Visteon Corporation (VC) Q1 2013 Earnings Report, Transcript and Summary

Good morning, and welcome to Visteon's First Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, this conference 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 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. Scott Deitz, representing Investor Relations for Visteon Corporation. Mr. Deitz, you may begin.

Thank you, Montserrat. Good morning, everyone. We appreciate everybody taking the time to join us for our review of the first quarter of 2013. We'll provide a recap of our results and insights associated with our overall performance and some sense of what we see ahead. As Montserrat mentioned, the presentation deck associated with today's call is posted on the Visteon website within the IR section. And again just a reminder that our website is visteon.com. Also the 10-Q was filed earlier this morning with the news release. With us today are Tim Leuliette, Visteon President and CEO; and Jeff Stafeil, Visteon's CFO. I'm pleased to report that Visteon's Vice President and Treasurer, Bob Krakowiak, is also joining today's call. I'm delighted to report that Bob will be adding Visteon Investor Relations to his day-to-day responsibilities in the next few days. Just by way of background, it's been my pleasure to advise Visteon on IR during the past 13 months in the role I play at Fleishman-Hillard. And I'm grateful to have had this opportunity and to talk with and get to know many of you in the process. I've known Bob for many years. We worked together elsewhere. And I can report firsthand that his business credentials are solid and that he has a passion for and understands the best practices associated with IR. Bob joined Visteon in early 2012. He has successfully led the treasury function and managed several value-creating financial actions. You will absolutely benefit from Bob's more than 20 years of senior financial, operating and engineering leader. He is a dear friend and absolutely a rock-solid pro. The transition of IR to Bob will be orderly. It begins today, and I'll continue to remain in the background and provide help when called upon. A more formal note will come out with his contact information. Now on to more important things on to the call. As you'd expect, following Tim and Jeff's prepared remarks, we'll turn to your questions. Again thanks for joining us. And now I'll turn it over to Tim.

Thank you, Scott, and again welcome, everyone. And let me say thank you to Scott for the support you've given me since my arrival. And Bob, thank you for taking on the assignment. We look forward to our future together. Let's start with Page 2 of our deck and the highlights of the quarter. We are not where we want to be long term. We have not achieved the operating performance or the revenue stream we want to achieve and can achieve. But for the first quarter of 2013, for the 9 months into our journey here, this is a good quarter. Let's start by looking at revenue of $1.9 billion. That's driven by obviously the things you would expect, strength in Europe -- excuse me, strength in Asia and strength in North America. But fundamentally here, I think an important element for investors to know is that excluding Interiors, which we talk about separately, the remainder of Visteon saw revenue in Europe up year-over-year. And we're seeing that impact, and I'll talk a little bit about this later, of technology and obviously content changes increasing our revenue across the board. EBITDA was strong at $170 million for the quarter. On a net income basis, you see that we have had a tax proceeding that was favorable to us. We continue to work through the process, where we deal with a lot of foreign jurisdictions over time. We are comfortable at receiving and getting some adjustments in our tax position, which occurred this year -- or this quarter, which was a favorable event, and we generated some good cash. We generated cash, not only on an adjusted basis but including the free cash flow after looking at things like transaction and restructuring expenses. So from that perspective, I think, a strong quarter. We have $1.1 billion of liquidity at the end of the quarter, almost $1 billion in cash, up $274 million over prior year. And we still have our ABL availability in the U.S. Debt, 1.2x EBITDA. We have a net cash position of $218 million. And we're going to take you through the fact that some of that cash now is more in the U.S. than it has been in the past as we've transferred cash from around the world to the parent here in the U.S. As we look at the lower left-hand corner of the box, the question is where do we stand vis-à-vis our guidance for the remainder of the year? I will say that it's early in the process. It's only the first quarter. We're not going to go back in and adjust at this stage. But I will say that we're very comfortable with this guidance, and we were very comfortable and pleased with our first quarter. Europe was stronger than we expected. And there were a few other positive factors, some strength in penetration, some strength in mix that helped drive the quarter. But 1 quarter a year does not make. We have adjusted our EPS, however, for the guidance for the year to reflect the mathematics of the tax agreement that we had in the first quarter. Other than that, we've kept, at this point, the guidance the same. Let's move over to the right side of the box. And you see that another, I think, major event is that we did acquire $125 million of additional shares. I'll go through the details of that through an ASB program in the first quarter that did trail in a bit into April. So it's a first and a second quarter event, but it's now completed. I'll go through the details there. But again we were active in the market buying shares back over the last 60 days. Another important element of value creation again, which I'll expand upon, is HVCC. Not only did we -- at this point, all except one facility has now been transferred over. We're waiting for some -- from 1 remaining element in China, which the paperwork should be clean here in about 30 days. Everything else has been transferred and consolidated in. We did a road show. I think I shared with you that Jeff and Scott and I and Y.H. Park would start to hit the road in Korea and Hong Kong and Singapore and Tokyo and start to tell the Halla Visteon story. And that, combined with good performance, and again I'll talk a bit more about that later, we have seen a very strong reaction to the marketplace, and we're now trading consistently over KRW 30,000 on that particular asset for which the Visteon shareholders own 70% of. We did this quarter also sell a remaining JV, a Taiwanese JV as part of the Lighting sales. You recall we sold Lighting last year. There was a remaining JV that we sold and monetized this quarter for $17 million. And we did sign the agreement to sell some of our Yanfeng interest in China for $20 million. That will close this quarter, but the transaction was approved and then settled last quarter. Moving to the next page, Page 3. I do want to spend a little bit of time here expanding a bit about our share repurchase plan. As you recall, we purchased $50 million shares in Q4 at an average price of $49.72. Honestly, that was really done in December because October, November had a series of blackouts and other elements, which precluded our activity in the space, but we were able to go back and buy $50 million in December. As we went forward with the remainder or the first stage, I should say, of the $250 million of the remaining program, we set aside 1/2 of that for an ASB program. We decided to proceed with that because that allowed us to move more aggressively and to accomplish over a shorter period of time a larger share buyback than we could have done through more conventional means. We did launch that on March 5. We purchased 2.2 million shares in total, of which 1.7 million were acquired before the end of Q1. The remainder of those were acquired in April into Q2 but now complete. That represents about 4% of our outstanding shares we bought back over that period of 60 days or so. The volume weighted price was $56.58, again below our current trading price. And we still have remaining $125 million of the approved purchase plan. The box at the bottom is kind of a good summary as since December, we have spent $175 million on share repurchases. That's at an average price of $54.44 and that's 3.2 million shares or 6% of the outstanding shares in the last 5 months. So again our commitment to addressing -- what I call addressing the balance sheet and going back and buying shares back, I think that summarizes it up well of what we've accomplished over the last 5 months. Moving on to Page 4. Quickly, let's look at where the market is and where we were in Q1. The numbers don't change much here with respect to production locations. But again the story, I think, is worth repeating. Asia is over 1/2 of the production base in the world today; Europe, 23%; and the U.S., 13%; North America in total, 19%. That's the footprint of where vehicles are built. And the question is how well do we fit that footprint from the standpoint of Visteon itself? As you can see on a consolidated basis, we're almost 1/2 Asia-Pacific; up 30% in Europe; 19%, North America; 5%, South America. Very close on a consolidated basis to really what the footprint is globally. When we include YFV and our nonconsolidated subsidiaries, you can see that we are almost 3/4 now Asia. So again very active in the Asian market. That's where the growth is going to be. That's where the action is, if you will, on some significant growth over the next decade. And again that's the center of where Visteon does business. We amplify that on the next page, Page 5, where you see the progression of how we've become a more Asian-centric enterprise over the last decade. The bar chart here, the blue bars reflect the nonconsolidated total footprint of Visteon, including YFV, which, as I said, through 2012 was 71% and through Q1 of 2013 now up to 74%. And we look at the line below, which is also the consolidated basis, you see it's still a strong growth in both consolidated and nonconsolidated footprints of our Asian commitment. So again we will continue to tell this story that we are an Asian-centric business. Moving on to Page 6. Quickly, this is a chart that we shared with you in the past as to what is our kind of footprint and work plan and key strategic value contributors that we are focusing on in 2013. I don't have time to go through each one of these in detail. So what we've done is on the next page, Page 7, is focused on 4 of the critical ones, which I think are important as value drivers for U.S. investors. First of all, implementing HVCC. That was one of the key tasks. And I will say that the market reaction from both a customer perspective and an investor perspective has been quite high. I think what's important to note is, and I will show a chart here in a moment, is that since January 1, our 70% stake in Halla has contributed over $10 a Visteon share value, which obviously has not manifested in itself in value in the market. But that's the true value of contribution and the fact of our ownership of Halla and its value increase over the last 4 months. The value of Halla Visteon for every Visteon shareholder, it's $42 per share. And that's a strong contributor, and we only see that expanding. Second, one of the elements we talked about was the share buyback. I've mentioned that, that we purchased about 4% of our shares back, 2.2 million shares year-to-date. And then guidance, another value driver is performance. And we're launching an $800 million 3-year order book. You start to see that -- quite honestly, you saw more than that start to flow through because, as I said, we were more probably a little more conservative on Europe than others and we saw some positive mix and content issues in Asia. So we're seeing some very strong revenue growth. You saw that Q1 sales were up 8% and adjusted EBITDA was up 19% year-over-year. And underneath that, we're working the cost elements. We have reduced the North American admin staff by 6% since the 1st of the year, and we have reduced our global leadership team. The corporate officer base of the company is down 30% since December 31. So we're working all aspects of the cost equation. We're working all aspects of the technology equation to continue to expand and create value here. The other point, and I mentioned this earlier, I think it's worth focusing on is on 12/31, we had $278 million of cash in the U.S. Today, we have -- at the end of the quarter, we had $384 million of cash in the U.S., again making sure that the cash basis in the U.S. is more than sufficient to deal with the needs. As you know, we're a very global enterprise, but again we pay a lot of bills out of the U.S. We're sitting here with a good cash base in the United States. We take -- we have undertaken significant value-generating steps. We are continuing to do so. We're still working all those line items on the prior page. But I did want to highlight these as part of the first quarter. Moving on, I would like to focus a bit now on Page 9 on the Halla story, Halla Visteon story, at this point. As you know, as we said earlier, as we put this business together that it would be the #2 global business in the Climate side. It's strongly -- we've achieved that, one of only 2 full-line suppliers. We talked about our $700 million backlog when we put this together. I would expect over time, you will see that number grow as we're starting to win business in '13 that's going to impact '15 and that was the 3-year window. We're going to see that $700 million backlog be a $700 million plus backlog and grow, very experienced leadership team with Y.H. Park, who joined us and obviously led the discussions on the road show in Asia. A strong team, strong leadership capability. I'm going to go through here a bit in a moment all the things these people accomplished because it's important to understand that not only was this deal accretive from the beginning, but now there's value opportunity and margin improvement and growth with those assets. As you can see, Halla is again almost 60% Asia. So it's a strong Asian footprint. And again you see where we stand on the bottom right side there as far as market share compared to our competitors. Going forward on the next page, Page 10. You see that historically, this company has grown at a 15% CAGR. We're saying now going forward over the next 3 years that we see this at a 7% plus CAGR. As I said, we were encouraged with the first quarter in both Europe and Asia, and as well as some revenue wins that we're seeing, is that we'll probably come back and adjust this up. But again a strong conservative forecast that we believe underlies the expansion and value-creation opportunity of this particular business. Going to Page 11, I think is a critical backup for those of you who want to get to know Halla a little bit better, Halla Visteon a little bit better. Again this transaction was accretive from the get-go. But as you look at this, there's some background information that I think is very important. Between 2006 and 2012, Halla Visteon has acquired over 11 -- or expanded 11 operations, 9 of which were from Visteon before this transaction that we have just announced and just completed here last quarter. Over that period of time, they added about $1.1 billion of revenue and 4,700 employees. During that period of time, by addressing operating profit improvement, by reducing SG&A, by decreasing engineering as a percent of sales, by working on quality, by working on safety, they've improved the earnings base. $120 million of those assets -- by improving operating profit by $120 million on those assets over that period of time and growing that revenue base 16% on the assets that they took over. That has generated a 210% increase in the share price of Halla Visteon over that period of time. So not only is this story one of combining businesses, but it's putting it in the hands of people who have created value from all the fundamental elements: factory floor, SG&A, efficiencies and out there aggressively growing revenue. So the footprint we've put in place here, as I said, is far from over and far from generating the value proposition that it can. And going to the next page, Page 12, is an example of the kind of dynamics and the kind of technology base that we put into Halla Visteon. First of all, I'm very pleased that Halla Visteon won an Automotive News PACE Award here last month for an innovative technology in seal fittings. And seal fittings doesn't sound like rocket science. Let me tell you it's very important. Why? Because the refrigerant leakage from an environmental perspective is a major issue around the world and how that's done and how -- and assuring that there's no leakage of those chemicals is very critical. And this technology base was seen as one of the more significant awards around the world from an automotive supplier. But it goes back. There are a long list of history and a long history here of technology innovations, whether we're talking about heat pump systems, whether we're talking about thin film coolant heaters or battery contact coolers, the refrigerant cooling that we're using for the BMW electric vehicles. There's a strong history of technology here, and that's manifested itself as you see on the right side of the page looking at patent awards, patent awards and patent filings. And this was pulled together by Boston Consulting Group. Of all the players in the climate business, you can see that Halla Visteon is leading in the world now on patent and patent disclosures as we go forward -- patent filings. The next page, Page 13, is one of the disconnects in value but I think one of important things for you all to look at. And that is since January 1, the Halla Visteon share price is up almost 33%, Visteon's up 11.8%. And we own 70% of Halla Visteon. And that's one of the major fundamental value elements of the Visteon Corporation and the Visteon share price. So we see a disconnect here. We assume over time that the math will eventually work and this will work its way through the system. But it's something we track, and I think it's important for the investment community to track, to understand the value proposition Halla Visteon is, trades every day. And that is a part of the Visteon share price. And so we expect to see a more congruent and closing of that relationship over time. And with that, let me turn it over to Jeff and let him talk about the financial performance.

Great. Thanks, Tim. I'll start on Slide 15, where we present our key financial results for the quarter of 2013 compared with the first quarter of 2012. As Tim said, clearly you can see we had a good quarter to start the year as we meaningfully improved versus prior year on all our key metrics. As we 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. As non-GAAP financial measures, this adjusted financial information is reconciled to U.S. GAAP financials in the attached appendix on Pages 27 through 29. I will discuss all these metrics more on the following pages. Turning to Slide 16. Taking a look at our consolidated sales and adjusted EBITDA. Sales were $1.9 billion during the first quarter of 2013 or $139 million better than the first quarter of 2012. The increase was driven by higher sales in Asia, North America and South America. Meanwhile, our adjusted EBITDA was $170 million in the quarter, up $27 million versus the first quarter of 2012 and primarily reflects higher volumes, partially offset by increased product development cost. Product development cost increased $14 million year-over-year, reflecting investment to support future growth, as well as lower engineering recoveries from our customers. The recognition of engineering cost recoveries tends to be uneven throughout the year and were low in the first quarter of 2013. For the full year, we are still projecting slightly over $100 million of recoveries, of which approximately 12% were received in the first quarter. Commercial agreements, which had a material impact in the fourth quarter of 2012, were significantly less than the first quarter. In total, commercial agreements benefited first quarter by $7 million, $2 million higher than last year. Turning to Slide 17. We show our sales and adjusted EBITDA for our 3 product segments: Climate, Electronics and Interiors. It is important to note that we have made several changes to our segment reporting beginning this quarter and have adjusted our prior year results accordingly. Please refer to Pages 30 and 31 of the appendix for additional detail. In the first quarter of 2013, sales and adjusted EBITDA for both Climate and Electronics improved versus the first quarter of 2012. However, primarily due to reductions in European production volumes, Interior financial results were lower. I'll cover the details in the following pages. Page 18. We provide an overview of Climate sales and adjusted EBITDA. Climate sales in the first quarter were $1.2 billion, up $205 million or 20% compared with 2012. The increase reflects higher Hyundai volumes in Asia, as well as the launch of new business in both Europe and Asia. Currency also positively impacted sales by $17 million, primarily driven by a stronger Korean won and euro. Adjusted EBITDA for the first quarter of 2013 was $113 million, up $29 million or 35% when compared to the first quarter of 2012. Increased volumes were the biggest driver and were partially offset by increased product development costs. Currency had a negative impact on our adjusted EBITDA. As we have discussed in the past, a strengthening won increases our sales but has an unfavorable impact on our adjusted EBITDA. As we have more cost exposure than sales exposure to the won, in the first quarter, the unfavorable adjusted EBITDA impact has been partially mitigated by currency hedges. Climate's adjusted EBITDA margin was 10.2% in the first quarter, up 50 basis points versus the first quarter of 2012. It is important to note that adjusted EBITDA margins on this slide and the next 2 slides exclude the impact of equity income and noncontrolling interest. You should note that the former Visteon Climate facilities that were sold at various intervals in Q1 and continue through Q2 were not fully impacted in Halla's result. So there are some material differences between Halla's financials and Visteon Climate financials. And there's a bridge on Slide 36 to give you the guidance there. Moving to Slide 19. Electronics sales for the first quarter of 2013 were $365 million and adjusted EBITDA was $30 million. Electronics sales for the first quarter increased $36 million versus 2012. The increase primarily reflects higher volumes in our cockpit electronics business, partially offset by lower vehicle electronics sales, which decreased by $16 million year-over-year to $32 million for the quarter. Adjusted EBITDA for the quarter increased $2 million versus 2012, primarily reflecting higher cockpit electronic volumes, partially offset by $6 million in lower profits related to lower volumes in our vehicle electronics product line and increased investment in product development cost. First quarter 2013 adjusted EBITDA as a percentage of sales, excluding equity income and noncontrolling interest, was 7.1% compared to 7.6% in the first quarter of 2012. The decrease in adjusted EBITDA margin is explained by the run-out of our vehicle electronic business. Adjusted EBITDA margin on cockpit electronics were flat year-over-year. Furthermore, cockpit electronic margins were negatively impacted by a temporary contract manufacturing relationship, which will create operating efficiencies for Visteon in the future. Excluding the impact of this temporary contract manufacturing relationship, adjusted EBITDA margins for cockpit electronics would have increased by 100 basis points versus the first quarter of 2012. It should also be noted that Electronics product group absorbed additional corporate cost in the first quarter of 2013 versus prior year. These additional costs negatively impacted Electronics first quarter 2013 adjusted EBITDA margins by 70 basis points. These costs reflect corporate overhead that was previously absorbed by the non-Halla Climate businesses and Lightings product line. The reduction of fixed cost will continue to be a key objective as we move forward. All right. Now turning to Interiors on Slide 20. We provide their first quarter -- or first quarter sales were $317 million and adjusted EBITDA was $33 million for the quarter. Sales decreased versus the first quarter of 2012, primarily due to lower production volumes, as well as a weaker Brazilian real versus the U.S. dollar. Volumes were slightly higher in Asia and South America, but our European volumes were significantly lower. In total, volume reduced Interior sales year-over-year by $62 million. While adjusted EBITDA decreased due to the lower volumes in Europe, we were able to mitigate much of the impact through favorable year-over-year cost performance. It should also be noted that equity and affiliates related to our Interiors product group totaled $38 million in the first quarter of 2013 or unchanged from the prior year. The increase in profits from Yanfeng affiliates was offset by the elimination of profits related to our R-TEK joint venture, which we sold in August 2012. YFV results were in line with expectations, as we discussed at the Deutsche Bank conference in January. We have seen large increases in sales. The profit after tax has lagged due to the high upfront engineering and launch cost associated to support the increased business. This has generally been the pattern of YFV and is in line with our expectations. Moving to Slide 21. We provide a breakdown of our key components of our first quarter 2013 tax provision and cash tax payments. The table also provides a buildup of our full year 2013 estimated tax expense and cash tax payments. In the first quarter, our income tax provision was a benefit of $18 million, reflecting operating taxes in profitable countries, the accrual of withholding taxes related to current earnings from consolidated and nonconsolidated affiliates and a $54 million noncash tax benefit related to a decrease in reserves for uncertain tax provisions related to audit developments in the quarter. For the full year, we expect our tax provision to range from $50 million to $85 million. As we mentioned during our fourth quarter 2012 earnings call, our tax expense will be uneven throughout the year due to the impact that ongoing tax proceedings outside the U.S. can have on our judgments regarding uncertain tax provisions in a given quarter. Our cash tax payments in the first quarter were $29 million, excluding a Halla Korea audit appeal deposit of approximately $20 million. For the full year, we have not changed our guidance as we still anticipate our cash tax payments to be between $140 million and $180 million. Turning to Slide 22. We provide -- or we generated positive free cash flow of $59 million in the first quarter. It should be noted that our free cash flow included $36 million of restructuring and transaction-related cash payments. We exclude these items in our adjusted free cash flow, which was $95 million during the quarter. Significant items in the quarter include: a $97 million benefit from working capital, which was primarily seasonally and timing-driven; $29 million of taxes, which includes $5 million of taxes related to the Halla HVCC transaction; and $41 million of equity earnings related to dividends that were not yet collected in the quarter. Capital expenditures were $63 million during the quarter, approximately 75% of which related to our Climate operations to fund its growth. Cash balances were $995 million as of March 31, up $150 million since year end of 2012. The improvement is primarily attributable to positive free cash flow and proceeds from debt raised at Halla but partially offset by the $125 million of cash used to repurchase Visteon stock. Total debt at the end of the quarter was $777 million. Finally, moving to our guidance on Page 23. As Tim mentioned, we are reaffirming the guidance we gave during our fourth quarter 2012 earnings call for all items except adjusted earnings per share. Our increased adjusted EPS primarily reflects lower expected tax expense for the full year, as well as a slight reduction to full year depreciation and amortization. We now project adjusted EPS to range from $4.04 to $5.52 per share. As we have already discussed, our 2013 adjusted earnings per share by quarter may vary significantly driven by the impact of certain tax proceedings outside the U.S. The impact of these proceedings will result in uneven tax expense throughout the year and could result in further revisions to our EPS guidance. Now let me turn it back to Scott to start the Q&A.

Thank you, Jeff. Montserrat, I see we've already got 5 people who have jumped in, eager to ask questions. Let's poll the audience for others.

[Operator Instructions] Your first question comes from the line of Colin Langan with UBS.

Any color on the latest status of the Interior sale? Is that progressing well? Do you think you'll be able to get that done by the end of the year?

As you know, when we get to the M&A side of the story, we typically do not get public about that until there's something to announce. Obviously, I think the fundamental position on Interiors was stated on our strategic template for 2013, which was to divest Interiors. And I think that is -- you can assume that, that's our work plan. And when there's something to announce, we will.

Okay. And any thoughts -- I mean, you highlighted pretty clearly in the presentation the very big disconnect between Halla share price and your price. Any thoughts of what might be driving that? I mean, it does seem very unusual.

It is and it isn't. I mean, I kind of chuckled the other day. I noticed 2 events. One was that they talked about Chinese vehicle sales, which impact not only YFV but Halla quite significantly. We're up 17% and our stock never moved. And then there was 165,000 new jobs in the United States. The whole market went up, including us. For that, we still, I think -- and part of our message, and you've heard this from me in the past, is that there still is a U.S.-centric view of the auto stocks, and that's 9% or so of our revenue base in absolute sense. So I don't know if yet we've convinced or connected or communicated effectively enough about the non-U.S. portion of our business and how important that is and how that's a growth and driving story. I think it's a part of the maturation of the investment base and it's part of the maturation of probably the investment cycle here in the U.S. to be more Asian-focused. It's going to take some time. And all we can do here is highlight that and make sure every time we talk that people understand the underlying value components of this stock and this company. We are an Asian story. We will be an Asian story. And we are more driven by the expansion and growth of Asia than we are whether there was 160,000 jobs created 1 month or not in the United States. But at this point, we're still -- our stock is being driven more by the latter than the former. We will continue to communicate. We will continue to tell that story. And hopefully at some point, they start to connect.

Okay. And what about looking at the opportunity to cut SG&A? It sounds like a lot of actions were actually taken in the first quarter. How much more is there to go? Or are we going to see it now kind of run the year now that the actions are taken?

When you get back to -- and I'll turn this over to Jeff for color. But when you go back, we did lay out a template back, I think, at the Deutsche conference in January 15 of a kind of a footprint of where we're going to take SG&A. You saw that I think SG&A was down, I think, 50 basis points quarter-to-quarter, year-over-year. As we grow, we obviously pick up some SG&A, but we still have a target and a game plan to deliver on that. And Jeff, you want to expand upon that?

Yes. I'd say in total there's more room for us definitely to decrease our SG&A base globally. I'd say over the coming quarters, there will be a little bit of noise as we look at SG&A as a percentage of sales and in total as we look to make Halla more independent and absorb the extra facilities they have and take away some of the admin we probably have in other regions of the world. But I'd say the Deutsche Bank presentation and the road map we created for SG&A on that page is still probably the best document we have to give you insight for our intentions.

We see -- just to finish. We see no reason why we still can't continue down that path. The growth is good and the growth brings with it some SG&A, just by definition. But our game plan is still in place. And you saw some actions there in the first quarter. Those actions are not just at the working level but up through all the way through the corporation. I think the fact that since December 31 we have reduced the corporate officer account by 30% is a statement of our desire to address all aspects of that cost base and we are continuing to do so.

And in the Electronics book, you mentioned that it was impacted by the allocation of some overhead that was formally in Climate. So is that, that you're getting a better understanding of where the costs actually reside? Or is that still trying to allocate between the buckets, where those SG&A costs...

Yes. And Colin, that's our major opportunity and sort of short-term obstacle as well. But we have a large pool of corporate overhead that as we have discussed in the past existed to support a much larger Visteon. Historically, all of that overhead was allocated to every business, including historically, we allocated quite a bit of it to Halla, even though Halla never paid for a lot of those expenses. What we have done now is we just allocate to Halla what they actually pay for and what we have agreed documents with Halla to pay for, for services provided. And although we've cut the pool, there's just more that has to be allocated to both Interiors and to Electronics right now. We've left a small residual in corporate, but we think that there's quite a bit more opportunity to continue to reduce that overhead burden over time. But some of that will take a little bit of time.

From a business unit perspective, Colin, and again I think Jeff mentioned earlier, as you create a standalone-capable Halla Visteon, it picks up some of this infrastructure cost before it is reduced at corporate level. There's some noise quarter-to-quarter. But ultimately, it's a very simple mathematical exercise. They pay for it and it's here, or they don't pay for and it's gone. And there will be a very small, very focused corporate group left necessary to manage these businesses. But the product lines have to carry it. And as you go quarter-to-quarter, there's some noise as we continue the process of cleanup. But it's clearly in line with our objectives. And I don't see any -- or any reason why that the goals, as we said, that we outlined in the Deutsche conference can't be met.

Your next question comes from the line of Ryan Brinkman with JPMorgan. Ryan Brinkman - JP Morgan Chase & Co, Research Division: All right, okay. So my first question just simply relates to the decision to only reaffirm full year guidance. So 12 of the 14 auto parts companies that we cover and that have reported 1Q earnings thus far have beaten. But only 3 of them flowed through that beat to the full year. So it's certainly understandable not to raise guidance, whether it's just because it's only 1 quarter under the belt or there's a lot of macro uncertainty out there. But given the magnitude of your 1Q beat, I think some investors might wonder why you didn't flow at least some through. So it might be helpful if you could just provide a little bit of color there, whether the decision is some sort of reflection of pulling earnings ahead or significantly different than expected earnings cadence relative to Street, or is instead just simply related to conservatism.

Again thank you for the comments, Ryan. And let me say this that 1 quarter is -- does not make a year. And I think all of us here looking at the dynamics of the macro environment, not specifically Visteon itself but looking at Europe and looking at Asia and everything else, have said look, we're very pleased with our first quarter. We're very happy with that first quarter. It was much stronger than we expected. Let's sort of just take a deep breath. Let's see how the second quarter progresses. And then we'll go forward. We do have and did establish, I think, a fairly broad range of performance targets for the year. And so therefore, there was -- it wasn't exactly a specific target. We did have a broader range, and I think we're comfortable with that range at this point. But I would suspect that at the end of second quarter, that will be a good time for us to go back and reassess our guidance and clearly we'll do so. But I just think it's part of the scar tissue of history and time is not to go jump around every quarter and move guidance. Let's just sort of get another 3 months under our belt, then we'll go back and take a look at it. Ryan Brinkman - JP Morgan Chase & Co, Research Division: Okay. That's great. That's actually really helpful, what I was looking for. Next question is just you repurchased way more stock than we'd expected during the quarter, really almost half of your authorization. So should the faster pace be interpreted as potentially hinting at any potential increase to the authorization? What are the latest terms? And what's the latest thinking in terms of the timing of remaining purchases and whether you might in fact maybe be wanting to do some more beyond that?

Jeff?

Yes, I mean, I thought we saw there was an opportunity in Q1. We felt that as we had put out some fairly strong guidance at the beginning of the year, we thought the time was right to jump on, I'd say, a larger share repurchase during the quarter. And we were happy that it executed well. Right now, I'd say our plans haven't changed. We still have a fairly large sizable authorization of another $125 million. We have quite a bit of time to do it, but we'll continue to be opportunistic as we look at it going forward. Ryan Brinkman - JP Morgan Chase & Co, Research Division: Okay. Great. And then just maybe a final question. To follow up on the earlier question about that dichotomy between the trend in HVCC and VC share price, you mentioned that communication and investor education is sort of currently the primary tack that you're taking. But are there any other potential actions, other potential levers that are within your control that you think might also be helpful? So for example, a potential Hong Kong listing, which is, I think, maybe had been bandied about from time to time. Is there any thought that something along those lines could potentially accelerate the appreciation, not just for Halla but for your other significant Asian assets as well? Any updated thoughts there?

I guess, I will stick with the comment that I've made, I think, here consistently, and that is we will pursue all options to optimize shareholder value. And that includes where we list, how we list, all aspects should be on the table because there's no reason in the world that our shareholders should carry a penalty because of perhaps where they list. I think the issue here is we focus first on education, we focus first on communication. But I don't want to take any cards off the table at this point.

[Operator Instructions] Your next question comes from the line of Brian Johnson with Barclays.

I want to focus, as opposed to just generally praising your business, on the Climate business. So stipulate that everything everyone else said, I just said. But in particular in Climate, those of us who were out in Korea saw a very impressive factory there. And I'm wondering this year-over-year margin improvement. How much is just from the volumes coming in off of your customers? And how much of it is from the early days of applying the Lean Manufacturing disciplines we saw in Korea to some of the Visteon factories that have now come under Halla management control?

Brian, a very good question. I would say very little of that is reflected in the quarter. But the plans -- a lot of the quarter was getting that transaction done and the teams integrated. And that's gone exceedingly well. And I'd say they've also put together very nice plans to go and address a lot of opportunities to bring up the margin, especially at, we'll say, the new plants that they just bought from Visteon. A lot of those plans are really under way and start to bear a little bit of fruit in the second quarter but really will start to pick up pace farther into the year.

Okay. And any kind of internal goals or goals you can share with us on [indiscernible] beyond the original synergies?

Yes. Brian, we provided some guidance back on the original strategy, I think, of 100 to 150 basis points of margin improvement. And I think that's still our goal. And I think it's still realistic as we look at it today.

Okay. But as I recall, was that a lot from -- how much of that 100, 150 was SG&A and redundancies versus actual Lean Manufacturing improvements?

I think we said gross margin, so no SG&A in that number.

Okay. And second, you kind of had a comment buried down there on Electronics and kind of taking into account the cockpit electronics businesses. Does that indicate any kind of shift in your thinking on Electronics from maybe being a seller to a potential consolidator? Or is that just kind of noting what you said all along that this is an industry that could consolidate?

I think there's no change in our strategic direction here. We see Electronics as being currently suboptimal in size. And that does not imply that a sell is imminent or anything else. But at this point that there's some strategic options we should probably pursue. As with all businesses here, there are both tactical and strategic needs. And in the case of cockpit electronics, it is one of the hottest areas of the automotive business. We've got a very interesting and dynamic position there and a very strong intellectual property position there. So I would suspect that over time, you'll start hearing more strategic discussion around options that we have there. But at this point, the focus on the first quarter, it was focusing some manufacturing in Europe. We need some floor space in our Climate operations. And they used to jointly produce in a single site. And we just need to focus and expand our footprint in Europe. And this is part of some relocation of manufacturing there, which will be a bit of a drag also in the second quarter but should probably be done by the end of -- by the third quarter.

Okay. And just one last question on cockpit electronics. Is there any way you could dimension for us or maybe name some customer or type of platforms if you have them, where you're doing reconfigurable electronic dashboards as opposed to analogs? I'm just trying to figure out what your starting point, as that moves from the center screen to flat-screen dashboards.

I don't think we've announced the customer names, but we have announced that we have won some platforms in Europe. And I'll have to leave it at that because we don't announce unless a customer announces on that.

But we have good content.

But we have good content across a number of European, Japanese, Asian, North American customers, and that will be expanding going forward. I want to say that the Electronics business is a very attractive business, but it's not a business that I think that, and I want to again reinforce a statement I've made in the past, that we're not going to go leverage the Visteon balance sheet to go make a larger statement there. But we will explore other options.

Your next question comes from the line of Matthew Stover with Guggenheim.

A number of them have been addressed. But I guess, 2 detail questions, and then a follow-on to Brian's line of questioning. First, are we on target for a YFV filing here to disclose the results? Any sort of time frame for that filing?

Yes. Yes and yes. I think yes, we're on target and we have plans. And I think that timing is end of second quarter, so end of June.

Okay. On the raw materials side, was there any impact in, I guess, I'd think about the Electronics business, but any of the businesses year-to-year?

Not beyond noise level, nothing of significance.

[indiscernible] well, I'd say, in the quarter.

Okay. And then if I -- so since last quarter, I guess, just to follow on Brian's question, JCI has announced a decision to sell their electronics business, given that business is going to require, from their perspective, a significant investment to meet the future needs of customers' plans. So what do you think about that observation? And what does it imply to your sort of investment plans and kind of the slope of the investment plans to ensure that your asset maintains its relative competitive positioning?

It's a good question. We are obviously aware of the JCI announcement. Each of us in this business brings a different footprint of assets. And each of those have a different CapEx engineering mix. Our particular mix of product is more software-intensive than hardware-intensive. Our CapEx is in the 2% to 2.5% range. So when it comes to investment, we're talking about software investment, engineering investment, not capital investment. And as I've said in the past, we've got a business here that is generating, can generate 8%, 9% EBITDA margins with a 2% CapEx -- 2%, 2.5% CapEx at a 12% to 14% growth rate. That's a story that we like and we know we're competitive in and the marketplaces tell us we're very competitive, given our business awards. So we have a different footprint and a different opportunity set perhaps than JCI. They have one different than us. And everyone's got a different footprint. We're happy with what we have, except for its scale. And again, as I said, I've made a commitment that we're not going to leverage the Visteon balance sheet to solve or expand that business. But there are other ways to go get there, to increase value. We're looking at all options to increase the value. But we're very, very pleased with the reaction that business has and the competitiveness it has, given our investment footprint and engineering expense.

I appreciate that thoughtful answer, Tim. When I think about the Electronics business, I guess, RD&E would be for me, to your point, sort of the big piece of the investment. And if there's -- from their perspective, it's a little bit nebulous, the commentary they're making. But there's a big change here in this business that would require a significant uptick in RD&E. Do you see that for your personal -- your own business as you think about kind of planning out the next 1 to 3 years?

Well, remember, we're spending 12% of sales on RD&E with about 25% of that paid by the customer and reimbursed. So that's, that dynamic that you see that Jeff mentioned earlier that quarter-by-quarter, there's a lot of noise level of when those payments are received. And we don't see a need to go spend more than that. I think that's fine. Again remember, a lot of our engineering footprint is in India and other locations, it's not in the United States.

[Operator Instructions] Your next question comes from the line of Kirk Ludtke with CRT Capital Group.

Just a couple of follow-ups. On the currency, I guess, it was a positive in the quarter. I'm on Slide 16. But you mentioned, Jeff, that you had some hedges that mitigated some of the moves there. And I'm just curious if the won stayed where it is now and based on what you've already have in place, would this be a significant part of the bridge for the full year?

I don't think it'll move too much, and I don't have -- where are we, KRW 1,091? Is that the current rate? Yes, we have a fair amount hedged for the year, Kirk. So such that from a transactional standpoint, it might move margin around a little bit, but it shouldn't move our nominal EBITDA around too much.

Okay. Great. And then with respect to the guidance on Slide 23, I guess, the adjusted free cash flow guidance excludes restructuring and transaction-related cash, and I see the restructuring payments down below. What are the -- what amount of transaction-related cash has been excluded?

It's on the bridge. I don't know if I have the number in my head. But I think if you look at the bridge in the appendices, you'll see it.

Okay. It's back there. Okay. And then the EBITDA guidance, is there any way that you -- I know you don't disclose the equity income and the minority interest that are embedded in that. But is there any kind of directional guidance you can give us from where we are?

Can you repeat that question again? I'm sorry, I was looking through to find your first question.

Sorry, the adjusted EBITDA guidance includes, as you know, equity interest and minority interest. And I know you don't disclose those pieces of the adjusted EBITDA guidance. But I'm just curious if you could talk a little bit about direction.

I think we've given you a couple of pieces that I can help guide you to, Kirk. There's one -- there's a bridge in one of the appendices where we gave you an estimate of our expected increase in NCI year-over-year. And then I think at the Deutsche Bank conference, we said YFV was going to be up but only slightly this year in PAT primarily because of the launch expenses associated with the $1 billion or so revenue that they're launching here. So I think you can probably piece those things together to back out those from our guidance.

Montserrat, this is Scott. I think I'll jump in and thank all of the participants, and thank you and your team for managing the call so nicely. With that, I'll turn it over to Tim for final thoughts.

Thank you, Scott. And again I want to thank all of you for your interest and support here at Visteon. I will say this, we're on a journey here. We have both a litany of tactical and strategic requirements that we are continuing to address as we go forward. We're at a stage where I will sit back and say I'm pleased with the team and the performance to date and Q1 was a solid quarter, but we're by no means done. And so we look forward to seeing you. I know we're going to be doing a tour here a bit, and we'll continue to have that open dialogue with you going forward. But we look forward to a good year and a good Q2. And we look forward to seeing you again. So thank you very much.

Thank you, everyone.

Ladies and gentlemen, with this, we conclude today's presentation. We thank you for joining. You may now disconnect.