Colin Langan - UBS Kirk Ludtke - CRT Capital Group Matt Stover - Guggenheim

Joe Von Meister - Bennett Esther Lee - Samsung Asset Management

Good morning and welcome to the Visteon, second quarter 2012 earnings call. All lines have been placed on a listen-only mode to prevent a background noise. As a reminder, this conference call is being recorded. Before we begin this morning’s conference call, I’d like to remind you this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the slide entitled forward-looking information for further information. Presentation materials for today’s call were posted on our company’s website this morning. Please visit www.visteon.com/earnings to download the material if you have not already done so. I would now like to introduce your host for today’s conference call, Mr. Scott Deitz, representing Investor Relations for Visteon Corporation. Mr. Deitz, you may begin.

Thank you Regina. Good morning everyone. Thanks for joining us this morning; we appreciate your time. This morning we’ll take a look at Visteon’s view of our second quarter performance and we’ll provide you with a recap of our results for the quarter in some detail. We will take a look at insights associated with our overall performance and we will provide some look ahead. As Regina mentioned, the presentation deck associated with today’s call is posted on the Visteon website within the IR section and just a reminder that our website is visteon.com. As you may know our related 10-Q was also filed this morning. We are joined as you would expect by Don Stebbins, Chairman, CEO and President of Visteon; and Marty Welch, Executive VP and CFO. Following Don and Marty’s prepared remarks we’ll open the call to your questions. Again, thank you for taking the time to join us and with that I will turn it over to Don.

Thanks Scott and thanks to everyone joining us this morning to review Visteon’s second quarter 2012 results, which were inline with our expectations. In the second quarter our consolidated sales totaled $1.7 billion and our adjusted EBITDA was $151 million, representing a margin of 8.9%. Our work to reduce cost continued to be successful during the quarter as SG&A came down 13%. Our net income totaled $75 million for the quarter. Included in our net income was $32 million of net good news related to a $63 million equity investment gain, partially offset by restructuring asset impairments and other nonrecurring costs. Adjusting for these items, our net income would have been $43 million or $0.80 per share on a diluted basis. We finished the quarter with $702 million is cash and $597 million of debt, translating into a net cash position of $105 million. Our $175 million asset back revolving credit facility remains undrawn. We continue to focus on a profitable and efficient use of our assets. We completed the sale of our headquarters campus in April and since the close of the quarter we have further streamlined our business portfolio with the completion of the sale of the lighting product group and the announced sale of our stake in R-TEK, a U.K. based interiors joint venture. Further more, consistent with our approach to maximize the near and long term interests of our shareholders, the Visteon Board of Directors authorized a $100 million share repurchase program that we are announcing today. Creating value for our customers and our shareholders will continue to be a top priority, as we further optimize our portfolio products and as we targeted investment to fuel Visteon growth and achieve a full and fair stock market valuation. Slide three provides a summery of automotive production volumes…

Great. Thanks Don and good morning everyone. Slide 13 provides a summary of our second quarter 2012 and year-to-date financial results compared with last year. As we’ve highlighted on prior calls, our 2012 and 2011 results are impacted by a number of items that make year-over-year comparisons a challenge. First, our 2012 financials are impacted by the deconsolidation of our Duckyang joint venture, which was effective on October 31, 2011. Second, 2011 and 2012 gross margin, SG&A and net income were also impacted by employee severance and other non-recurring items. For the rest of this presentation I’ll refer to adjusted sales, adjusted gross margin, adjusted SG&A and adjusted EBITDA, which exclude these items. Reconciliations between our reported financials and our adjusted financials are provided on slides 32 and 33 of this presentation. Slide 14 provides a summary of our 2012, second quarter financial results, which as Don noted, were in line with our expectations. On the right side we provided our 2012 year-to-date results. Second quarter 2012 adjusted sales of $1.7 billion were $166 million lower than second quarter 2011. The decrease primarily reflects unfavorable year-over-year currency and the non-recurrence of certain commercial agreements that benefited the second quarter last year. Adjusted gross margin was $130 million or 7.7% of sales. Since its $58 million below 2011, driven primarily by unfavorable currency, product mix and lower commercial agreement impacts than in 2011. Adjusted SG&A was $87 million, $11 million better than 2011 and 20 basis points better on a percentage basis. Adjusted EBITDA was $151 million for the quarter, about even with the first quarter and our free cash flow was a use of $61 million, reflecting normal seasonal trade working capital usage. Turning to slide 15, volume and mix resulted in a $6 million decrease to sales in the…

Thanks Marty. Slide 25 summarizes our commitment to our shareholders. These points guide our actions as we were to improve our performance and by extension our valuation. During the second quarter we experienced some headwinds related to lower volumes in Europe and South America, as well as unfavorable currency. However our performance was as we expected. We expect these headwinds will continue and to intensify for the remainder of the year and as a result, will impact our full year financial results. Our teams our focused on driving continuing operator improvement to mitigate the near term issues resulting from the lower volumes and the unfavorable currency impacts. At the same time we are committed to taking actions that optimize Visteon’s business portfolio and create long-term value for our customers and our shareholders. We’ll now be happy to take any questions you have. So Regina, lets go to the Q&A and I’ll turn it over to you.

Thank you. (Operator Instructions). Your first question will come from the line of John Murphy with Bank of America.

Good morning guys.

Good morning John.

Just a couple of questions around Europe. I mean, first this R-TEK interiors JVCo sounds interesting. Is there other items or other facilities or other business in this interiors business in Europe that you might be able to sell off piecemeal or do you think maybe the solutions of the European interiors business is more of a wholesale sale of the remainder of the business.

John, this is Don. We are looking at all those options for the Interiors business. There are a number of join ventures around the world that we have. This happens to be obviously in the UK and we had a willing partner to transact something quite quickly. So we are looking at those options and if we can bring those to fruition and they make sense for us, we’ll certainly do that.

Okay, and second question on Europe more broadly, as you look at the potential for down side in Europe, because it’s very difficult to call right now. I’m curious as to what leverage you think you have to pull in response to some weakness in European volume in the near term.

Yes certainly, there is probably four, five different levels you have. One is working with your customers; two, working with the supply base; three, utilizing local labor relationships; four, is I think as we mentioned before, we took a pretty conservative approach in terms of our hiring as volumes came back up in terms of the temporary employees, so that provides us a significant amount of flexibility as we slide down and then five would be permanent layoffs and so, we had in France, we already have a social program in place for one of our facilities there and so we are executing against that right now.

Okay, that’s helpful. And then just lastly as we think about this share repurchase of $100 million that just got authorized, I mean is that a recognition that maybe some of the more strategic actions you should be taking should be more inwardly focused and in investing in the business and rationalizing the business internally as opposed to sort of big bang strategic actions that would include external parties.

You know I think it’s really providing us a totally balanced approach for the use of our capital and certainly it does take into account what you mentioned, that some of the larger transactions may be difficult to pull of in the timing that we may had originally scheduled for. But its also a reflection of where the stock price is today and its important for us, so we felt it was important for us to make that statement that where the stocks trading is we don’t feel is appropriate.

And maybe, actually really just lastly, in light of that and what’s happening with Halla, I mean, is there any consideration of taking down the bite of the apple and going back with another bid or is it at this point you think that’s kind of stuck in the mud and something you would revisit far in the future.

I think we need to fully understand the NPS, decision. Once we do that then we can evaluate the options and we will decide at that point in time.

Great, thank you very much.

Thank you.

Your next question will come from the line of Brian Johnson with Barclays. Brian Johnson – Barclays: Good morning. Just a real quick housekeeping question and then continue with sort of the corporate strategy. Housekeeping, it looks like you’ve taken Yanfeng and spread the equity income across the segments, is that correct.

Yes it is. Brian Johnson – Barclays: As well as other equity income and thus results.

Yes, its just the Yanfeng has the Yanfeng Visteon Electronics which spreads over to that segment, that’s really the only spread. Brian Johnson – Barclays:

Yes, I guess I would answer it in a couple of ways. One is, when we decided to make the tender for Halla, we had to examine a number of different alternatives and perhaps prior to launching it. So we chose the path that we felt was the right one for us and for HCC. Other than that I would say its not really appropriately to try to speculate on what we are going to do in the future regarding HCC. Brian Johnson – Barclays: Okay, I mean would it be fair to say that that current configuration is, that there are alternatives other than just sitting at the current configuration.

Absolutely, absolutely there are. Yes. Brian Johnson – Barclays: And just finally, are you singling with the $100 million of dispositions and a $100 million of share buybacks that any cash got in through sort of house cleaning garage sales if you will, goes back to shareholders and what does that imply if so, kind of beyond that for some of the other cash on the balance sheet of even if you don’t Halla from the borrowing capacity you might have in terms of stepping up the share repurchases.

Yes we are not tying the two together in terms of asset sales to the share buybacks. Again, I think as we look at the share repurchase, I think you do have to take it into context of what’s going on in Europe with the euro zone economies and European production. Additionally, you’d also have to consider what’s happening in Asia. I think we feel a little bit better in China with the news out of China coming about their stimulus, coming in the second half, so. But I think you got to take all of those into account, along with asset sales proceeds as you evaluate share repurchases. Brian Johnson – Barclays: Okay, thanks.

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

Hi Colin. Colin Langan – UBS : Thank you. Do you have some color on – I know Halla reported that they had some issues in India with I guess some FX issues that effected their business. I was wondering, does that translate directly to you, because they also indicated the second half would get better. So does that mean Climate gets a little bit better in the second half as well and is that why minority interest is down quite a bit, because of Halla.

Well, certainly the rupee has impacted both the Halla facilities, as well as Visteon, so there is no question about that. In terms of the back half of the year, again, as we outlined here, the performance for the first half of the year is certainly near our expectations and as we look forward, we do expect climate to improve. The climate business went through a number of launches in the second quarter and are tapering off as we move forward into the third quarter. So we certainly do expect a better performance out of the climate business as we go forward in the back half of the year and that’s Halla, as well as Visteon. Colin Langan – UBS: Okay, and any color on slide, I think three you showed that South America was down like 30%. Which business, which segment would that hit the most. That seems like a pretty big, really support in South America, you call out as a big customer there. Which segment would that be the worst headwind on and I guess like maybe the opportunity for that to improve.

Probably electronics; its really all three, electronics, interiors and climate. Again, this really had to do with Ford’s production levels in the first half and primarily the second quarter. So we think that Ford comes back fairly strongly in the back half of the year as they launch their new products. Colin Langan – UBS: Okay, and in terms of the R-TEK, I mean that was already going though equity income. Any color on how much it was last year in terms of the contributor?

Let me check on that.

Its about $5 million to $7 million a year, something like that. Colin Langan – UBS: In equity income or was that fully consolidated?

No, no, it’s in equity income, yes, its not consolidated. Colin Langan – UBS: Okay, and just you talked a little bit about the Halla tender, you know any sense on when the timing and why you think maybe the original offer didn’t go through.

What we have is – again, I mean what we know is what NPS stated, which was they felt that it was more valuable long term, etcetera, etcetera. Then there is a lot of rumors and we just have to filter through that and get the accurate answer and then we can make our decision as to what the next steps are. Colin Langan – UBS: Okay, all right. Thank you very much.

Thanks.

(Operator Instructions) Your next question will come from the line of Kirk Ludtke with CRT Capital Group. Kirk Ludtke – CRT Capital Group: Good morning.

Hi Kirk.

Good morning Kirk Kirk Ludtke – CRT Capital Group: With respect to interiors, could you give us a timeline as to when you will be rolling out Plan B?

I think, the way I would phrase it Kirk is that, we are working with a sense of urgency on the interiors business. Certainly the R-TEK transaction gives you some flavor of that. I think there will be more difficult pieces on some and whether or not it’s a transaction in total or multiple transactions or joint ventures or whatever all those options are, we are just going to have to walk down that path as quickly as we can. Kirk Ludtke – CRT Capital Group: Okay. I’m sure your competitors are experiencing a lot of the same issues, right.

Yes, I mean the lack of substantial profitability in the interiors business is well known and all of our competitors feel it. Kirk Ludtke – CRT Capital Group: Do you get the sense that – you had a transaction in the works for a long time and probably weren’t focused on a plan B. But I suspect that competitors have been working on plan B. So do you get the sense that there is an agreement among industry players that something has to be done or are we just starting from a blank sheet of paper and we really don’t know what your customers think and what your competitors think about JVs and finding it a more viable business model.

Yes, I would pass on trying to comment about what my competitors think. Kirk Ludtke – CRT Capital Group: Okay. I guess I’m not really asking for anything specific, just do you get the sense that there is an agreement via your customers. Are they willing to work with industry players to get this business model into a more viable place.

I would say that the conversations that we had with our customers regarding the Yanfeng Visteon transaction was very positive and that they were very, very enthused by the combination. And so I think that yes, they do, certainly the customers recognize the importance of suppliers that can bring them innovative product, you know and be financially stable at the same time. I certainly also know that our competitors would like to find solutions to the situation as well and so I think overall as you look at the industry, I think that makes good sense and that means that things will happen. Kirk Ludtke – CRT Capital Group: I noticed you didn’t – if I’m reading this correctly, didn’t increase the cash restructuring cost for this year in your guidance. Is that because you haven’t gotten there yet, you just haven’t quantified what they might be or whatever you decide to do, its next year’s business or how should we think about that.

I mean I think if you look at the segment disclosures that we have, I mean the returns aren’t great, but they are positive and I think we are managing the business through a difficult period from a volume perspective. I don’t think we are looking at massive restructuring actions as one of our alternatives at this point. Kirk Ludtke – CRT Capital Group: Okay, that’s helpful. So the solution I guess would be re-pricing contacts and winning more business and is that kind of more where you are headed in terms of restructuring.

Regarding interiors? Kirk Ludtke – CRT Capital Group: Yes.

No. I mean I think we have to run this business. We got to serve our customers, we got to keep our factories full, there is no question about hat. We have to compete and we are going to do so. We got a new management team in place to do that. I’m excited about that, I think that’s going to be great and we’ll do that. Now again, if there’s alternatives in terms of the strategic nature of the business like an R-TEK transaction, like a YFV transaction, certainly we are going to run hard to do that. But again, whether that’s a month away or two years away or whatever that timeframe is, you still have to run the business and service the customers, as a profitable basis as you can. Kirk Ludtke – CRT Capital Group: All right, OK. Just switching briefly to Yanfeng, the equity income was down year-over-year if I’m reading this right, which is there any – so I guess, if nothing else, it’s getting tougher to forecast Yanfeng and…

I don’t think its tougher to forecast. I think you have a couple of things in play there. Certainly volumes in china were lower than we had expected for the year than I think most people had expected for the year and then secondary, Yanfeng has had tremendous success over the last couple of years in terms of winning new business and therefore the SG&A cost so to speak or the engineering cost have ramped up. Kirk Ludtke – CRT Capital Group: Okay, that’s helpful. Do you – and I might have missed it, but did you disclose how much equity income is in your full year EBITDA guidance and do you mind just giving us directionally what that is.

Well, we have not disclosed that, and we have not guided towards it.

Right. I think that falls into the category, because one entity is such a high percentage of that number. You get into the restructurings on what we can say about the Yanfeng entity. Kirk Ludtke – CRT Capital Group: Right, that makes sense. Okay, I appreciate it. Thank you.

Great. Thanks Kirk.

Thanks for taking my call. Many of my questions have been – hey Don, how are you. A bunch of questions have been answered; two questions though, maybe three. On the R-TEK valuation, can you give us a sense of what the multiple on EBITDA was there?

About 4.5 times 11 EBITDA.

Okay. Two, as we kid of look at the regional performance of the business, in Europe and in South America you had a very negative customer mix in terms of end market production. I was wondering if you could sort of go into each one of the businesses and talk about how North America performed on a year-over-year basis and maybe shed a little light on sort of Europe, just so that we can kind of get a sense as we see the sort of production schedules in the second half or just how we should think about the outlook for the businesses and in these two markets that are kind of going in two very different directions.

I guess where I would start is just as a percentage of the corporate revenue on slide four or five, whatever that page is. Clearly Europe is going to have a bigger impact on us than North America and by product group, climate and electronics are in North America, where interiors is not and then in Europe, all three product lines are represented in Europe and fairly strong. I would say that probably most concerning is, if you look at Ford, PSA and Renault-Nissan in terms of what’s expected, second half of 2012 versus the first half of 2012, we are looking at production volumes down 16% or 17% period-over-period. So from our perspective, yes, we are into a situation where our key customers in Europe are going to have a tough goal in the second half, which means as I mentioned, we got some work to do in terms of mitigating that lower production level.

Okay. It sort of moves me into the last question and that is, as I think about what happened with Yanfeng and the MOU, the interiors business, just sort of sitting there as an outside observer and looking at this, thinking about a Chinese company, acquiring a business with heavy exposure in Europe, I would imagine they wouldn’t necessarily want their big, first cut of the apple to be buying a business that needs to be restructured. So are you sort of thinking about the long-term strategic plan for that business, is it kind of a fair comply that you probably have to restructure that business before you can strategically position it.

No, I don’t think so. I agree with you, the assumption that the YFV’s decision was based upon, what they saw coming down the people, but the restructuring of the business gets much – in interior this gets directly to what OE facilities you are servicing and what products are in those plans. And so if you take a look at PSA and their schedule and what facilities they have announced, what facility they have announced they want to close, it doesn’t really impact Visteon is a negative way. And so it really starts to play out as to what products, what the product cycle looks like if you have to restructure. Certainly, again, there is some volume issues and we are staffed with temperature workers at different facilities and so depending on what the volumes are, you may have to eat through your temporary workers at that point and have a small social plan, which is essentially what we are doing at one of our French facilities today. But I don’t think there is a massive restructuring of the business that looms in front of us in interiors.

Yes, I agree with that. I think the facilities and interiors in more than any other of our segments are really very much customer specific and to understand, I mean we have to really take a look at precisely which customers and which customer facilities they service.

Okay, I appreciate that. Thanks guys.

Thanks.

(Operator Instructions) Your next question will come from the line of Ryan Brinkman with JP Morgan.

Hi, thanks for taking my question. With the cancelled sale of your consolidated interiors division to ISP, it seems there’s a lot of focus and there has been a lot of questions on this call what to do with the business as a stand along entity. You obviously meant R-TEK announcement along these lines. Is there any read across to your other consolidated operations like consolidated climate for example. So with the non-conformation of the Halla tender, does that cause you to potential think about consolidated climate in a different way and why you seek to monetize portions of that like you did interiors today.

No.

Okay, and what about the electronic divisions. How should investors think about the potential sale of that? Could that also come in portions like R-TEK today?

I don’t think the transaction with YFV and the inability to consummate it has any impact on the thought of running two businesses, climate and electronics.

Okay and could you talk about your plans or potential for tax optimization, sort of potentially independent of anything to do with Halla.

So we have, as we talked about in previous calls, many strategies around making sure that we appropriately build cost to entities around the world for services that we provide and to make sure that we recoup those costs and other strategies to take maximum advantage of tax deductions in places where we pay taxes and I think we continue with those. I don’t think there is anything new to report there. I think we have a very aggressive program and we continue to refine it each year.

Okay, that’s helpful, thank you.

Thanks Ryan.

Your next question will come from the line of Joe Von Meister with Bennett.

Hi guys, thanks for taking my questions.

Hi Joe

I have a couple. First off a housekeeping question. What was the cash balance for Yanfeng at the end of the quarter? I think at the end of the year it was around a $1 billion.

Right, at the end of the first quarter it was about $1 billion and at the end of the second quarter it was about $1.1 billion. I should note that the dividend payments out of the various Yanfeng entities occur in the third quarter, so they haven’t occurred yet, but they will occur in the third quarter.

Great, and on the Ford call, it sounded like there was plan to reduce its footprint in Europe. Can you talk about how you expect that to affect your business?

I guess Joe, we have not definitively received information from Ford as to what they are going to do with their platforms, we have platform volumes and so as we talk about Ford being down 16% or so, first half to second half, that incorporates their view on their production levels and their planning. So from that perspective we don’t have any more information to update you on.

And in terms of plan B, would you consider spin-off of Halla as a potential plan B. I mean, I think many of us thought that maybe Halla would be spun-off. Instead you tried to take it or may be you could talk about your thought process on that particular course of action rather than spinning it off. Why does it create more value to buy out the share of Halla you didn’t own versus spinning it off to shareholders?

I think its important as we have said. The objective of the climate business is to challenge for the number one position in the world. We are number two today, and over the last three to five years we have expanded, lets say the gap between positions three, four and five from where we today and its really important from our perspective in terms of driving the value of the company to operate that as one business. We certainly can operate as we do today and we are moving everyday towards more and more integration of the two businesses. But the ownership leakage that the 30% creates is not cost effective when you are trying to run a global business and competing against the likes of a Denso and a Valio, etcetera. So from that perspective, that drove the decision to try to take the 30% of Halla and make it whole owned.

Great, thanks guys.

Thanks Joe.

Our final question will come from the line of Esther Lee with Samsung Asset Management.

Sorry, Joe just asked the question what I’d like to ask. So yes, thanks for taking my...

Okay, thank you.

Thanks Esther.

I will now turn the conference back over to Mr. Deitz for any closing remarks.

Regina, thank you and thanks to everyone on the line. We appreciate your participation and I’m sure we’ll be talking with many of you, one on one during the next few days. Have a great day and enjoy the weekend when it gets here.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect at this time. Good day.