Visteon Corp (VC) 2012 Q4 法說會逐字稿

Good morning and welcome to the Visteon fourth-quarter and full-year 2012 earnings 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 mornings 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 on 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. Scott Deitz representing Investor Relations for Visteon Corporation.

Mr. Deitz, you may begin.

Thank you, Natalia.

Good morning, everyone, and thanks for holding on the line there for an extra minute or two as additional people dialed in.

Thanks for joining us for what we estimate will be about a one-hour call.

We are certainly grateful you're taking the time to join us for our review of the fourth-quarter and the full-year 2012.

Today we'll provide you with a recap of our results for the period and insights associated with our overall performance.

We will also discuss our view toward 2013.

As Natalia mentioned the presentation deck associated with today's call is posted on Visteon's website within the IR section.

And just a reminder that our website is Visteon.com.

Also of note the 8-K and 10-K were filed this morning at about the same time as the news release.

We are joined today by Tim Leuliette, President and CEO, and Jeff Stafeil, CFO.

As you would expect, following Tim and Jeff's prepared remarks, we'll open the call to your questions.

Again thanks for joining us.

With that, Tim, it's all yours.

Thank you, Scott.

And again good morning, everyone.

We do appreciate you joining us this morning.

We did have a good quarter.

We ended the year with some good momentum as we enter into 2013.

And let me hit some of the highlights, and Jeff will expand on the detail here as we get through the call.

We ended the year with sales of about $6.9 billion, $628 million of EBITDA, and an adjusted EPS of $4 a share, which was net income of $213 million.

Positive cash flow of $102 million, free cash flow of $10 million.

And we did end the year with solid liquidity.

Cash of $845 million, up almost $100 million from prior year.

And that is, by the way, after we paid back $50 million, or retired $50 million of bonds and bought back $50 million of stock.

Debt is $569 million, down $30 million from prior year.

And our debt to adjusted EBITDA is less than 1.

We will spend a little time today obviously on updating 2013 guidance.

We're not really changing at this stage our forecast for sales EBITDA or free cash flow.

But because of changes in the share count and some tax issues, we have raised the earnings-per-share number.

Jeff will expand upon that a little later.

We also, as we look back to the year, are very pleased with some of value-creation actions we took.

And some of those now proceeding into 2013.

I'll go through those in a moment.

Moving on, if you will, to the next slide, page 3, we put this here for a couple reasons.

One, I think as we look at the value metrics for what drives and should drive your mindset as to why to invest in Visteon, and how we differentiate ourselves, I think we need to, first of all, go look at where vehicles are built.

And there's a couple points here.

One -- this is the 2012 look back at the production around the world -- over 50% of the vehicles today are produced in Asia.

North America accounts for 19%, the US about 12% of all vehicles produced.

So as we look at the global vehicle industry, we have to sometimes disconnect ourselves from the impacts of sequester or Bernanke comments, or political upheaval here in the States, and understand its balance and its impact on the global production of vehicles.

When we look at this bar chart on the left as to where vehicles are built, then the question is, where does Visteon do business.

And here, again, I think is one of the value metrics that we've tried to share with you in the past, and that is we do participate significantly in Asia.

This includes the current footprint of Visteon, including our interiors business, of being, though, principally an Asian business, especially when you consider our non-consolidated entry.

So we do participate in that high-growth Asian market.

Which, by the way, the China component that's embedded in that 52% that's Asia, that component over the next 10 years will grow at the same size as the current size of the US market.

So significant opportunities here for us to participate in those growth markets, and we wanted to share that with you.

Moving on to the next page, page 4, we tried to highlight some of the major activities that we have gotten into this year to generate value.

And it got, from a calendarization perspective, quite intense, obviously, towards the end of the year.

And what I'd like to do is just leave that page as a summary, but move on to the next page, page 5 where we start taking those pieces and applying to where they are within the corporate level, and where they impacted the different business groups.

First of all, going back and looking at Visteon specifically on the strategic plan side, as you know we did outline last year on September 19 the strategic template for the Company,.

That's in your appendix.

That's still the strategic plan for this Company.

We also began to attack the SG&A and fixed costs.

We attacked the pension issue and reduced the PBO there by 25%.

And again, I mentioned earlier, we did a $50 million share buyback and a $50 million bond retirement.

As we look at the pieces of the Company, looking back, obviously the Halla-Visteon, which we internally refer to as Project Talk, putting together and consolidating our Climate business.

It's been a significant success.

The response from the customers has been very strong.

The recent awards have been very encouraging.

That's a $410 million transaction back to the parent.

80% of that will be completed by the end of this quarter.

The only pieces that are not are just because they're in the queue for some regulatory process, typically China at this stage.

And those will all be completed if not by the end of the first quarter, into the second quarter, and clearly within the first half.

On an adjusted gross margin basis, I think the other thing that we should look at from a value story is the margin improvement that really occurred across the board.

As we look at the second half of Halla-Visteon versus the first, you saw a 1.5% increase, 150 basis points in gross margin.

And again a solid $550 million in new business wins.

As we look at Electronics piece, which was one where we're going to focus on, on this call, as we have historically done over the last few calls, focusing on a specific business.

This is now the turn to focus on Electronics, unlock the value there.

But also, there, the gross margin during the year versus the second half versus the first, up 80 basis points.

And $515 million of new business wins in '12.

On the Interiors piece, again we are continuing to explore alternatives there.

It's not core.

We'll talk a bit more about that the next page.

But even there we saw some margin improvement in the second half and won some new business.

We focused on Yanfeng Visteon the last time we were together on January 15 at the Deutsche conference, those of you that were there.

And, again, the focus of that business is continuing its growth.

And relating to the fact that there's 26 facilities there, eight all new and 18 being expanded significantly at this point.

Now, that's what we did in 2012.

Let's now look at creating value for 2013 on the next page.

These are the things that we're looking at internally.

These are the kinds of metrics that we are looking at to measure our own selves with.

And that's, first of all on the SG&A and fixed cost side.

Another 5% reduction in SG&A in '13, which should bring about a 30 basis point improvement in overall margins to the Company.

We will execute a portion, obviously, of the $250 million outstanding share buyback program.

There will be a component of that this year.

On Interiors, I think the simple term and simple word for Interiors and what our goals are this year are very simple -- divest.

And when it comes to the Donfeng sale, which I think we've probably talked about in the past, we're going to complete the sale of our 20% direct interest in the Donfeng Visteon piece.

As we look at the pieces, Halla-Visteon this year, we're going to complete that transaction that we started.

We're looking now at launching $700 million of this backlog, as we grow this business at a 7% CAGR over the next few years.

And I think, quite honestly, given some of the momentum we've seen recently, as the year has started here, that we can probably increase that CAGR as we look out over the longer term.

And we're also looking at 100 to 150 basis points of margin improvement there over the next few years.

And beginning the components of that process.

These margin improvement programs are driven by just factory floor improvement, by optimizing assets, and by discipline.

On the Electronics side, we have a positive backlog there, starting over the last few years.

I'll expand upon that in a moment.

14% CAGR growth in the cockpit electronics piece, which is our core business there.

And, again, focusing there on some margin improvement.

And on Yanfeng Visteon, we're launching $1 billion in business this year, over $1 billion next year.

Looking at increasing our dividends there and increasing the transparency.

As we committed to you on January 15, we will be using this year to roll out more information on Yanfeng.

Some of the financials will be included in a K that will be done by the end of June.

That's the template of 2013.

I would like now to turn to page 7 quickly, to look at the share repurchase program.

Just to remind you that we have $250 million outstanding on that program.

The first $50 million that we purchased back in the fourth quarter, we purchased at an average price of $49.72 a share.

And we'll obviously update you on this on a quarterly basis.

Moving on to the next Section here, as I said it's been customary for us to focus on a specific segment.

This time it's Electronics.

I want to give you a view of what we see as we analyze our options here, understand the business as we do.

And the first piece here is on page 9, is looking at the business.

It really is in two components.

We have a consolidated electronics business, which is $1.3 billion and eight facilities, Asia, Europe, North America, South America.

And then we have the non-consolidated piece.

The largest component of that is our Yanfeng piece.

But we also have a motorcycle two-wheel drive operation in Indonesia.

That is about $800 million of revenue, and eight manufacturing sites.

Together, when we eliminate the inter-company, we're looking at an Electronics business of about $1.9 billion, with 16 manufacturing facilities around the world.

As we go to the next page, on page 10, you see that the cockpit electronics piece, which is really the core of this business that we're building for the future, that's a 14% CAGR.

And that is again a fairly strong component of growth, and something that we need to make sure we understand from a value perspective.

And I will be honest with you, I don't think in our share price today this understanding of the value proposition here is there.

This is a business that is currently at an 8% EBITDA margin.

9% revenue is engineering.

That's a net number.

This is an engineering intensive business.

We spend approximately 12% of sales on engineering, of which 25% of that is typically now covered by customers as part of the joint co-development.

And from a CapEx perspective it's not a capital-intensive business, it's only about 3%.

We're in the top three in information and controls.

And a top five player in the overall cockpit.

Market leader, in many respects.

And I'll take you through some reactions from customers on a couple slides back.

And there's some key opportunities for growth, or key opportunities here for value, as we understand our options in this business.

Again, on the right side of this chart we'll focus on a couple terms.

And that is, we look at the information and controls business, and we look at the audio and infotainment piece as the area that we participate in.

Moving to the next slide, when you look at our Electronics business, it's 11,000 people in 31 sites in 15 countries.

We have technical support and sales activities in all the major regions.

And we do have joint ventures in China, Indonesia and Russia.

We're almost 50% Asia-Pacific in this business, 25% each in North America, Europe, a small sliver in South America.

Our customer base is typically Ford right today, Renault-Nissan, the Chinese OEM's growing, Mazda, Volkswagen, and others.

But I will say this.

Significant expansion is now occurring with some of the order book with Renault-Nissan and the Japanese OEMs.

And some significant awards with Jaguar Land Rover and Volkswagen.

As we go to the next page, this is the cockpit electronics market on the left side.

It's a $35 billion piece of the over $100 billion automotive electronics.

$35 billion of it is in this cockpit area, and is growing quite rapidly.

If we look at information and controls, we are the third place position behind Conti and Denso.

When we look at the overall cockpit, we're in the fifth position behind Alpine, Harman, Denso and Conti.

This is an industry and a segment that is ripe, we believe, for consolidation.

There hasn't been a major consolidation in this area since the Siemens VDO activity in 2007.

So this is where we play, and this is the strengths we bring to the market.

Going to the next page, and why we see the growth, from our perspective, in value, is looking at the business from a couple perspectives.

First of all, separating out the vehicle electronics business, which has been the business that the Company is phasing out.

Which is, in many respects, a build-to-print, low-margin business and focusing on the cockpit side.

Cockpit, both in the consolidated and non-consolidated pieces.

And you can see over the last few years the decline of the build-to-print vehicle electronics business has been offset by the growth of the others.

But on a top-line basis it doesn't look like there's a lot of activity.

But underneath that has been some fairly strong dynamics.

And as we look forward, we see some significant growth.

As we look to the next page, that growth -- on page 14 -- is fueled by a history of strong new business wins over the last few years.

You can see from 2009 to 2012 a steady stream of new business wins, fueling what is the cockpit electronic growth for us on the right side of the page.

As we look out over 2015-16, and the new awards that are coming in, we're fairly comfortable with this forecast and outlook.

As we go to the next page, page 15, you see the kinds of products that we are in.

The heads-up display, the infotainment pieces, some of the cluster work.

I will tell you, we have about 700 software engineers in India.

Jeff and I and others were there two weeks ago going through the next generation.

Many of these people came out of the gaming industry, so some of the graphics and some of the excitement in the cluster is very real.

On the infotainment side, the ability to walk in the vehicle and have that display mimic the iPhone or the Android, whatever you have in your pocket, immediately pick you up and reflect the same icons on the page.

A lot of dynamics going on in this market.

We have shown on the right-hand side a concept vehicle, that I'll talk about shortly, the Visteon e-Bee.

Which reflects the next generation of where we see this market going.

The HABIT Cockpit Concept and the SmartScreen concept, all of these technologies now rippling through the industry, and representing the kind of technology base the Company has.

Going on to the next page, we did show at the Electronica in Munich and in the Consumer Electronics Show in Las Vegas the e-Bee vehicle.

And the e-Bee vehicle will be with us at the Shanghai show, for those that want to come with us.

We are going to be out there in April.

The e-Bee vehicle, reaction has been very strong.

Customer feedback has been it's the best concept vehicle we've ever seen from Tier 1. You see the reaction here from some of the other OEMs.

It creates a platform of technology, it creates a platform of value.

Now what do we do with it?

Going forward, to summarize the Electronics positionings, it's a 14% CAGR growth business for us now.

We are embedded in what is now the largest mobile device in the world, the automobile.

And we have substantial opportunities here.

And our optionality has been the key to our strategy, is still in place here as to what we do with these assets.

And with that, let me turn it over to Jeff now to go through a deeper detail of the financials.

Thanks, Tim, and good morning, everyone.

I'll begin on slide 19 with an overview of our full-year 2012 sales by region and by customer.

The left side of the page reflects only our consolidated sales.

While the chart on the right includes sales from both our consolidated and non-consolidated joint ventures.

As Tim mentioned earlier, we are an Asian-centric company, which you can see in the above chart.

Based on our backlog we expect Asia to continue to grow as a percent of our overall sales.

Turning to slide 20, it should be noted that our financial results have been impacted by a number of items that make year-over-year comparisons difficult.

The adjusted financial information presented on this slide excludes these items.

As non-GAAP financial measures, that's adjusted, financial information is reconciled to US GAAP financials in the attached appendix on pages 41 through 48.

I will discuss each of these metrics more in the following pages, but you can obviously see, and as Tim said, it was a good quarter.

Turning to slide 21, adjusted sales were $1.8 billion during the fourth quarter of 2012, and $6.9 billion for the full year.

Versus 2011, sales increased $166 million in the fourth quarter, and decreased $126 million for the full year.

Fourth quarter adjusted EBITDA was $42 million higher than 2011.

While adjusted EBITDA for the full year decreased by $57 million.

Turning to slide 22, this highlights our 2012 adjusted EBITDA performance by quarter.

We generated $196 million of adjusted EBITDA in the fourth quarter, compared with the average adjusted EBITDA of $144 million during the first three quarters of the year, or $135 million if you exclude the Lighting business.

When we first gave guidance for 2012 we said that we expected new business and increased cost efficiencies would drive increased profitability in the second half of the year.

Those expectations were realized.

But the significant increase in the fourth quarter also reflected the calendarization of commercial agreements.

The fourth quarter included $37 million of commercial agreements.

Generally speaking, these agreements primarily relate to business in Europe and South America where, for some of our customer contracts, we have not adjusted our purchase orders annually for large movements in currency, material prices, and/or fluctuations in expected volume.

As a result, we negotiate adjustments every year with these customers for these items.

And we have called them out separately in this presentation.

The timing of these agreements can be uneven throughout the year.

And in 2012 we recognized a disproportionate amount of the full-year impact in the fourth quarter.

As we look forward to 2013, we expect new business and cost improvements will flow through our results.

But the first quarter will not receive the same level of benefit from customer agreements as did Q4.

Similar to 2012, we expect adjusted EBITDA in the second half of 2013 will be higher than the first half.

Again, because of new business launching throughout the year, as well as increased cost savings.

Turning to slide 23, we show our adjusted sales and adjusted EBITDA for our three product groups, Climate, Electronics, and Interiors.

Results are up in each segment.

And we will cover each of the details on the following pages.

Moving to slide 24, we provide an overview of Climate sales and adjusted EBITDA for the fourth quarter and for the full year.

Climate sales in the fourth quarter were $1.2 billion, up $161 million compared with 2011.

The increase reflects higher Hyundai Kia volumes in Asia, North America and Europe, as well as new business wins in Asia.

Currency of a negative $8 million was a partial offset, primarily driven by a weaker Euro.

Adjusted EBITDA for the fourth quarter of 2012 was $99 million, up $27 million when compared to the fourth quarter of 2011.

Volume was the biggest driver, but it was also helped by commercial agreements and a positive business equation.

Climate's adjusted EBITDA margins were 9.9% in the fourth quarter, the highest quarterly margins of the year.

It is important to note that the adjusted EBITDA margins on this slide and the next two slides exclude the impact of equity income and non-controlling interests.

For the full-year, Climate sales were $4.3 billion and our adjusted EBITDA was $315 million.

The increase in adjusted EBITDA for the year was driven by higher volumes, partially offset by unfavorable currency.

Moving to slide 25, Electronics sales for the fourth quarter 2012 were $331 million.

And adjusted EBITDA was $43 million, representing a margin of 11.2%, excluding equity income and non-controlling interest.

Electronics sales for the fourth quarter increased $11 million versus 2011.

The increase primarily reflects higher North American volumes and our cockpit electronics business, partially offset by a weaker Euro and lower vehicle electronics sales.

Which, as Tim mentioned, have been impacted as we have slowly run out our vehicle electronics business.

Adjusted EBITDA for the quarter increased $13 million versus 2011, primarily reflecting higher cockpit electronic volumes and a positive business equation, partially offset by lower profits from our vehicle electronics product line.

Fourth-quarter 2012 adjusted EBITDA as a percent of sales, excluding equity and non-controlling interest, was the highest of any quarter in 2012.

Margins benefited from strong volumes, increasing cost efficiencies, as well as the calendarization of certain items, including engineering cost recoveries and warranty expense.

For the full year, Electronics sales were $1.25 billion and adjusted EBITDA was $101 million.

Sales decreased $117 million.

Vehicle electronics sales declined $144 million, while cockpit electronics increased $27 million versus 2011, driven by the benefit of higher volumes in North America and Asia that more than offset unfavorable currency.

Adjusted EBITDA for the year was $25 million lower than 2011.

And reflected lower vehicle electronic profits, unfavorable currency, and lower YFVE non-consolidated profits.

Versus 2011, our adjusted EBITDA margins, excluding equity income and non-controlling interest, decreased 100 basis points from 7.8% to 6.8%.

The year-over-year decrease in margins is explained by the runout of our vehicle electronics business and unfavorable currency.

Excluding the impact of currency, margin increased by 20 basis points in our cockpit electronics group.

Turning to slide 26 and our Interiors business.

Our Interiors sales in the fourth quarter were $342 million.

And adjusted EBITDA was $54 million, or 6.1% of sales, excluding equity income and non-controlling interest.

Sales decreased for both the quarter and the full year versus 2011, primarily due to lower European volumes and a weaker Euro and Brazilian real versus the US dollar.

Adjusted EBITDA increased in the fourth quarter, driven by the timing of customer commercial agreements.

For the full year, adjusted EBITDA declined $39 million versus 2011.

The year-over-year decrease includes $46 million of unfavorable volume related to Europe and South America, and $14 million of unfavorable currency.

The business equation was negative in the fourth quarter but positive for the full year.

The business equation was impacted by the timing of engineering and design recoveries, which significantly benefited the fourth quarter of 2011, and were calendarized more evenly throughout 2012.

Moving to slide 27, we show our adjusted SG&A for the fourth quarter and full year of 2012 compared to 2011.

In the fourth quarter of 2012, our adjusted SG&A expense totaled $97 million, a slight increase versus the fourth quarter of 2011 on a 10% increase in adjusted sales.

Adjusted SG&A in the fourth quarter of 2012 was 5.3% of sales, a 40 basis point improvement versus the fourth quarter of 2011.

For both the quarter and the full year, 2012 reflects the positive year-over-year impacts of net cost efficiencies and currency, offset by the higher rent expense at our North American headquarters, and certain other costs.

As we have mentioned previously, we are taking further cost reduction actions which we expect will result in additional year-over-year savings going forward.

Turning to slide 28, adjusted free cash flow was $7 million for the fourth quarter, and $102 million for the full year 2012.

In the above table we show our full-year adjusted EBITDA of $628 million reconciled to cash from operations of $239 million.

It should be noted that our cash from operations includes $92 million of restructuring and transaction-related payments, which have been excluded from our adjusted free cash flow.

Capital expenditures were $229 million during the year, approximately 65% of which relates to our Climate operations.

Cash balances were $845 million as of December 31, up $99 million from year end 2011.

The improvement is attributable to a positive free cash flow, and proceeds from asset sales, including the Lighting business, the R-TEK joint venture sale, and the Grace Lakes headquarters facility, partially offset by cash used to repurchase Visteon's stock and retire Visteon's debt.

Total debt at the end of the quarter was $569 million, down $30 million since the end of 2011.

Moving to slide 29, you can see that our balance sheet remains strong.

We ended the fourth quarter with debt of $569 million, and cash of $845 million.

Translating into a net cash position of $276 million.

We have no significant debt maturities and the majority of our debt is not due until 2019.

Moving to slide 30 now, I will spend a little time discussing our latest 2013 volume and currency assumptions.

Full-year global volumes are forecasted to increase by 1.5% in 2013, reflecting higher year-over-year volumes in North America, Asia and South America, partially offset by weaker volumes in Europe.

In the bottom left table, we detail 2013 estimated sales growth for Visteon's key customers -- or, for a few of Visteon's key customers, compared to IHS estimates for volume growth.

Most notably, Visteon's sales related to Hyundai Kia in Asia are projected to grow significantly, despite a decrease in production volumes, primarily driven by new business wins.

The right side of the page highlights our two largest currency exposures, the euro and the Korean won.

For 2013, we are using a Euro assumption of $1.30 compared to an actual rate of $1.29 in 2012.

For the Korean won, we are assuming a rate of 1,056 for 2013 compared to 1,131 in 2012.

However, it should be noted that we have a number of hedges in place, and our effective rate is about 1,095.

Moving to slide 31, and as we said at the analyst conference in January, there are a few important points to consider in order to properly compare our 2012 adjusted EBITDA with our 2013 guidance.

In 2013, we plan to recast our adjusted EBITDA to exclude non-cash equity-based compensation expense.

And our Lighting business is a discontinued operation.

Recasting for these items, 2012 adjusted EBITDA would be $626 million.

In addition, it is important to note that 2012 adjusted EBITDA included $3 million of income related to R-TEK which was sold in 2012.

Further, in 2013, we will incur additional non-controlling interest of approximately $10 million related to the Climate entities that were sold to Halla.

Lastly, our 2013 adjusted EBITDA guidance includes a $15 million unfavorable currency impact.

It should be noted that we expect sales to increase over $100 million related to currency in 2013, as a strengthening won increases our sales, but has an unfavorable impact on our adjusted EBITDA.

Adjusting for these additional items, 2012 adjusted EBITDA would be $598 million on a comparable basis with that presented in 2013.

Finally, moving to page 32, we take a look at our financial guidance for 2013.

As Tim previously mentioned, we are reaffirming the guidance we gave at the Deutsche Bank conference in January for all items except adjusted EPS and interest payments.

Our increased adjusted EPS reflects a higher, a slightly revised share count, reduced interest and tax expense.

We expect adjusted EPS to range from $3.65 to $4.44 per share.

Our 2013 adjusted EPS by quarter may vary significantly, though, related to certain tax proceedings outside the US.

The impact of these proceedings could result in uneven tax expense throughout the year.

And, in particular, is expected to provide a benefit in the first quarter.

That concludes my remarks and let me turn it back to Scott for Q&A.

Thank you, Jeff, thank you, Tim.

Before we move on to Q&A, I just want to remind everyone that there's a very robust and detailed appendix as part of this deck, and would certainly encourage you to take a look at the supplemental financial disclosures.

With that, Natalia, we're ready to begin the Q&A process, if you want to ping the group.

(Operator Instructions)

Ryan Brinkman, JPMorgan.

Congratulations on the quarter.

My first question is -- just after the sale of your interest in Visteon TYC, which had not really been on our radar screen, and coming on the heels of last year's R-TEK sale, which, again, had not been on our, or I think, other investors' radar screens, I'm just wondering what other JVs are out there?

Like, I learned today that you have some motorcycle and all-wheel-drive venture in Indonesia, which I was also unaware of.

So, apart from the big ones, YFE and Duckyang, maybe you can just shed some light on what else is available, even if you're not looking at potentially divesting it?

It seems like maybe not any one is highly material, but in aggregate, it seems to be getting meaningful.

Thanks.

Again, thanks, Ryan.

A couple points.

The one sale of the -- it was the last remaining sale of the component -- of the Lighting business, which we had to [ramp] up, which was part of the announced sale earlier, that was the one element.

I think as you look at the various JVs we have around, yes, they're small.

They're all included, I think, in our reported materials, obviously.

There's nothing of significance here.

I think when you still look at the bulk of our JVs, they're the ones that we've discussed in the past, which are the Yanfeng piece, the Duckyang piece.

I think as you look at our Interiors business, there's a couple JVs inside Interiors.

And we've also said, on the Interiors piece in particular, that that's more of a mosaic than many people understand.

There's an Interiors business in Europe that's fairly strong and large, but there's also these JVs in Korea, and some other smaller pieces in India, et cetera, that are part of that.

I don't really see a significant opportunity set here of a $30 million, $40 million, $50 million -- if that's what you're thinking about -- gain by the sale of some JV that you're unaware of.

We're cleaning those pieces up, and I think the big ones you are aware of.

Okay, thanks for that.

And thanks for the deep dive, too, on Electronics this quarter.

Maybe to just dovetail on your comments in regards to that division, I was wondering if you could perhaps elaborate on the press release that you issued just on Monday of this week, regarding the next-generation infotainment platform with the European automaker.

I take it that you cannot name that automaker, or else you probably would have in the release.

But just anything else you can tell us about that.

What should we read into it?

Does this signify you're bringing maybe your infotainment systems maybe more upscale, to compete more head-on with some of the more visible competitors there?

Or just what other takeaways should we take from that release?

Thanks for the question.

It's a good one.

That infotainment award -- and, yes, we would be happy to announce the customer if we could -- but the key to that was, it's one of the next-generation open-source type infotainment platforms.

The Eagle platform, that we call it internally, which we're going to be rolling out to a number of customers over the next few years.

That is more, to use your term, an upscale, more sophisticated system.

But, most importantly, it interfaces with a whole broad array of other software and other providers' technologies, this new open-source type technology which everyone wants to go to.

And I think we'll expand a bit more.

It was shown, I think if you were -- I can't remember if you were -- but for those that were out at the Consumer Electronics Show, we spent a deep dive on that platform.

We will also be highlighting that at the Shanghai show on April 17, 18, and 19.

I'll be there with the leadership team.

And if you're going to be visiting there, we will take you through the technology, because it's quite exciting.

Okay.

And very last question, maybe for Jeff.

Just regarding the total Company -- high-level question -- the total Company adjusted EBITDA walk on page 21 of the presentation.

It seems like a lot of the improvement in the quarter was driven more by commercial agreements rather than business equation.

Just high level, how should we think about this?

And what is your outlook for commercial agreements, how they're likely to track in 2013 relative to 2012?

And should we think about business equation being stickier than commercial agreements, or not necessarily?

Thanks a lot, guys.

Ryan, good question.

The commercial agreements really reflect the areas that, in a perfect world, we would have adjusted in new purchase orders, and should reflect our monthly results.

They were definitely more lumpy in 2012, as a lot of it was left for the fourth quarter to accomplish.

But I would say one of the steps we're taking in 2013 is to do our best to make those agreements more regular based, and trying to spread them more evenly during the quarter.

But they do require, the way they are currently constructed, an agreement with the customer, which always is a little difficult to time.

But they are real things that happen in the quarter, or during the year.

It's just a catch-up.

They've occurred several years running within Visteon.

So, I would say we'll have a little bit more diligence and a little bit more focus to do them a bit more evenly throughout the year, is our goal.

And I would say this, and I know, Ryan, you're off now, but I want to send this message to everyone on the phone.

And that is, we may not be able to duplicate the kind of magnitude of those numbers in a quarter going forward, but we're clearly going to duplicate the intensity of making sure, if somebody owes us money, we go get it.

And I think the issue here of getting engineering recoveries, getting proper payments, getting proper pricing is something that we will intently pursue, appropriately so, as we go forward.

Thanks so much.

Brian Johnson, Barclays.

I have a few questions.

First, just following up on that commercial agreement, was the magnitude you got in fourth quarter reflective of what you might think about for full-year 2013 in your prior guide?

Or are you actually getting more traction in collecting what's owed to you?

I would say, for the most part, it should reflect about what we're going to get in 2013.

There was a little bit of catch-up, we'd say, in probably 2012.

But for the most part, it's reflected, and it's certainly reflected in our guidance, Brian.

I would say, just to put a ballpark on it, approximately 25% to 30% of that was probably out-of-year recoveries from like '11, et cetera.

So, the rest of that should be more stable.

And again, we've included it in our guidance.

Okay.

So, that was -- you were reflecting that going forward.

Yes.

Second, just a very minor question, but then I do want to talk about Halla and Interiors.

Could you just give a couple sample products in this wind-down vehicle electronics space?

On the powertrain side?

Steve Meszaros is here.

He runs the Electronics piece.

Do you want to comment, Steve, on some of the products you have in that group?

Yes.

These are products that are the history of our prior legacy as being a sole supplier of some products to Ford Motor Company.

And they're typically the last of our powertrain electronics, and some body electronics business that we were actually began the exit of, back in 2006.

But some of these have a very long lifetime, and it's taking a number of years to exit completely.

They last as long as the platform.

(multiple speakers)

The exit of [Cadi] has really signified the bulk of the rest of that business going away for us.

So, just completely, even though they have semiconductors, completely different from the information in the infotainment business you're staying in.

They're different.

Yes, they have circuit boards and that type of thing.

But the issue here is, in essence, a build-to-print, and supporting in many respects some customers versus the opportunity to go and design, and be at the upfront, as far as leading the technology charge in the cockpit side, which we do.

So, some were designed to print, some weren't, but for the most part it's not an area that has the margin opportunity, the growth opportunity that the cockpit side does.

Okay.

On Halla, you had a regulatory filing that you wouldn't buy the minority stake, or reignite, if you will, the prior tender offer.

What does that mean in context of your comments and conferences that the right number is either 100% or something else?

This was a statement required in the filing as to what our intentions were with respect to the tender offer.

It had to be updated just as part of the normal process.

So, at this stage of our business model, we don't currently have any plans to make another tender offer, or proceed with acquiring any of the 30% we do not own.

And that was a required request on the Korean filing from the agency there.

Okay.

But in terms of -- does that imply that you might bleed out more stock to the marketplace?

Or you're happy where you are?

We've basically said long term that we're a [051] or [100] kind of guy, but at this point in time we have no plans to go up or down.

Okay.

And then finally, on the Interiors segment, a couple questions.

Is it still cash-flow neutral or even positive, as you seek to find buyers for it?

And two, any update in terms of -- do you have a [data room where their books out]?

Or are we're not yet at that point in the process?

I don't think we want to comment in granular detail on where we are in the M&A process.

But I will say that, from the standpoint of cash flow, as we've said before, the business is a drain on the short term because of restructuring costs, as rightsizing the operations in Europe.

And I think that's probably the principal driver of cash flow, is the restructuring and proper rightsizing of the Business.

Okay.

Thanks.

Look forward to seeing you in Asia.

Matthew Stover, Guggenheim.

Nice job.

A quick question for you.

A couple of them, actually.

I want you to clarify the comment you made on recoveries.

I understand that in the '13 guidance you have an expectation of recoveries baked in.

But if we look at the release, you posted [37%] of a recovery in the fourth quarter, which was [30%] better than last year.

And then for the year, was [20%] better.

So, how should we think about that recovery embedded in your guidance?

It's a good question, Matt.

Think of the recoveries as parts we're selling within 2012, for the most part, that have a price that has not been reflected for, let's say, excessive currency movement, or where there's some other commercial element with the customer that justifies a higher price.

And rather than changing the PO, we have a one-time per year settlement on that customer.

So, it's really -- it represented, for the most part, we'll say all of, 80% of it represented sales in 2012 where we just didn't have a PO that reflected the economics of the real purchase.

Mostly business in Europe and South America.

So, I would say, for the most part, I want you to look at it and say -- it belongs in the year, it's just a little bumpy of how it comes into our P&L.

And then, just describe that with a comment that you'd made.

I think you'd characterized the year as starting weaker from a margin standpoint, but then improving as the year goes on.

But then when we look at the impact of this recovery on the fourth quarter, it's a very favorable impact to this year's fourth quarter.

And so, should we be thinking about that margin improvement as being versus this delta?

Or is there an issue in the fourth quarter of last year where there might be some comparability issues just because of timing?

Timing did have some influence on this; there's no question about it.

But, for the most part, I think -- going back, there's a lot of elements in your question -- we do have, just by the very nature of the growth, a back ended in every year, stronger quarter, the last half than we do in the front half.

We also, quite interestingly, and we won't get into this in too much minutiae, but we are impacted, quite honestly, as a company larger by Lunar New Year and Chinese New Year than we are by the conventional Christmas and New Year break, because more of our business is in Asia, which also happens to be a first-quarter event.

So, therefore, we have a little bit different balance through the year than the others do.

But for the most part -- and I just want to reinforce Jeff's comment -- we will continue to pursue taking these lump-sum events like occurred in Q4, and trying to make sure they're now more through the year and through the quarter the best we can.

There's some areas -- Argentina is an example -- where you've got cyclicality and an inflationary impact on currency, which sometimes, just by its default, creates episodic events of recovery.

But we'll continue to try to reduce those as we go forward.

And I would stress, Matt, too, as you look at our fourth quarter, even as you adjust those, we had very good sales and we had very good base-level profitability, which did improve year over year.

Fourth quarter was a good quarter, regardless, and this just made it better.

Yes.

Now, if I look at the comment regarding divesting the Interior business -- if I look at your benefit obligations in the US, you've got about $1.5 billion, and overseas you've got about a $0.5 billion in your pension obligations.

How much of that stuff is associated with Interiors?

I think the easiest way to summarize that up is that Interiors has really no US operations.

So, therefore, no impact here.

Okay.

And on the International piece?

On the International piece, there's obviously some French pension and some elements there.

But that's not a driving factor of our overall unfunded position or our pension piece.

There's definitely some exposure related to the Interiors business.

I don't have the number off the top of my head, Matt, but it's --.

We can get it to you.

Yes.

The last question is -- Tim, you made a comment that the Electronics business is, I think you said, ripe for consolidation, given there hasn't been much activity.

Is that to imply that you'd be interested in participating as a consolidating entity?

Or was that an observation?

We like to keep our options open there.

I have been consistent, I think, since my arrival here, is that probably being the lead consolidator in any one segment is probably not our focus.

But I do want to keep our options open there.

And I do want to make sure that you all understand what we see as we evaluate the options for that business and the strengths that it has.

And at this point, we put Electronics -- it was on the back burner last year because we had other priorities to deal with.

And as this year progresses and some of the other priorities start to work themselves off, we'll start looking at the options we have with Electronics.

But I do believe that industry does need consolidation.

Okay.

Thank you very much, gentlemen.

Colin Langan, UBS.

I think back in November you mentioned listing in Asia as a possibility for some of your joint ventures.

I think you said at the time it would take 18 months.

Any update there on the timing, and whether that's still something you're actively pursuing?

I think we've been very clear -- and it's a good question, Colin -- that if we don't see the value proposition being properly addressed here in the US, that we'll look at scenarios and other options where we can achieve that.

We were obviously in Asia as much as we're anywhere.

And that option's still on the table.

And the timing is still around -- it will take at least 18 months?

Anything of that magnitude, if we were to pursue something like that, is not a short, easy event.

So, just stay tuned, and we'll see how things go.

And in terms of, I think, also back around November you mentioned you were doing the $100 million in restructuring.

How much has been completed so far?

Or is this you're still just identifying what needs to get restructured?

Colin, we took a charge in the fourth quarter of around one-third of that, $35 million or so.

We have, I'd say, as we look into 2013, we'd see the balance of that.

And the cash flow is happening this year, for the most part; it might spill a little into next year.

Okay.

And is that predominately Interiors?

What we've taken so far is predominately Interiors.

You can see it in our 10-K.

But one of our French facilities we downsized a little bit.

In the rest of the year, it's a bit of a mix, including some South America type of activities.

There was basically three buckets for that, as you recall.

One was Interiors and the rightsizing.

The other was, we'll call, the SG&A and restructuring of the burden base here at the Corporation.

And the third bucket was cleaning up what we called some of the legacy issues with customers and others.

And each one of those has a different timeline.

The second bucket, which is the restructuring SG&A side of the Company, will continue to be ongoing.

But typically has fairly quick paybacks.

So, from an annual perspective, there's some quarterly cash flow impacts, but from an annual perspective it tends to be less than a year payback, as a rule.

And any color -- actually your tax guidance came down for next year, it looks like, by around $20 million, and on the high end.

And then tax for the quarter actually came in pretty low.

But it doesn't seem like cash taxes has changed much.

So, what is actually going on with the taxes?

That's a good question.

It's basically -- and one of the -- we mentioned that they could vary significantly.

We have a few uncertain positions where we have some reserves out there.

Depending on how some of our activity goes, we might release some of those reserves, which could impact mostly our tax expense on our income statement.

We haven't changed our cash tax guidance at this point.

Although we will look, obviously, for additional opportunities to work on our effective cash tax rate as we go forward.

So, it's essentially your estimated reserve came down?

Is that because of where the --?

Correct.

Essentially a reserve on an uncertain tax position, we might get a little better definition of what the likelihood is we'd have to pay.

In certain cases we think we're going to reduce that reserve.

Okay.

And just lastly, you obviously highlighted cockpit electronics as a growth area.

What percent of the Business today is cockpit?

Is it already 90%?

And then does the vehicle electronics go to zero fairly shortly?

You can see it on -- it's page 13, I think, you can take a look at that.

The yellow on that slide is the vehicle electronics piece, and then the remainder is cockpit.

The only two -- the two colors of cockpit, one is in the consolidated entities and the non-consolidated entities.

But you can see how the yellow, which is the vehicle electronics piece, continues to go down.

Some of this hangs on for quite some time.

We have a piece in India that hangs on for quite some time; in China, that doesn't go away.

But for the most part, it's down now to being 10% or so of the Business.

Okay.

All right.

Thank you very much.

Kirk Ludtke, CRT Capital Group.

We really appreciate the update on Electronics.

It seems like a pretty major trend, the integration of CE into the cockpit, particularly the smartphone.

Could you just talk a little bit about how your customers feel about the integration?

It seems like obviously it makes a lot of sense, but they probably have some mixed feelings.

They are losing some control over the product.

They might have to cut the content providers, particularly the smartphone manufacturers, into the mix somehow at some point.

Can you expand on that?

And how quickly you think this will roll out.

Is this something that is happening at the bidding level in a very pronounced way, and in a few years we're going to see the iPhone display across dashboards in the industry?

Can you talk a little bit about those things?

It's a good question for a whole day of technical presentations.

But let me summarize it this way.

The dynamics of the consumer driving the interior electronics of the vehicle is now real and cannot be discarded.

The OEM and all of us are reacting to the fact that the consumer is sitting in the car with a device in his pocket, and that device has significant influence and impact on everything else in the vehicle.

So, all of this is rolling out.

We are very well-positioned in the user-interface element of that.

But there are other people, other partners, other things.

There's probably -- we have 30 active partners there in various elements of this.

So, I would say that this is very real; it's a very dynamic piece.

I'll be happy to answer lots of questions with the team and the staff, as we sit down at the Shanghai show, or any other time to take you through it.

But this is an exciting thing in the vehicle, and it's very real time.

The quotes we're doing now reflect a different vehicle than you're driving today.

Yes, it sounds like it.

With respect to the margin expansion, it would make sense that your margins would go up as you move toward the role of an integrator and away from a manufacturer.

I was just curious, is this basically -- are you offering something that you already are doing, and you're riding a wave?

Or do you need to go in and convince customers that you have new capabilities?

I think, first of all, the customer has always viewed Visteon as being one of the leaders on the interface side -- human interface side.

The cockpit, taking whatever external or internal factors the driver needs to see, feel, hear, interface with, and being the integrator of that.

And so, they've come to us.

We do joint clinics with a number of customers, looking at different technologies, and different interface styles and technologies.

So, it's a very real -- it's a real spot for us, and it's an area that we have significant leverage with the customer.

And they come to us.

When we were at the Consumer Electronics Show, we spent literally hours and hours and hours with almost all the major OEMs as they went through the show, and then sat down in our vehicle, the e-Bee vehicle, and evaluated some of what they saw, but some of what we were offering as to how they want to modify their vehicles.

I can't tell you how dramatically different the e-Bee vehicle is from what you're driving today, including the instrument panel layout, the space, the use of technology.

We can go on and on here.

I know I've got to cut this off, Kirk, but this is an exciting area of the vehicle.

And one which I think you, as an investor, or as an analyst in looking at Visteon, need to understand our role in.

That's great.

Can I sneak one more in?

Everything has a price.

You were talking about consolidation.

Do you actually see assets on the market that would fit into your portfolio?

I would say that this is a segment that, as I said, we're going to elevate up to the front burner in '13, and we'll be evaluating our options there.

And I'll just leave it at that.

I appreciate it.

Thank you very much.

All right.

And let me say this to all of you.

As we looked at first quarter -- and let me close here, if I may, Scott -- we had a good quarter.

We ended the year with some momentum.

But we know we've got a lot more to do.

And so, '13 we've begun to lay out the building blocks of the next stages of value creation.

We are very focused on that.

We're going to take a group of you, I think, to Seoul and Shanghai here in a couple of weeks, so you can see our activities in Asia.

We are going to be back at the Shanghai show.

Asia is very important to us.

But also, the overall bottom line of creating value here and delivering to our customers.

And so, we appreciate your support.

We're pleased with this quarter, as I said.

But that's yesterday's news, and we go forward to 2013, which we are comfortable with our outlook.

We're comfortable with our momentum coming into this year.

And we see this as being another good year for Visteon.

So, thank you, all.

We'll talk to you again next quarter.

Thank you.

Natalia, that completes our call.

This concludes today's earnings call.

Thank you for joining us.

You may now disconnect.