Visteon Corp (VC) 2015 Q1 法說會逐字稿

Good morning, and welcome to Visteon's first-quarter 2015 earnings call.

(Operator Instructions)

As a reminder, this conference is being recorded.

Before we begin this morning's conference call, 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 information.

Presentation materials for today's call were posted on Visteon'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. Bob Krakowiak, Visteon's Vice President, Treasurer, and Investor Relations.

Mr. Krakowiak, you may begin.

Good morning, everyone.

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

We appreciate your interest in our Company and thank you for joining us to review first-quarter 2015 results.

We scheduled the meeting for an hour and will open the lines for your questions after Tim and Jeff's remarks.

Please limit your questions to one question and one followup.

As previously mentioned, the presentation materials associated with today's call are posted on Visteon.com within the investors section.

Also note that our Form 10-Q was filed earlier this morning with a news release.

Again, thank you for joining us.

And now, I will turn it over to Tim.

Thanks, Bob, and good morning, everyone, and welcome to our call.

I'll immediately jump into the material here on page 2. This was a good quarter for the Company.

We delivered strong results in the quarter on a consolidated basis.

Looking first at the conventional and historical view of Visteon, which includes HVCC, which is still consolidated in our revenue, $2 billion of revenue and $189 million EBITDA, adjusted free cash flow of $139 million, and earnings per share of a little over $2 a share.

On a net-debt basis, obviously, a strong balance sheet.

Our LTM EBITDA to net debt is 0.1.

We just also announced that we completed our accelerated share buyback program that we initiated about a year ago.

The majority of these is shares have been retired already and have been included in our numbers, but about another 10% of that was just recently completed, so that program is behind us, the average price at $96.72 a share.

If we look now separately at what I would call the new Visteon, the post-HVCC sale Visteon, which includes electronics and the remaining corporate component, that was also a very, very strong quarter.

Sales of $781 million and an adjusted EBITDA of $84 million both are all-time records for any quarter.

And should we have been a stand-alone business, that would have been an $0.84 earnings per share number.

The quarter was driven by a lot of aspects, stronger revenue than we expected, some good performance at the factory floor level, and SG&A performance.

We had some one times, not significant, but we also were facing some significant foreign exchange headwind, which makes the performance all that much better.

As we looked at the performance and as we looked at exchange and we looked at a lot of aspects, we have decided to update our guidance for the year.

I'll take this in different pieces here.

First of all, looking at sales.

The exchange impact on sales is fairly straightforward.

The euro is a lot weaker than we had anticipated as we put together the budget.

It was $1.28 in the budget.

It's now $1.10 is our forecast for the year.

That's flowing through.

We also hit our revenue stream and EBITDA to some degree as well.

Jeff will take you through the details.

We will also be selling off, as you know, our HVCC entity here shortly.

It does own some of the electronic assets in India, and it's going to take a while for those to come back to us just given the transaction and timeline in India, so those are also being removed for the remainder of the year.

So net-net, our revenue guidance we're going to reduce, primarily for FX, down to $3 billion

On the other side, we looked at our guidance in EBITDA and cash flow, looked at the performance of the year, tempered by the fact that this is early in the year.

And also, remember that typically, the first half of the year is about 53% of our revenue on average, so we can't take a first quarter and multiply it by four.

We have to look at the year in total.

But we still felt comfortable, even with the exchange headwind, to increase guidance on EBITDA to a $245 million to $265 range and $40 million to $80 million of adjusted free cash flow, again, reflecting a good performance overall in the Company, and again, offsetting what was those FX headwinds.

Moving on to page 3. This is a chart we share every time, just, again, aligning everyone to where our vehicles are built and where we build our products -- and where we sell our products, I should say.

In the first quarter, there were 22.3 million vehicles built globally.

Over half were in Asia.

Asia will continue to grow as a percent.

Europe, 24%; North America, 20%, with the US being about 14% of all vehicles produced in the world.

If you look at Visteon both before and after the HVCC sale there shown on the right, today, because of the strong Asian presence of HVCC, obviously, we almost mimic the vehicle build ratios with almost our half our business in Asia.

When we sell off HVCC, we go to more of a -- almost a third, a third, a third, if you will, balanced globally.

However, over the next few years that we share this with you, the Deutsche Conference, the Auto Conference earlier in the year, is that Asia is growing much faster than the rest of this, so we will continue to see Asia grow as a percent of our business.

But Europe will remain a larger piece of our business than the vehicle build overall because of the content and the progressive and aggressive nature of European vehicle producers to incorporate advanced electronics in their vehicles.

So we have a very well-positioned platform.

As I said, Asia will continue to grow.

China in particular will grow up considerably.

You will start to see that red component on the -- the red piece of the pie grow.

But again, we're very globally balanced, will be very well globally balanced as we go forward.

Going on to page 4, again, looking back and reminiscing a bit here, if you will, about HVCC, HVCC has been a strong and viable element of Visteon since its inception and it's acquisition over 20 years ago.

If we look just over the past eight, nine years, you see that has had 17% CAGR in revenue growth.

As we look forward here, last year, hit $1.2 billion with the new business wins and net of loss and re-wins, so a strong, strong order book.

And a 7% CAGR is still a comfortable control number looking forward as we look to 2018.

It's not just, as I say, a Korean company anymore.

As we've looked around, I said, there's certain companies based in Korea that have broken out into what I'll call a global footprint, a global capability.

We can think of Hyundai and Samsung and LG, and as a matter of fact, HVCC is the same way.

It's growing in Europe, growing in North America, growing in South America.

I think for all of us here at Visteon, I now want to take this opportunity to say thank you to the Leadership Team of HVCC and members of Management and then all the employees of HVCC for all they've done over the years and the splendid performance we've seen them have quarter after quarter as they get ready to transition to new ownership.

A good business, a solid business, an attractive business going forward, and we're sorry to see them go, but we wish them well because we know that their future is going to be bright.

Moving on to page 5, let's discuss the sale here for a moment.

We announced in December and began a process of approvals and getting things lined up to get this sale completed.

In March, we announced that had received all the antitrust approvals to sell our 70% stake to Hahn and Hankook.

That included China, Czech Republic, India, Korea, Russia, Slovakia, Turkey, and the US, quite a plethora of approvals that were needed globally.

And then on April 17, we received SEC approval for the proxy and, of course, distributed that quite quickly to the shareholders.

We will have a special shareholders meeting here on May 18 here at Grace Lake to get approval for the transaction.

That, and there's some remaining agreements between the parties associated with post-sale support, et cetera, that we're winding up as well.

Once that approval is received from shareholders, the buyers have 15 days to close on the transition.

I would say at this point that their enthusiasm and interest getting this transaction done is the same as ours.

We see this transaction proceeding in sometime in early June, and you can see the timeline below in the chart as to the various events, but we are now within weeks of getting this transaction completed.

Moving on to page 6. One of the questions, and Bob and Jeff and I chuckle a bit because this is one of the questions asked most -- probably than any question that's ever been asked of us is, what are you going to do with the proceeds?

The good news today is I'm not going to tell you anything new.

Exactly what we said before, is that we will be returning about $2.5 billion to $2.75 billion of will be an approximately $3 billion receipt at close.

We fully expect the net proceeds, once we clear up the tax issues in Korea, to be approximately $3.2 billion to $3.3 billion, meaning that we'll have around 5% or so, maybe even less, of a net tax exposure on the overall transaction.

The $3 billion will be immediate.

The timing to get the remainder of the money, going through the process in Korea is hard to timeline, but could be some years, clearly will be some months, before we receive that, but we're highly confident of receiving that amount once we go through the process in Korea.

So we'll return $2.5 billion to $2.75 billion, as we have said.

It will be a series of structured actions that will include buybacks and special distributions and a large return of capital as a primary component.

I've said this before; I'll say it again.

We're cognizant of the tax implications of the transaction itself, and we're cognizant of the tax implications to the shareholders and will do our best to minimize that, pay the proper amount of tax, but minimize that within the confines and the capability of the wall.

The element that determines the amount of the qualified dividend and the taxable element of this is a function, as you know, as we've said before, of a complex tax calculation regarding earnings and profit for a given year, and then on a historical look-back basis.

There's an incentive and an advantage on some of this to return some of the cash in 2016 and reduce the tax exposure, but for many other aspects of the return, they need not wait, and we will be as aggressive as we can in getting the cash proceeds back to the shareholder as quickly as possible.

We will be very definitive as we get close to the close here, get the close done, of what we'll do the proceeds, and we'll timeline that.

But again, remember this, we will do this as quickly as possible, and we will try to do this in a manner that returns the maximum amount of money back to the shareholders in the timeline that we said was within 12 months, and that would be our target.

Some of that, as I said, will be done rather quickly.

We will be more definitive as we get to the close.

Going on to page 7. Let's review the quarter and talk about a business update here for moment.

The quarter for electronics and the new Visteon was quite good.

Overall, the margin was 10.8%, and electronics by itself was 12.2%.

We know we've got further work to do.

I'll talk about that, but we're seeing some good performance, again, despite the currency impact on an EBITDA basis for the quarter, which was $10 million.

We continue to win significant new business.

And as we talk about all the various pieces here and all the elements today in this call, one of the things I want to focus on is this small, but a very important piece of this page, and that is the value proposition for this business is not just driven by performance or operating performance, which we will do.

This Team is dedicated and capable of doing that, but it's also making sure that we're properly positioned in what is one of the most attractive segments in the auto industry.

While we do not quote numbers on quarterly basis -- we only do it on an annual basis -- I will tell you that the first quarter continued the momentum we saw last year of a strong business, win, new business and re-win business.

Last year, we won $1.3 billion in business.

I think this year we'll be at that level, maybe a little bit more.

So there is tremendous customer momentum in the marketplace for this combination of JCI and Visteon and the new Visteon electronics business, a Company that's doing -- I'm pleased with where we are at today.

Going on track for the synergies, we still have synergies to do.

There's still actions we need to take.

While we are pleased with first quarter, there's clearly some more actions that we are in process of taking place to improve margins even better as we move forward.

We announced to you a $40 million to $70 million targeted synergies.

They tend to be harder to track as you get on down the road, as the organization is consolidated, et cetera, but you're starting to see to see these things flow through the numbers, and they'll continue to do so by the end of next year.

Restructuring, IT, decentralization, integration actions, which will continue to improve this business, are on track.

We had identified to you earlier the cash outflows of approximately $110 million associated with this over time, of which about $17 million occurred in Q1, and that number is still the right number, and it's still on track.

I'll expand upon that in a moment.

From a shareholder value perspective, we continue to focus on return on capital.

I should say here, we still also focus on operations.

The operating acumen of the Organization and the Leadership Team here is focused on continuing to improve those margins, and we still have, with the balance sheet, even with the proceeds back, the ability to go to the right sized value creation M&A opportunities as they present themselves.

So net-net, positioning the business well for growth, and we are encouraged by the first-quarter performance.

Moving on to page 8, talking about this restructuring.

And again, this is the focus on electronics in corporate only, not anything related with HVCC.

As we previously stated, we expect about $110 million in restructuring of professional fees, integration cost, IT transformation, et cetera, during 2015.

Half of that, roughly, is restructuring cash outflows to right size SG&A in engineering; consolidate that.

We made some further announcements on that front yesterday with the announced consolidation of the Holland engineering organization, will eventually be consolidated mostly here in Grace Lake, and some of the actions -- activities taken over in Japan.

And $55 million in IT decentralization and associated cost with that.

From a combined perspective, of an expense perspective, it's about $80 million this year.

It's a cash outflow of $110 million.

You can see on the table below that $17 million of that will occur in the first quarter.

$93 million remaining.

So just as you model and look at the cash flows here, remember that those will be part of our story, and they continue to be part of our story as we go forward.

But we're getting the returns on those investments, as you would expect and as you see in the first quarter.

As you go on to page 9, this is also an important story, and I just mention it here.

We've always mentioned that the key to connected car, the key to the electronification of the automotive industry is the democratization of technology.

It's not enough to be in the high-line vehicles.

It's not enough to be in the luxury vehicles where the per-unit costs are high but the volume is low.

What we're seeing here -- and this is just some of the launches we had in the first quarter -- are vehicles in the B and C class.

These are vehicles that are the first-time new car buyer vehicles.

These are vehicles that represent not the per-unit content, but have much higher volumes.

And these vehicles have to become part of electronification of the auto industry to make the connected car ultimately work.

You need the network.

You need to be in these vehicles.

And I'm very pleased with the awards here, the Mazda 2, the Ford Figo, the Ford Fiesta, the Renault Twingo.

These are vehicles that are in that B and C category.

And then you've also got the F-150s and the Mercedes vans that are more commercial, or at least from a workload perspective, you're seeing this apply across the board.

And Visteon has positioned itself well to be in these segments globally.

And this is just in a case in point as an example of some of the actions we had and we're -- benefited from in first quarter.

With that, I will turn it over to Jeff, and he'll take you through the numbers in detail.

Thanks, Tim.

Good morning, everyone.

I'll start my comments on slide 11.

Here we show our key financial results for the first quarter 2015 compared to the first quarter of 2014.

As we have explained on prior 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 appendix on pages 27 to 29.

Additionally year-over-year comparisons impacted by a number of transactions, including the acquisition of Johnson Controls' electronics business in July 2014 and the acquisition of Cooper Standard's thermal and emissions division in August 2014.

These transactions resulted in significant year-over-year increases in sales, adjusted gross margin, adjusted SG&A, and adjusted EBITDA.

Lastly, as we explained in previous calls, we have reclassified the majority of our interiors business as discontinued operations in our financial statements.

Our income statement has been adjusted to exclude interior-specific income and expense, and interior's net profit has been reflected on one line as discontinued operations.

The financials on this slide exclude discontinued operations, with the exception of the free cash flow and adjusted free cash flow numbers.

Adjusted EBITDA was $189 million in the quarter, compared to $161 million for the same period last year.

The $28 million year-over-year increase reflects the impact of the JCI electronics acquisition and improved electronics performance.

Currency unfavorably impacted first-quarter results by $24 million versus last year.

Adjusted EPS was $2.04 in the quarter, compared to $0.65 in the first quarter of 2014.

The year-over-year increase reflects higher adjusted EBITDA, lower taxes, and lower shares outstanding.

Tax expense was only $1 million for the quarter, which included a $33-million tax contingency accrual release related to the outcome of a favorable tax audit.

Adjusted free cash flow was $139 million in the quarter, $75 million higher than the same period last year.

I will cover these metrics more in the following pages.

Turning to slide 12, we provide first-quarter 2015 sales and adjusted EBITDA for core Visteon and total Visteon.

Core Visteon, which includes the combined results of the electronics product group and corporate costs, is what we expect our ongoing operation post the HVCC operation, or transaction, and after we address our legacy interiors and climate facilities.

Sales for core Visteon were $781 million in the quarter, $342 million higher than last year.

Adjusted EBITDA for core Visteon was $84 million, $40 million, or 91%, higher than the same period last year.

As we have already discussed, transactions make our year-over-year comparisons difficult, especially the Johnson Controls electronics acquisition, which closed on July 1, 2014, thus it is included in our current 2015 results, but was not in Q1 last year.

I will go in more detail on these year-over-year sales and EBITDA comparisons on following slides.

Moving to slide 13 on our electronics product group.

Electronics sales for the first quarter of 2015 were $781 million, and adjusted EBITDA was $95 million.

Sales increased versus 2014 by $342 million, largely driven by the JCI electronics acquisition and net new business wins.

These increases more than offset $27 million of unfavorable foreign exchange primarily related to a weaker euro.

Adjusted EBITDA increased $38 million in the first quarter versus 2014.

The increase is again primarily driven by the JCI electronics acquisition and new business wins, as well as a positive business equation.

Let me also point out that the increase in adjusted EBITDA would have been larger if not for the $10 million of adverse currency impact year over year.

The JCI electronics integration continues to go well and as expected.

We saw significant improvement in electronics adjusted EBITDA versus the prior quarter.

Higher volume drove a portion of that improvement, but we've also seen a reduction in fixed cost, as some of our synergy actions have materialized quicker than we expected.

Moving to slide 14, we highlight electronics adjusted EBITDA and adjusted EBITDA margins for the last several quarters.

As I said on the prior slide, first-quarter results were strong and reflected some of the synergies we have been pursuing.

Generally speaking, it was a good quarter and a nice start to our year.

That said, I'd like to make it clear that the $95 million of Q1 adjusted EBITDA should not be thought of as a run-rate number.

Our operating results are seasonal, whereby the first quarter and first half are materially stronger than later periods.

We expect a similar trend in 2015, explained by typical plant shutdowns during the third quarter and less workdays during the fourth quarter.

Additionally, Q1 results benefited by approximately $4 million related to slightly-higher-than-average engineering recoveries and a sale of some of our unused or non-core patents.

Second, we expect the weakening euro will continue to negatively impact our results for the remainder of the year.

Our first-quarter 2015 average euro rate was $1.16.

For the remaining quarters of the year, we have a forecast based on a euro rate of $1.10.

As a reminder, every $0.01 strengthening of US dollar versus the euro costs us approximately $3 million, everything else being equal.

As Tim said earlier, we've increased our full-year guidance for adjusted EBITDA, but we do expect second-half profits to be lower than the first-half profits, driven by the normal seasonality of the business.

Turning to slide 15, we provide an overview of the key financials for our climate product group, which primarily reflects the HVCC business.

Climate sales for the first quarter of 2015 were $1.3 billion, down $28 million versus last year.

The year-over-year decrease for the quarter is more than explained by unfavorable currency, which reduced sales by $94 million year over year.

Impacting sales were both a weaker Korean won and a weaker euro versus the US dollar.

This decrease was partially offset by $95 million related to higher volumes in Europe, new business wins with Hyundai, Kia and Ford, and the impact of the Cooper Standard thermal and emissions acquisition.

Adjusted EBITDA was $109 million in the quarter, compared to $117 million last year.

Excluding currency impacts, adjusted EBITDA increased by $1 million as positive business equation more than offset slightly lower volumes.

It should be noted that volumes had a slightly negative impact on adjusted EBITDA despite a positive impact on sales, as volumes were lower in Asia, our highest-margin climate region.

Our climate product group has been impacted by unfavorable currency for multiple quarters now, but it continues to successfully launch new business and improve its cost performance while working to mitigate against future foreign currency movements by localizing more supply around the globe.

Overall, the business continues to execute quite well.

Turning to slide 16, we take a look at our cash flow and our capital structure for all of Visteon, including our HVCC business and the remaining interior and climate operations.

Free cash flow was $118 million in the first quarter.

It should be noted the impact of our discontinued interior operations of approximately a negative $8 million is included in this figure.

Adjusted free cash flow, which also includes discontinued operations but excludes restructuring and transformation-related payments, was positive $139 million in the quarter.

Our cash balance was $916 million as of March 31, 2015, and we closed the quarter in a net debt position of $41 million.

We have a strong balance sheet and leverage profile, with debt to the last 12 month's adjusted EBITDA of 1.4 point times and net debt to EBITDA 0.1 times.

Excluding HVCC cash and debt, we had $454 million in cash against $611 million in debt, or well under 1 times net leverage before considering the HVCC proceeds.

Moving to slide 17, we provide adjusted free cash flow by product group for the first time.

As I discussed in the prior slide adjusted free cash flow was $139 million in the first quarter.

Our HVCC climate business generated the majority of our cash flow, contributing over $130 million of adjusted free cash flow in the quarter.

Our core electronics and corporate business generated $6 million of adjusted free cash flow, despite a $32 million seasonal trade working capital outflow.

Trade working capital, which is impacted by plant shutdown, has historically been negative in the first and third quarters for the electronics business, but generally recovers a little in Q2 and more substantially in Q4.

As we continue to realize electronics-related synergies and right size our corporate structure to be in line with the smaller sales base, we expect adjusted free cash flow from our core operations to increase meaningfully.

Moving to slide 18, we provide an overview of Visteon's current reporting structure.

Our Q1 2015 results reflect three product groups and a corporate cost center.

Post the sale of HVCC, our product group reporting will change, which I will discuss in more detail on the next slide.

On this slide, the left half highlights what we're calling core Visteon, or our ongoing operations.

This includes our electronics product group and our corporate cost center.

The right side of the slide provides an overview of our climate and other product groups, both businesses which we are in the process of exiting.

We expect to complete the exits of these businesses during 2015 or early 2016.

As Tim discussed, we are still on track to complete the sale of our 70% stake in HVCC in the coming weeks.

We also believe that we will complete a series of transactions with HVCC over the coming 6 to 12 months to move all of the electronics operations under Visteon and all the climate businesses under HVCC.

Finally, we believe we will complete the exit of our interior legacy facility in Europe by the end of 2015 using cash approximately equal to the net pension liability transferred with the operation.

Moving to slide 19.

We provide an overview of Visteon's reporting structure post the sale of HVCC.

We have color-coded the slide to show three contemplated transactions to complete our transition into a focused electronics company.

First, in green, we show transactions necessary with HVCC to move the remaining climate business underneath HVCC and to move the electronics business that is currently in the HVCC structure underneath Visteon.

We expect to buy the Indian electronics facility from HVCC by early 2016.

Most likely, these transactions will result in a net cash transfer from Visteon to HVCC as the purchase price of the Indian electronics facility is expected to be higher than the price for the remaining non-HVCC climate businesses.

The sales and adjusted EBITDA for full year 2015 of the Indian electronics business are projected to be approximately $75 million and $7 million, respectively, while the sales of the climate business to be sold to HVCC are projected to be approximately $100 million and the adjusted EBITDA between $0 million and $5 million.

Given the uncertainty regarding the timing of the Indian electronics purchase, we have excluded second-half 2015 results for this facility in the updated guidance figures, which I will present on the following pages.

This change contributed approximately a $40-million reduction in sales and a $4-million reduction in adjusted EBITDA, and is already reflected in our updated guidance.

Second, in light blue on this page, we show our planned exit of the remaining interiors business in Europe.

As mentioned in the past, this operation is approximately break even cash flow, and we expect to pay cash of approximately equal to the net pension liability that we will transfer with the transaction.

Finally, in orange, we show the two remaining portions of our interior sale to an affiliate of Cerberus that have not yet completed.

These transactions are planned to close in Q3 of this year.

The last bucket on the slide relates to our discontinued operations.

In addition to the majority of our interior business, which is included in discontinued operations today, historical HVCC financial results will also be reclassified as discontinued operations after the closing of the HVCC sale.

Turning to slide 20, we highlight the key changes to our updated guidance.

The guidance metrics are for the electronics product group and the corporate cost center only.

We have excluded all financial results related to our climate product group and our legacy facilities.

We are updating our guidance to capture several significant impacts including, first, currency.

We have updated our financial projections for the latest exchange rate.

The rate exchanged most significantly was the euro to dollar.

Our previous guidance was established with a euro-dollar exchange rate of $1.28.

Our latest projections use a rate of $1.10 for the last nine months of the year.

Changes in currency rates had an unfavorable impact on both our sales guidance and our adjusted EBITDA guidance.

The impact on sales is to reduce full-year sales by approximately $170 million, while the impact on adjusted EBITDA is to reduce profits by approximately $30 million.

Second, as I said earlier, we have assumed the HVCC electronics facility in India will be sold as part of the HVCC transaction.

Any subsequent repurchase will not take place until at least year end.

The impact on electronics sales and adjusted EBITDA is a reduction of approximately $40 million and $4 million, respectively.

Finally, we have updated our guidance for operating performance improvements, which more than offset the impact of the unfavorable currency and the HVCC electronics facility.

Moving to slide 21, we've included this slide to better illustrate our expectations for the euro-to-US-dollar exchange rate for the rest of 2015.

At the top of the slide, you can see the average euro-to-US-dollar exchange rate in the first quarter was a $1.16, while our effective rate with hedges was $1.21.

We have used a rate of $1.10 our projections for the rest of the year.

This decrease and the rolloff of hedges consistent with our hedging policy results in a decrease in our effective rate from $1.21 in Q1 to $1.16 in the second quarter, and down to $1.11 by year end.

The annual impact of currency movements on our full-year updated adjusted EBITDA guidance versus our prior guidance is approximately $30 million unfavorable.

Moving to slide 22, we provide updated guidance for 2015.

We have three material updates to discuss.

First, we have decreased sales to account for the shift in foreign exchange and the HVCC Indian electrics business.

Next, we have increased our guidance for adjusted EBITDA.

While the change in our exchange assumptions has had an approximate $30 million negative impact, our performance is expected to more than offset this impact as our synergy plan has materialized quicker than previously expected.

Finally, we have increased adjusted free cash flow consistent with our earnings expectation.

Moving to slide 23, we provide a reconciliation from our 2015 prior guidance for sales and adjusted EBITDA to our updated 2015 guidance.

Our updated 2015 sales guidance is $3.0 billion, or roughly $300 million lower than our prior guidance.

The variance reflects the removal of HVCC electronic sales for the second half of the year, unfavorable currency of $170 million, and the removal of the other product group sales of $100 million from our guidance.

Despite the decrease in the sales versus prior guidance, we have increased our midpoint adjusted EBITDA guidance by $15 million, to $255 million.

The increase reflects a $50-million improvement related to business performance and cost reduction actions, which more than offset $30 million of unfavorable currency impact and $5 million related to the removal of HVCC Indian electronics business in the second half of the year.

Now let me turn the presentation back to Bob for Q&A.

Thank you, Tim and Jeff.

Please open the line for questions.

(Operator Instructions)

Colin Langan, UBS.

Tim, can you just give an update of -- you announced that you wouldn't stay on.

Your contract ends at the end of this year.

What is the status of the search, and what is your outlook in terms of how long you're going to stay with the Company at this point?

As we said, that I would be staying on until we find a successor.

We're in that process, but nothing new to report.

I won't leave until we've found somebody that we are all comfortable with.

And again, you be the second to know.

We'll get that process done and then announce.

In the meantime, we are, as you can tell, focused specifically on the business and the running of the business globally and getting this HVCC deal done.

And then, on the buyback transaction, can you give any color in terms of how you're thinking about between buybacks and special dividends?

In particular on the special dividend, would you do the tactful dividend before the return of capital, because that piece looks like it has to wait next year, so how should we think about the priorities there?

What would come after [climate sales now?]

First of all, I'm not going to give you any more color on of the breakdown but to sit back and say if there are elements that are taxable now as opposed to taxable later, might as well get them done now and get them behind us.

I think we're going to work cognizant of at least some of that process.

But again, you're within a couple of weeks, and we'll give you so much more of expanded detail when we are ready to go through that whole process.

No more color until two weeks.

Okay.

And any color -- what is going on with the taxes?

It seems like this quarter was quite good, but it looked like your full-year tax guidance is up, so anything unusual happening on the tax front?

I mentioned it there in my comments quickly, Colin, but we had a reversal of $33 million of tax expense in the quarter relating to some -- and it was, we'll say accruals for uncertain audits.

We had favorable completions to those audits and were to reverse that accrual.

So the tax expense is abnormally low, with a with a $1 million number in the quarter.

But I thought -- it looks like your full-year guidance actually went higher.

Is that wrong?

That went from (multiple speakers)--

We do have some more EBITDA, but I think a lot of that benefit we had won't make itself into corporate and electronics.

It'll probably be attached to our discontinued operations, Colin.

In other works, part of the climate business or HVCC, that will move to discontinued operations.

Thank you very much.

Brian Johnson, Barclays.

I want to focus more strategically on just the electronics business, not get into capital allocation and merger and all the fun stuff.

Just think about it, this business that people are valuing whether they want to own for the next several years.

A few questions.

Can you give us a sense of how your CPV is developing?

Particularly, as I look through the awards on page 9, are we seeing a movement either in the production or in the orders, or even, if not that, in the pipeline towards reconfigurable dashes in driver information systems of the higher CPV?

Good, I'm glad to talk about something besides proceeds, Brian.

That's -- appreciate your question.

The content that we're seeing, and I mentioned earlier, that the momentum of new and re-win business in 2014 is continuing in 2015.

It's very rare if the replacement product is at a lower price.

There's additional content, usually throughout the vehicle applications.

But you're also seeing new stuff.

We've mentioned in the past a smart core.

Smart core is a much higher vehicle content of product than historical, more than just a reconfigurable cluster.

So we're seeing added content.

The case in point there is, on a $3 billion business base with a $1.3-billion win, of which $800 million was a new business, you are seeing us grow faster than vehicle build, and that's a driven by either share or content.

And quite honestly, it's both over time.

As you get into the 2018, 2019 perspective, you see that it's a lot given by content.

I think one of the metrics, and we talked about internally, is being more explicit on content per vehicle and looking at those trends.

And now that we're just a single-focus product, which is a electronics, we can probably do that more easily, and we'll talk about being more public about that type of information.

But it's all headed in that direction.

We're not winning business based on cut-throat pricing.

This is all a technology-driven game.

That technology game implies that there's more content as you move up.

Even on these vehicles here, I'll give you case in point, we had a vehicle application between first -- let's say generation one, and then it went to generation two in the next platform, is that the cost of our components went up $50 per vehicle.

The plastic bezels and surround that support that went down by $50.

To the consumer, he did not see a difference in the cost base or the OEM.

He didn't see a difference in cost base, but our component, our portion of that went up considerably.

We're seeing as we look throughout many applications that type of story.

Do you need a vehicle relaunch to do that, or can it be a vehicle mid-cycle refresh where the driver information could be brought into the modern era?

Good question.

I think for most of our customers, they focus on new platform launches as being the place where they want to go do this.

Again, no matter how fast and how aggressive we would like to be in moving to a connected car software world, as I said, the first that thing we need in the connected car is a connection.

That takes 4G LTE, and we're only 4G LTE in the US for the most part.

So some of the vehicle global problems that we're seeing are evolutionary in many instances, but the content continues to increase.

There are vehicles, and we are involved right now with one of the customers who's a mid-cycle update on that, but that is more rare.

It's typically done in vehicle platforms where there's major launches.

And if you look at our vehicle awards, that's typically where the bulk of our business comes from is when there's a new vehicle platform.

Okay.

So that's the revenue side.

On the margin side, your implied guidance seems to be about 10% for this year.

Two questions around that.

Your long-term implied outlook is also about 10% for 2018.

Does this imply that potentially there could be upside to that?

And how does that -- is it being driven at all between where the margins were of the JCI -- your legacy Visteon, your legacy JCI, and then this business we've been talking about?

Couple of points.

I think we mentioned back in the January conference that we saw the 40% increase in EBITDA between -- over the next three, four years to 2018 as being probably substandard.

And that there was potentially further updating of that.

It was driven by, in many respects, our SG&A situation.

I think we focused -- the last discussion we had, Jeff went through an SG&A conversation, and we will continue to focus on SG&A as a potential to improve the overall margin of the Company because we know we're still a little heavy there.

The other issue, too, is that no matter how focused we are and how much we've discussed the JCI acquisition, this is only the third quarter that we've reported since we've gotten the keys.

And as we learn about the company, we see further areas of opportunity.

Obviously, we saw some strength in the first quarter that gives us some optimism.

But at this point in time, we would like to let the quarters and the year roll out to see if there's any upside potential there.

But again, remember, as Jeff said, there always is a typical softness in this last half of the year which works its way through in margin.

So you'll see some stronger margins in the first half of the year, and you'll see some lower margins in the second half of the year.

We ultimately know that we've got to be a double-digit margin business here, and I think that will flow out.

And we'll update the market as opportunities present themselves as we get more comfortable with the business.

There's two things for a successful acquisition.

One is buying at the right price, and the second is executing the game plan to integrate.

We're in the middle of that second process now.

I think we bought the business right.

We're in the business of executing our integration plan.

I'm pleased with the process and the progress.

We're confident, and we're -- had some good performance in the first quarter.

Let's just see how the year progresses.

Okay.

And this final, more short-term question, what would happen to electrons margins if the euro strengthens a tiny bit by the end of the year?

Does that become a tailwind?

And vice versa, if (multiple speakers)--

Yes.

Definitely.

We're only partially hedged, and you can see on the one slide we've provided there, Brian, that highlighted some of our foreign exchange, and it would be tailwind if we move that way -- page 21 I guess.

We a $1.10 assumption in for the year.

And every $0.01 of strengthening is about $3 million.

Or actually, it goes in both directions before consideration of any hedges on an annual basis.

Okay.

Thank you very much.

Matthew Stover, SIG.

Thanks very much.

Two questions, one mechanical.

If I look at the FX for the electronics business, you called out $27 million impact, and I -- going to assume that's for the full business.

Should I just apply half of that to the historic YFV, Visteon business?

Would that be appropriate?

To the historic YFV business?

No, YFV and Visteon business, i.e., the non-JCI electronics piece.

Yes, probably, that's about right.

Our European -- it's all really driven by Europe sales, and the old Visteon business and the old JCI business were roughly about equal.

Yes, in Europe.

So look at that, it's probably about 10% organic growth in the quarter for that business.

Yes, the exchange masks some decent improvements in sales because of what happened with the euro.

Second question is on increase in the $50 million EBITDA, I recognize that a portion of that is a result of what happened in the first quarter.

What are some of the other things we should think about are driving the back half of the year?

Is this just programs are loading quicker than you expect, or is it mostly the SG&A improvements are coming in a little quicker than you'd expected?

It's a few things.

I'd say not as much to do with SG&A.

I think our engineering efforts have performed well, both on the direct cost as well as the general recoveries from our customers.

Second thing I would highlight would be what we call the four-wall margin or our operating margins in the plants.

The plants have performed well, so that's a function of getting and finding synergies on things like material and taking best practices from the operating factory floor and applying it.

We've seen good results there as well.

I think we have more opportunity as we move forward, but some of those things have moved a little quicker than we had originally put in our plans.

Matt, just amplifying on that.

We, as you know, did a forced integration here quite quickly once we get the keys, and we went through that, the best practice issue is -- we try and implement quite quickly, and we're finding some areas that were greater than our expectation as far as opportunities.

You're starting to see those flow through.

At that's a thing that you -- it's a penny here and a penny there.

It starts to add up over time.

Thanks very much, guys.

Ryan Brinkman, JPMorgan.

Congrats on the quarter.

Just regarding the better core, the better electronics EBITDA in the quarter, one reason that's cited on slide 14, you had talked about the synergies with JCI, and I imagine that is behind some of the full-year increase, too.

I'm just curious if that's related to -- is it related more to a sooner-than-expected realization of the same total amount of expected synergies over time?

Or could it instead portend an increase in the total expected synergies over time, therefore providing a reason to think differently about long-term targets?

Yes, Ryan, I think that obviously we're continuing to work these business.

As Tim mentioned, we've only been under common ownership for three quarters, and we're continuing to drive the Team.

I would say there's a lot of opportunity in this business At the end of the day, that opportunity -- the sales piece and the excitement we really have is over the future sales portfolio.

But I would say we're operating well.

I think have ability to operate a bit better.

I think it's a little too early, a little too premature to give you an indication of whether or not we can upsize those, synergies.

But, we're continue to look for every avenue we can in the business and are encouraged by what we have seen so far.

I think none of us are satisfied with the performance of the business where it is.

So we'll focus, and can focus, on continued improvement.

But again, three quarter is all we've had the business, as Jeff said.

We're learning as we go.

Okay, thanks.

And then just some quick ones on tax impact, the planned capital return.

Firstly, do you have any greater clarity from the IRS in terms of how much of any dividend payment in 2016 would be considered qualified taxable versus tax-free return?

And then at the time of the 4Q call, I think there was like a still a $500 million range in there.

So secondly, if you don't have that clarity yet, do you expect to get it by early June?

And then thirdly, if the amount that's determined to be qualified tracks at the low end, say $500 million, or at the high end, say $1 billion, how would that factor into your thinking of buyback versus dividend?

The first piece of your question would be if we tightened the range.

The concept is still there that to the degree we were to pay a large dividend, it would be better from a pure tax standpoint to pay the majority of that dividend in 2016 because of what we explained in the last call, how the dividend would be characterized.

The range that we put forward, we are continuing to work to tighten that, but it is not so much of a discussion with the IRS as it is looking through all the opportunities we have on tax planning.

And there's a lot of contemplated transactions that I brought you through in my words.

Some of those transactions will perhaps bring about additional tax attributes that factor into that analysis.

So I think not so much because there's Iris clarity or other things, but as we move forward with the business on some of these transactions, it might unlock opportunities for us to maybe have a better tax picture.

So I think those ranges are probably still the correct ranges to use.

And the reason that they are wide is not for necessarily a lack of sharpening our pencil, but the lack of pure clarity of exactly how all those transactions will manifest themselves and what tax attributes will fall out of them that we may be able to use to mitigate some of the proceeds and provided better a tax answer to shareholders.

Okay, great.

And then just lastly, one of your infotainment competitors, Harman, recently closed on some technology company acquisitions in the area of over-the-year updating, application software, development, et cetera, to enhance its infotainment offerings.

Curious how you think about acquisitions going forward?

I ask in part because the JCI acquisition was highly accretive, but Harman's acquisitions, really not so much near term, right.

I think probably reflecting over the fact, you buy developing-stage technology company, you're expected to pay a large premium.

You've suggested before that all of your acquisitions would be accretive in year one without synergy.

Maybe you're at a different point in the Company's stage.

Are you considering technology tuck-ins, and would you be willing to modify that earlier self-imposed condition of immediate accretion?

And do you need those additional technologies to compete, or do you think you have everything that you need in-house currently?

Over time, there will be opportunities to grow the business vis a vis external growth and M&A.

There are areas in the software side that we obviously are interested in.

As you've seen over the last year or so, we will do partnerships, relationships at times, take on some assets.

I think we'll continue to do that.

Overall, we believe the balance sheet allows us to go and do the kinds of things this Company still needs to go do.

If there's something significantly larger that makes sense that's beyond the balance sheet that we have today, money is always available if it makes sense.

The issue of being accretive in the first year or not, I'll withhold on that.

I'm not going to say yes; I'm not going to say no.

But I will say this, is that if any acquisitions are done by this Company -- by me, by my successor, anyone else -- I think you've seen a discipline here, by the Board and by the Leadership Team here to make sure there's a value creation story here.

The value creation story is paramount.

And as those opportunities present themselves, we'll look at it in that light.

I think that with the growth we have internally today, we have got a lot of internal momentum.

It's technology driven.

There's areas where we need support or help.

We can relate to that through partnerships, I said, and relationships.

But there is a tremendous amount of momentum here in the short term, which I think -- and given the fact that we're still integrating JCI, we will be hesitant to go do something large soon, just on the very nature of digesting what we have.

Okay, great.

Thanks for all that color.

Chris Van Horn, FBR Capital Markets.

Thanks for taking my call.

I just had a quick question on the -- you said the pipeline, and that it gives existing new business wins you guys are highlighting.

Can you just give me a sense, can we think about as a similar split of just looking at the new business or the pipeline coming up?

Is it a similar split in terms of customers, regions?

And then if you could give us some additional color of when you're seeing new business wins, is it core products, or is it products introduced or developed in the past one to two years?

Thanks.

Good question.

First of all, I would say over the next few years, the majority of the growth is Asian based, and that just was what was in the pipeline, and that was what was awarded.

So there will be a skewing of business awards, and I'm talking about 2016, 2017, that are more Asian based.

And as I said earlier in my comments, that we'll see that piece of the pie go to more Asian, and that's not for any other reason than just that's just the way the platforms are being awarded and what happens.

You get into 2018 and 2019, you'll see more global platforms that may have been a decision made in Europe, let's say, but that they're built around the world.

Typically, and as again I commented earlier, you'll see major changes in content typically associated with platforms.

And there are some new major platforms in the 2018, 2019 range that are significant step ups in content.

That's just the nature of their cycle.

Those products that are going to be over launched in 2018 were first shown to a customer 2014.

And to be shown to the customer 2014, they had to spend some sort of gestation time, birthing time inside our own businesses.

So they are much more advanced than stuff that's in production today, but again, I think we need to go through the lead times that industry has.

We could be in a position to invent and launch product within 12 months, but our customer is not ready for that.

Our customer still goes through a vehicle development cycle, a launch cycle, and a testing cycle that puts us into, depending on the customer, somewhere between a 28- to as much as a 42-month cycle, and that's just the nature of our industry.

Now, there are exceptions to that rule, but they're not big enough to move the number considerable.

We're trying to compress the developed time.

We're seeing, obviously, great interest in compressing development time.

But in the end, the development time of our products is not driven by the gestation and prove-out within electronics, per se.

It's driven by the development of the vehicle and the prove-out of the vehicle, which is a much more complex and longer development cycle than we quite honestly need ourselves.

Okay, got it.

Just looking at the customers, it seems like there's a lot -- I think of you guys as had leverage to Ford, et cetera, but it seems like there's a lot of more new customers on this slide.

Is that how you guys see it, and is that how you see in the pipeline as from a customer standpoint?

Yes.

Ford remains a large customer, but you're seeing a lot of Renault business and [Chinese] business and other business.

So while we expect Ford to remain -- and I think we showed this chart in the past.

It was at the January conference.

But we expect to see Ford remain a major customer of ours, but it'll decrease as a percentage just because of the bulk in the new wins that are occurring.

A lot of that is Asian; a lot of that is Europe.

That's going to be eroding, if you will, the traditional Ford share.

But we were winning businesses across the board, Japan, China, Germany, everywhere.

Great.

Thanks again for taking my call.

That's all the time we have today.

I'd like to thank of a participation in today's call.

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

I would now like to turn it back over to Tim for some final comments.

Again, I want to thank you all for your support, and your investments for those that are already into the Visteon share.

We have had a good quarter.

Think the most important part here is to get beyond the good quarter of financial performance and look at the strategic nature of the business.

We have, over the last few years, repositioned Visteon to be a major player, focused player in the electronics world.

The customer reaction has been strong, and the integration of JCI is working well.

The HVCC transaction should be close within a few weeks, and we'll enter a new chapter for this Company with high growth and a very strong balance sheet.

We appreciate your support through the years, and we look forward to a prosperous future.

Thank you.

Thank you.

This concludes today's conference call.

You may now disconnect.