Visteon Corp (VC) 2010 Q4 法說會逐字稿

Good morning, and welcome to the Visteon Corporation fourth-quarter and full-year 2010 earnings conference call.

All lines have been placed on listen only mode to prevent background noise.

As a reminder, this conference call is being recorded.

Before we begin this morning's conference call, I'd like to remind you, this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future results and conditions but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements.

Please refer to the slide entitled Forward-Looking Information for further information.

Presentation materials for today's call were posted to the Company's website this morning.

Please visit www.Visteon.com/earnings to download the material if you have not already done so.

I would now like to introduce your host for today's conference call, Mr.

Michael Lewis, Vice President, Treasurer and Director of Investor Relations for Visteon Corporation.

Mr.

Lewis, you may begin.

Thank you, and good morning, everyone.

Welcome to Visteon's fourth quarter and year-end conference call.

Presenting today we have Don Stebbins, our Chairman and Chief Executive Officer, and also Bill Quigley, Executive Vice President and our Chief Financial Officer.

With that, welcome, and I'd like to turn this over to Don.

Thank you, Michael, and good morning.

During today's presentation, I will review Visteon's 2010 highlights, and then I will turn it over to Bill for the financial review.

First, let me say that we are very pleased to speak with you today.

As you know, we emerged from Chapter 11 on October 1 of last year and we began trading on the New York Stock Exchange on January 10, and today we are filing our first 10-K as a new entity for Financial Reporting purposes.

As we take you through our 2010 financial results, you will notice year-over-year improvement in almost every key metric, as well as a very unique position in the current marketplace.

We have innovative technologies, a low-cost manufacturing and engineering footprint, valuable customer relationships, and a strong presence in the rapidly growing Asian markets.

As this slide states, we believe our past accomplishments have positioned Visteon for future success.

First let me talk a little bit about our 2010 restructuring.

During the last year, we were able to address our balance sheet.

Our debt and OPEB liabilities were reduced by over $2.4 billion, and at year-end, our net debt position was a negative $418 million, reflecting a year-end cash balance of $979 million.

As you know, since the end of 2005 we have restructured over 50 facilities.

In 2010 we exited 6 manufacturing facilities, the majority of which were in North America.

Additionally, we exited our services agreement with the Automotive Components Holding Group.

But our 2010 highlights were not all restructuring-related.

Gross margin improved on an apples-to-apples basis by over 150 basis points to 8.7% while our SG&A decreased 70 basis points to 5.1% of sales.

Free cash flow was an outflow of $35 million in 2010, slightly worse than 2009, but 2010 was impacted by $335 million of Chapter 11-related cash outflows, so excluding these items, free cash flow improved considerably versus 2009.

Slide 4 presents our consolidated sales by product group, by region, and by customer.

At the bottom right of the slide is our market penetration by customer, which includes both our consolidated and non-consolidated sales.

In 2010, Visteon's consolidated product sales totaled $7.3 billion.

We also had $3.5 billion of sales at our non-consolidated affiliates, increasing our market penetration to $10.8 billion.

As you can see, we have a well-balanced distribution of sales by product, by region, and our global customer base continues to diversify.

Climate is our largest product group, and its share of total sales increased from 38% in 2009 to 44% in 2010.

Asia is our largest region, at 40% of total sales.

While we have substantial relationships with General Motors, Mazda, PSA, Renoni, Sun and VW, our two largest customers are Hyundai-Kia and Ford.

Slide 5 takes a closer look at Visteon's regional product sales for 2009 and 2010.

Visteon sales increased from $6.4 billion in 2009 to $7.3 billion in 2010.

Sales increased in every region, with the exception of North America, where divestitures and closures executed during the course of our reorganization had a significant impact.

The majority of our year-over-year increase occurred in the Asia-Pacific region, where consolidated sales increased $789 million to a total of $3.1 billion in 2010.

The Asia story is even more pronounced, if sales at our non-consolidated affiliates are included.

A majority of our affiliates, including our largest affiliate, Yanfeng Visteon, are in the Asia-Pacific region.

In total, $3.3 billion of the $3.5 billion non-consolidated sales are in Asia, driving the Asia percentage of total sales up to 56%, 8 points higher than its share of total sales in 2009.

Slide 6 highlights how well our sales are balanced when compared to global production levels.

You can see that in 2010, 49% of global automotive production was in the Asia-Pacific region, while 40% of Visteon's consolidated revenues were in Asia.

And when we include our non-consolidated affiliates, 56% of our sales are in the Asia Pacific region.

Slide 7 provides an overview of our Asian operations.

As you can see, we have a very significant and growing presence in the region, with 57 facilities and over 20,000 employees.

Visteon consolidated sales dipped to $2.3 billion in 2009, as production volumes fell on the first half of that year, but increased nearly $800 million in 2010.

Visteon's non-consolidated sales in Asia have grown steadily but in 2010, they increased significantly, almost 70% to $3.3 billion, giving us a market impact of $6.4 billion in the world's largest automotive market.

One of the highlights in 2010 was our participation in a variety of technology shows around the world.

At customer events in Europe, China, Japan, India, and Korea, we displayed our See Beyond vehicle.

The See Beyond vehicle showcases innovative products from all of our product lines, highlighting connectivity, sustainability, and the improved user experience.

There are more than 40 innovative products on the vehicle.

And despite our being in Chapter 11, we spent 2010 developing our latest concept vehicle,one designed for the emerging markets, which was unveiled in January.

This vehicle which we call The Growth Market Car showcases innovative technologies for the emerging markets and offers enough modularity to allow us to address various customer and regional differences.

The Growth Market Car made its US debut at the 2011 International Consumer Electronics Show in Las Vegas.

As you can see from some of the headlines on slide 8, the response to the exciting new technologies has been very positive.

Both the See Beyond and the Growth Market Car will be featured at the Shanghai Automotive Show in late April.

Additionally, we received 2 awards.

One from Toyota, recognizing our noise reduction technology, and our engineers were recognized by the Society of Plastics Engineers for their development of a self-reinforced airbag door currently used on the Citron C5.

These technologies shows have highlighted many of the innovative future products and technologies which we are presently working on, but we're also excited about the products that we're launching this year.

Slide 10 highlights a few of the vehicles that we'll be launching in 2011 and below each vehicle are the Visteon products that can be found on each.

This year, we have approximately 100 different launches, representing almost $1 billion in revenue.

Slide 10 highlights 2 of our latest technologies from 2 of our product groups.

First is our new lightweight electric compressor.

Our integrated solution meets the demand of hybrid and electric vehicles while maintaining the performance levels of traditional belt-driven compressors.

BMW, Hyundai and Kia are current customers.

Second is our reconfigurable cluster, featuring a 12.3-inch TFT display.

This display integrates multiple functions and operating modes to present driver information via virtual gauges and graphical displays.

Range Rover and Jaguar are current customers.

Slide 12 highlights our three-year backlog.

We continue to win new business while we're in bankruptcy and our $700 million backlog is defined as new incremental business, less lost business.

The majority of our backlog is in the Asia-Pacific region and 3 key customers, Hyundai-Kia, Ford, and PSA represent over 80% of this backlog.

And although not shown on this slide, the majority of the backlog is in the climate product group.

We remain confident that our three-year backlog will continue to increase, because since our emergence, we've been added to customer sourcing panels.

We've been removed from new business holds.

We've been asked to assist customers with distressed suppliers, and we have received numerous unexpected new business quotes.

Should be noted of course that this backlog is for our consolidated entities only, and does not include any new business that will impact our non-consolidated affiliates.

As we look at Visteon today, we see a Company with a strong product and technology portfolio, and outstanding manufacturing and engineering footprint, a significant and diverse customer base, and a financial profile designed to enable us to compete and to move the business successfully forward.All with the objective to create additional shareholder value.

We truly appreciate the support of our customers, our suppliers and our partners over the past few years and we believe that Visteon is well positioned for the future.

We'll now turn it over to Bill to review the fourth quarter and full year financials.

Thanks, Don and good morning, ladies and gentlemen.

I'd like to spend a moment to review the presentation of our 2010 financial statements.

As Don stated on October 1, 2010, Visteon emerged from Chapter 11 and became a new entity for financial reporting purposes.

Accordingly, in our 2010 Form 10-K, which will be filed later today, Visteon's consolidated financial statements will reflect both successor and predecessor reporting.

Successor reporting reflects the consolidated financial results of Visteon, post the effective date of emergence from Chapter 11 while predecessor consolidated financial results reflect those prior to emergence.

For purposes of our discussion today and as highlighted in our press release, we have combined both predecessor and successor financial information for purposes of comparing our 2010 financials to the prior year.

Visteon's 2010 combined fourth-quarter results include $1.056 billion of favorable reorganization items.

These items, principally gains related to the settlement of obligations, previously recorded as liability subject to compromise, in accordance with our plan of reorganization, and the impact of the adoption of fresh start accounting, are detailed at the bottom of this slide.

Our combined financial results also include a net benefit of $79 million, the items comprising this amount detailed at the bottom right of the slide.

These items include $146 million expense reduction related to the termination of post-retirement employee benefits, offset by $26 million of non-cash inventory fair value adjustments pursuant to fresh start accounting, $14 million of post emergence expenses related to our Chapter 11 proceedings, and $27 million of restructuring expenses, including $24 million for employee severance and termination benefits at a European interiors facility.

As I move through the remainder of my presentation, I will refer back to a number of these items, some of which impact our reported gross margin and SG&A.

Finally, it is important to note that all of these items are excluded from Visteon's 2010 adjusted EBITDA performance.

Slide 15 provides a summary of our combined 2010 fourth-quarter and full-year financial results as well as a comparison from the 2009.

Full-year 2010 product sales of $7.323 billion were just over $900 million higher than 2009, with the vast majority of the increase occurring in the first half of 2010.

While production volumes increased, our fourth-quarter 2010 product sales were lower than the same period in 2009, largely reflecting the impact of divestitures and closures completed in connection with our reorganization and restructuring initiatives.

Product gross margin was $807 million for 2010 to $214 million improvement over the prior year.

As highlighted on this slide, gross margin in each of the periods presented included expense reductions related to Visteon's termination of post-retirement employee benefits.

In 2010, expense reductions associated with these actions totaled $133 million in the fourth quarter and $198 million for the full year.

The same periods in 2009, these expense reductions totaled $133 million.

Taking this into account, 2010 full-year gross margin improved by almost $150 million over 2009.

These benefit termination actions also impacted our SG&A performance for 2010, SG&A totaled $395 million compared to $331 million in 2009, an increase of $64 million.

As we've highlighted here on this slide, this increase is entirely explained by OPEB expense reductions recognized in 2009, a benefit of $62 million compared to an increase in expense of $5 million in 2010.

In 2010, restructuring-related costs for facility exits and cost-reduction initiatives totaled $27 million in the fourth quarter and $72 million for the full year.

In 2009, the net benefit from this line item of $84 million includes net restructuring charges of $22 million and a gain of $95 million associated with the deconsolidation of our UK operations in the first quarter of 2009.

Our financials also reflect reorganization items associated with our Chapter 11 proceedings and emergence.

On a full year basis, we recognize a net gain of $933 million in 2010 of which $1.56 billion was recognized in the fourth quarter.

Full-year 2010 net income, which included the impact of expense reductions associated with OPEB as well as restructuring-related and reorganization items was $1.026 billion.

Adjusted EBITDA, which excludes these items, was $614 million for the year, $160 million higher than our 2009 performance.

And in 2010, free cash flow was a use of $35 million reflecting a use of $141 million in the fourth quarter, largely impacted by cash outflows of $247 million related to Visteon's emergence from Chapter 11 in October.

Slide 16 provides comparison of our product sales for the fourth quarter and full year of 2010 and 2009 as well as the distribution of sales of our region.

2010 full-year sales totaled $7.3 billion, an increase of $903 million over 2009.

Sales were higher in every region with the exception of North America, which was impacted by divestiture and closure actions we completed in both 2009 and 2010.

As Don highlighted in his comments, Asia-Pacific represents 40% of Visteon's total 2010 consolidated sales, 6 percentage points higher than a year ago.

Europe and North America accounted for 36% and 17% of 2010 sales respectively, compared with 37% and 22% in 2009.

The bottom of the slide outlines the key drivers of the year-over-year increase in sales.

As noted, 2010 full year sales significantly benefited from an improvement in production environment across all regions, increasing the sales by over $1.2 billion.

While volume and mix did increase sales in the fourth quarter of 2010 by $116 million, almost 75% of the year-over-year volume improvement occurred in the first half of 2010.

On a full year basis, divestitures and closures lowered sales by $422 million.

The majority of this decrease occurred in North America, about $400 million related to the exit of 12 facilities during 2009 and 2010, and 9 of which were interiors-related operations.

Currency favorably impacted full year sales by $136 million, primarily reflecting the weakening dollar versus the Korean won, however, the year-over-year currency impact in the fourth quarter 2010 was negative as the impact of the weakening Euro more than offset the impact of the strengthening won.

Slide 17 summarizes our product group segment consolidated sales for the full year 2010, as well as provides a comparison to 2009 results.

Climate sales in 2010 were $3.3 billion, Asia-Pacific accounting for 62% of the total.

The majority of the remaining sales are split about evenly between North America and Europe.

On a year-over-year basis, 2010 sales were $765 million higher than 2009.

The majority of the increase, about $574 million was in the Asia-Pacific region, explained primarily by higher volume and favorable currency.

Volume was a positive factor in every other region as well.

Electronics sales in 2010 were $2.146 billion, $174 million higher than 2009.

Higher production volumes in Europe and Asia were partially offset by the closure of a US manufacturing facility in early 2010 and unfavorable currency, principally a weaker Euro.

Interior sales were $2.159 billion for the year, $46 million higher than 2009.

Production volume increases in both Europe and Asia more than offset the impact of North American facility exits during the course of 2009 and 2010.

Slide 18 details product gross margin.

2010 product gross margin was $247 million in the fourth quarter and $807 million for the full year.

As noted previously, both periods were impacted by expense reductions associated with the termination of post-retirement employee benefits, $133 million in the fourth quarter, and $198 million for the full year.

In addition, our fourth quarter 2010 results included $26 million of increased inventory costs associated with fresh start value adjustments.

As we've highlighted here, 2009 gross margin performance also reflected expense reductions associated with OPEB termination actions of $133 million in the fourth quarter.

The bottom of the slide provides the key drivers of the change in gross margin for both the fourth quarter and full year.

On a full year basis, 2010 product gross margin improved by $214 million.

Volume and mix was a dominant driver, increasing margin by about $318 million and much of the volume increase was in the first half of the year as volume and mix only increased fourth quarter year-over-year results by $11 million.

Divestitures and closures and currency were unfavorable for both the quarter and the full year.

Divestitures and closures reduced gross margin by $67 million during the year, $23 million in the fourth quarter.

Comparatively, 2009 fourth quarter gross margin was favorably impacted by significant inventory build aheads, and customer surcharges, in connection with the exit of a number of our North American manufacturing operations.

On a full year basis, currency decreased gross margin by $93 million reflecting a weakening Euro and strengthening Korean won.

A stronger Korean won has a favorable impact in our sales yet an unfavorable impact on gross margin.

As almost 30% of Visteon's Korean sales are denominated in either US dollars or Euros while nearly all costs are won-denominated.

Net cost performance improved full year margin by $17 million, reflecting cost reductions in excess of customer pricing.

On a comparative basis, fourth-quarter performance was unfavorable as customer cost recoveries and supplier pricing settlements provided a net benefit of $28 million in 2009 as compared to a net cost of $7 million in 2010.

In addition, employee performance incentive compensation accruals in the fourth quarter of 2010 were about $10 million higher than in 2009.

The last highlighted variance on this slide provides a year-over-year impact of OPEB and inventory fresh start adjustments.

On a full year basis, these items improved gross margin by $39 million and for the fourth quarter these items lowered results by about $26 million.

As I noted previously, both of these items are excluded from adjusted EBITDA.

Slide 19 summarizes gross margin performance for each of Visteon's product group segments, including the impact of the termination of OPEB and fresh start accounting adjustments for both full-year 2010 and 2009.

We have included the impact of OPEB and fresh start items for each product group, and for each period at the top of this slide.

As highlighted, these items are taken into account, gross margin as a percent of sales improved year-over-year for each product group.

The key drivers of the gross margin change are outlined at the bottom of the slide.

Climate gross margin for the year was $379 million, $64 million higher than 2009.

OPEB and fresh start items reduced gross margin by $19 million.

Volume was favorable while currency and net cost performance were partial offsets.

Currency had an unfavorable impact on margin, although it had a positive impact on sales.

Electronics gross margin was $297 million in 2010, $134 million higher than 2009.

OPEB and fresh start items improved margins by $82 million.

Favorable volume and net cost performance were partially offset by the impact of currency, principally a weaker Euro and the impact of a closure of US manufacturing facility in early 2010.

And lastly, interiors gross margin was $131 million for the year, $16 million higher than 2009 results.

OPEB and fresh start items reduced gross margin by about $24 million, while volume improved margin by $74 million and divestitures and closures and currency were partial offsets.

Slide 20 provides a summary of SG&A expense for 2010 and 2009.

SG&A expense in 2010 totaled $103 million in the fourth quarter and $395 million for the full year.

Like gross margin, SG&A was also impacted by the termination of OPEB and fresh start items.

As highlighted here, the impact of these items increased full year 2010 SG&A by $19 million, compared to a reduction in SG&A of $43 million in 2009.

Taking these items into account as well, SG&A as a percent of sales improved from 5.8% in 2009 to 5.1% in 2010.

Key drivers of the year-over-year change are highlighted at the bottom of the slide as well.

Net cost efficiencies reduced SG&A throughout 2010 and totaled $53 million for the full year including a $4 million benefit in the fourth quarter.

On a full year basis, currency increased SG&A by about $6 million, although currency did provide a slight benefit in the fourth quarter of 2010.

The increase in other includes higher employee performance incentive accruals of about $45 million, based on the achievement of annual performance objectives in 2010.

In 2010, net income of Visteon's non-consolidated affiliates totaled $146 million, $66 million or 83% higher than full-year 2009 results.

As highlighted on this slide, this performance was primarily attributable to Yanfeng Visteon, and its related affiliates, reflecting significantly higher OEM production volumes, particularly in China.

The left-hand side of the slide provides YFV's total sales for the last decade, in accordance with PRC GAAP.

2010 sales totaled CNY31.8 billion or $4.7 billion in US dollars, a 64% increase over 2009 results.

We've also provided a summary of YFV's financial results on a US GAAP basis at the bottom right hand side of this slide.

YFV posted US GAAP net income of $218 million on sales of almost $2.6 billion in 2010.

Of this amount, $109 million or 50% is reflected in Visteon's 2010 financial results as equity income.

In addition to the 50% ownership in YFV, Visteon also has direct ownership interests in certain YFV affiliates which provide an additional $27 million in equity income in 2010.

Slide 22 provides adjusted EBITDA comparison for the fourth quarter and full year, and as noted in my previous comments, adjusted EBITDA does exclude the impact of OPEB, restructuring and reorganization-related items.

Adjusted EBITDA in the fourth quarter of 2010 was $138 million and $614 million on a full-year basis compared to $230 million and $454 million in the same periods a year ago.

Similar to the previous slides, the key year-over-year drivers of the change in adjusted EBITDA for the fourth quarter and full year are summarized at the bottom of this slide and reflect the comments I made earlier in the presentation.

In summary, on a full year basis, the improvement in adjusted EBITDA of $160 million in 2010 compared to 2009 reflects an improved production environment, positive net cost performance, and higher equity income, net of minority interest.

These positive factors were partially offset by the impact of divestitures and closures, currency and higher employee performance incentive compensation accruals.

Free cash flow for the fourth-quarter and full year 2010 is detailed on slide 23.

Free cash flow in 2010 was a use of $141 million in the fourth quarter and a use of $35 million for the full year.

As highlighted on this slide, Visteon's 2010 free cash flow performance was significantly impacted by Chapter 11-related items which totaled $247 million in the fourth quarter and $335 million for the full year, which included $174 million of interest and fees related to $1.5 billion of pre-petition secured term loans, about $100 million for professional fees and about $60 million for the satisfaction of other claims and items.

Full year 2010 free cash flow was $25 million lower than 2009 results, largely reflecting an increase in Chapter 11 cash outflows of $308 million during 2010.

Adjusting for 2010 Chapter 11 items, the main drivers of the change in year-over-year free cash flow performance included improved adjusted EBITDA, offset by higher equity earnings, net of dividends received.

Other changes highlighted on this slide of $158 million include lower restructuring cash payments of $19 million, increased minority interest of $19 million, and increased performance incentive compensation accruals of about $75 million.

The left side of slide 24 summarizes Visteon's cash balances at the end of 2009, on September 30, 2010, on October 1, 2010, post the impact of emergence and year-end 2010.

Cash balances at year-end totaled $970 million,(Sic-see press release) $23 million higher than balances on October 1, our emergence date.

Compared to year-end 2009, cash balances are lower by $116 million, principally reflecting cash used during 2010 to affect our plan of reorganization and emergence from Chapter 11.

Outstanding debt balances and future maturities are highlighted on the right of this slide.

Year-end 2010 outstanding debt balances totaled about $561 million, a decrease of over $2 billion from year-end 2009 levels.

As noted, there are no significant near term debt maturities as a vast majority of outstanding debt is represented by a new $500 million secured term loan due in 2017, which was a component of our exit financing facility.

In addition, we secured a US $200 million asset-based revolving credit facility as part of our exit financing which remains undrawn.

Visteon has significant US tax attributes prior to emergence from chapter 11 including net operating losses of about $3 billion and $700 million in capital loss carry forwards.

As part of Visteon's plan of reorganization, we completed a legal entity restructuring that triggered a US taxable gain prior to emergence, which utilizes a substantial amount of our pre-emergence US tax attributes.

In effect, this legal entity restructuring optimized our existing tax attributes, increase in our US tax basis, and the shares of certain foreign affiliates held by Visteon and created a pool of earnings that, when repatriated from these affiliates to the US in the future, should be considered previously taxed for US tax purposes.

After adjusting for the effects of the legal entity restructuring, Visteon still retains approximately $1.4 billion of net operating losses which can be carried forward from 10-20 years.

Use of these NOLs is subject, however to an annual limitation of approximately $115 million, due to certain change in ownership rules which came to effect upon our emergence from Chapter 11.

The legal entity restructuring fully utilized our capital loss carry forwards and create additional foreign tax credits, which now total over $900 million.

These credits are available for use for US tax purposes even though most are not recognized currently under US GAAP.

Looking forward to 2011, slide 26 provides our 2011 outlook for product sales and adjusted EBITDA as well as certain assumptions underlying this guidance.

Our 2011 estimated product sales are based on future assumptions of OEM production of key platforms in which we have significant content.

Our outlook for key production volumes are highlighted on the left of this slide, and are in line with IHS Automotive's latest projection.

Our 2011 expected financial performance is also impacted by currency movements and our outlook is based on a US dollar to Euro rate of $1.33 and a Korean Won to US dollar rate of KRW1135.

We expect the full-year 2011 product sales will be about $7.4 billion plus or minus $100 million representing a modest increase over 2010 full-year results.

Full year 2011 adjusted EBITDA is expected to be $640 million plus or minus $20 million or about 8.6% of sales, representing an increase of almost $30 million from 2010 full year results.

Slide 27 provides a further view of our 2011 sales outlook.

Visteon's product sales are projected to increase modestly as I stated from $7.3 billion in 2010 to $7.4 billion in 2011.

On a regional basis, we expect our Asia-Pacific sales to increase to 43% of 2011 sales, with Europe and the Americas at 36% and 21% respectively.

At the bottom of this slide, we have highlighted the key drivers of expected year-over-year change in consolidated sales.

We expect that the impact of divestitures and closures will lower sales in 2011 by about $280 million.

Excluding the impact of divestitures and closures, we project sales will increased year-over-year by about $380 million or about 5% largely reflecting higher expected OEM production volumes for our key customer platforms, and as Don stated earlier, we expect our net new business backlog to provide an increase in sales in 2011 of about $60 million.

On the next slide we provide our 2011 outlook with financial items.

In addition to expected 2011 product sales and adjusted EBITDA, we also expect free cash flow to be a use of about $225 million in 2011.

Depreciation and amortization for 2011 is expected to be about $320 million, or an increase of about $40 million from 2010, reflecting amortization expense associated with intangible assets recognized in connection with fresh start accounting.

2011 free cash flow will be impacted by a number of items which are highlighted here, including interest payments of about $50 million, cash taxes of about $140 million, net pension funding of about $50 million, cash used to satisfy remaining Chapter 11 claims and fund expected restructuring of about $200 million, capital spending of $270 million.

On the capital spending front, the majority represents investments in our climate product group, largely in the Asia-Pacific region.

With that, this concludes my presentation and we're very happy to answer any questions you may have.

Thank you.

Thank you, Bill.

At this time Brandy, can you open up the lines for questions, please?

Certainly.

(Operator Instructions)

Our first question comes from the line of Kirk Ludtke with CRT Capital Group.

Good morning, everyone.

Kirk.

I hope to start on-- first of all thank you for all of the disclosure in the slides.

I'm on slide 27, which is the guidance slide, and I was curious, how much of your 2010 EBITDA was associated with those businesses that you're closing and divesting?

Kirk, it's Bill.

I think if you look back to the gross margin slide, we identified, again this is on a variable basis, about $67 million of full year.

And if you look forward, we had cost reductions associated with, obviously taking out fixed cost.

So, I think there's effectively somewhat of a nominal impact moving into 2011.

We've got, again, a dip.

We're expecting about $280 million in sales.

The variable margin obviously is running at about 10% or so, but we're going to do our work with respect to the fixed cost structure to take out.

Okay.

What kind of contribution margin are you assuming on the $400 million of incremental revenue?

I think that contribution margin is going to be in line with, if you think about where we're at our adjusted EBITDA guidance of $640 million and the sales of $7.3 billion.

That adjusted EBITDA or gross margin is going to be very close if not slightly higher than our current gross margin for 2010.

So what would you guess?

Incrementally like 20%?

It's going to be at the same margin percentage.

Okay.

How much equity and minority interest income do you have in your 2011 EBITDA guidance?

Do you know off hand?

We certainly know, we're currently not providing that guidance, Kirk.

It's obviously included in our $640 million guidance for 2010 on an adjusted EBITDA basis.

If you think about the two components obviously YFV is a significant component of our equity income.

We would expect to see growth in that market, maybe not at the same level of 2010 performance, but again, we're not providing that guidance currently with respect to that joint venture, in particular.

Okay, thank you.

That's helpful.

Also with respect to the taxes, the $140 million of cash taxes, it just struck me as a sizeable number given the tax attributes.

Is that something that we should be expecting longer-term or is that a one-time item?

I think if you put it in the context, Kirk, of our cash taxes in 2010 were $103 million, $104 million.

We're showing here, from a guidance perspective of about $140 million of the distribution of our profits around the world, are markedly different obviously.

And the tax benefit that we received from US tax attributes is upon repatriation of dividends, for example, and/or as we look to cost allocations, taking costs out of North America and moving them around the world.

So, the profitability of the business, which shouldn't be a question is, there's a significant profitability position in Asia and we can't tax effect that until we repatriate.

Okay, and then with respect to the $200 million of Chapter 11 claims and restructuring costs, I was wondering if you could break those down between the two categories and give us a sense for-- is 2011 the last year that we should be expecting anything from the Chapter 11?

And what kind of cash restructuring do you expect going forward beyond 2011?Is that it?

Sure.

If you look at the $200 million, it does comprehend both Chapter 11 claim satisfaction as well as expected restructuring.

I'd split that about 50/50.

The Chapter 11 claims reflect obviously the satisfaction of our general unsecured claims and other claims that we have post-emergence, in accordance with our plan of reorganization.

I think those cash costs will obviously move throughout 2011, that $100 million or so, maybe a trickle effect into 2012 depending on how the reconciliation process goes with respect to outstanding claims.

On the restructuring front, there's a couple of pieces.

You'll note in our 10-K when we file it later today, we've got about $40 million in restructuring reserves on the books, at the end of 2010.

There's going to be a flow through from that restructuring, the actual cash expenditure into 2011.

And we are expecting additional restructuring during the course of 2011, as we continue to look at our engineering footprint, our manufacturing footprint, and our administrative and related functions footprint.

So, that kind of comprises that remaining $100 million of expected restructuring.

To your last question with respect to 2012, while we're not providing obviously guidance for 2012, we continue to refine this footprint here at Visteon.

I think you can see that from our history.

I would not expect significant amounts in 2012, but again, we continue to look at every aspect of the business given the distribution of the business around the world.

Okay, great.

And then with respect to, I think with respect to the taxes, you mentioned that you were able to write up the basis of all your entities to fair market value, and I just wanted to confirm if I heard that correctly?

There were certain foreign affiliates, so if you think about significant foreign affiliates, you can think about Korea and you can think about China.

And those have been the basis in those entities is now equivalent-- written up to fair market value?

Yes, for those involved-- exactly, in the legal entity restructuring that we did, but principally you're going to have our Korea and China operations.

And then lastly, with respect to the new business, I've got the impression that the net new business number is likely to go higher and I'm just curious if you think that there's still time to move the needle meaningfully in 2012.

My guess is 2011 is pretty much baked.

Yes, 2011 is done.

2012 and 2013 I still think there is some upside.

We're either very close to receiving some POs for 2012 and 2013 so I do expect that number to move up.

Okay, thank you.

Thank you, Kirk.

Thanks.

Our next question comes from the line of Colin Langan with UBS.

Can you comment on if your outlook for segment margins long term?

I'm surprised it's a relatively flat margin year-over-year.

If you're divesting some of the unprofitable businesses, why wouldn't the blended margin increase?

It does seem when you look at the different segments, you're lagging your peers.

Is there any reason why your footprint isn't as competitive that you shouldn't have your peers' margins or is this just a 2011 issue that we should maybe see some margin expansion in the out years?

I think we do see margin expansion in 2011 and in the out years.

That's certainly what we expect.

In terms of our peers, I think that really starts to get to what is the product mix.

We have a different product mix than some of our peers do, and I think that would impact the margin in that comparison.

But you mean-- I'm sort of thinking in the individual segments.

Your Interior segment seems relatively low.

So, how is that mix different than other Interiors companies for example?

Well, no, I'm saying the blended margin of the Company we expect to improve.

If you're comparing our total Company margin to somebody else without an Interior business, as you're highlighting, you'd expect that to be a negative impact on our total Company margin.

Okay, and can you provide any color on what you consider core to your business?

There's a lot of talk about Yanfeng, whether they're a strategic assets or something you'd be willing to sell?

And even among the Interiors and Electronics, are you looking to grow your position in some of those segments or divest some of the segments?

Yes, I think that there will be M&A activity in the industry.

I think the [Vallejo] deal with Niles is certainly the start of some of that as companies look to strengthen their product positions or their regional breadth or their customer diversity.

As we look at it, we expect to play in that.

As we go forward and we feel very fortunate now to be able to do that, which hasn't been the case for the past few years.

But what about, I mean, Yanfeng, is that something you would consider divesting or selling?

Or Halla, the same questions?

Are those critical?

Yes, a couple of points on both of those.

Certainly our relationship with Sykes/Hasco is critically important to us.

It's a relationship that's been built over 16 years or so now.

We think that China market is extraordinarily important.

We tried to point out in the presentation that we believe Asia, given its significance in the global automotive industry, is an important place to play.

And China is certainly the big dog in that region.

Regarding Halla; Halla is an important part to our climate business which is one of our core product groups.

I don't think, we run that business as a combined entity.

I know the Street likes to look at it as two separate, but from our perspective, either one separated from the other doesn't really work.

Okay, and then you commented on the NOL, but you don't have many facilities in the US and a lot of that is in the US.

Are you going to be able to utilize the $115 million limitation?

Or what actions can you really take to actually start cashing in on the NOL?

Right, Colin, it's Bill.

To your point we do have this limitation because of effectively change in control if you will of $115 million.

It's obviously a large attribute to total.

We are looking to, and have talked about this before, we've got a number of programs in place with respect to redistributing, if you will, our costs around the world.

And we're going to continue to do that process and look to the opportunity to do that, but your point in the near term, it's probably not a utilization of that $115 million limitation, certainly not in 2011.

Okay.

And can you also comment on commodity costs, obviously its been a risk.

Do you have commodity cost pass throughs and what's your biggest exposures?

Sure.

This is Bill again, Colin.

On the commodity front, from our key exposures if you will, we obviously consume aluminum, copper, steel, and resin.

So, if you look at those various commodities we have certain pass-through mechanisms and recovery processes with customers.

We do have obviously longer-term supply contracts in place with respect to these commodities so I think we try to work every angle with respect to muting or dampening any type of commodity increase we have at least in those four line items.

Obviously, we've got a fairly significant, I'll say, increase in our 2011 financials, but to one point that came across earlier this morning is we certainly haven't put in an oil spike of $105 per barrel, currently.

Again, operating under kind of longer-term contracts with suppliers.

So, those are kind of the big spends that we have in subtotal think about probably $1 billion spend across those four commodity categories.

Our next question comes from the line of Jason Alper with BTIG.

A couple quick questions.

One, I seem to recall on the last conference call some guidance you thought you'd be able to achieve low double digit EBITDA margins going forward and obviously your guidance for 2011 is more along the lines of 8.5% EBITDA margins.

Was wondering if you could just comment on that for a second.

Thank you.

I think what you're referring to is at the Deutsche Bank conference, somebody-- the question was, what was our objective, and we said that we felt that low double digits was achievable in our business.

And given our portfolio of product, and that was our objective.

Okay, so does that still remain the objective?

Absolutely.

Is it still achievable?

Yes, it is.

Okay.

So I'm assuming though that it's not achievable for 2011?

That's correct.

Okay.

And then my second question, on the net new business on slide 12 that you display.

What types of production assumptions are you using to derive those revenue numbers?

This is Bill.

I think if you talk a look at our production estimates that we provided with our guidance, so you've got that year obviously for 2011.

We're effectively in line in the out years with HIS currently, and I think your February projection was the latest update they provided.

Yes, we do this on a platform level.

We look at those volumes.

We use HIS as guide posts and obviously interaction with the customer as well.

I would say they're largely in line with those four of your projections as provided by HIS.

Okay, and within those new business wins, is it safe to say that a majority of them are the Asia-Pacific region should we just plan on erosion in North America and growth in Asia?

How should we think about this?

Yes, I think on page 12, it shows that 79% of the backlog is in the Asia-Pacific region.

Okay.

Thank you.

Thank you.

Our next question comes from the line of John Murphy with Merrill Lynch.

Hi guys, it's actually John Lovallo on for John Murphy.

Thanks for taking the call.

A couple of questions for you.

There's been a lot of talk about some kind of slowdown in China after the expiration of the tax benefits.

Are you guys seeing anything along those lines?

Yes, I think the numbers for February are going to show that China has slowed down.

The expectation is that for 2011 China will grow somewhere in the 10% to 12% range versus the 30% range from last year.

So, yes, I think it will slow down.

Yes, we are seeing it, but again, I think a growth rate of 10% to 12% is still fairly good.

And I would also say that for the last few years, China has exceeded every one of those kind of guidance-type items.

And the only other comment I'd make to tag on to Don's comment as well, there's been-- I would say it's hard to say it's a softening through February with respect to still double digit approach.

The SAC brands could be performing better in the marketplace than the overall market.

So, the SGM, SVW, and SEIC brands continue to look to outpace the actual production.

Okay, thank you.

That's helpful.

And then given your kind of production in revenue forecast, what level of capacity utilization are you guys running at?

I think, given what we see today, probably in that 85% range, is where we're at today.

Okay, great.

That's helpful.

And finally, what would you list as your top priorities for cash in 2011?

And if you could just remind us what the minimum cash level is to run the business.

This is Bill again.

I think we talked about this in January at the Deutsche conference.

Obviously given the cash on hand currently, but also looking to the volatility across all regions, if we have perfect access to all of our cash, I think my comments specifically were you'd need probably a minimum in system anywhere from $300 million to $400 million.

Obviously that assumes that you can access any dollar around the world any time you want, but the volatility in the regions is about $100 million plus, if you will, that we operate in.

With respect to your second question on-- I think you're asking what do we think about cash, we certainly like our cash position.

I think the Company has never been in a position where, from a capital structure perspective at least, if they can be aligned with other suppliers.

Similarly, I think it's very important with respect to moving forward the business, but obviously at the same time, as we move forward here through 2011 and into 2012, opportunities are going to present themselves.

And we certainly would like to participate in those opportunities to further Visteon's portfolio moving forward.

Okay, great.

Thank you very much guys.

Thank you.

Brandy, we have time for one more Analyst and a couple questions here, we're running close to the time.

Our final question comes from the line of Tim Daileader with Knight Research.

Hi guys.

A quick question.

It looks just on the face of it that your gross margin took a hit in the fourth quarter.

Could you speak to that a little bit?

Yes, it does.

Bill Quigley again.

I think if you look at it on a year-over-year, we all know on this call as well as in this room here that 2009 fourth quarter performance is a tall order and a tall comparison.

I think if you look at it, also from third to fourth as well.

We did have a lower margin, principally with respect to-- if you think about gross margin, we had obviously some increased incentive costs and we also had some increased pricing settlements, and supplier settlements in 2010, compared to the third quarter of 2010.

I think some of that's behind us as we move forward, but I think as Don indicated as well, in our January discussion, pricing continues to be on our forefront with respect to expectations in the marketplace, and we're continuing to monitor that very closely with our customer interactions.

Just two other quick things.

First one, when you show in your forward guidance you're showing a 30% increase in CapEx from last year and obviously last year was thin.

Is this basically building out geographically with your major customers?

Certainly, we have new programs, certainly they are a lot of those are in the Asia-Pacific region.

So certainly, yes, a lot of that is increased capacity in Asia-Pacific.

Yes, if you kind of size it just briefly to Don's point, you're talking about $140 million plus in Asia for expectations for 2011 of that 270.

Tim, we have time for one more question.

Sounds like Tim has dropped off.

Brandy, I think we're all set on the Q & A.

Everybody, thank you for your participation.

We would like to saw thanks again for joining us on this conference call and Brandy we can close the lines now.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your participation.

You may now disconnect at this time.

Good day.