Lear Corp (LEA) 2009 Q1 法說會逐字稿

Good morning. My name is Leslie and I will be your conference facilitator today. At this time I would like to welcome everyone to the Lear Corporation First Quarter 2009 conference calls. (Operator Instructions). Thank you.

I would now like to turn the call over to Mel Stephens, Vice President, Investor Relations.

All right. Thank you and good morning, everyone. Thanks for joining us for our earnings conference call today. By now you should have received our First Quarter earnings press release and financial review package. And these materials have been filed with the Securities and Exchange Commission and they are also posted on our website at lear.com under the investor relations link. Today, our presenters are Bob Rossiter, Chairman, CEO and President and Matt Simoncini, Chief Financial Officer. Also participating on the call today are Dan Ninivaggi, Executive Vice President, Lou Salvatore, President of our Global Seating Business, Ray Scott, President of our Electrical and Electronics, Terry Larkin, General Counsel and Sherry Burgess, Treasurer and John [Trithal], Vice President of Business Planning and Analysis. There are a couple other Lear Executives to help with questions.

During the call we will be making forward-looking statements that are subject to risks and uncertainties. Some of the factors that could impact our future results are described in the last slide in the slide deck and also included in our SEC filings. In addition, we will be referring to certain non-GAAP financial measures. Additional information regarding these measures can be found in the slides at the end of the deck labeled non-GAAP financial information.

If you'll turn to slide number two, here we lay out our agenda for today's review. Matt will cover our First Quarter financial results. Then Bob will provide will provide some summary and outlook comments. And following the formal remarks , we'll be happy to take your questions. So now if you'll please turn to slide number four, I'll turn it over to

Thanks, Mel. I'll start with a brief overview of our First Quarter. Business conditions and global automotive production levels remained severely depressed this the First Quarter. In this difficult environment, our net sales were down 44% to $2.2 billion and our core operating earnings were negative $67 million. Industry production was down in all of our major markets. In response to lower production we accelerated our global restructuring and cost reduction efforts.

Given the lower production in North America and our continued efforts to expand our business in Asia, 68% of our revenue in the First Quarter was generated outside of North America. We ended the quarter with cash and cash equivalence of $1.2 billion, as compared to approximately $1.6 billion at the end of last year. The decline reflects negative free cash flow in the quarter and a termination of our accounts receivable factoring facility in Europe. Later in the presentation, I will provide an update on where we stand in terms of our overall capital restructuring.

Slide five provides a little more detail on the present business environment. Amid very challenging conditions globally, the auto industry is struggling to overcome a sales and production environment that is below replacement levels and not at a sustainable rate. Automotive industry sales remain the most depressed in the United States with present sales running at an annual rate of 9.5 million units. As a result, there was significant production down times during the First Quarter and further plant down time has been scheduled for the Second Quarter. For the second half of the year, however, industry forecasts calls for sales and production to improve. For the full year, CSM's current industry outlook is about 8 million units in North America and 15 million units in Europe. In this depressed environment, major auto makers have announced further restructuring actions, including the elimination of brands, vehicle program delays and cancellations, reductions in dealers and further capacity actions. This restructuring and consolidation has created a very challenging environment in the near term which should result in more stable and sustainable business conditions for the industry over the longer term. During the quarter, Chrysler voluntarily filed for 11 Eleven as part of a US Government supported plan of reorganization. General Motors is presently pursuing a readvised restructuring plan to secure further financial support from the government.

Slide six provides detail of the First Quarter industry production by major market. Global industry production was down 36% in the First Quarter as every major market experienced a decline. In North America, industry production was down 51% with a domestic three down 55%. In Europe, industry production was down 40% and in South America, industry production declined 18%. In Asia, industry production was down 29%. However, Lear's major market in the region, China, was only off 2%.

If you please turn to page seven. With the sharp lower industry production, our financial results were adversely impacted despite our aggressive restructuring and cost reduction efforts. In the First Quarter our net sales of $2.2 billion and our cooperating earnings were negative $67 million. We continue to achieve increased benefits from our restructuring initiative as well as other ongoing cost reductions, however, these favorable factors were not enough to the offset the steep declines we experienced in production. Free cash flow in the quarter was a negative $219 million. As I mentioned earlier, industry forecasting services that we follow are calling for an improvement in the second half industry production globally. While we are not providing four-year financial guidance at this time, we expect restructuring cost for the year to be in the range of $175 million and free cash flow to improve sequentially.

Slide number eight provides our financial score card for the First Quarter. Starting with the top line, we posted net sales at $2.2 billion down $1.7 billion or 44% from last year. The decline reflects sharply lower production globally. Our reported pre-tax loss was $257 million. Our net loss after taxes was $265 million or $3.42 per share. These reported results include restructuring cost and other special items.

On the next slide I'll show our results excluding special items to highlight our underlying operating performance. Reported SG&A cost were down about $21 million or 16%, reflecting census reductions and other cost improvement actions. SG&A costs adjusted to exclude special items were down about $32 million or 24%. Interest expense was $56 million, up $9 million from last year, primarily due to higher borrowing levels. Depreciation and amortization at about $66 million was down $9 million from a year ago, reflecting a lower trend of capital expenditures. Other expense was about $13 million compared with $2 million a year ago. The increase reflects primarily increased losses at our IAC joint ventures offset in part by favorable foreign exchange.

Slide number nine shows the impact of restructuring and special items on our First Quarter results. Our reported loss for interest, other expense and income taxes was $188 million. Excluding restructuring costs of $115 million and other special items of $6 million, our core operating earnings were negative $66.7 million, compared with positive earnings of $186,500,000 a year ago. The decline in cooperating earnings reflects the lower industry production globally offset in part by favorable cost performance including increased savings from restructuring actions.

Slide ten summarizes the impact of major items on our First Quarter sales and margin compared with a year ago. Again, the major adverse factor resulting in lower net sales was lower industry production in America, Europe and other markets. Foreign currency translation also had a negative impact on sales. Margins were adversely impacted by the lower industry production globally. Favorable operating performance, including restructuring saving, was a partial offset.

Let me comment briefly on what has been happening with our new business. In January, the status of our three-year backlog was $1.1 billion with zero net new business for this year reflecting new business wins outside of North America being offset by lost programs in North America. While our overall 3-year backlog remains in the $1 billion range, net new business for this year is likely to be negative by about $150 million reflecting pro rib delays and deferrals as well as lower industry production.

Slide 11 shows what is happening within our product segments. The segment earnings shown on both a reported and an adjusted basis which excludes cost for restructuring as well as other special items. To help understand our underling operating performance, we have also provided adjusted margins. In our seating business, sales were down 42% and adjusted margins declined from 6.5% to 1.4% compared with a year ago, reflecting primarily lower industry production levels globally. A partial offset was the benefit of restructuring as well as ongoing cost improvement actions. Longer term, we expect our seating margins to improve as the industry recovers and we realize benefits from our cost improvement growth in the market.

In our electrical and electronics business, sales were down 49% and adjusted margins declined from 5.5% to negative 12.6%. This reflects the impact of lower industry production. As you know, last year we initiated a strategic improvement plan for this business. While we made progress in improving the cost structure of this business, the steep downturn in production volume has made increased scale a strategic priority. Accordingly, this business is in transition from a sub scale sales level to critical mass as we implement our global sales growth plan and we see the benefit of hybrid technology penetration. In time, we see our electrical and electronics margin improving as industry production improves we bring online a significant backlog of new business and further improve our cost structure.

Please turn to Page 12. Precash was negative $219 million in the First Quarter compared with a year ago free cash flow was adversely impacted by extended holiday shut down, lower industry production levels and lower earnings. We expect free cash flow to improve sequentially this year with the Second Quarter being less negative than the First Quarter and the second half being up considerably less adverse than the first half. Our liquidity position at the end of the position remains strong with cash and cash equivalence of approximately $1.2 billion. Again, this compares with approximately $1.6 billion at the end of last year. The decline in our cash balance reflects a negative cash flow during the quarter and a termination of our accounts receivable factoring facility in Europe.

Let me turn now to our capital structure. Yesterday we announced an extension of the waiver of covenant defaults through June 30th. We recognize we have to address our debt structure, although our liquidity remains strong. We continue to explore alternatives with our lenders and others to restructure our debt outside of bankruptcy. This is our strong preference.

I'll turn it over to Bob for some summary comments and then we'll be happy to take your questions.

Thanks, Matt. To summarize, obviously the global business conditions continue to be very challenging. With sharply lower sales and production in all our major markets. This response, we're following a lien operating structure and a targeted investment strategy. We also are accelerating and expanding our cost improvement and global restructuring actions and we have eliminated significant cost. It's been painful, but unfortunately necessary. At the same time, we are maintaining our focus on key operating priorities including continued diversification of our sales, further evolution of our low-cost footprint, investment in new technologies, selective vertical integrations in seating, and actions to strengthen and grow our electrical electronics businesses. And this entire Company is focused on cash and minimizing cash burn during these difficult times, and we have had exceptional success.

Discussions with our lenders and others regarding a restructuring of our capital structure is continuing. As Matt mentioned, it is our strong preference to accomplish this out of Court. Before we take your questions, I would like to sincerely thank the entire Lear team for their dedication, hard work and perseverance in the face of unprecedented challenges. We have endured many sacrifices with the conditions before us and I truly appreciate the extraordinary effort being put forth. I'm confident we will withstand the downturn and be positioned to take advantage of the recovery in the industry and sales and production. Now we'll be happy to turn it over to you for questions.

(Operator Instructions). Our first question comes from the line of Himanshu Patel of JP Morgan. Your line is open.

Hi. Good morning, guys.

Hi, Himanshu.

The $1.2 billion in cash, Matt, how much of that was held at the hold Co. Versus overseas?

We're not going to get into that level of specifics. But we have enough cash and it's in the locations to fund our international operations. We have pulling at international, Himanshu, like most corporations and we have it in the locations where we need to fund our operations.

Okay. And then can you just talk us through how you're working with capital swings by quarter for the rest of the the year? Obviously we have some production shutdowns here. But when production resumes in the Third Quarter, would that be the quarter when we should think about a big outflow?

Not necessarily. It's as much as the cadence of the sales within a quarter. Right now we actually see from our standpoint we see that production overall is kicking up. And that will generate cash in the back half of the year. Working capital is also tied -- quarter working capital is also tied on a little bit of the cut off on the month end. For instance, we're on an accounting, Himanshu. This quarter, for instance, was impacted by two things. First and foremost the cadence of sales within the quarter since most of the shutdowns that we experienced in December extended well into the year. Both sales were largely in receivables at quarter end. The other thing that happened was our calendar cutoff for the quarter was April 4th, and that's why the balance sheet is dated in the press release. That picked up an additional payment run, so to speak, mainly out of Europe. All in all, we don't see right now a significant cash outflow for working capital in Q3.

Okay. And then on the restructuring spend, I think at the start of the call you said the total cost would be $175 million for the full year. Was that the cash cost you're referring to?

No. Cash cost will be a little bit less than that. A good chunk of our charges in this quarter was a non-cash charge related to certain pension obligations with various facilities.

How much was the cash restructuring spending this quarter?

About $50 million.

And for the full year you would say maybe like $150 million or so?

Yes. That's a good ballpark.

Okay. And then last question, from your perspective, CapEx is low right now. What is the minimum maintenance CapEx in your view for the business?

Well, we're doing more of the minimum maintenance CapEx. What's driving the CapEx more than anything is the backlog in the program delays. Obviously we're also very cash focused and conscious during this time. But the reduction of production has also freed up some component manufacturing capacity, which has allowed us to reduce our capital expenditures. Historically we talk about CapEx in the range of 1.7% of revenues. Last year we were able to bring that number down. I would still look at the lower end of the range that we had given in the past of 1.5% of revenues. And we're pretty comfortable doing that even in the depressed revenues numbers that we expected to see this year.

Okay. I'm sorry. Maybe one last one. I don't know if you guys could even talk around this. But on the debt restructuring, I understand you're in a situation now where you can't talk too much about it. But does a potential bankruptcy of General Motors influence your decision on whether or not you would like to try to do this out of Court or in Court or is that an independent issue in your eyes?

It's an independent in our eyes.

Okay. Very good. Thank you.

Thank you. Our next question comes from the line of Patrick Archambault of Goldman Sachs. Your line is open.

Hi. Yes, two questions. First, can you just provide a little bit of an overview. Obviously you guys had some pretty significant restructuring benefits accruing year on year and First Quarter. Can you give us a little color on sort of how those were split US versus Europe? And how we can think about those benefits going forward? So far a lot of companies have reported really good progress in North America but have been struggling somewhat in Europe just as the restructuring actions there take more time. And I wanted to just get your take on that.

Let me -- no problem, Patrick. Starting with your restructuring program overall, through last year we had spent about $580 million and invested about $580 million in restructuring actions. In the past we said we need to think about the savings and two and a half year pay back. We have cumulative savings last year in about $250 million. Now, that was split relatively 50/50 between seating and electrical as we moved some of our high cost locations into more cost competitive regions of the world. This year of that $175 million, it's probably split two-thirds to a third Europe. From a savings standpoint, we expect the savings to come in this year about $30 million a quarter on average. And a lot of those savings are actually benefiting from actions that we took in previous years. Again, the savings are probably skewed in the same overall split of about two-thirds to a third Europe. Two-thirds North America, one-third Europe.

Okay. Great. And $30 million is more or less the number like just in terms of the incremental structural cost?

Year-over-year.

Year-over-year. Okay.

Year-over-year. We expect that to be fairly consistent. The reason the First Quarter is so high, we assumed in our plan certain plant closures that were pulled ahead as a result of the customer out ahead of a plant closure.

Okay. Great. And That's helpful. And one follow-up. With the significant downtime at Chrysler and at GM, there is concern about a working capital crunch out in sort of late August and maybe September. Just given the general difference between payables and receivables I wanted to see if that's something you generated and how we should model that from a working capital perspective?

We have anticipated it. We've run the models. The first thing -- a couple back drops I would like to provide, though, we have $1.2 billion of cash and cash equivalence. We expect the cash burn in light of even the production cuts that have been announced to improve each quarter sequentially taking into consideration even the timing of the production cuts. The other thing that's important to note is from a percentage standpoint and a raw dollar standpoint, we don't have a whole lot of business with Chrysler anymore from a percentage standpoint, it's pretty low. It's pretty low. GM we do obviously have a lot of business with GM. We factored in the shutdowns. We do do think there will be a slight use of working capital in the Third Quarter but again we do expect overall cash flow to improve in the quarter.

Any chance you can give us the receivables that you have out to -- excuse me -- GM and Chrysler? And then if you can remind us if you've participated in the treasuries receivable insurance program?

We have participated in both the GM and Chrysler receivable program. From a receivable standpoint, it's really hard to give you an exact number because it depends on production levels and the timing of the month in relation to when you get the payments. GM currently pays once a month on average. And so if you did the math based on our sales volumes, global GM volumes are around 20% of Lear's total sales. If you did the math you would get back a number of anywhere between $75 million to $150 million at any given time globally with general motors. If it's right after the payment, that amount would be significantly lower and if it's right before the payment, that amount would be higher. We believe we don't have our exposure both with Chrysler and GM is very manageable.

Okay. Great. All right. Thank you very much.

Thank you. Our next question comes from the line of Brian Johnson of Barclays Capital. Your line is open.

A few questions. First, why is the quarter closing on April 4th, a Saturday this month, this quarter?

We close every quarter during the year on an interim basis on what we call an accounting close which is a 4-4-5. It's pretty common in the industry. It's actually pretty common outside of the industry for most publicly traded company. Because it allows you to manage your work flow accordingly. We cut off every quarter on a Saturday at midnight. That has been consistent for many, many years. At year end, however, we keep it open to the exact date of 12-31. This is a very acceptable accounting treatment that many, many public companies do and it's acceptable for the SEC.

Okay. And in your release, can you tell us anything about the alternatives per cap structure? And when you say you're talking with lenders and others, does others just mean bankers and lawyers or would others include other potential new sources of finance.

What we mean by other certain potential and financial partners, all alternatives mean all alternatives. We're look at everything. And I don't want to talk about the specifics of those alternatives.

Have you been approached or are you approaching someone who might be willing to put new money into the company?

We have been approached.

Okay. Thanks.

Thank you. Our next question comes from the line of Rod Lock of Deutsche Bank. Your line is open.

Good morning. Can you repeat that number you gave earlier on your receivable exposure to GM North America.?

I'm sorry, Rod. You broke up a little bit.

The receivable exposure to GM North America. I think you mentioned it earlier but I missed it.

Yes. It really depends on production levels and timing in relation to the payment. Rod, our global sales to GM which used to be in the 24%, 25% range with the recent production cuts and what have you is probably closer globally to about 20%. To do the math depending on where we are and what we're producing in the quarter, it can be anywhere from $75 million to $150 million at this current production levels depending on where you are in relation to that payment.

That's just the North American receivables, right? Not global?

That is the international receivables. That's global.

That's global. Okay.

Uh-huh.

All right. And you said you're participating in the program the receivable guarantee program. Are you also participating in that factoring program and how are you accounting for that?

We're doing the guarantee program.

So can you charge -- you charge yourself basically another 2%.

Right. But we haven't -- yes. Per invoice. But we haven't really -- it's just taken -- I'm looking at Shari. Our Treasurer. Rod, it's only really paid on a partial invoicing from Chrysler. The GM thing is not obviously up and running yet.

Yes. The program wasn't up and running even for Chrysler until late in April. So all of the participation will show up had the Second Quarter.

Okay. And there was a report yesterday, I think it was on debt wire, saying that the waiver precludes you from paying a coupon on the bonds. Can you just talk about whether that's correct and does that mean that basically you would have to restructure your debt inside of a 30-day grace period? How does this sort of play out from here?

Your understanding is correct. We haven't made a decision on the payments. We're continuing to evaluate all alternatives, taking into consideration market and industry conditions. Now, those conditions are starting to show some signs of stabilization and improvement. Our plan and timing of it will largely depend on how the dynamics play out, Rod.

But it could extend beyond a 30-day grace period.

It could. It could.

Okay. And just lastly on the content per vehicle decline, could you just speak generally just given the situation that the Company faces. Is that affecting your backlog in anyway? Obviously there's not a lot of new business being awarded to anybody nowadays. But just generally how do you see the Company's positioning relative to winning new business and retaining existing business?

There hasn't been a whole lot of sourcing awards going on in the industry overall. The cadence of production awards has slowed. We did continue to win business in the quarter, but there was not a whole lot being sourced. Our ability to win new business I think is extremely strong, just because of our global footprint in the products we offer and the position that we're in. Electrical electronics we've got a great product offering and a very good footprint in global reach. And seating we're one of the two true global providers with a great component capability and low cost footprint. So from that standpoint, we really -- we think we're in really good shape, Rod.

From the decline in the content per vehicle, it's really just a mathematical decline. And what I mean by that is we obviously don't sell to the industry. We sell to specific car lines. But content will flow with the products that you're on and in the rotation rate for large or luxury vehicles in Europe probably heard that in the quarter. The longer term the reality is the content in these products whether they're electrical distribution is increasing dramatically and the content on our seats are increasing dramatically as people put higher end seats in the entry level vehicles and we put more of our components on those.

Have you been able to try triangulate late this 24% decline in GM models that they've been talking about? How are some of these rationalizations going to affect you?

It's been hard to tell. We've been closely monitoring it. We don't have a whole lot with Pontiac and Hummer for that regard. But we're keeping an eye on it. And at this point it's still too early to tell. Now, what's been announced to date has not had a meaningful impact on us.

Great. Okay. Thank you.

Thank you. Our next question comes from the line of Chris Ceraso of Credit Suisse. Your line is open.

Thanks. Good morning.

Good morning, Chris.

Is it conceivable that your operating profitability, core operating profitability gets worse from Q1 to Q2 because the concentration of downtime at GM is on the big trucks?

Yes, it could. What we're seeing right now for the Second Quarter is somewhat consistent with Q1. But it's important to understand, and this is extremely fluid environment, it seems to change by the day. What they produce, how they produce it, these things all impact us. Plus, it's not just General Motors. We have a global business and more than half of it is throughout the US. We're starting to see recovery signs in Asia and that should help, specifically in China. Europe is still tenuous. And even though the numbers are starting to stabilize a little bit, the mix of how they take and how they take the product out will impact us. So, right now it could get worse in the Second Quarter, but we're seeing a fairly consistent quarter in Q2 right now based on what we know today.

You mentioned GM globally was 20% of your sales. How much of that is North America and how much is Europe?

Europe is probably 5% of that.

Okay. I guess there haven't been a lot of awards lately. But over the last year maybe, what's your success rate been in getting contracts with commodity protection?

We're not going to get in that level of specificity. But we have won. We do protect ourselves in many cases on the commodity increases. In fact, on the wire we typically have a built-in hedge. We work with our customers with commodity exposures when we have them. We did not bear the full brunt, obviously, of the spike that we saw last year in metals because of our ability to work with the customers and find fair solutions. In the last two years, we've been averaging business wins of about $1 billion a year. So we've been very successful with continued penetration in the market. And, like I said, our commodity impact last year was extremely light in comparison to the significant increase we saw in the metal market.

Okay. Last question you mentioned in the outset that you're trying to dial up your restructuring efforts. Are you constrained in anyway by your cash position? Restructuring has been a big cash outflow for you. Is there more that you'd like to do but you can't because you don't have the cash?

No.

Okay. Thank you very much.

Thank you our next question comes from the line of John Murphy of Merrill Lynch. Your line is open.

Good morning.

Hey, Murph.

A question on the ARs here in Europe. There is $138.5 million that you had to pay back on that receivables facility and you haven't included that in your free cash flow number. What was the age of those receivables? Is that really old? Is that why you're pulling it out from the quarter? Because it seems like receivables in a facility like that would be intra quarter anyway.

No, I think, let me get the math correct and then I'll kick it over to Shari. I believe the loss was $144 million specifically. 144 specifically in the quarter. Those receivables weren't old. What it was was a factory program for certain of our European customer receivables. Now, the European receivables are usually longer than the US just by normal business operations, and we adjust our payments to the suppliers the same way. So the business conditions in Europe typically a receivable is 60 days but it's not uncommon to have them as long as 90 days. These were normal course term receivables, Murf.

Yes. And it was a typical financing arrangement, a factoring arrangement in Europe and they were ongoing current receivables that had been factored and the program was discontinued this quarter with the distress in the industry. That's all.

We don't have a past due issue in our receivables in anyway.

Okay. So you're not -- so these were receivables that were originated in the quarter, put in the facility and the facility was terminated. So you're backing that out of the working capital for the quarter? I mean, it seems like it should be included in the working capital change in the quarter.

It was receivables at year end of roughly $144 million.

Okay.

That's how the math would work.

Gotcha.

Right.

If we look at the waivers you've gotten from the banks here, I know you can't talk about it too much, but should we assume that the maturities that you got scheduled out last year in July still 468 on March 23, 2010 and 822 and January 31, 2012. Is that sort of the same set of assumptions and it's just a waiver to June 30th?

Yes.

And then if we look at the mix, GM produced [190,000] which is an $800,000 a year run rate. That's an incredibly rich mix in the quarter. Where do you see that going in the Second Quarter and then in the Third Quarter as they're really pulling back?

Well, I'll tell you where CSM sees it going. CSM with the announced shutdown of GM facilities, they see the production at G2 at roughly 100,000 units and then moving up to about 150,000 in Q3 and Q4 which would put a total year number around a platform of 600,000.

Okay. And then, lastly, when we look at the electronics business, you alluded to the fact that you needed to gain some scale there. Is that scale two X, three X or is it 50% larger. What is sort of the magnitude of the scale that you think you need to pull together that would make that business really, really hum? And if you can't do that internally, might this be a set of assets that would be up for sale to raise capital here?

The way we look at it, our January backlog for that segment is roughly $0.5 billion. That would be a nice, nice step as we bring it in. We also think there's a lot of opportunity increase content per vehicle driven by a couple factors. The vehicles are getting more electronics and each electronic needs a circuit to connect to -- electrical circuit to connect to and put more content into the vehicle. We think that's a growth opportunity. The penetration of hybrids is the wild card ride now. But the way it typically works in the designs that we're seeing and we have some pretty fascinating stuff going with Bolt and [Fisker] on is its electrical system is redundant. It's a duplicate. The electrical system that sits on top of the low voltage system. As far as the scale, double would be great and we think it's achievable.

Tripple would be better.

Uh-huh.

Okay. And is that something that you would consider selling and getting back the core seats or is that something that is wound up in seats?

No. We think it's core. And we're going to grow the business.

Great . Thank you

Our final question comes from the line of Brett Hoselton from KeyBanc.

Good morning. Just so I'm clear on this, it sounds like there is no question in your mind as you move forward sequentially. Is that a correct understanding?

That is a correct understanding.

Can you characterize the order of magnitude versus where you were in the First Quarter in?

Yes. It's kind of hard. I'm trying to stay away from pinpoint guidance. Obviously there's a lot of fluidity in the number which drive the cash flow right now, Brett. But right now I would expect a 20% improvement in the Second Quarter number. What we see today from the First Quarter or another magnitude order of magnitude you could use the range of 35% to 45% of the cash burn that we expect in the year to be in the First Quarter.

Okay. And then as far as your supply base is concerned, obviously you typically have a dollar amount that you spend on your distress supplier cost. Can you provide us with an idea of where you're at in the First Quarter and where is that relative to where you've been previously, whether it be last quarter or last year?

Yes, I can. Just to put a frame of reference on it and tie back from the statements we've made in the past, in the Fourth Quarter last year we talked about a spike up in some of the distressed costs. In 2005 was the worst year of distressed cost for Lear corporation in recent history. A disproportionate amount came from interiors. At that time the distressed combination of operating subsidies as well as cash flow to support businesses that were in trouble was about $50 million. '06 we saw those costs come down in half. In '07 we actually were nil. And then last year in the Fourth Quarter we saw a step up. And that step up I think at the time was less than $10 million. And we said we could anticipate at year end 2009 becoming more like in the range of $40 million to $50 million. Our quarter costs this year First Quarter costs this year were less than ten, probably in the range of five. There is an obvious increase in that activity. But the one thing that's important to note is we've gone through some difficult actions combined with the divestiture of ISD, we've consolidated our supply base fairly significantly. There has been in the prior years obviously a rash of unhealthy suppliers that have ceased to exist or have been managed out of our supply base. To make a long story short, we see possibly our thinking is that it could be possibly as high as the '05 time frame and that's kind of what we're seeing. We did not get hit significantly in this quarter, however.

Thank you very much, Matt.

Okay. I'll just wrap it up. First off, Matt, you did a great job. Really good. Finance team , thank you for the job you're doing. Operating guys, you're doing a special job in minimizing the cash burn for the whole company it's been exceptionally good. I mentioned only that since there's hardly anybody left on the call probably. But liquidity position of this company is very strong. North America, Europe and in every market we operate in in the world. So there should be no concern about Lear's ability to pay.

Secondly, there is opportunity out there for us. I really and truly believe that things are going to start stabilizing soon. And we're going to take advantage of that. So just keep focused. Do what we have to do. Stay positive. And it's

Thank you.

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