Visteon Corp (VC) 2013 Q4 法說會逐字稿

Ladies and gentlemen, this is the operator.

Today's conference call is scheduled to begin momentarily.

Until that time, your lines will again be placed onto music hold.

Thank you for your patience.

Good morning, and welcome to our review of Visteon's performance for the fourth quarter and full year of 2013.

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

Today we are pleased to be presenting to an audience of investors in New York City.

Before we begin, I would 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 details.

A webcast of this earnings conference and the presentation material is posted on the investors section of Visteon.com.

Please visit our website to download the material if you have not already done so.

With us today are Tim Leuliette, Visteon's President and Chief Executive Officer; and Jeff Stafeil, Visteon's Executive Vice President and Chief Executive Officer.

We appreciate your interest in our Company and for taking the time to join us to review our performance in the fourth quarter and full year of 2013.

Under the format of today's meeting, those here in the audience with us will have an opportunity to ask questions after Tim and Jeff's remarks.

Again, thank you for joining us and, now, I will turn it over to Tim.

Thank you, Bob.

And again, let me extend my welcome to all of you here and on the phone.

Obviously, as you have seen, this is not our typical earnings call format.

As we sit here in New York, we decided to combine our investor call with investor day to take you through our technologies.

It's a unique opportunity here because, as we look out and you see -- you will basically see what we had taken to Las Vegas for our consumer electronics show as well as all the HVAC technology that we have brought to do with not just ourselves but with the engineers and the technicians and the leadership of the product groups to explain it to you.

As we do this format today, we will go through the earnings, focus on both 2013, give some 2014 guidance.

Then you are going to tour these products and see and listen to the presentations and listen to the people who have developed this.

We will also speak a bit about how legislation is impacting our portfolio.

We will also talk about how they impact of the two recent announcements we have made on OpenSynergy and Autonet, those relationships, how that impacts our future.

And then we will sit back here after the presentations and take you through how that builds to 2017's story.

I am very pleased and very happy to have you here.

But also, as a result of reaching out to you and coming to New York, we have the opportunity today as we look at the invitation list who has accepted to join us is that we will have over half of the ownership of Visteon here today.

And that represents a great opportunity to have that one on one and that interface with such a large group of the investment committee.

So with that, let me begin.

On the first page here, recent highlights.

I will summarize this by saying it was a good year.

We delivered strong full-year performance, sales of $7.4 billion.

We had a record EBITDA of $704 million.

It would have been $710 million under the old measurement criteria, had we had YFV in for the entire year, but the sale at the end of the year caused some modification to the numbers.

It would have been $710 million otherwise.

This is a record EBITDA.

For a company that's smaller than it was, size is not everything.

The focus that we are bringing to this business, focus on climate, focus on electronics and, as we exit interiors is building a base of strong performance going forward.

Adjusted net income of $331 million, EPS of $6.48.

We reported net income attributable to Visteon of $690 million.

That includes about $465 million of gains related to the sale as well as $51 million of taxes related to that.

A positive adjusted free cash flow of $232 million, $130 million higher than 2012, and free cash flow of $43 million.

Strong performance for the year, strong performance for the quarter.

As we look at the liquidity situation, obviously now we reflect the cash that's on our books from the sale of YFV.

We have about $1.7 billion in cash.

This is after, by the way, of buying back some bonds, returning some bonds as well, and buying some stock back, as you know.

And we have $100 million of US ABL which is untapped.

Debt of $730 million.

And we repurchased, as we said, $300 million of shares and repaid $100 million of our debt since the beginning of Q4 2012.

With respect to guidance, we only talked guidance here about a month ago.

I'm not here to go change those numbers today -- $7.7 million, $7.9 million sales, and Jeff will take you through some of the buildup.

But what I do want to focus on is the last item, and that is, as we are targeting an $875 million share repurchase through the end of 2015.

Have we been in the market yet?

Outside of that shares we bought back in Q4, the answer is no.

The reason is that we are confronted with blackout periods, restricted periods due to the end of the quarter, end of the year, trailing through to when we have an earnings release.

We also were confronted in December with having information resulting in an [information leaving] LOI, which led to the announcement in January of the sale of JCI.

You obviously understand that we are facing some potential transactions in the interior side.

And we've faced those same issues of having some information that's not yet completely ready for dissemination, and therefore we will probably be in a blackout period here until mid-May.

So we will not be in the market to start buying stock back, most likely, until mid-May.

From the standpoint of delivering strategic actions, to summarize the year up, some highlights -- contributed climate, sold Yanfeng, agreement to acquire JCI, focused on the reaching agreements to exit interiors.

Let's start amplifying some of that here in a few slides in a moment.

As we do every earnings release, we talk about where the car is built and where do we do our business.

And I will give you the same story each time.

Asia continues to grow.

Fourth-quarter, it was 53% of all the vehicles produced in the world came from Asia, 24% in Europe, 18% in North America, 12% in the US, 5% in South America.

Why is that important?

Why do we keep reinforcing that message?

We still see our stock move more up and down based on US SAAR than we do China or Asia.

There's still a culture and mindset of how important the US is in the auto industry.

It is important.

It's 12% important in the world's global auto industry, as it represents the contribution to the overall production.

As we look at where we do business, you can see climate fits the international spread of production quite well, 60% of it in Asia.

Electronics, 40% in Asia.

This was before the JCI and before some of the other actions that we are going to discuss.

Interiors is still heavily focused on Europe, but you can see that in absence of interiors, the remaining core businesses are levered to Asia, will be more levered to Asia.

It has a very good footprint as we go forward.

I will go through some of the building blocks here on the next page in more specificity here in a moment.

But I think the issue is that when we talk to you, when I first met all of you back in September 2012 at the Citi conference, many of you at the Citi conference in 2012, we laid out a template of where we wanted to take Visteon.

And at that point in time, I think many of you viewed Visteon as an event company, an event stock.

There were things that needed to occur -- sales, buying, cleaning up, exiting, et cetera, that made this and an event company.

And from our standpoint we said, look, 2013 into 2014 we will be an event period.

We will be addressing the issues, cleaning up.

I call it the cleanup, paint up, and fix up period of the Company.

But as we entered 2014, a lot of that was going to start being behind us, and we had to look at the value proposition.

Today we are only -- this first presentation we are talking about 2013 and our guidance for 2014.

But as we get into presentation for the investor day, which we will go back online here right after noon, we take you through how this builds a value story because now that's a focus of Visteon is this value creation which is quite strong.

But let us focus on some of the specifics here before we started and some of these building blocks for the year.

A year ago we gave guidance of $7.3 billion to $7.5 billion in revenue and $620 million to $600 million of EBITDA.

The difference between the $620 million to $660 million and where we ended up at the $706 million was not because we sandbagged, because that's always an excuse, but basically because if you look at the flow that incremental revenue flowed to the bottom line.

And what's an important message for Visteon going forward is that that revenue does flow to the bottom line.

Right now, we use IHS and others as independent inputs as to gauging our volume projections, but once we have those, we build our model.

I was very pleased with how the management team took every incremental dollar of revenue that came by.

Europe was a little better than we anticipated.

China was a little bit better than we anticipated.

India was a little better than we anticipated.

Ford was a little bit better than we anticipated.

It flowed to the bottom line, and that's the delta from where we were.

But a year ago we still had five major reporting functions.

We had over 100 joint ventures.

I know it was difficult for you to understand the Company.

I was on the Board here for a few years before I took over this role.

It was difficult for me, on the Board, to understand the complexities of this business.

We have continued to focus on cleaning it up.

We continued to focus on focus as we go forward, but that's what we were a year ago.

And we had a corporate-centric culture.

Now, let's talk about where we have transgressed.

By the way, in the background is either a very large woodpecker or our competitors trying to burrow their way into the presentation.

But people are trying to address it.

As we look at those building blocks, I want to spend a few moments here on HVCC.

I can't be more pleased with how this is come about.

In that year we put it together; it's now the second largest climate company in the world, thermal management company.

You are going to see out here some tremendous technology this afternoon or this morning into this afternoon, including the first mass-produced hydrogen fuel-cell vehicle by Hyundai that has now, I think, got many more orders than they have production capacity to build.

And it shows you how we are addressing thermal management issues when you have vehicles that don't have engines running all the time, which is going to be the future.

But it's a technical engine being driven by legislative issues, being driven by environmental issues, CO2 credits, all the stuff that seems to be minutia starts building a different business model for us in creating revenue.

And Y.H. will take you through that.

But up till now that stock is up 60% since we started the formation of the Company -- strong balance sheet, zero net debt by itself, robust backlog, and 7% sales CAGR through 2017, our planning period.

It's intellectually property driven, and it's also a balanced company, becoming more balanced.

China sales now exceed $1 billion annually.

Sales even grew in Europe in 2013, and you see that we are right now underway in expanding in China and in Russia and in India.

As we look at the YFV/YFVE consolidation, this story, which we've talked to before but I want to explain how it builds into where we are headed -- this became a very delicate negotiation for one critical factor.

We wanted to exit the parts of YFV that were not core to us, but we wanted to get back into and consolidate the parts of YFV such as YFVE that were important to us.

That has been -- that negotiation took some months to accomplish.

Again, it was closed for the most part, that we got most of the cash (inaudible) in the fourth quarter.

Some cash trails.

But that transaction was valued at $1.450 billion when the smoke cleared, $300 million value for the YFVE component, for our ownership of the YFVE at $300 million cash to Visteon of $1.150 billion.

We have received over $1 billion of that cash right now in the bank accounts in the US.

We have about $150 million remaining.

And as we outlined initially, our tax rate on that is roughly 10% to 11%, utilizing some of the NOLs and other capability we've had.

So this is a critical transformation for us.

And it is now about behind us now, just the cash.

And it's now building that expanded YFVE relationship as part of our electronics business, now that we consolidate that into our numbers.

The JCI acquisition -- I will amplify a bit on this now from what we've said in the past.

The bottom line is that -- and Marty is going to take you through what this does for us.

But it makes us the second largest, the third-largest cockpit ecosystem, electronic ecosystem provider in the world, clearly a strong contributor in this business of driver information, a major base to level off of.

Purchase price, $265 million.

We look and we quote their numbers.

Their numbers were $58 million of EBITDA for their fiscal year, which ended in September.

That includes $11.8 million, about $12 million of corporate charges from JCI corporate to that business.

We would expect significantly less corporate charges from the Visteon corporate [pace] to this asset.

And we also see this having some critical synergies.

SG&A -- immediately, there's engineering/technical resource synergies.

What I like about this business is there's a lot of the senior people at JCI are former Visteon people.

They know the culture.

They know each other.

There's a similar operating style.

So we can start melding this thing together, I think, a little quicker than we normally would.

Targeting this thing, late second quarter to close.

Can't wait, want to get going.

Got a few things you got to do to get the deal closed and go through all the process.

We are happy about it, and we look forward to welcoming those JCI employees as part of the Visteon family.

Can't wait.

As soon as this thing closes, I know Marty and I are going to be on the road shaking hands, greeting these people, and making them feel wanted and warm and part of our family.

Looking forward to what this will do.

And Marty will take you through what it will do for us as we go forward.

Exit interiors -- this is the last remaining, if you will, major event, I would say, from an exit perspective that we need to address.

We are working towards divestiture; as I said, we have, at this point, given you some indication of the aspirational trend, targets, object of the process that we are involved in right now, which is three different transactions -- a standalone Asian JV which is focused to really one particular customer with a separate buyer, the European customer legacy business -- we've got one there, which is really focused on one particular OEM.

It's kind of integrated into some of the other OEM's issues, labor and facility issues, such that it needs to standalone and be treated separately.

And then there's the remainder of the global interiors business.

These will be a combination of transactions.

They will be announced as they individually occur.

We have always said that our job here, our objective here was to get a net neutral impact from a value perspective.

We will be exiting a great deal of pension liabilities, other employee liabilities, and some debt.

The liabilities, including these pension issues and what have you, amount to about some $200 million.

So there will be our cash contribution to exit these liabilities.

But when we do exit these liabilities, our objective here has been to have no tail.

If we wanted to joint venture some of these, if we wanted to go do a different kind of path where we had some remaining exposure, we could have done this perhaps a little quicker.

Our goal here is to find the proper buyers for each one of these assets, properly financed, properly motivated to go and build these businesses, but do so not on our watch.

Our focus is to be out of these businesses, and that's the path we are taking.

Lean corporate model -- again, some additional information here from what we've seen perhaps in the past.

And that is that we not only are reducing this fixed cost and SG&A burden, and if you go back to our January 15, 2013, our January 15, 2014, our August presentation last year of this stair steps, this was in line.

We are right in line with that plan.

This is where we are taking the fixed costs and SG&A spend down.

But more important, that next set of bar charts underneath here on page 10 is you see how much of that is at the corporate level and how much of that is the product group level.

Now, this includes the outside service aspects of some of this responsibility as we move to outside services, and we are paying the bills for it, which gives us some cost efficiency.

But as you see, that lean corporate model says that most of the capabilities that are necessary to run these businesses on a stand-alone basis operationally are now embedded there as opposed to being carried at the corporate level, where it's just charged out.

We want to Marty and Y.H.'s of the world to be responsible for their business.

If they need a head, if they need an expense, if they need a fee, if they need an advisor, if they need a license, if they need some support, they make that decision.

We don't make it at corporate and charge them.

I don't like the club fee approach to corporate overhead, and we continue to minimize that.

What does that mean from a corporate people perspective?

There were 1283 people on corporate staff back in mid-2012.

We will be down towards the end of this year into next year in the 60 to 70 range so that we now will be a very lean corporate group, and allowing these product groups to have the resources and the focus they need.

Our goal here in 2013, and I will amplify this more as we talk about 2015, 2016, 2017 here later in the day, is that we are focusing on the strategic goals.

This has not been a company that is focused on flavor of the month.

We have stuck to our 2012 goal from that September presentation -- simplifying the business so it's easier to understand.

It's important for all of us, not just you as investors or analysts, but it's also important for management.

We can't be everything to everybody.

We are very laser focused on our electronics and climate business.

We've significantly reduced our fixed cost and SG&A since 2012 and focused those resources to the more appropriate place.

We have committed to create value through strategic actions.

Again, we've discussed Climate, the Yanfeng, working towards interiors divestiture, the consolidating YFVE, the JCI issue.

And now we have two businesses.

Very important to remember we have two businesses that are number two, one number three by a couple tenths of a point, could be number two in the world, our climate and electronics business.

And they are both high-growth, high-margin businesses.

When we look at the capital employed, when we look at the returns on capital in these businesses, they are very strong.

These are cash-generating businesses.

They are large enough in their space that they can control the technology and economic footprint.

They are players in that space that can have leverage.

And you will see that as you walk through these presentations and bucks and vehicles here in a little while.

From a strong capital return perspective, $300 million in share repurchases since Q4 of 2012, which has translated to 4.9 million shares on average price of $61 a share.

It has been a good use of corporate cash.

And $100 million in bond redemptions since Q4 2012.

We will still go back and, as I said, be active and get that $875 million remaining stock buyback in place, have to pace it around all these blackout periods.

It will get done.

And we are committed to that.

And with that as an overview, let me turn it over to Jeff and talk about the results in particular and specifics.

Thank you.

Thanks, Tim.

I will begin my comments on slide 13 of the material.

Here we present our key financial metrics for the full year 2013 compared to 2012.

As we have explained on previous calls, our financial results are impacted by a number of items that make year-over-year comparisons difficult.

The adjusted financial information presented on this slide excludes these items and represents how we manage the business internally.

As non-GAAP financial measures, this adjusted financial information is reconciled to US GAAP financials in the attached appendices on pages 30 through 32.

2013 was a strong gear for Visteon as we meaningfully improved versus the prior year on all our key financial metrics, driven by strong performance in our core operating businesses, climates and electronics.

Note that on this page we have excluded nearly $500 million of gains related to the YFV transaction, in all of these metrics.

On this page we also show our old and new definitions of adjusted EBITDA for your reference.

Our old calculations result in $704 million of adjusted EBITDA, while our new definition yields $600 million.

The difference between the two is that our new definition does not include equity income or noncontrolling interest.

Given that the sale of our YFV business -- I'm sorry.

Given the sale of our YFV business, we opted to change our definition to be more consistent with our peers.

That said, we will focus on our old definition of adjusted EBITDA throughout this presentation, and we will begin using the new definition when we report our first-quarter results.

I will cover all these metrics in more detail on the following pages.

Turning to slide 14, I will discuss the impacts of the YFV transaction on our 2013 results.

In November, we increased our ownership in Yanfeng Visteon Electronics, YFVE, and thus begin to consolidate its results.

This impacted both our November and December financial results and added $66 million to sales.

In mid-December we completed the sale of our 50% interest in Yanfeng interiors, YFV.

In total, the transaction has reduced Visteon's adjusted EBITDA by $6 million for the year.

If the transactions had not been completed, Visteon's 2013 full-year adjusted EBITDA would have been $710 million.

Specifically, the electronics product line adjusted EBITDA was favorably impacted by $3 million related to the YFVE consolidation.

The consolidation itself improved results by $6 million, but this was partially offset by $3 million of lower equity income.

Adjusted EBITDA related to the interiors product line was also impacted by the transaction.

In total, interiors equity income was reduced by $9 million, based on the relating closing dates.

Moving to slide 15, we provide an overview of quarterly consolidated sales and adjusted EBITDA versus the prior year.

2013 fourth-quarter sales were the highest of any quarter during the last two years.

The increase reflects new business in the climate product group and higher volumes in Asia and Europe.

Q4 adjusted EBITDA was $187 million, equal to Q2 adjusted EBITDA, the highest of any other quarter for 2013.

Although the trend in adjusted EBITDA showed continued strength and stability in each quarter during 2013, Q4 adjusted EBITDA was lower than in the fourth quarter last year.

In addition to the $6 million negative impact from the YFV transaction discussed in the previous slide, Q4 2012 presents difficult comparable period, as we have discussed numerous times in the past.

Specifically, 2012 Q4 results were favorably benefited from the impact of commercial agreements, higher engineering project recoveries, and several one-time adjustments impacting the electronics product group.

That said, our full-year adjusted EBITDA margin of 8.1% compares favorably to the 7.7% achieved in the previous year.

Turning to slide 16, we compare 2013 fourth-quarter and full-year sales and adjusted EBITDA to last year's results.

It is important to note that both Q4 and the full-year 2013 results were impacted by the YFVE consolidation.

The consolidation of YFVE financials for the last two months of the year increased 2013 sales by $66 million.

Adjusted EBITDA, excluding equity income, increased by $6 million due to consolidation.

2013 Q4 sales were $1.96 billion or $135 million better than the fourth quarter of 2012.

Other than the consolidation of YFVE, the increase was driven by sales in climate, which benefited from higher volumes in all regions, particularly Asia and Europe.

Adjusted EBITDA for the fourth quarter of 2013 was $187 million, down $15 million compared to the fourth quarter of 2012.

Equity income from our non-consolidated joint ventures increased, but was more than offset by increased noncontrolling interest.

As discussed on the previous page, Q4 2012 presents difficult comparison as it benefitted from several timing benefits.

That said, our full-year results have less timing-related impact and show a strong increase in both adjusted EBITDA and adjusted EBITDA margin versus 2012.

Turning to slide 17, we show our full-year sales and adjusted EBITDA for our three product groups: climate, electronics, and interiors.

It should be noted that the adjusted EBITDA figures on this page include the benefits of equity income and affiliates and a deduct for noncontrolling interest.

I will cover each of the metrics on the following pages in more detail.

Moving to slide 18, we show our fourth-quarter and full-year sales and adjusted EBITDA by product group.

Note that the product group adjusted EBITDA on this slide excludes equity income and noncontrolling interests, which are both shown separately at the bottom.

We have subtotaled results for our climate and electronics businesses.

You'll notice that sales in adjusted EBITDA for our combined climate and electronics businesses are up 14% and 18%, respectively, on a full-year basis versus 2012.

Both of these product groups experienced strong year-over-year growth during 2013.

Results for our interiors products group continue to be impacted by lower productions and commercial recoveries.

Sales and adjusted EBITDA for this business were down 9% and 40%, respectively, on a full-year basis versus 2012, primarily related to the lower production volumes in Europe and South America.

Our equity income improved year over year, mainly due to strength in China that benefitted the YFV affiliates.

Offsetting this gain was $18 million increase in NCI, primarily related to our 70% ownership in HVCC.

On slide 19, we provide an overview of the climate sales and adjusted EBITDA for the fourth quarter versus the prior year.

Climate sales in Q4 were $1.3 billion, up $91 million, or 8%, compared with 2012.

The increase reflects higher volumes in Asia and Europe as well as the launch of new Hyundai business in Asia and Ford business in North America and Europe.

Currency also positively impacted sales by $23 million, primarily driven by a stronger Korean won, euro, and Chinese RMB.

Adjusted EBITDA for the fourth quarter of 2013 was $112 million, down $6 million or 5% compared to the figures in the fourth quarter of 2012.

Currency lowered EBITDA by $12 million, as the strengthening Korean won impacts our purchasing exposures more than the Korean won sales exposure.

Noncontrolling interest also lowered adjusted EBITDA by $10 million for the quarter.

Increased production volumes and new business were partial offsets on a year-over-year basis.

Climate's adjusted EBITDA margin was 11% in the fourth quarter, reflecting a strong, consistent margin throughout 2013.

In fact, full-year adjusted EBITDA margin increased from 10% to 10.6% year over year.

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

Moving to slide 20, electronics sales for the fourth quarter of 2013 were $396 million and adjusted EBITDA was $40 million.

Electronics sales for the quarter increased $59 million versus 2013 (sic-see press release "2012").

The increase was more than explained by the consolidation of YFVE, which increased sales by $66 million for the period.

As we have explained on previous calls, the electronics product group sales are also being impacted by a mix shift between vehicle electronics and cockpit electronics.

For the full-year, vehicle electronics sales decreased by $56 million, while all cockpit electronics sales increased $195 million.

Sales related to vehicle electronics have been steadily decreasing over the last couple of years but are starting to level out.

In 2013, they totaled $112 million.

In 2014, we project vehicle electronics sales to be approximately $80 million.

Adjusted EBITDA for the fourth quarter decreased $8 million versus 2012.

As previously mentioned, Q4 2012 presents a difficult comparison point.

As you can see by the spike in margin in that period, it was benefited by several timing-related items including higher engineering billings and larger customer recoveries.

Fourth-quarter 2013 adjusted EBITDA margin excluding equity income and noncontrolling interest was 9.6%, higher than all other quarters of 2013.

Full-year adjusted EBITDA margin was fairly consistent with 2012 despite the decline in vehicle electronics business.

Note that the vehicle electronics business had margins of approximately 30% as it had virtually no engineering support, given that it was being phased out of production.

Turning to slide 21 and taking a look at our interiors business, interiors sales in the fourth quarter were $317 million and adjusted EBITDA was $60 million.

Sales decreased versus the fourth quarter of 2012 by $19 million, primarily due to lower production volumes in South America.

Adjusted EBITDA increased by $6 million versus the fourth quarter of 2012, reflecting a $12 million increased equity income from our Yanfeng affiliates, partially offset by lower volume in design recoveries.

As previously described, we continue to operate and implement improvement actions in the interiors business while supporting and investing in it.

Thus, while we are continuing to target divesting it, we continue to support its growth and improvements.

Moving to slide 22, we provide a breakdown of the key components of our 2012 and 2013 tax provision and cash tax payments.

Our 2013 full-year income tax provision was $107 million, reflecting the following: operating taxes in profitable countries, which included a $12 million tax benefit relating to a valuation allowance released against Korean foreign tax credit attributes; an accrual of withholding taxes related to current earnings from consolidated and non-consolidated affiliates; a $48 million net tax benefit for tax contingencies relating to the release of certain reserves for uncertain tax provisions; and $52 million in transaction-related taxes related to the HVCC and YFV transaction.

If you look over on the cash payment side, we had cash tax payments in 2013 of $291 million.

Included in this total were $101 million in transaction-related taxes and a total of $38 million of tax deposits in Korea and Brazil.

We believe these tax deposits are recoverable in the future.

Of the remaining $152 million of cash tax payments, $28 million related to the withholding taxes, and most of this charge related to dividends from our former YFV investments.

Turning to slide 23, we will take a look at our cash flow and our capital structure.

Free cash flow was $28 million in the fourth quarter and $43 million for the full year.

Free cash flow in 2013 was significantly impacted by restructuring and transaction-related payments as well as the impact of the Yanfeng transaction.

I will discuss more on these on the next slide.

Fourth-quarter free cash flow also benefited from positive trade working capital and significant dividends from unconsolidated affiliates, partially offset by increased recoverable taxes that were paid in multiple jurisdictions that should be recoverable in the future.

Cash balances were $1.7 billion as of yearend, up $857 million since prior year.

The improvement is primarily attributable to proceeds from the YFV transaction, increased debt, and positive free cash flow, but partially offset by the $250 million used to repurchase Visteon stock during the year.

Moving to slide 24, we walk from free cash flow to adjusted free cash flow.

As I mentioned, free cash flow for the fourth quarter and full year was $28 million and $43 million, respectively.

Those flows were impacted by restructuring and transaction-related items totaling $108 million in the fourth quarter and $189 million for the full year.

Excluding those impacts, adjusted free cash flow was $136 million in the fourth quarter and $232 million for the full year.

It should be noted that adjusted free cash flow was higher than our guidance of $145 million to $185 million that we provided at the Deutsche Bank conference in January.

The increase was related to the Yanfeng transaction during the fourth quarter.

In total, the transactions increased free cash flow by $83 million, most of it related to increased dividends net of withholding taxes.

These increased dividends were not included in our guidance.

On slide 25, we provide our 2014 full-year financial guidance.

As mentioned earlier, beginning in 2014 we have redefined adjusted EBITDA to exclude the impact of equity and affiliate income and noncontrolling interests to better align with the definitions used by the investor community and in consideration of the sale of our interest in YFV.

For the full year, we project the midpoint of adjusted EBITDA of $680 million, adjusted free cash flow of $125 million, and adjusted EPS of $2.65 per share.

These figures have not changed since we presented them to you last month at the Deutsche Bank conference and do not include any contemplated M&A activity.

Specifically, they do not include any impact from our announced acquisition of JCI's electronics business, nor do they contemplate any ownership change in our interiors operation.

When preparing our currently 2014 midpoint of guidance to the preliminary guidance we provided last August, there are two noteworthy differences.

In August, we continued to include equity earnings and noncontrolling interests in our EBITDA calculation, and both these forecasts have been negatively impacted since that time.

One reason for the difference in equity income is driven by divestiture accounting, as we were required to change our accounting treatment relating to future dividend and equity income as we transitioned from the equity method to the cost method of accounting for a YFV affiliate we continue to own until mid-2015.

As result of this change, we will reflect the majority of the dividends received in 2014 as balance sheet adjustments as opposed to an income statement benefit.

Additionally, the equity earnings forecast has declined due to a delay in acquiring a portion of them YFVE ownership interest until mid-2014 due to various regulatory requirements.

Excluding the impact of equity income and NCI forecasts, our adjusted EBITDA is slightly different from our targets provided last August by about $20 million, primarily due to weaknesses in South America and South Africa.

Meanwhile, our core operation at HVCC in electronics remain unchanged from that previous guidance.

Moving to slide 26, we provide a walk from our 2013 guidance for product sales and adjusted EBITDA to our 2014 guidance for these items.

For product sales walk, the first variance relates to consolidation of YFVE.

On a pro forma basis, if we had included YFVE for 12 months, Visteon's sales would have been $7.7 billion in 2013.

In 2014, we project interiors product group sales to decrease.

However, this decrease will be more than offset by increased sales in our two core product groups, climate and electronics.

Most of the sales increase will come from incremental new business, as we expect production volumes at our key customers to be relatively flat year over year.

For the adjusted EBITDA walk, we first reconcile our old definition for adjusted EBITDA, which included equity income from unconsolidated affiliates and noncontrolling interest, to our new definition, which includes these items.

2013 adjusted EBITDA using our new definition was $600 million.

We project 2014 adjusted EBITDA will increase to $680 million.

The YFVE consolidation will increase adjusted EBITDA by approximately $44 million.

This represents 12 months of consolidated EBITDA in 2014 versus only two months in 2013.

2014 adjusted EBITDA will be unfavorably impacted by lower sales in gross margin at our legacy interiors and climate facilities.

These decreases will be more than offset, though, by increased profitability at our HVCC climate and our electronics product group facility.

Now, let me turn it back to Bob for Q&A.

Thank you, Tim and Jeff.

We will now open up the floor for Q&A from our audience.

If you have a question, please raise your hand.

When I call on you, please stand and a microphone will be brought to you.

Please state your name, company, and then your question.

This will ensure everyone on the webcast can hear the questions as well.

First question, Ryan?

Ryan Brinkman from J.P. Morgan.

On I think it was slide 6 of your presentation, you mentioned that HVCC has got a strong balance sheet and no net debt.

Can you talk about maybe what the optimal capital structure is for HVCC?

And then also what opportunities, strategic or otherwise, are afforded to you by having that strong balance sheet?

Yes, the debt at HVCC is something that we look at quite frequently.

It's a strong cash flow producer.

If you look at the company, it historically pays a strong dividend.

It increased its leverage a little bit with the transaction to buy our climate businesses a year ago.

But it continues to pay down that debt.

The forecast would show it would continue to do so.

Putting debt there is something that we continue to explore.

Whether that debt comes in the form of an acquisition or increasing leverage with some sort of share buyback or other program are things that we continue to explore.

But our plans aren't definitive on that at the moment.

One of the things, just to expand upon that, is that, as we've said before, there is some opportunity to -- first of all, we don't want to put cash on the balance sheet and let it sit there.

Nobody wants to do that.

The question is taking that cash off or changing ownership, et cetera.

Right now we have a difficult time putting cash to work and buying stock back already.

What I don't want to do is do anything to bring more cash back that puts a burden on our costs or reduction in earnings power of HVCC while it just sits as cash on our balance sheet.

So we are balancing that, but I'm sure over time we all share the same objective.

And that is there should be leverage on HVCC, and we don't want to put a lot of cash on that balance sheet.

So given those goals, let's let the year evolve and see where we leave.

Okay, thanks.

And then maybe just a follow-up on HVCC.

You guide to, I believe, a 7% revenue CAGR through 2017 there, which is several percentage points stronger than light vehicle production.

Are there any scenarios you can imagine under which revenue could grow potentially even faster, for example, if some of this European refrigerant legislation were to break your way in Europe, would that benefit you within that timeframe?

Or is that a little bit longer term?

I can see scenarios where the revenue would be higher in 2016, 2017, based upon legislative or like -- take the European issue.

The R744 decision will be made sometime this year.

That could impact -- ultimately, the R744 cadre of opportunities could amount to somewhere between $300 million to $500 million for this Company at the end of the decade.

The question is when do we participate, if we participate, and at what ramp up.

When we look at the marketplace -- and when you go through the technologies today, you will see that there are legislative pressures to add more content for us.

So, I'm sitting here today saying I feel more upside than downside to the revenue stream.

But events have to unfold.

And right now, when we put forecast out, the 7% CAGR, that's stuff that we can touch, that we feel comfortable with, that we've either got in order for or pretty high confidence that that's in the bank.

These other opportunities are just that, opportunities.

As they unfold, obviously we will bring them forward.

But I think the important point here is legislation and environmental rules are going to make this a growth business for quite a while.

And just very last question for me, you made several recent infotainment announcements related to OpenSynergy, Autonet, apparently an award to provide infotainment for an Asian vehicle that was unnamed.

Was that in your backlog, number one?

And then, number two, maybe shed any light on those announcements.

And is there anything you can say about Ford's movement away from Microsoft towards QNX?

Does that open incremental opportunity for you?

So I sense four questions there.

Let me take them.

Is the Asian-based open format, our infotainment package, in the numbers?

The answer is yes.

Regarding the Ford situation, let me just go back to the Autonet, which is more of a connectivity play.

And we are going to talk about that today, of how there's about a $30 billion market in the connectivity side, making money off analytics, other opportunity sets that's not in our portfolio today, not in our forecast, not in our earnings stream or revenue stream, that this opens up the opportunity for us to participate in.

And that's the Autonet story, which Marty will take you through in an expanded way.

And OpenSynergy is the opportunity for us to interface with lots of different software formats.

Whether Ford is with Microsoft or not, it doesn't matter.

Using basically an Android-based interface, we can interface with many different types of software, whatever software systems, the operating system that the customer wants, and still bifurcate that from critical elements of the vehicle, which are CAN bus and separated unto CAN bus, considered a bifurcated operating system.

That, also, Marty will take you through for an expanded base.

Those two opportunities, the Autonet and the OpenSynergy, expand our footprint to go do some additional stuff.

And it's interesting; I was talking to Marty right before the call today.

And I think he's already received seven emails from these announcements saying, hey, we got to talk, from customers.

So it's the kind of stuff that we brought Marty on board to do.

It's the kind of stuff of expanding what is more of a traditional automotive foot print to more of the connected car footprint.

And we are pleased with that.

But we will go into greater depth when Marty steps up here in a little while.

Great.

Matt Stover, please.

Matt Stover with Guggenheim.

A couple questions.

I wanted to think about the balance of the growth opportunity from the electronics business and the investment that you need to make to accomplish that.

It looks like your R&D increased year over year.

And on the base Visteon business, I want to get a sense of how we should think about that into next year.

And then I would like you to also comment on as we integrate the JCI electronics business, how you can optimize investment to improve the fundamental margin and earnings performance of that business.

Okay.

And your questions all focus on the electronics side with respect to how the year progressed (inaudible) in 2014?

That's right.

Okay.

Well, let me just take it in pieces here and hopefully answer your questions, and Jeff can chime in.

We have an opportunity set.

We, first of all, faced in 2013, the opportunity with the growth.

And we did ramp up some engineering for selected programs.

That engineering, as you know, electronics is a capital -- is not a capital-intensive business; it's an engineering-intensive business.

When we ramp up engineering, it's because we have a business order for something coming.

So therefore, there is a payback, and it makes some sense.

We don't just add engineering for engineering's sake.

Secondly, and I think more critically, as we go forward with JCI there is duplication of some of the same fundamental technical platforms, whether it be on R&D side or development side, that we will get synergies from.

One of the things that we don't do on the Visteon side and others do is we do not capitalize engineering.

As we look at some of these advanced programs, we expense it through the P&L immediately on the Visteon side.

As you look at JCI, as we look at some of our competitors, they don't do that.

We will assess that as to what is the appropriate path.

But we do immediately expense that, even though those are [extremes] and those activities go forward.

So we see it improving.

We see just the leverage on the platforms that we are investing in without JCI improving the financials there.

JCI is a turbocharger opportunity to strengthen that EBITDA performance and earnings performance.

I don't know if you want to like amplify or --

Yes.

I think my big point there in addition to what you said is both these businesses are growing pretty heavily.

So as Tim said, we are putting engineering ahead of it.

As we bring JCI together with us, we see that combined engineering team not in the traditional element of having to shrink so much to basically cut costs in that way or that we can leverage that base a lot better without having to add as much incremental engineering to support the new business as you bring these businesses together.

So I think your second piece of why bringing the two engineering teams together will allow us to, overall, decrease our percentage cost and engineering over time.

As we look at the JCI contribution with synergies, et cetera, and you look out even a year or two, and you see a contribution of, say, $100 million of EBITDA from the JCI piece alone.

And you lay that on the growing Visteon electronics piece, you see a business that is generating a great deal of EBITDA that is significantly undervalued in our share price today.

So, we will hope to amplify a bit of that granularity in the rest of the presentations here later this morning.

Thanks.

Final question, we will take from Colin Langan.

One, can you just comment on the sustainability of margins, particularly on electronics and interiors?

They were the highest of the year.

Were there any seasonal factors helping them out in the quarter?

I think both should be sustainable if you look at the margin profile of what we are projecting as we go forward.

We continue to see some opportunities to improve margins.

I think with the JCI integration we will have some more opportunities to improve margin.

It's an area for us to focus on.

We find the general give-and-takes in this business of pricing, which we generally have to give price reductions to our customers every year.

But we are able to, for the most part, find material and other offsets in productivity to offset those things.

But then as you look forward on our new programs, there's a lot more technology content.

There's a lot more R&D.

There's a lot more complexity going in, which does allow for some higher margins.

So that battle we expect over time to continue to have some steadiness -- increase in our margins, although I'm sure from quarter to quarter you will see some gyrations.

But over time I think we see stable to better.

There's always a little pressure in the fourth quarter from people who haven't paid us or those kinds of things, to make sure it gets in by the end of the fiscal year.

But that has been much more reduced from the dynamics in 2012 into 2013.

So for the most part, this is a sustainable footprint.

Just following up on the earlier question, Ryan's question, you commented there was a $300 million to $500 million opportunity from the R744 potential change.

What are the assumptions in that?

If you look at the content of the vehicles that we will need to change -- and again, if one of the big OEMs goes through R744 in Europe, then there will be a rippling effect because there's a lot -- and there's an R744 presentation here, which we can take you through here in a little while, is to -- its performance and its contribution is significant.

But what it is, it will trigger other OEMs.

And therefore, the content from those heat exchangers and compressors and the other elements of that that are our forte, looking at what is a reasonable share of that business, would translate to that.

Why today?

Because we have 0% of that market in Europe.

And right now, we are one of the fundamental providers of that technology.

So, we see a role for us to play growing as the decade progresses.

And just one last question -- you mentioned going through electronics that vehicle electronics would have about $80 million in sales.

But the margins were 30% on what was rolling off.

Is the remaining business the 30% margin business?

Or was that just the incrementals are abnormally high?

It's generally very high.

The con margin on that business is very high.

Remember how engineering intensive our electronics businesses is.

And that vehicle electronics business, for the most part, has been de-sourced from us a long time ago.

And you have seen the work down of that sales going away.

But it hasn't been things we have had to support.

So the contribution of new business will improve our margin.

But we generally have had some headwinds as that vehicle electronics goes away because of the high con margins.

We don't give productivity on business that is going away, and we don't have to put any engineering on it.

Yes.

So it carries some high margins while it's still here, but it will go away.

And when does it fully roll off?

Some of it is pretty sticky.

And some of it we will hopefully be able to hold onto for a long period of time.

I will say all that stuff is reflected in the guidance that we've given you.

Yes, there will be $30 million to $50 million that will stick out through the planning horizon.

It won't go to zero.

But that's in the numbers we've given.

All right.

Thank you.

All right, great.

Well, thank you, everyone.

I would like to thank everyone for the participation.

If you have any additional questions, please feel free to contact me at your convenience.

I also want to encourage those of you on the phone to join us for the presentations this afternoon, focusing on our climate and electronics products and technology.

You can access the webcast from the investors section of Visteon.com.

Presenters will include Tim as well as the leaders of these core businesses, Y.H. Park of Halla Visteon Climate Control, and Marty Thall of Visteon Electronics.

Those presentations will start at 12:15 PM and will conclude with a panel Q&A that will also include Jeff Stafeil.

Now, I would like to turn it over to Tim for final comments.

Tim?

And I want to thank you all for joining us today.

I think the excitement is before us, so I won't speak too long here.

We have built the business platform of growth.

We have built a business platform of excitement.

Out there are some of our leading technologists to take you through that.

So, I'm just going to turn it over quickly to Bob and say, let's kick off the next phase of this great day.

Thanks, Tim.

That concludes our financial results presentation.