Good day, ladies and gentlemen and welcome to the First Quarter 2010 ArvinMeritor Incorporated Earnings conference call. My name is Marisol; I'll be your operator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions). I would now like to turn the presentation over to Mr. Brett Penzkofer, Senior Director, Investor Relations. Please proceed, sir.

Thank you, Marisol. Good morning, everyone and welcome to the ArvinMeritor first quarter 2010 earnings call. On the call today we have Chip McClure, our Chairman, CEO, and President; and Jay Craig, our CFO. The slides accompanying today's call are available at www.arvinmeritor.com. We'll refer to the slides in our discussion this morning. The content of this conference call, which we are recording, is the property of ArvinMeritor Incorporated. It's protected by U.S. and international copyright law and may not be rebroadcast without the express written consent of ArvinMeritor. We consider your continued participation to be your consent to our recording. Our discussion may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Let me refer you to slide two for a more complete disclosure of the risks that could affect our results. To the extent we refer to any non-GAAP measures in our call, you will find the reconciliation to GAAP in the slides on our website. Now, I'd like to turn the call over to Chip.

Thank you, Brett and good morning, everyone. Last year, we worked incredibly hard to position ArvinMeritor to emerge from the downturn a stronger company, supporting the global commercial vehicle and industrial markets. We are pleased to report that we were able to maintain our forward momentum throughout the first quarter of 2010. I do want to say how proud we are of the ArvinMeritor global team who is responsible for delivering the good news we are announcing today. It was through their dedicated efforts to deliver on our promises that we were able to achieve better-than-expected results including stronger EBITDA, breakeven earnings per share, and positive free cash flow this quarter. We believe our positive results are a direct outcome of the very aggressive business improvement initiatives we implemented last year including our laser focus on expense management and streamlining our business with the goal of driving profitable growth. While we recognize the challenges that continue to persist, we believe we are well positioned in our markets around the world to perform well going forward. Now, let's turn to slide three to review some of the highlights of our first quarter. Our total sales for the quarter were up approximately 16% quarter-over-quarter. We believe that this increase in sales is a strong indication that the worst is behind us. In the first quarter, EBITDA before special items was $56 million, up 40% quarter-over-quarter. We reported breakeven earnings per share from continuing operations before special items. This compares to a loss of $0.65 per share in the same period last year. In addition, we reported free cash flow that was significantly higher year-over-year and we converted our incremental revenue slightly in excess of 20%. We also continue to invest in growing our industrial segment and expanding our position in emerging markets…

Thanks Chip. Before I begin a detailed review of the charts, I'd like to mention that our financial statements now reflect the adoption of new accounting standards for the presentation of minority interest, as well as the treatment of convertible debt, which has resulted in restated historical results. Starting on slide 12, which compares our fiscal first quarter results from continuing operations to the guidance we had previously given you for the quarter, as well as the fiscal fourth quarter results. In nearly every category, we achieved or exceeded our previous guidance. EBITDA before special items increased 40% sequentially to $56 million on 16% of additional revenue. Free cash flow was a positive $2 million, a significant improvement from first quarter results in previous years and is a testament to our continued discipline in managing working capital performance. Free cash flow before factoring in restructuring was more negative than expected due to sequential sales increases requiring investments in working capital in all of our global markets. However, due to our continued focus on working capital management, this investment was able to be almost entirely offset by our sale of receivable programs in Europe. In addition, due to the cutoff of customer payments over the holiday period, certain customer payments were not received until after quarter-end. Overall, we are encouraged by the consistency of our ability to convert earnings to cash, driven by our team's continued focus on improving asset utilization. Slide 13 is our income statement from continuing operations before special items for the first quarter. Earnings per share from continuing operations before special items was breakeven as compared to a $0.65 loss for the same period last year on 6% lower sales. This dramatic improvement in earnings performance is due entirely to the success of our cost-cutting efforts including…

Thanks, Jay. Before we open the call to your questions, I'd like to just reiterate that we are encouraged by our continued progress. Our accomplishments in the first quarter underscore the strength of our core business and demonstrate that the initiatives we've implemented are working. We are committed to completing the transformation of our company into one that is focused on the commercial vehicle and industrial markets. We made significant progress in 2009 and we will maintain our efforts in the years ahead. As we execute our strategy and implement our operational initiatives, we remain committed to our rigorous cost management initiatives so we can continue to realize improved operating leverage. We will remain focused on our strategy to drive innovation by accelerating our development of new products and advanced fuel-efficient technologies, maintain our focus on sustainable profitable growth and continue to strengthen the balance sheet. As the global markets recover and we can leverage the strength of our worldwide operations, we are confident that we will deliver and grow our business. Thank you. Now, let's turn it over for questions. Operator?

Thank you. (Operator Instructions). And standby for the first question. And our first question comes from the line of Himanshu Patel from J.P. Morgan. Please proceed. Himanshu Patel – J.P. Morgan: Hi, good morning guys.

Good morning, Himanshu. Himanshu Patel – J.P. Morgan: A couple of questions. On the temporary cost add-backs of $19 million for Q1, can you just help us think through for the next few quarters? Would there be any additional such add-backs that we should be thinking about?

Well, I think as we – Himanshu, this is Jay. Good morning. I think as we guided in December, we expected – I think was $52 million annually of those add-backs. So certainly, we do expect additional add-backs as the quarters go on. It's still within that range. Remember that the $52 million that we disclosed in December was a number directed towards guidance for just our core operations and included in the amount for the quarter is also some of the add-backs of pay and variable compensation for the light vehicle operations as well. Himanshu Patel – J.P. Morgan: And so the remaining $33 million or so, that should be spread over maybe throughout the next three quarters or so, Jay?

It should, but again, the $52 million was just for the CVS operations. So that net difference of $33 million maybe a bit larger, because we do have some light vehicle restoration of pay cuts and variable compensation that we expect for the remainder of the year up until the point that we get to the disposal of that business. Himanshu Patel – J.P. Morgan: Okay. And then can we talk a little bit about LVS? It looks like the business has turned a corner, back into the block at still relatively low volumes. Just any kind of updates on how easy it would be to potentially divest this business now? Could there still be exit costs associated with it that we should be thinking about or maybe now that it's not losing money maybe the sale is a little bit easier in terms of dollar cost involved for you guys?

Well, Himanshu, let me start – this is Chip. Let me first of all start by saying, yes, there is no question that we have really focused on that and actually going back to the better part of the year to make sure we can improve the cost performance on that and I see – I think you are seeing that reflected in the first quarter results on that. I'll also tell you there is a significant level of interest in body systems business by a lot of global players. So that is still clearly out there that way. And we are still committed to that process of moving forward with that. So yes, I think it is. As we look at that – and I guess the third thing as we should also say, there is some volume increase we have seen in some areas. And fourthly, as I kind of indicated in my comment, is there are some new program wins that our body team has done, all of which I think adds to the overall enterprise value of the business. So as we look at, bottom line, a lot of interest out there from a lot of global players and clearly, our focus is to go through this process through 2010 to make sure we get the best outcome for our shareholders, customers, employees, but we do feel good about the process going forward. Himanshu Patel – J.P. Morgan: And so is it your view that the sale could still happen sometime this fiscal year?

That is our target at this point, to continue moving forward with that. Yes. Himanshu Patel – J.P. Morgan: Okay, great. And then one last question. Just any updates on sort of balance sheet thoughts, whether it's in terms of an equity raise or a convert or whatever? Where are you guys thinking about capital structure in light of what's going on with end markets, any development since the Analyst Day on that?

I think we are – our thinking is still very consistent with where we were at the Analyst Day, which is our near-term focus is working on the renewal of the revolving credit facility, which we know will involve looking at our 2012 bonds applications and our need to refinance at least a portion of those. Himanshu Patel – J.P. Morgan: Okay, great. Thank you.

And our next question comes from the line of Patrick Archambault from Goldman Sachs. Please proceed. Patrick Archambault – Goldman Sachs: Hi, good morning.

Good morning, Patrick. Patrick Archambault – Goldman Sachs: Can you just give us a little bit of an overview in terms of how you see the order book shaping up both in Europe and North America? I understand in North America there was a bit of a pre-buy and maybe a little bit softer in the interim, but Europe also – may also be getting better on the margin. Can you just give us your thoughts on those two regions?

Sure. As you look at it, we are seeing it – I think in reverse order, we are seeing some incremental increase in Europe and obviously, I think that is from the very deep bottom that they were at this past summer. So we are seeing a sequential increase in Europe. Here in North America, as I look at that, really it's kind of our order board, if you will, is booked out through the end of this quarter and into early next quarter with a lot of the 2009 engines that are now being put into vehicles. So we do see that through this quarter and into the beginning of next quarter with some improving strength of orders out into the May-June time frame. And then looking longer term, we are starting to see some 2010-compliant truck build orders being placed, but still it's very early on that. So as we see it the next several months, we do see a strong order board for the engines that were built in 2009 and we, like others, continue to see what takes place in the second half of the year as it relates to 2010 compliant engines. Patrick Archambault – Goldman Sachs: And what are the trends in China? Obviously, there has been a little bit of trepidation about potential softening there on the back of monetary policy actions. Has that affected your businesses at all?

We are still 24/7 there. If I look at our China business in particular, it is primarily off-highway and so as you look at the infrastructure build, which about half the stimulus funds are targeted for that, that continues very strong in that way. And as I kind of indicated in my comment, we have actually made some additional increment investment with our partner there to do that. So we actually see that, because of the businesses we are in, continuing very strong even currently and kind of going forward. Patrick Archambault – Goldman Sachs: Great. And I guess last question. In terms of working capital, should we – is the way to think about it sort of modeling working capital sort of increase in line with what you see in this quarter as sales continue to ramp up. But then something that I guess would be fully offset with your factoring facilities, just a little – if you could give us a little bit more guidance on how to think of that?

Sure. Yes – good morning, Patrick. This is Jay. Couple points to make note of there is, one, our working capital metrics are staying relatively constant. So I think you are going to look at changes in revenue and then the consistency of our working capital metrics with some improvement in inventory turns. But as far as the ability, if there was rapid increases in revenues, to offset that with off-balance sheet factoring, it depends on the mix of that revenue growth. If it's – if it predominantly comes from Europe where those programs exist for us, it would be offset by the off-balance sheet factoring programs. If it come – if the growth is more heavily weighted towards North America, that would have less of a benefit for us. Patrick Archambault – Goldman Sachs: Okay, great. Thank you very much.

And our next question comes from the line of Brian Johnson for Barclays Capital. Please proceed. Brian Johnson – Barclays Capital: Good morning. A couple of questions. First, your sales and EPS and EBITDA, you are guiding flat sequentially, but it seems that you are looking at increased sequential production, at least on the commercial vehicle side. Is that right? I mean, what are – A, what are the production assumptions behind your second quarter guidance; and two, if it's – if production is going up, what's keeping EBITDA flat?

I think on the production assumption side, we are not providing production assumptions into the – into our second fiscal quarter. We – part of it is also, Brian, that on the light vehicle side, which is included in our guidance. We are seeing some of the runoff of the European stimulus programs, particularly the one in Germany just ended and then France is scheduled to end shortly. And our light vehicle business body systems, the lion's share of its business is directed towards the European market. So we do expect some small decline there that maybe offset by some continued growth on the commercial vehicle side. But we are seeing – on the commercial vehicle side for example, we are expecting North American demand to be roughly flat quarter-over-quarter. Brian Johnson – Barclays Capital: Okay. And second, any update on your litigation over transmissions with Eaton Corporation?

Well, as you know, just to kind of give you a background of that, that – the trail was bifurcated in two phases, the liability phase and the damages phase. And as you know, the courts did rule in our favor on the liability phase. So we are – and at this point, Eaton has stated kind of publicly they plan to appeal the decision. So at this point, we are kind of moving along with the court on that as they move towards the damages phase. But at this point, there is no other update than what we provided the last time and obviously, at the same time, we do recognize that Eaton has stated their public intention to appeal the process. So we are somewhat just in the process with the court right now. Brian Johnson – Barclays Capital: Can they appeal it with before the damages – before the damages phase and is there a date for the damages phase?

I don't know if there has been a date set at this point, Brian. And obviously, the rest of that kind of have to defer to the court and that's why we really deferred to the court as to the process for that. So no date has been set at this point. Brian Johnson – Barclays Capital: Okay, thanks.

And our next question comes from the line of Brett Hoselton from KeyBanc. Please proceed. Brett Hoselton – KeyBanc: Thank you very much. Chip, Jay.

Good morning, Brett.

Good morning. Brett Hoselton – KeyBanc: Good morning. Commodity costs, any sense of what your expectations are for commodities in fiscal year upcoming?

Brett, we are seeing just a slight increase in commodity costs, nothing that is overly concerning to us. But again, on our – remember, if you recall on our commercial vehicle business, we do have what we believe are very effective pass-through mechanisms that do have some lags associated with them, but had worked quite effectively as those costs have increased in the past. But right now, we are expecting fairly insignificant commodity cost increases. Brett Hoselton – KeyBanc: Okay. And then as you ponder potential equity offering, what are some of the chief factors that you are thinking about? And then as far as timing is concerned, where is your – where are your thoughts in terms of timing? And I guess specifically, I think one of the key issues that you mentioned earlier before was refinancing some of your debt and so forth. But can you talk a little bit about some of the chief factors you are considering and the timing?

Well, thanks for the easy question, Brett, on pondering. But the – I think as we look at our long-term goal of being to BB credit metric, we look at all of our planning assumptions within that timing horizon and try to ascertain if we will generate internally the liquidity required to meet those goals. And we take that input into consideration in looking at any capital market activities we are considering making in the future and look at that in its entirety. So that's kind of where we are in the process right now. Brett Hoselton – KeyBanc: Okay. And as far as – I know that you had a goal of refinancing your – I think your revolver by this June, if I'm not mistaken. Where are we at in that process? Are you – have you begun discussions at this point in time or are you in the middle of discussions, are you finishing discussions or is this something – I mean, where are you at in that process?

We are still feeling that we – you are correct in restating that our goal is by this summer of this year to hopefully have completed that process. And we are still feeling comfortable that that is an achievable goal at this time. Brett Hoselton – KeyBanc: Okay, okay. Well, thank you very much, gentlemen.

Our next question comes from the line of Eric Selle from J.P. Morgan. Please proceed. Eric Selle – J.P. Morgan: Hey, good morning. I've been on and off the call because there is a lot of stuff going on. So I apologize if I'm repeating anything. But can you guys give us the cash cost that you guys anticipate to shutting or selling the remaining LVS business?

I think we – again, we have put previously some disclosures in the 10-K that were written in the context of looking at the rest of the company. But we are – I would say we are encouraged with the recent performance, but we should recall that the body systems business, which is the bulk of the remaining light vehicle business, does reside a portion of it in Western Europe. So as we are looking at alternatives there, there could be some required restructuring cost to just contract some of that production capability there. But we are working to minimize any of those obligations and again feel encouraged by recent performance. Eric Selle – J.P. Morgan: And then on that regard, is the cash restructuring – did you guys give any guidance for cash restructuring for this year?

Yes, we have guidance on the cash – cash piece of the restructuring and I think it is $25 million we are expecting in cash restructuring. The amount incurred in the first quarter was $5 million. Eric Selle – J.P. Morgan: Okay. And then Cummins came out and said the first half 2010 orders are down 80% versus the second half in '09. Is this in line with your outlook?

Yes, this is Chip. And as I look at that, what they are really talking about, I believe, is 2010-built engines. As I indicated, we are still seeing a good order book kind of going forward for the next several months because it really is being built with 2009 engines. So ours is a little different that way. We do see some uncertainty till we get to the second half of the year as it relates to 2010 engines. But as you look at the next quarter or quarter-and-a-half for us, if you will, our third fiscal quarter, because of the inventory of 2009 engines, we do see a strong order book there, but then we – like I commented and kind of saying we then have to look at the second half of the year for the ramp-up in the 2010 engines. So it's just a little different where they are in the supply chain and they are kind of upfront with engine supply and we are more down towards the end of the finished trucks. So it's the difference in timing. Eric Selle – J.P. Morgan: Okay, great. And then finally, just the amount outstanding on your AR securitization and factoring programs?

Right now, I believe, what is – what's outstanding at the end of the quarter on the off-balance sheet line [ph] was $147 million as of the end of December. And that was an increase of $54 million from the previous quarter-end. Eric Selle – J.P. Morgan: Okay. Thanks a lot for your time.

And our next question is a follow-up from the line of Brett Hoselton from KeyBanc. Please proceed. Brett Hoselton – KeyBanc: Good morning, gentlemen.

Hi, Brett. Brett Hoselton – KeyBanc: Just a quick question. LVS, cash flow, EBITDA is up – I think you said last quarter, cash flow in the LVS is kind of roughly breakeven. I'm wondering still breakeven up a little bit.

I think it's a still around breakeven. I mean, it's consistent with the overall results for the company. Brett Hoselton – KeyBanc: Okay. Very good. Thank you very much, gentlemen.

Thank you.

And our next question is from the line of Derrick Wenger from Jefferies & Co. Please proceed. Derrick Wenger – Jefferies & Co.: Yes, thank you. A four-part question. You had mentioned the cash restructuring charges. How about the accrual restructuring charges for fiscal year '09 to '10? Those were $2 million in the first quarter. Second question is the SG&A ticked up to about 7.4% in the first quarter. Is this a level that we can kind of use going forward, the increase in SG&A as a percentage of revenues? And then there is two other follow-ups. I guess you have $61 million of letter of credits against this $666 million line, I just wanted to confirm that. And then what were revenues from continuing ops in the first quarter?

Okay, I'll try to – just making a note of the questions here. First question on the accrual for restructuring, you are correct; we had $2 million in the first quarter. We have not disclosed guidance on that, but I think we – I would say we expect that the run rate on that maybe a bit higher as we go on in the year. The – as far as the percentage of SG&A, certainly the step-up to 7.4% from 6.7% in Q4 was entirely due to the temporary cost reductions that were reinstated in the first quarter, primarily the pay reinstatement and some variable compensation accruals. I don't think as a percentage, you should necessarily hold that constant in the future because some of that cost is fixed at this point in time going forward. As far as letters of credit, our letters of credit at 12/31 were actually $26 million against our line of credits – line of credit. And then I think your last question was, if I recall correctly, revenues from continuing operations. Derrick Wenger – Jefferies & Co.: Yes.

We – right now, that is $1.146 billion and recall that our light vehicle, the body business, is still included in continuing operations. Derrick Wenger – Jefferies & Co.: Okay. And just a follow-up on that letter of credit. Isn't your line $666 million because I thought I saw on the release that you have $605 million available?

The line is – the availability was $605 million and the – again, the letters of credit were $26 million. Derrick Wenger – Jefferies & Co.: Okay. So total availability of your $666 million –

I'm sorry, I misunderstood your question for a moment. The borrowings under the revolver were $35 million at the end of the year. Derrick Wenger – Jefferies & Co.: Okay. Thank you.

You are welcome.

This concludes the question-and-answer session for today's program. And I'd like to turn the call over to management for any closing remarks.

Yes, this is Chip McClure again. I just want to thank everybody for their time, their questions, and their attention and support. And we look forward to talking to you in the near future. I wish you all a good day. Thank you very much.

Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.