Welcome, and thank you all for standing by. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this point. Now I'll turn the meeting over to Mark Oswald. Sir, you may now begin.

Thank you, Ivy. Good morning, and thank you for joining us as we review Adient's results for the second quarter of fiscal 2017. The press release and presentation slides for our call today have been posted to the Investor Section of our Web site at Adient.com. This morning, I'm joined by Bruce McDonald, our Chairman and Chief Executive Officer; and Jeff Stafeil, our Executive Vice President and Chief Financial Officer. On today's call, Bruce will provide a few opening remarks followed by Jeff, who will review the financial results in greater detail. At the conclusion of Jeff's comments, we will open the call to your questions. Before I turn the call over to Bruce and Jeff, there are a few items I would like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today, and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to Slide 2 of the presentation for a complete Safe Harbor Statement. In addition to the financial results presented on a GAAP basis, we will also be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. This concludes my comments. I'll now turn the call over to Bruce McDonald. Bruce?

Okay. Thanks, Mark, and good morning to everybody on the call. We appreciate your taking time with us to talk about our second quarter numbers here. Although this is only our second quarter of reporting our numbers as an independent company, we're well on the way to delivering on our midterm commitments, which are really simple. It's 200 basis points of margin expansion, and that's without the benefit of a growing equity income base, accelerating our free cash flow, de-leveraging our balance sheet, and returning the seating business here, adding to its historic growth trajectory. If we start at slide four, some of the accomplishments in the quarter I'd like to talk about, it should demonstrate that we're not only focused here on near-term financial results, but also setting in place the things that we need to do to position the business for long-term success. So starting off with our financials, which obviously Jeff will cover in a lot more detail, and I'll just take a few of the real highlights here. So if you look at our adjusted EBIT for the quarter, at $334 million, up 12% versus the second quarter of last year. And if you look at the margin progression, a 100 basis points year-over-year, including [New Year] [ph], 7.9%. I just couldn't be happier with the progress that our team is making on reducing our SG&A, driving our margin expansion initiatives, and getting us to the levels that we need to get to here on a go-forward basis. Regarding EPS, more good conversion here, and EPS up 16.3%, at $2.50 in the quarter; so getting great progress there. If you look at the accomplishments on the balance sheet I think they're equally impressive. We had strong operating performance in the quarter, good cash generation which drove…

Great, thanks, Bruce. Good morning everyone. Turning to our financial performance hopefully had a chance through your second quarter results for the earlier this morning and as Bruce mentioned we've had a good quarter as we continue to build on positive momentum from Q1? I'll start my comments on page 9 of the slide deck and as you can see from the table we continue to executive on driving earnings growth and margin expansion during the quarter. I've expected revenue was down but I'll cover that more on the next page but meanwhile our earnings were up again by double digit percentages in the quarter other pages formatted with a reported results in the last in our adjusted result in the right side while reported results show well over 200% increase give it and over a $9 per share of the EPS growth. I will focus my commentary on the adjusted numbers. These adjusted numbers exclude various items that we view as either onetime in nature or otherwise skew important trend the underlying performance. Adjusted EBIT improved 12% or $36 million versus last year which represented 100 basis points of improvement. Meanwhile equity income was up 17% year-over-year but if you adjust for FX. It was up 22% and finally adjusted net income was up 16% despite a slightly higher tax rate than expected. I'll cover taxes in more detail shortly but clearly our second quarter is build up to momentum of our strong Q1 results. As I'll discuss later, the strong stronger earnings translated the stronger cash performance as Well. We repaid $100 million of our term loans during the quarter and still ended up with $729 million cash balance quarter end. Turning to slide 10, I was breakdown our revenue in more detail. We reported consolidated sales of…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from the line of Mr. Colin Langan from UBS. Sir, your line is now open.

Great, thank for taking my questions, and congrats on a good quarter. Can you provide a little color on the airline opportunity, I mean in terms of how fast do you think you could get a developed prototype to market, and any color on how much investment will be needed, and what kind of margin pressure that would have, and if any of that investment has already been started.

Thanks, Colin, for your congratulatory comment. Yes, and sure, I'm happy to. I think probably the best way to think about it is, first of all, there is no margin pressure. If you recall, our roadmap for the 200 basis points of improvement, we had a downward sort of block in that waterfall associated with the investments that we needed to make to grow the business. And so it's covered within that, we're spending money. I would tell you that the cost of developing a seat that we can go in, I'll say, a ready-to-sell type seat, and design, it's comparable to a reasonably complex auto seat. So it's not exceptionally high. In terms of the timing, we hope to have -- well, we've basically put together in within a six-month timeframe was, we call it an experiential prototype, so something that someone could go and sit in and look in, didn't have all the completed fit and furnishing, I would say, around it, but enough to sort of demonstrate, say, some of the things that we're doing there out of the box compared to the traditional industry. And we wanted to take that to Hamburg, which is sort of the primary -- it's the one and only aircraft interior show that everybody goes to. So we wanted to go there, have something that we could sit down and show our customers, and get some input as we sort of finalize our production intent design. We hope to have or we expect to have a seat design finalized, and a beta-type prototype that's certifiable by the end of our fiscal year. In terms of a revenue type cycle, this is a market that on the lines [shipment] [ph] side is probably like a three-year type window. But there's also an important part of the market that's retrofit that could be, say, two-and-a-half type years. So it's not abnormal to automotive, the timing, the costs, the processes very similar to what we're used to in automotive.

Got it, all right. Thank you. And then you've targeted 150 basis points of SG&A opportunity. You've got a lot of that passed. I mean, how much is left, and is that something we should be thinking about as we look into the second half, and the guidance implies fairly flat. I mean, what is the opportunity that you still see left on it?

Yes, Colin, great question. We still have lots of opportunity I think. And there's lots of things we're going to continue to push on from an SG&A perspective. We really said that was a two-year journey. So a lot is probably weighted towards 2017, but there's going to be more as we move forward, we believe.

Maybe like two-thirds of this, and maybe one-third -- in the future.

That's about right, yes. And then the thing, and Bruce mentioned this or alluded to it is, at the same time what we're starting to experience is we're still cutting some of that SG&A we don't need, we'll say from an efficiency perspective. There is an element of investment we're making for the future growth. That the red bar or the down bar that Bruce mentioned relating to some activities to support the new order book or the larger order book, the airline or some of the adjacent market businesses. Not terribly material yet, but those things will build a little bit. But we should still continue to see margin improvement with the view of that a lot of that 200 basis points we talked about or the really next big step of it going to be on the metal turnaround, which would start to really show in the numbers in 2019.

All right, thank you very much for taking my question.

Yes, thank you.

Thank you. Our next question comes from the line of Mr. Adam Jonas [Morgan Stanley]. Sir, your line is now open.

Thanks, everyone. So, just a question about free cash flow, so you explaining in detail and very effectively the move to the $400 million this year. Question is, looking forward to 2018, previously you talked about doubling the $250 million to $500 million. Is there any follow-through from this year to next year, even if you can't be specific, because we don't want to talk about 2018 yet, but just in general, is there some follow-through to make that -- also lift that bias a bit?

Yes, we'll give you more color as we get closer to 2018 or more specifics, I should say. But our 2017 numbers have a little over $300 million of restructuring and becoming Adient-type cost. And those should go down materially. I did mention, there's a little bit of a timing element of about 50-ish of those, but net-net those should go down quite a bit as margin performance continues to come through those should both have positive impact on our free cash flow in 2018. And then 2019 should even be better, so as we work thorough those you should see some meaningful step-ups in both years as we move forward.

Okay, great. And then my last question, if the market does not give you the appropriate value for your Chinese JVs, and I think you and your team have expressed a bit of frustration of that apparent lack of value implied in the stock price. But if that were to continue, do you see strategic alternatives to potentially unlock the value for those businesses?

I would say, no. I think our challenge is -- I mean we're only six months into it here. I think we were trying to enhance the granularity and our communication in the financial characteristics, the goals, and things like that backlog that we have those businesses. And so I'm certainly not ready to give up on that yet. But I think more importantly is does the -- our Chinese operations are an integral part of our seating business. They're not sort of a hang-on. I mean, if you think about some of the customers, General Motors, they're developing global platform or developing their GEM program together with SAIC for global production. And so us having a joint venture in China with their same partner, very beneficial for us to participate in the sourcing and development of that vehicle, and then have add-on benefits elsewhere. Volkswagen, when we talk about our Gen II frame, a huge chunk of the global volume is the Chinese market. So our franchise without China would be severely eroded. And then one of our competitors would get out and we've been disadvantaged. And we have to do a much better job on that communication, but really can't think about that China is separatable. That's from a seating perspective. Now, from interiors, it's a little bit of a different story because that is not integral in terms of our global seating operation. I continue to like the interiors business for a number of reasons. Well, first of all, it's just getting started, and we're only at the early stage and of seeing the benefit of the growth that we have in that business. Secondly, is as we think around autonomous vehicles and our West Coast strategy, especially some of the new entrants, our key differentiator that we have is being able to go in and talk to our customers about complete interior solution. I know you, Adam, and a lot of the other folks on the call had the opportunity to see our two demonstrator vehicles. But I mean, just showing what we can do around level 4 automation, and how the interior and the seats, I mean, the whole interior of the vehicle is going to change. I mean I personally like having the optionality that we have with that business.

Okay, Bruce, appreciate that. Thanks.

Thanks, Adam.

Thank you. Your next question comes from the line of Mr. John Murphy. Sir, your line is now open.

Good morning guys. Just a first question on margin expansion and total basis points you guys are looking at. I think this question has been somewhat asked, but is there a reason to think that that would be an asymptotic limit as to what you could get to. Or should we be thinking about that 200 basis points as your target near-term, up to 2019, and there could be some upside from that thereafter?

Yes, I think we've kind of -- I don't know if there's a limit per say because there's some element of farther-away science becomes a little challenged. I think, John, if you look that set of numbers, and we have an opportunity as revenue continues to grow, which we think it will grow after 2019 with improved order book, to get some benefit of increased scale, which I think is just an opportunity to go north of that number. We've used the 200 as really more of the measure of what we can do at around, we'll say, close to that $17 billion of consolidated revenue, but as that number grows that we think that there's probably some additional opportunity. And as other markets, like the airline comes in, and if that has success we could have, that's certainly a higher margin space. We could do better there.

Yes, I think, John, the other thing is when we set that target we said it was a four-year target; just to be clear, not three, but just wanted to clarify that, but in that timeframe we do not have [indiscernible] or metals business where it ultimately should be. We will not be -- we are rolling over all of our programs. We still have an awful lot of launches coming in globally on some of these big Gen II IBK initiatives. So, metals is not a -- by 2020, is not where it needs to be, which is I would tell you double-digit EBIT margins, not EBITDA margin. So, yes, I think beyond 2020 we still have room to grow. I do no think our -- we need to drive our SG&A lower, lower, and lower. But the metals improvement, I think the scale benefit that we can get by starting to grow our footprint again or the capacity utilization is to be a tailwind.

Okay. And then just a second question. I mean, you highlighted, there's a bit of a headwind in the quarter. Just wondering if you can remind us as to what level of raw material sharing you have with the automakers either through indexing or pass-throughs, and sort of the timing of that higher raws, and how you pass that along to the customers.

The majority of it, John, is pass-through agreements, but there's also we end up getting most of it back. You could probably say almost all of it back through a combination of those indexed agreements, and just general negotiation with customer through commercial deals. So net-net, for the most part we're able to offset all of it. But your point on the lag is an important one for us. It varies by customer; some have index arrangements that might last or might be a quarter delay, other ones might be a full year. It's probably safe to say on average about two quarters.

Okay, that's incredibly helpful. And then just one last one on the tax rate, the 10% to 12% up to 14% or 15%, is there a cash component? I know it's a small nit, but is there a cash component to that or is that mostly just…

Yes, and so the cash -- and that's built into the guidance number that I gave you, John. So the cash and the -- you can say they both moved sort of up to about that level. We do expect finding the opportunities I mentioned with some of the structuring changes. Just from a clarity point there, some of the structural changes we've made and are in the progress of making, we don't start to get the tax benefit until they're doing. So this year, there's only going to be a partial benefit. The reason we say we'll have a better rate in 2018 is we'll get the full-year impact of the structuring changes we've put forward, which should both a rate and a cash benefit as we move forward.

Great, very helpful, thank you.

Thanks, John.

Thank you. Your next question comes from the line of Mr. Joseph Spak [RBC Capital]. Your line is now open, sir.

This is actually Jacob Hughes [ph] on for Joe. Just want to get a little additional color on China. I think [indiscernible] obviously is the difference so far, but they called out some slower sales and some higher inventories over there. Just given your presence there, could you just elaborate on what you're seeing?

Yes, I think if you just look at the most recent quarter, and again obviously there is not perfect information there. But I think if you look at anecdotal evidence, the production say was up six -- I mean I have seen numbers anywhere from five-ish to seven, but let us call it 6%, and I had seen range in terms of retail being up in sort of a 0.5% to 3%. So there's definitely some build in terms of dealer inventory. When -- I would say if you look at the quarter that we're going into here, people do expect that that will kind of unwind a little bit here. So, if you sort of ask me, what's my view in terms of this next quarter's production? Our customers do expect to take some of that out, but nonetheless pretty robust demands.

Okay, got it. And then on the top line revision, I guess it about 600 million at the midpoint. Is that -- I know you think 250 or about 150 differences on car side, is the remainder just FX?

No, I think last we said, we were sort of -- our guidance was shifting down. And so I wouldn't kind of -- I wouldn't tie our old guidance to this guidance with the 150 or more, the whole 250 million or 300 million of inventory collection would be in the number.

And there is about 300 million give or take of FX in that decline.

Got it. All right, thank you.

Thanks.

Thank you. Our next question comes from the line Mr. Brian Johnson. Sir, your line is now open.

Yes, good morning. I want to talk a little bit more about the midterm in China. Less so the debate over production versus retail, but want some more color around the margins on both seating and interiors in China, where you expect those to go? And in particular, I understand the content drivers are both, but how do you see the competitive environment in each, especially the environment looking at GM slides where the OEMs are seeking to offset retail price pressures with supplier cost reduction. Seats and interiors are a big parts of the cost of car.

Sure.

So what are you seeing there? How do you protect margins in that, and then droving the final twist of noise out the China about JV partners becoming more assertive in the relationships with their western partners?

Well, I would say that there is an element of increased pricing expectation from our customers. We have been able to respond to that given our cost base and volume growth, so it hasn't been issue. Well, we have always talked about what -- in China our business -- our margins are amongst our highest. They are higher than our aspirations you could say for the rest of the world, because we do have some benefit of the fact that we have localized things that market imports. So we have a localization benefit. But -- so we have talked Brain about -- we don't see our seating margins growing in China, but we are pretty comfortable that we can maintain them. And if you look at our last five years, we have just done some analysis I think we shared at recent conference. Our margin has actually up picked a little bit here over the last five years in aggregate. Our interiors, we expect to have margin increases because we are still incurring some startup cost particularly on the IT side, standardizing our -- there are two companies' prior system. So, we've talked with interiors that there would be -- we are looking for something like 80 to 100 basis point and have that split that between China and outside of China, but it's not all outside. So that's how I would answer your question in terms of the margin pressure. I know there is a lot of skeptics out there that margin pressure is higher than it ever was and it's all gone away. I am very confident that we can continue to do exceptionally well there. Your comment around the partner, we have outstanding relationships with our partners. Like I said, they are integrated part of our company. Our partner's success and our success are -- and we have a symbiotic relationship. We can't get rid of them and compete them in China. They need our technology, our metals capability, access to the global customer. A lot of these big programs are obviously better engineered in China; have input from their partners. So, I mean I spend a huge amount of my time with our partners. I meet with them because we have so many of them at least very other week, not always in China. I mean they are here. So for instance next week I am in Canada meeting with -- one of our board meetings, and Thursday of next week, [indiscernible] dinner with them here at Michigan. So we spend an awful lot of time with them and maybe someone in your coverage has a specific issue, but I don't see there being anything untoward going on in terms of our relationships whatsoever.

Okay. And just a quick follow-up; on the seating, it sounds like you still have supply chain and other efficiencies you can use and volume to offset price reductions. What do you see around the competitive environment both with the other western players? And are the Chinese locals just disappearing as competitive forces due to quality issues? Or, have any of them learnt the secret to make quality seats?

Well, I wouldn't so much say they have bad quality. I would just say it's the craftsmanship of our - of not just ours but I will say western type suppliers. The -- the second world smaller SUV the more complex second world type structures. Those capabilities don't exist with a lot of a local suppliers. And that's why the market is -- all of us global players are winning in China at their expense. It's those kinds of things. It's not that their quality is terrible and ours is hugely better. It's more a question of capability than quality.

Okay, thanks.

Thanks, Brian.

Thank you. Our last question comes from the line of Mr. David Leiker. Sir, your line is now open.

Hi, this is Joe Vruwink] for David.

Hi, Joe.

Similar question to Brian; so when you look at what the other seating peers have reported this quarter, it's generally been high-single digit, low-double digit type growth rates. And over the midterm, the expectation is maybe mid- to high-single digit is sustainable. So when you think about your booking today and look out to 2020, is that the type of growth rate you think is going to be possible for your business by that time?

Yes, Joe. I think it is. Right now, on the consolidated side we are certainly suffering some of those capital constraints and the decisions that predated the spin [ph] announcement, but if you look at what we've been winning and we have been winning attractive business, it's hard to turn in 2019 and I think 2020 is a good mark to say we really should be -- really better than industry growth. And this is primarily because we think that there is advantage to or an increasing content per vehicle trend in this space which should allow us to grow little bit faster.

Yes. The other thing I would say is obviously we've gone to market in a different way in China. We are at first, and when we went there, you had to partner, and be in a minority position. So, all of our Chinese business is non-consolidated. And I think as you compare your cost against the lot of the other automatics players, they are not in that situation. Some of their business is non-consolidated, but some is. And so, when you look at our rate with zero China growth, it's probably not the best comparable and if you were to take our business and put, which is half of our business and consolidate it. The other half is our non-consolidate Joint Ventures and average of the two. I think you find it -- look, we are already operating that growth rate comparable to our - to the automotive industry, the automotive supply industry and if you -- and that's what North America and Europe offering both hand side behind the back right now.

And then, just one follow-up on this point, you've done a good job of presenting the geographical makeup market share in regions for you and the others and in every region and inevitably there is some in-source business that's being done. There is regional peers that are still getting business. When you think about big guys growing and grabbing what remains out there, is there going to be M&A opportunities where you are grabbing it but maybe some of it is grabs through acquisition?

Potentially, potentially, and I'd say, especially the farther you get away from North American, Europe, I mean, Asia is much more fragmented than other regions. So yes, I would say potentially and that's something that we would like. I think I need to wrap up the call because we are approaching the end of our time, so maybe just a few closing comments. Our company is just six months old and I guess could be more pleased in terms of the market with exception that we've had and the interest that we see from our investors in the analyst community. We have excellent customer relationships and Joint Venture part relationships and that's like really the core of why we are growing our backlog I mean for many, many, many years the automotive seating is business was the growth engine of John's Controls and the more time we are, we've been separated and adding in terms around much of a more consents I have in our ability to get back to that position. Our separation from Johnson Controls has been seamlessly completed; the payment that we had from those the final one. Our businesses are performing really well and that's enabling us to offset some of the volume softness and commodity headwinds that we talked about. Our growth initiatives are like I said early gaining momentum and then just in terms of wrapping up by -- I'd for sure like to thank our employees all around the world for their dedication to customer, their hard work, especially the time of significant change. I know our team morale is exceptionally high and engagement outstanding and I just couldn't be prouder of the global team and I want to thank them all here on this call. And with that, Oswald will conclude things.

Thanks, everyone.

Thank you. Good.

Thank you. And that concludes today's conference. Thank you all for joining. You may now disconnect.