really very pleased with these recognitions which demonstrate the clear commitment to high quality by all of our employees worldwide.

Turning to slide 12, and our focus for 2010 and beyond, this is consistent with what we have shared with you in the past. We will continue to make operational improvements and continue our restructuring efforts.

Our focus will be on further optimization of our manufacturing footprint, on our supply chain and materials costs and to continue reducing complexity in our operations and in our entire value chain. We have refocused our technical and marketing resources on reinvigorating our product portfolios across our business franchises in order to create clearly differentiated products to help our customers compete with in their respective marketplaces.

We plan to pursue attractive business and growth opportunities primarily in Asia Pacific, but also pursue specific growth opportunities in other geographic areas. All of this with a strong focus on improving margins while maintaining a strong balance sheet.

If I could now get you to turn to slide 13. The focus I described earlier is supported by a One Dana operating philosophy which you see articulated on this slide.

It's based on a set of principles that we believe translate globally. This philosophy is comprised of four cornerstone values.

First, our commitment to operating with honesty and integrity. Second, acting as a good corporate citizen. Third, open communications both internally and externally. And finally, the pursuit of continuous improvement in all of our operations.

These values underpin our four key deliverables which are first of all, delivering customer satisfaction i.e. being a company that our customers want to do business with. Second, a renewed commitment as we have been saying to you to innovation and technology which means that we will compete on the basis of technology and new products that help our customers differentiate themselves in their end markets.

Dedication to quality in all that we do which means living by our key processes and flawlessly executing on the basics. And finally, maintaining strong suppliers which speaks to the fact that we recognize how integral supply chain is in providing value to our customers.

To this end, we're focused on building long-term, mutually beneficial relationships with robust financially sound supplier partners. So I'll have you turned to slide 14.

When you add this all up, the sum of these cultural values is one team. It's one Dana focused on one purpose and that purpose is through our people, creating exceptional value for Dana shareholders by delivering superior products and service to our customers.

Now I'd like to turn the presentation over to Jim Yost to cover our financial results for the quarter. Jim?

Thank you, Jim. Overall as Jim indicated, we had another good quarter and on slide number 16, you can see our financial summary for the quarter compared with both the first quarter of 2009 as well as the fourth quarter of last year.

Sales were about $1.5 billion. That was an increase of almost $300 million compared with last year and slightly improved from the fourth quarter.

We'll cover those in detail in a second. Adjusted EBITDA of $108 million is also a significant improvement over 2009 and again, I will cover EBITDA in a bit more detail in subsequent slides.

Both the quarterly EBIT or loss before interest expense and income taxes and net loss were substantial improvements versus both last year and Q4. You'll note here, capital expenditures were relatively low at $11 million. But as I will mention later, we're still expecting to spend in line with our overall prior guidance.

Free cash flow at $34 million positive for the quarter was very strong and a dramatic improvement over last year. Additionally as you will see, we did end the quarter in a net cash position again as Jim mentioned.

Just to note, the reporting of our operating segments have been adjusted to reflect the fact that we have combined sealing and thermal into power technologies group and that will be reflected as you will see in the appendix.

Turning to slide 17, you can see the change in our sales for the quarter versus 2009 when our sales were only $1.2 billion. We are up about 24% largely due to volume and mix of over $230 million.

Pricing was flat in comparison with 2009 and currency was slightly favorable due to the dollar weakness compared with the first quarter of 2009. Because we closed on the sale of structures in early March, there is a negative impact to revenue of $24 million in comparison to 2009 which had a full quarter of sales. The year-over-year impact related to volume and mix pricing and currency for the period in which we did own structures is reflected in the respective categories.

Turning to slide number 18, you can see the explanation of change in our adjusted EBITDA for the quarter which was up $92 million from last year to $108 million this quarter. The volume and mix were favorable by $57 million related to the sales increase I mentioned on the previous slide of $232 million and that represents about a 24% contribution margin.

The currency impact on sales was essentially neutral and pricing was unfavorable due to a one-time lump sum payment we received in the first quarter of 2009 which was actually booked and recorded as other income but we treat it as sales because it was in fact a payment for that type of action.

Cost performance contributed over $50 million for the quarter with conversion costs at our plants better by about $50 million and material costs lower by $20 million compared to 2009 first quarter. We did incur higher pension expense of $6 million in the quarter.

It is a non-cash increase that we've mentioned previously and slightly higher compensation and benefit costs which we discussed in our prior calls. These costs will continue throughout the year.

Turning to slide number 19, you can see our sales in the first quarter compared with fourth quarter of last year. And we put this slide in here to try and highlight that in fact, sales were up on a comparable basis about $67 million.

Pricing was slightly favorable on a quarter over quarter basis. Currency as I mentioned with the weaker dollar actually hurt us a bit $15 million and then you can see here the impact of that three weeks of the structures business which we did not own in March.

Turning to slide number 20, you can see that our $108 million results was a slight decline from where we were at the end of the fourth quarter of last year. Volume and mix on the slightly higher sales of $67 million was a contribution margin flow-through of about $15 million. Pricing as I mentioned previously was slightly favorable and currency was slightly unfavorable at $2 million on an EBITDA basis.

Cost savings and other were negative in this quarter with pension expense a little bit higher. Product engineering is also going to be higher for us on a continuing basis as we increase the focus on product development activities as we bring out more and better and value added products.

Operating costs were $4 million higher on a quarter over quarter basis primarily related to some higher premium freight and plant ramp-up costs associated with the relocation of some of our manufacturing activities to a new location in Mexico. Additionally there were some items in Q4 that were not recurring in Q1.

The net impact of $7 million associated with these items resulted primarily from a favorable settlement of a VAT tax issue and reductions to our asbestos liabilities which were partially offset by non-recurring bonus and warranty expense. The impact of the structure sales that three weeks in March was about $6 million, unfavorable on a quarter over quarter basis. Overall, while we did have some higher costs this quarter on an ongoing basis, we are on track to achieve our full-year efficiencies and cost reduction targets.

On slide number 21, we summarized our adjusted EBITDA margins over the last nine quarters. As we discussed before, we have had some significant improvements, primarily starting in the second quarter. And although this quarter's results were a little bit down, we still remain on track to achieve the 8 to 9% EBITDA margins on a full-year basis.

Turning to free cash flow on slide number 22, you can see the strong performance for the quarter. Free cash flow was a positive $34 million and that was $238 million better than last year when we had a cash usage of about $200 million largely related to the runoff of payables because we had cut back very dramatically on our purchases.

You can see on this slide again that working capital was only a minor increase for us. We've done a great job of managing the inventory. Inventory was down over $20 million from the end of last year.

So continued very good management of inventories helped us minimize the impact of the higher sales on working capital. Slide number 23 we normally label as net debt.

But as you can see here, we've had to change the title on this slide to net cash. The net cash position of $85 million reflects total cash of over $1 billion. And the slightly reduced debt due to the sale of our structures business, with that all the proceeds all go towards the paydown of debt.

Slide number 24 just gives you an update on our very strong global liquidity position. We improved that position by over $100 million versus last quarter and we remain in a very strong $1.261 billion. Now I would like to turn it over to Jacqui for a market and sales update.

Thanks, Jim. Turning to slide 25, in the global market segments we serve, we continue to have cautious optimism in the light vehicle and medium and heavy truck markets.

However, we have seen strengthening in the North American light vehicle market and now believe that this improvement will result in greater strength on a full-year basis. As a result, we have increased our full-year production outlook since our prior earnings call. Our views on medium and heavy vehicle markets are unchanged and we expect to see modest improvement in the latter half of 2010.

In our off-highway market, we are seeing the flattening of the market in total after over a year of large decreases. We are seeing a pickup in orders from some customers, but many are still working through high inventory levels on hand.

Overall we expect the market to be relatively flat this year. Our production estimates are in line with third-party forecasts and the overall revenue impact to Dana is expected to be about 15% including both the market improvement and our net new business. Jim, back to you.

Thank you, Jacqui. Slide number 26 details and updates you all on our expected full-year impact of the sale of our structural products business. As I mentioned earlier, we closed the sale of that business in early March with the exception of Venezuela which should close later this year, most likely this quarter, and our Longview facility which we will keep.

The transaction will not be treated as a discontinued operation and as a result, we will include in our sales and our EBITDA the results of those operations while we own them. Our first quarter results did include $144 million of sales and $11 million of adjusted EBITDA which will remain in our full-year reported results. We will continue to report the results for Venezuela until sold and ongoing for Longview.

As you can see on the slide, the revenue adjusted EBITDA and free cash flow reflect the 2010 impact of previously anticipated results for the operation sold. We have adjusted for these impacts on our 2010 targets which I will cover on slide number 27.

So turning to that slide, you can see the same information we provided previously in previous discussions. We have adjusted the plan numbers there for the sale of the structures business reflecting the numbers that I had just taken you through.

We are on track to achieve all of our financial objectives and are now projecting that revenue will be improved based on the industries that Jacqui took you through with an expected year-over-year increase of about 15% and a little bit more than 15% adjusted for the sale of the structures business in 2009.

Additionally, we expect the adjusted EBITDA to be in the range of $475 million to $525 million and that is up from the adjusted plan of $450 million. Overall, we continue to be on track to achieve positive net income in 2011 along with an adjusted EBITDA margin greater than 10%. Now I would like to turn it back to Jim for some closing comments.

Thanks, Jim. In summary, we are on track to achieve our 2010 plan as you will see on slide 28. We are pleased with our results and our ability to continue to achieve key business wins in the marketplace.

We're going to continue to focus on our core businesses and grow it profitably. I would like to now turn the call over to our moderator for the Q&A session. Whitney?

(Operator Instructions) Joe Amaturo, Buckingham Research.

Jim, could you touch on or quantify the impact of lower F series production in the first quarter and the impact it had on the driveline segment or what used to be called the driveline segment? And then I guess my second question would be could you just give us a sense of how you expect working capital to impact cash flow throughout 2010?

I'll let Jacqui answer the first question.

On the F series, we had some small shortage in the first quarter which we expect to see made up based on ramp-up and pull-in into the second quarter. So on the year, you'll see a balance to our forecast.

Okay, but it was an adverse impact in the first quarter that should reverse in the second quarter, correct?

That's correct. It will reverse and make up the impact from the first.

And the heavy-duty stuff is the more impactful stuff as it relates to earnings and contribution to earnings. Is that correct also versus --

Joe, I'm not sure I understand the question.

Well the 250, 350, right, we're launching that one?

Right.

So is that more -- I would assume that that is a more profitable vehicle for you.

We don't disclose specific profitability by vehicle line. So I would like to reserve comment on that.

Okay, no problem. And then the working capital question?

On the working capital, obviously as volumes trend up, we will be using some additional working capital. Our projections actually don't have sales going up dramatically through the year at present expectations.

First quarter was pretty good. As a result I don't expect to see any huge impact on working capital. We're continuing to reduce our inventory and that will provide us with some cushion against some of the increases due to receivables. I don't expect to see a major impact.

And then just one final one, given the strong cash performance and given the fact that you moved to a net cash position versus a net debt position, any update on addressing just the gross amount of debt at some point?

We don't have anything to announce at this point in time. I'll just remind you that we do have some cash needs that will be coming up. There's about a $75 million payment that we expect to make to the IRS reasonably soon.

We are continuing to look at our investment opportunities in China through our joint venture with Dengfeng. That will likely require some cash outlay and we do have preferred dividends that we are looking to do something with. So there will be some good opportunities to use our cash. That said, I'm not too embarrassed to be in a net cash position.

I wouldn't be either. Okay, thank you very much.

Himanshu Patel, JPMorgan.

Thank you. All my questions have been answered.

Patrick Archambault, Goldman Sachs.

I guess the first just on the activity you're seeing on the commercial side in the US. Obviously there has been a pretty big focus on the high quality of the data points that we have seen just on freight and freight pricing and used sales and all that sort of stuff.

Can you give us a little bit of a flavor of sort of what you are seeing from some of your customers? Is the strong momentum that we saw in March net orders, is that sort of being sustained in your view?

The second quarter is picking up a little bit more than we expected. We still see a net dip from first to second.

We are seeing positive data on total freight miles and freight rates increasing. So second quarter might come in a little bit stronger. We're still seeing it light quarter over quarter.

(multiple speakers) I would just add to what Jacqui said is that obviously coming out of the Mid-America truck show, we got a lot of feedback from the fleets who are in fact seeing increases in freight. However, it does take some time for that to start translating into getting the existing truck capacity stabilized.

But I think once that swings, we will start seeing the fleets go back to start ordering trucks. Our expectation is we don't start to see an uptick, a real sort of real positive uptick until the back end of the year; third, fourth quarter.

Okay actually on that point, do you guys have a sense of how much additional capacity there is out there that's not being utilized now? I know that there's not really any hard data on that, but it seems to be debatable; some people saying that a lot of the trucks that are out there actually on the road, some people saying it's less than that.

We probably don't have a view on that, Patrick.

Okay, on Dengfeng, I think you guys had said that you owned a 4% interest, right? And I can't remember, I think you said it was around 60 or $70 million that you were potentially going to reinvest in that?

I guess two questions. What would that bring your stake up to? And do you have an agreement with the other owners of the JV to sort of buy in at the original -- at some set price that was pre-established or are you actually renegotiating kind of the price of that incremental stake as you go along now?

Patrick, we are in the process of negotiating that. The contract did not provide for a preset valuation.

It's based on the valuation performance of the business. And we will have more to tell you soon as we work through those negotiations. And we are moving in a negotiation to go from 4% ownership to about 50% ownership.

From 4% to 50, 5-0?

No, from 4 to about 50.

Okay and I guess last just on -- could you guys touch on a little bit -- I know that you had said that you were -- that you had some further consolidation opportunities maybe beyond 2010, that you had probably more facilities than you needed. Can you give us just a little bit of a sense beyond what you have outlined in your guidance as we look to 2011-2012, what some of the cost opportunities might be?

We are continuing to look at all of our operations for efficiencies and sometimes that leads us to make some changes in our footprint. But we are going to spend about $100 million this year as we said in prior calls.

Probably the bulk of that will impact us on a two-year payback basis. So we do have some substantial year-over-year improvements that we're looking at in 2011 from an operating standpoint associated with those expenditures this year.

And I suspect that we will continue to spend restructuring money into next year. We haven't set a specific target and it will be based on volume levels which at this point in time have been uncertain as well as the efficiencies we can drive through the plant.

So we don't have any specific guidance to give on 2011 at this time, but I would expect there to be still some significant incremental savings next year compared to this year for both restructuring we will do next year as well as the flow-through of what we are doing this year.

Okay, great. Thank you very much, guys.

Patrick Nolan, Deutsche Bank.

Just a couple of questions. Just first on the quarter, it's nitpicking a little bit, because it's only a few hundred million dollars. But I noticed the margin in the commercial vehicle segment weakened sequentially despite a higher revenues. Could you maybe give a little color on that?

Sure, I think the answer to that is pretty simple. Some of the operating costs issues that we mentioned were predominantly in the commercial vehicle business. So the operating issues that I mentioned were in that business unit and that's the reason why the margins were a little bit lower.

And those should probably reverse as we move into the back half?

That is the expectation.

Got it. When I look at your outlook, it seems to me most of the improvement is on the light vehicle side obviously but it looks like the mix spread, it looked like you previously were expecting the truck and SUV segment to underperform by about 7 to 8%.

Now that looks like it's 200 to 300 basis points lower. Didn't look like the mix for the industry was that much better in the first quarter. Is it just that your platforms are performing better or you think they are going to?

Again, I guess I am not sure I understand.

So if I look at -- you took up your truck and SUV production more than you took up your total production for the market.

Right. That's based on our platforms and our mix. So we have taken it up disproportionately because we expect that performance as we look at the results and orders coming in from the customers for the back half of the year.

Got it. And then just lastly on the cost reductions, is the reduction versus the previous guidance mainly due to taking structures out of the guidance?

Yes, 100% due to that.

Okay, thank you.

Tim Denoyer, Wolfe Trahan.

Quick question. I'm not sure if you typically discuss this, but can you give us a sense of your overall capacity utilization in the quarter and how you think that can go as you continue to restructure?

Tim, we have historically not given any specific information on that. I think it's fair to say we still have a significant amount of unused capacity given that we produced in '08 at a significantly higher level than we are producing now.

And our MFO actions, our reductions of our footprint, have been primarily related to reductions in cost. We haven't lost and purposely not reduced any capacity, so that as the markets do return, we will be able to satisfy our customers.

Great and then just on the reclassification of sealing and thermal into the power technologies segment. The margin on the combined segment (inaudible) looks like 11.8% which seems to be well above the historical performance of either sealing or thermal combined. Can you kind of talk about what's driving that? Are there any other business lines included?

Now that's a pretty straight comparison. We have been very, very pleased by the recent improvement in the operations there.

Those operations were to some extent underperforming in '08 and '09. Part of our strategy in combining them was to help focus the team on profitable business. And quite honestly, we have won some very significant profitable business and we have seen very good volumes in that business on the profitable pieces. So a lot of it is on the performance side.

I would add to that that in combining the two businesses, our leadership took the deliberate strategy of shall we say rightsizing those two businesses where the volumes and the business levels that we intend, we saw coming and were existing rather than sort of waiting for volumes to come back.

[Jeff Rosenbaum], York Capital.

Nice job. A couple quick questions. One, on the quarter on a year on year basis, if you back out the pricing decline of I think $18 million, it looks like the contribution margin overall was like 37 to 38% on incremental revenue.

Is that how we should think about the business going forward? Because I know in the past, I think you had talked about kind of mid 20s but that seems to be much better than that.

As I mentioned, that $18 million that happened in the prior year was included in other income. So it wasn't included in our traditional contribution margin number.

So I think the number we gave you there, the $57 million on a year-over-year basis on $232 million of sales, about 24% is a pretty good number. It's going to vary a little bit depending upon the business and the platforms. But we said previously somewhere 20, 25% is probably a reasonable flow-through for incremental volume.

Next question, I think you touched on it, but on your revised market guidance, is there a reason why the high end of the light vehicle range is still I guess at or slightly below where industry estimates are?

We are now in line with third-party forecasts. We're not trying to be overly optimistic because there's still headwinds that could come our way. But the high end is where the mid to the low end of the industry is and that's where we are comfortable at this stage.

Got it, thanks. Then just last, earlier in the Q&A, you mentioned you were I guess looking to do something with your preferred dividends. Can you clarify that please?

We did in fact do something. We did announce payment of two quarters of dividends in arrears and that payment was made to holders this month.

My comment only reflects that I assume the Board will continue to look at that and probably take some actions in the future. There's nothing that we can disclose at this time because it's up to the Board to decide when and how to pay those dividends.

Got it, thanks much. Nice job.

Emmanuel Rossner, Barclays.

It's Brian Johnson for Emmanuel and a change of roles. Could you give us some sense of -- you mentioned some operational issues in both light vehicle and commercial. What are you doing to address those and then what gives you confidence in EBITDA improvements apart from volume as we go forward?

Without going into too much detail -- it's Jim. We experienced a challenge with respect to an MFO. It's a manufacturing footprint change that we were making with one of our facilities where we struggled to implement correctly.

It cost us in terms of delivery, it cost us in terms of cost. But it is a one-time event and we fully expect that it's fully behind us and as we move into the second quarter, we already know that we're in good shape and it is behind us. It really should be viewed as a one-time event.

And about what did that cost in the quarter?

We haven't put a specific number on that, Brian.

Which division was it in?

The commercial vehicle business.

That is one-time it sounds like because it is switching over change of footprint. The second thing is, can you give us some more color on the below the segment income items and how those might develop through the year? Are these timing issues that might reverse or are we seeing kind of a new level of FX and other we need to be thinking about?

Good question, Brian. The FX is primarily related to the very significant change in currencies that happened in the first quarter. There was an event in Venezuela which dramatically changed the currency down there.

That was a negative to us in the quarter. We don't expect that to continue. And the other big piece of the foreign exchange was we had to mark to market some dividends payable on some of the intercompany loans from Europe back to the United States.

We had put in some stop-losses in that to minimize that impact. But there were some impacts in that quarter.

Most of that money has been repatriated to the United States. So we don't expect to see that to be a continuing issue going forward.

Now that said, if the currencies continue to weaken in Europe, we will see some small EBITDA impact associated with translation coming back. But the items that particularly hit us this quarter were largely one-time impacts that we don't expect to see continuing.

And in the other income, is that ramping up some of your joint ventures or was there something else going on there?

I think that's largely related to the higher pension accruals. We've had to make the non-cash pension accruals that we will continue to see as a headwind. We talked about that in December and on the last call.

Okay, so you're booking that in other income. We could probably expect that going forward, but your guidance of course really contemplates the GAAP pension expense?

Yes, that's correct.

And when you get equity income from your Chinese ventures, will you put it through that line or will you put it in the appropriate business unit that the products relate to?

I actually haven't given that any serious thought at this point in time. But we normally book all of that below the line.

So I don't expect to see it -- it will not flow through into the segment EBITDA that we report because we will not be -- it's unlikely we will be consolidating it.

Okay and when could we expect the actual equity income? It sounds like it's not an accounting issue for this year.

Well as soon as we make the equity investment, then we will begin reporting that. As Jacqui mentioned, we are in the process of discussing that with our partner right now. As soon as we have some further information, we will let you know. I would expect to see something this year however.

Okay, thanks.

Patrick Bartels, Monarch.

Could you just give us a quick update on where you are in your European restructuring and where you are versus the $100 million estimate you gave us on the last call for total restructuring?

Sure, the answer to the first half of the question, we haven't -- through the first quarter, we haven't had any substantial changes in Europe. We expect to see that happen in the back half of the year.

And as it relates to a restructuring in general, you can see we did book some expense and cash in the first quarter. We're on track for the $100 million that we expect to spend.

Akshay Madhaven, Redwood Capital.

Jacqui, just one question on the Bosch JV. I was hoping you could give us a sense for what the addressable market is either in terms of revenue or units?

Well in terms of units, it's probably 60,000 to 80,000 off-highway transmission short-term in the first generation of the transmissions in terms of addressable market.

And may I press you on the revenue opportunity as well?

Revenue I would not be able to put a bracket around at this stage.

Great. And the second question for Jim, your revised EBITDA guidance, I just want to make sure I understand it right. But does it include 1.25 quarters of structures in that 475 to 525 number? Or is it is as if structures didn't exist at all this year?

It includes the $11 million that we reported in the first quarter for structures and it will include the Venezuela results through most or all of the second quarter and then the small impact we expect from Longview on an ongoing basis. So it does include our results as incurred related to the pieces of that business that we owned during the time we own it.

Himanshu Patel, JPMorgan.

This is Ryan Bricman for Himanshu Patel. I was wondering in regards to slide 25 if it were possible if you could comment or speculate about the progression of North America commercial vehicle builds as the year progresses?

We expect commercial vehicle to be -- you've seen it up in the first quarter, slightly down in the second off the first and continue to grow through the year.

Okay and any comments on 2011 or what might be embedded in you sort out-year directional guidance figures?

Not at this stage.

But we sure hope we get lots of orders.

Derrick Wagner, Jefferies & Co.

A couple of different questions. I'll go through them one by one.

How much will the sale of Venezuela roughly bring in and will those proceeds be used to pay down term debt? And how does that term debt actually get paid down?

Is that on a pro rata basis or outstanding? And then secondly, the availability that's on the facility now and then what you paid for the 4% stake in Dengfeng and did you say that you were going to spend 60 to $70 million more?

Let me see if I can answer those and if I missed one or two of those, I'm sure you will remind me. The answer is the term paydown as prescribed by our agreement, it's all pro rata.

It will be paid down. Venezuela, the remaining piece is about $7 million. So it's not a substantive amount.

I will indicate to you that we have not repatriated all of the funds from overseas locations. So there still is further debt paydown to come associated with the pieces we have already sold as that cash is brought back on an expeditious basis for debt paydown.

We paid about $7 million for the first 4% of the DDAC. We said in our disclosures that that agreement at that time suggested in the range of 60, 70, $80 million for the additional 46% to get to 50%.

As Jacqui indicated earlier, we're in the process of negotiating that incremental -- the price of that incremental 46% and once we have that done and we are in a position to announce it, we will announce it.

Okay and then lastly, what is the availability on your facility?

In terms of the availability on our ABL facility?

Yes, on the revolver, yes.

The availability on that in terms of what we have is about $350 million. We've used about 150 of that for letters of credit.

So the excess availability is about $200 million as we stand today. That's included just for clarification. That is shown on slide number 24. You can see in terms of lines of credit that $279 million we show there is about $200 million in the US, the rest in Europe.

Okay, thank you.

Your last question comes from Vlad Shteynberg, Realm Partners.

A couple of questions. First of all, if I try and think about the adjusted EPS number, if I back out the restructuring costs of $19 million a large portion of that $12 million impact from (inaudible) and then some one-time costs on the commercial side that you pointed out too.

I get very close to zero cents per share, just marginally negative $0.02 or somewhere around there. So first of all, can you confirm that (technical difficulty) so based on that and based on the fact that the next few quarters are going to be stronger, (inaudible) position to be EPS positive in 2010?

We aren't giving any specific guidance on our EPS projections at this point in time.

But that logic is right directionally?

I would prefer not to comment at this point in time.

Okay, that's fine. Commercial revenues were up strongly on a sequential basis but the industry production was roughly flat. Could you give me some color on that?

It's basically continuing to pull share through the brand.

Okay. The raw materials outlook, what are your assumptions -- what are your budgets (technical difficulty)

I think your question is probably around what's going to happen with commodity cost exposures?

Correct.

Well certainly like many other companies in this space, we certainly expect that we're going to see increases in steel cost this year. As I think we had shared previously with the investment community, we do have a substantial portion of commodity cost increase covered by our customer contracts, around 75%.

However, with the caveat that many of these contracts have a time lag in terms of the ability or the timing to recover those material cost increases. But having said all of that, we do not expect to have an impact to the 2010 profit outlook we gave to you.

Okay and then two other questions. First of all, just on combining sealing and thermal businesses, can you give us more color on the synergies from that?

We don't break out the specific information on that. There were some significant synergies but I think more importantly, going forward it's the focus that we are placing on where we are investing and the business wins that we have which will drive the real value in that business.

And what is the current revenue for the Dengfeng JV for the overall entity?

We don't provide that. Again, once we get a little bit closer and are in a position to make some announcements on our investment, we will be able to provide more information on that.

Thanks and thanks for raising the estimates in line to the market's expectations of production.

Thanks for your interest. We appreciate it.

There are no further questions at this time. Ms. Etzkorn, do you have any closing remarks?

No, I just wanted to thank everybody for joining us this morning and we look forward to having future conversations with you. Thank you.

This concludes today's conference call. You may now disconnect.