Louis B. Tonelli - Magna International, Inc. Donald J. Walker - Magna International, Inc. Vincent J. Galifi - Magna International, Inc..

Rod Lache - Deutsche Bank Securities, Inc. Mark Neville - Scotia Capital, Inc. Ryan Brinkman - JPMorgan Securities LLC David Tyerman - Cormark Securities, Inc. Peter Sklar - BMO Capital Markets (Canada) John J. Murphy - Bank of America Merrill Lynch Michael Glen - Macquarie Research Ron J.

Jewsikow - Wells Fargo Securities LLC Itay Michaeli - Citigroup Global Markets, Inc. Brian Morrison - TD Securities, Inc. Todd Coupland - CIBC World Markets, Inc. David Tamberrino - Goldman Sachs & Co. Colin Michael Langan - UBS Securities LLC Richard Hilgert - Morningstar, Inc. (Research) Matthew Stover - Susquehanna Financial Group LLLP.

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter and Year End 2016 Results Conference Call. During today's presentation, all participants will be in listen-only mode. And afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded Today, Friday, February 24, 2017.

And I would now like to turn the conference over to Louis Tonelli, VP-Investor Relations. Please go ahead, sir..

Thanks, Amanda. Good morning, everyone, and welcome to our fourth quarter and year end 2016 conference call. Joining me today are Don Walker, CEO; and Vince Galifi, CFO. Yesterday, our Board of Directors met and approved our financial results for the fourth quarter and year ended December 31, 2016. We issued a press release this morning for the quarter.

You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review, all in the Investor Relations section of our website at www.magna.com.

Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation.

Such statements involve certain risks, assumptions, and uncertainties which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our Safe Harbor disclaimer.

As we review financial information today, please note that operating results for the interiors operations that we sold in 2015 are presented as discontinued operations, and this review of results will address continuing operations only. Please also note that all figures discussed today are in U.S. dollars unless otherwise noted.

In the Appendix to our slide package accompanying the call today, we include a reconciliation of certain key financial statement lines between reported results and results excluding unusual items. Our quarterly earnings discussion today excludes the impact of these unusual items.

In the fourth quarter of 2016, we recorded restructuring charges related to our European powertrain facility. This reduced operating income and net income attributable to Magna each by $17 million and EPS by $0.05. In addition, during the fourth quarter of 2016, we recognized the $13 million non-cash charge related to a pension settlement.

This reduced operating income by $13 million, net income attributable to Magna by $9 million and EPS by $0.02. Note that this settlement will reduce pension expense for Magna going forward and reduces our unfunded pension liability.

In the fourth quarter of 2015, we recorded restructuring charges related to our European exteriors and roof systems businesses. These reduced operating income and net income attributable to Magna by $15 million each and EPS by $0.03. And now, I'll pass the call over to Don..

Thanks, Louis. Good morning, everyone. Some of the highlights we'll cover off today include our record Q4 and full-year 2016 results, and Vince will review our fourth quarter details.

Our continued strong organic growth in 2016, strong cash generation from operations in 2016, integration of Getrag, Magna Steyr's preparation for significant launches over the new few years, and a 10% increase in our dividend on a quarterly basis going forward.

2016 was a great year for Magna, we posted record in sales, EBITDA, EBIT, pre-tax, net income, earnings per share and cash from operations among others. Through 2016, we highlighted the consistent outperformance of our sales growth relative to light vehicle production. In 2016, total sales grew 13% over 2015.

Our organic sales growth, excluding net acquisitions and adjusting for movements in foreign exchange rates, was 7% in 2016. This compares to about 4% growth for global light vehicle production – sorry, global organic sales outperformed global vehicle production by about 3% in 2016.

Similarly, North American production sales grew 7% organically, excluding acquisitions and foreign exchange movements. This compares to about 1% growth for North American light vehicle production, which represents 5% outperformance compared to the market.

European production sales grew 8% organically, compared to about 2% growth for European light vehicle production. This represents 6% outperformance compared to the market. And Asian production sales grew 26% organically, compared to 6% for Asian production. This represents 20% outperformance, more than three times the growth in the Asian market.

In order to ensure continued organic growth well into the future and to meet our objective to be world-class manufacturing, we're highly focused on research and development activities and invest in innovation. This includes both internally generated projects as well as collaborative ones. We have some good examples of these recently.

We demonstrated our light-weighting expertise with an ultralight door module, a project which we cooperated with the U.S. Department of Energy, FCA and Grupo Antolin. Having re-imagined the door architecture from scratch, the team was able to come up with an ultralight design that achieves 42.5% mass savings.

And this design is applicable to 70% of the light vehicle market. Magna combined its unique full vehicle perspective on the design of the driver-side door with an innovative mix of materials and our SmartLatch technology to meet the significant weight reduction.

We also announced a collaboration with Innoviz to deliver LiDAR remote sensing solutions for the implementation of autonomous driving features and full autonomy in future vehicles. The high-definition LiDAR enables 3D remote sensing to provide highly accurate real-time images of vehicles surrounding.

We recently became a founding corporate partner in NextAI, a program to drive artificial intelligence-related ventures. We believe technologies like AI and machine learning will have a huge impact on future mobility and society at large, a scenario we want to participate in to create preeminent AI ecosystem.

And we've been recently further recognized for some of our innovations last year, Crain's Detroit Business named Magna the second most innovative company for our electronics business, making us the highest ranked auto supplier.

The annual ranking is based on patent portfolios that considers patent quality, projected ability to bring patents to market, and whether patent owners keep their patents or make them public domain. Also late last year, we won several innovation awards from the Society of Plastics Engineers.

The award in North America for unique process of laser cutting and welding front and rear fascias came on the heels of a near sweep by Magna at the SPE awards in Central Europe where we won five awards in the exteriors category.

Innovation remains a very high priority at Magna with our capabilities, culture, financial resources and motivated employees.

I know we can continue to be successful in developing and commercializing innovation, that's something our employees play a key role in, and I'm extremely proud that we were recently recognized as one the Best Places to Work in Canada by Glassdoor, a program that relies solely on the input of employees.

It's an honor to receive such a recognition; we're committed to being an employer of choice and providing a culture that fosters professional growth and equal opportunity to our employees. We have owned Getrag for just over a year now. We are making progress integrating Getrag with our Magna Powertrain organization.

Including unconsolidated sales, our Powertrain group should reach approximately $10 billion of sales by 2018. We're combining activities in innovation and engineering with a focus on powertrain electrification. We're also combining activities related to vertical integration and purchasing.

And the teams are focused on maximizing the utilization of capital in the combined organization. Many of these items will take time to bear fruit, but we are pleased with the progress to-date and excited about the strategic value Getrag brings to us. Lastly, 2017 is a very busy and important year for our Graz's assembly operation.

We're preparing for the launch of the BMW 5 Series, which begins next month. Later this year, we will launch a new JLR program, and in early 2018, we'll launch the Jaguar I-Pace battery electric vehicle. Then in 2018 and beyond, we'll launch two additional vehicle models, I'm not able to name at this point.

By 2019, we expect assembly sales to be between $6.6 billion and $7.1 billion, compared to $2.2 billion last year. So lot's going on in Graz over the next two plus years. This tremendous expected growth in assembly sales and volumes is a testament to Magna Steyr's complete vehicle expertise and the deep trust that OEMs have in Magna.

With that, I'll pass the call over to Vince..

Thanks, Don, and good morning, everyone. In 2016, we had a record year for sales, up 13% to $36.4 billion. Adjusted EBIT margin improved to 8% despite the negative impact from the acquisition of Getrag. Adjusted EPS increased 16% to a record $5.23 per share.

Cash flow from operations was a record $3.4 billion and we repurchased 22.6 million shares returning $1.3 billion to shareholders in buybacks and dividends. Next, I will review our financial results for the fourth quarter ended December 31, 2016.

In the fourth quarter, our consolidated sales increased 8% or $685 million relative to the fourth quarter of 2015, to a fourth quarter record of $9.3 billion. Reported North American production sales increased 4% in the fourth quarter to $4.9 billion, a fourth quarter record, while North American vehicle production decreased 4% to 4.4 million units.

The North American production sales increase is a result of the launch of new programs and the acquisition of Getrag, partially offset by lower production volumes on certain programs, programs that ended production and net customer price concessions.

Reported European production sales increased 20% from the comparable quarter to $2.2 billion, a fourth quarter record, while European vehicle production declined 4% to 5.3 million units. This increase was primarily the result of net acquisitions, and the launch of new programs.

These were partially offset by lower production volumes on certain existing programs, the end of production of the MINI Countryman and the Paceman at our Magna Steyr assembly facility, the weakening of foreign currencies against the U.S. dollar, including the British pound and euro, and net customer price concessions.

Asian production sales increased 40% or $190 million from the comparable quarter to $663 million, an all-time quarterly record for Asia. This was primarily as a result of the launch of new programs, primarily in China and acquisition. These were partially offset by the weakening of the Chinese RMB against the U.S.

dollar, and net customer price concessions. Rest of World production sales increased 53% or $46 million to $133 million for the fourth quarter, primarily as a result of net customer price increases subsequent to the fourth quarter of 2015, and the launch of new programs primarily in Brazil and Argentina.

Complete vehicle assembly volumes declined 70% from the comparable quarter, while assembly sales only declined 30% to $439 million.

The decline in assembly volumes and sales were largely attributable to the end of production in the fourth quarter of 2016 of the MINI Countryman and Paceman, partially offset by higher volumes of the Mercedes-Benz G-Class.

In summary, consolidated sales excluding tooling, engineering and other sales increased approximately 8% or $627 million in the fourth quarter. Tooling, engineering and other sales increased 7% or $58 million from the comparable quarter to $936 million.

As anticipated, the adjusted EBIT margin in the quarter decreased to 7.5% from 7.7% in the fourth quarter of 2015.

The adjusted EBIT margin percent was negatively impacted by operational inefficiencies at certain facilities, higher warranty costs, the end of production of the MINI Countryman and Paceman at Magna Steyr in Graz and the acquisition of Getrag.

These factors were partially offset by productivity and efficiency improvements at certain facilities, a lower amount of employee profit sharing and higher recoveries associated with scrap steel.

Interest expense increased $3 million to $20 million in the fourth quarter of 2016, largely related to the increase in debt associated with the purchase of Getrag. In Q4 2016, our effective tax rate was 22.8% compared to 22.2% in Q4 2015.

In the fourth quarter of 2016, we benefited from the finalization of purchase price accounting for Getrag and other year-end related adjustments. Diluted earnings per share from continuing operations was $1.31, a Q4 record compared to $1.22 in Q4 2015.

The increase in diluted earnings per share was a result of higher net income from continuing operations and a lower weighted average number of diluted shares outstanding for the quarter, primarily due to the repurchase and cancellation of common shares, pursuant to our normal course issuer bids.

I will now review our cash flows and investment activities. During the fourth quarter of 2016, we generated $878 million of cash from operations prior to changes in non-cash operating assets and liabilities.

We also generated an additional $840 million in non-cash operating assets and liabilities reflecting our typical Q4 recovery of working capital and partial reduction in our investment in tooling, which has been building up during 2016.

For the quarter, investment activities amounted to $934 million, including $662 million in fixed assets and $155 million increase in assets and other assets, as well as $117 million for acquisitions including BÖCO. In addition, we've repurchased 2.7 million common shares for $114 million and paid $95 million dividends in the fourth quarter.

We also announced today a 10% increase in our quarterly dividend to $0.275 per share. This increase which represents our eighth consecutive year of increases reflects the confidence of both management and our board currently has in our future.

Our balance sheet remains strong with $974 million in cash as of December 31, 2016 and additional $2.1 billion in unused credit available to us. Lastly, our current outlook is unchanged from what we disclosed in Detroit last month. In summary, we posted a number of records in 2016, as well as for the fourth quarter.

We continued to significantly outgrow vehicle production in 2016, we generated a strong free cash flow in Q4 and we expect strong free cash flow generation over the next three years. We've returned $1.3 billion to shareholders in 2016 and our most recent outlook is unchanged from our previous outlook. This now concludes our formal remarks.

Thanks for your attention today. We all will be pleased to answer your questions at this time..

And our first question comes from the line of Rod Lache with Deutsche Bank. Your line is open. Please go ahead..

Good morning, everybody. I was hoping just to get a couple of clarifying points on the year-over-year revenue and earnings bridge. Your reported revenue growth of $685 million and a $40 million increase in operating income.

Was FX about $100 million and acquisitions about $570 million, so the organic growth was around $215 million, is my math correct, just pulling that from the release different areas?.

Are you looking at, I guess year-over-year on the quarter, Rod?.

Year-over-year on the quarter, correct..

FX negatively impacted by about – I guess on total sales just over $100 million....

Yeah. That's what I had..

...on EBIT. And on an acquisition stand front, when you look at, which there was a number of acquisitions we consolidated in 2016, there was Getrag, there was Stadco, in the UK, there was StarQ (19:25) in China and there was a little bit of Telemotive and BÖCO as well in Europe.

So, all-in-all acquisitions added about $670 million in sales and contributed positively to operating income..

Okay. So the acquisitions contributed positively to operating income and you said that the FX....

Sorry, Rod, just the operating income from all the acquisitions, it's around 4% on those incremental sales, so below certainly the Magna averages. As we were expecting, we've been talking about sort of Getrag being a negative impact to margins in 2016 and that's in fact was the case.

But all-in-all, some of the other acquisitions contributed to operating income.

And even when I look at Getrag, I guess we started (20:26) early on in January, talking about our outlook and we thought that Getrag would be negative about 0.35% of margin and it kind of neutral on earnings per share, actually when I run through Getrag and look at the debt we took off of Getrag, all in.

Getrag was a little accretive on earnings per share basis for 2016, it's little bit better than we thought and from a production (20:55) standpoint and overall margin, it did impact us a little bit less than we were anticipated when we started 2016. So all in all....

Okay..

(21:06) in 2016..

Did you say that the FX had minimal impact on EBIT, I missed what you said about the EBIT impact of that?.

About $100 million sales minimal impact, I mean, I think if you look at kind of average margin, that's probably a good approximation of the impact translation we'd have on EBIT..

Okay.

And in the European discussion, it sounded like the acquisitions were a loss, is that correct?.

You're looking year-over-year or you're looking sequentially, what are you looking at, Rod?.

I thought, I'd seen that in the MD&A for the quarter about the positives and the negatives. And I would need to find the section exactly..

Yeah. The MD&A talks about Q4, 2016 versus Q4, 2015. And in Europe, when I look at our acquisitions, they were negative in the quarter, year-over-year, and when I look – I look at Getrag, if I exclude Getrag, the other acquisitions we completed in Europe and consolidated in Europe actually were accretive to EBIT dollars, so they actually positive.

We incurred loss in Getrag in the fourth quarter. And that's attributable to things that we're anticipating, so continued launch cost and startup cost.

But we were negatively impacted by some higher warranty costs in the quarter, which not only impacted obviously Getrag numbers, but also had an impact on reported operating margins in Europe in the quarter..

Okay.

And what happened to the equity earnings in the quarter, they declined?.

Equity earnings, again when I look at Getrag, I'm factoring in, you're talking about Europe, are you talking about consolidated right now?.

Just consolidated, that was running at a higher rate from most of this year and then fell in the fourth quarter..

On a year-over-year basis for the quarter was flat..

Okay.

So is that seasonality decline from the first three quarters of the year?.

All right. Most of it's seasonality, I think there is some – the seasonality and I think there is just again, I'm trying to think that we're – just launch cost as well that we're incurring again in Getrag and Asia were ramping up, but it's seasonality, nothing unusual..

Okay. All right. Okay. Thank you..

And our next question comes from the line of Mark Neville with Scotia Capital. Your line is open. Please go ahead..

Hi, good morning. I just wanted to dig into the margin in Europe. I think in Q4, you did about 2.2% over the first three quarters, you're at about 4.8%.

I mean you sort of highlighted some of the reasons, but I was just trying to get a sense of maybe the magnitude of loss at Getrag, how much is lower volumes in Graz impacted as well?.

When I look at Europe, kind of we were thinking that – we'll be around 4.5%, that's kind of our guidance for Europe. It actually came in at 4.2%. And so the (24:50) there is a number of things, which I'll talk to. One is we talked about additional warranty costs in Getrag.

And I think that was the only I guess negative from a Getrag standpoint other than that, they were pretty well on track based on our understanding on the Europe launch costs and start-up costs.

Some higher warranty costs in Getrag, there was additional launch costs in Steyr as a result of launching of new products and I think that's just a pull forward from 2017 into 2016. The additional new facility costs again really a pull forward from 2017.

There was a reallocation of income between Europe and Asia, as we completed these accounts and we look at some of the intercompany pricing. We move some income into Asia, so that helped Asia a bit, but also had a negative impact on Europe.

And those factors will account for the difference between kind of where we guided to and where we actually ended up in the quarter in Europe..

And would that reallocation – I mean would have impacted prior quarters?.

No..

No..

You mean was it – did it impact Q1, Q2, Q3?.

I guess, would it have, because again, you had a pretty good start to the year-on-year for the first three quarters and....

Yeah, I'm not really sure. It wouldn't have been, if you kind of look at what I'm (26:25) fourth quarter, it would be not at all significant and just all in Q4..

Okay.

And on the 2017 outlook, you mentioned it's unchanged, but on a regional basis, would that be the – would the comments be similar?.

Yes. We've unchanged our outlook not only on a consolidated basis, but also by segment....

Okay. And then just maybe on the margin in Asia, 12.9% in the quarter.

You mentioned the reallocation I guess helped a bit, but maybe you talk about what else sort of the puts and takes and just looking at next year's guidance of 9% to 10%, you're feeling a little better about that as well?.

Yeah. Look at the kind of on a sequential basis, we're at 9.8% in Q3 and came in at 12.9%. I just got precautions all the time, Asia is a pretty strong revenue (27:21) base, so couple of million dollars extra or less has a pretty significant impact on reported margins.

So when I look at quarter-over-quarter, we had lower launch cost and a little bit less warranty costs and higher equity income and new facility costs. And when you look at kind of everything else, we had some pretty good pull through from incremental sales part of that mix.

So I think when you look at 2017 and what our guidance is, again based on what we look at for full year.

We're still comfortable with the guidance we gave even though we did outperform our Q4 numbers compared to what we're guiding for 2017?.

If you look at the ranges that we provided in production sales, we came in a pretty much bang on middle of the range in North America and Europe. We actually came in above the range in Asia, Q4 very strong on the sales side and as Vince said, the pull through on that, incremental sales was quite strong.

So I think what you're going to see in Asia was still going to be a negative in 2017, has continued on a year-over-year basis in 2017 and 2016, higher launch and higher new facility costs, which will offset some of the margins, but we'll get some contributions from equity income from new programs.

So we're pleased with the performance in Asia, hopefully there is some upside if we get through 2017. Whereas 2016 was a really strong year if you look at our outlook for 2017 in Asia, is actually a bit more muted, picking up again in 2018, 2019, but 2017 is isn't a huge – bigger growth year as we had in 2016..

All right. Thank you very much..

And our next question comes from the line of Ryan Brinkman from JPMorgan. Your line is open. Please go ahead..

Great. Thanks for taking my question. Can you talk a little bit about your commodities outlook for 2017, there's been some sharp rises in some of the metals prices just in the last few months here and I know the Cosma division does a lot there.

Can you just remind us of the escalators that are built into your contracts, do they cover most of your contracts, most of our automakers and does this have like a positive impact on your revenue, and sort of maybe a negative impact on your margin without maybe impacting your EBIT dollars, how should investors think about that?.

I think, when you look at the two commodities had the most impact on our business was steel and resin. And I guess the most recent deal that we looked at for 2017 versus 2016 from a commodity standpoint in total, the impact on bottom line is fairly neutral.

On the steel side, we were – customer resale programs covers probably somewhere between kind of 70%, 75% of our buy. And the balance of our steel buy is typically going to be locked in by shorter term contracts, when I mean by short-term contracts it's going to be 12 months to 18 months.

On the resin side, what we've been seeing happening is that our customers are moving more and more towards resale pricing on resins. I think we're at about 15% to 20% today on resale. So as resin prices move, we're going to see more direct impacts on bottom line results, because we're not covered naturally on that.

On the steel side, I would say we're fairly protected. I guess the variability on the steel side relates to scrap revenue, which we've identified as a significant negative in 2015, that turned around a little bit in 2016.

So if steel prices move up, that may give us some help on the bottom line results, but it's not a direct flow through, because there is some sharing with our customers depending on the contracts, and all the contracts are different between OEMs, I don't really want to get into a lot more detail..

Okay. That's very helpful color. And just a last question for me, in Detroit, you made some comments, it was probably more preliminary, then maybe a few more advanced thoughts about a border adjusted tax, and how that might impact you, I think maybe some investors have a stereotype that they're hugely disproportionate manufacturing in Canada.

Can you just sort of remind that's probably not the case, given the lot of the just-in-time manufacturing that you do, other suppliers probably have a lot more concentration in Mexico than you do in Canada. And I think you were travelling to some sort of business round table right after your presentation in Detroit.

Just curious, the conversations that you've had, as you've started to learn more about this, about the probability of it, and if you had more time to think about the potential impact to Magna?.

Yeah. It's Don here. I've spent a lot of time, we have as a company, looking at what the impacts might be, and if there's changes in that, or content rules, or border adjustment tax, I think it's too early to tell what's really going to happen.

I think if you'll look at it, there is the industry as a whole is trying to get all the facts to the right people, so at least they'd understand what the impact might be, depending on what changes they might make.

MEMA, Motor & Equipment Manufacturers Association in the States has been getting input CAR, which is Center for Automotive Research, getting all the data as part of the industry. The entity latest I understand is, I think it's pretty well understood that the difference between Canada and U.S. as far as trade is concerned, really isn't an issue.

After having said that, a new border adjustment tax, I think would be negative for the whole industry and Vince, maybe I'll turn over to him in a second. We have done some analysis of what the sales are within our company, but sales to customers and they buy it off our dock.

So I think it's too early to tell, we do have a lot of production in Mexico as well, but a lot of that is for vehicles that are produced in Mexico.

So I think, as a general comment, I think it'll be quite a while before we really understand what the changes might be, what the impact would be and nothing happens over night, but we are very closely watching and having an involvement in any discussions we're having with and Vince, maybe just cover some of the numbers..

Yeah, Ryan, as Don talked about, we're certainly monitoring what's going on and just a whole bunch of speculation of what may or may not happen. So from our perspective, we just gathered a whole bunch of data and internalized (34:44) shed some color on some of the facts and we'll just have that monitored from there.

When you look at our manufacturing operations in the United States, kind of what we export and what we import. We're fairly neutral between exports and imports, it pretty well balances out from a manufacturing standpoint.

The other thing we kind of look at and we talked about in Detroit, is when you look at our sales and our plans going to our customers like where they're going to. If you look at Canada, we got about $6 billion in sales, about half of that goes to the assembly plants in Canada, about half of that goes to assembly plants in the United States.

If you look at Mexico, we had about just slightly – just under $4.5 billion in production sales. About 60% of those production sales are shipped to assembly plants in Mexico, the balance is being shipped to assembly plants in the United States. And if you look at the U.S., which for us is our biggest market.

We are over $9 billion in production sales in 2016, and 90% of those production sales end up in U.S. assembly plants with the balance being split equally between what goes to Canada and what goes to Mexico.

So those are kind of like the broad parameters, Ryan, and we'll obviously as both Don and I talked about, we'll continue to monitor what goes on and ultimately think that we're going to end up in a position that is going to work for the industry, because any sort of adjustments, whether it's tariffs or taxes will have some impact to the industry, I believe because the industry is pretty efficient today from a supply chain perspective..

Thanks for the commentary and for those helpful additional figures too. I appreciate it. Thanks..

And our next question comes from the line of David Tyerman with Cormark Securities. Your line is open. Please go ahead..

Yes. Good morning, gentlemen. First question is just on the buyback, it slowed down as you went through the year.

I was just wondering your thoughts on the buyback going forward?.

Yeah, David, it did slowdown. We ended up the year with being pretty well at the midpoint of our target leverage ratio. We talked about kind of 1 times to 1.5 times adjusted debt to adjusted EBITDA.

We ended up at 1.3 times, with probably a little bit more cash than what we need to run the business, and that was as a result of really good quarter on working capital that I talked about in my formal comments.

I think as you look forward and how the cash flow we're going to generate, and the growth in EBITDA, we expect to continue to be in the market buying some stock throughout the course of the year.

Again, depending on as we move on quarter to quarter how we feel the kind of macroeconomic environment or opportunities for acquisitions we make, slow that down or speed it up. But our intention today is to continue to be in the market buying some stock..

Okay. That's helpful. And just on the warranty, it did tick up a fair bit in the quarter.

Is this true-ups or is this something that actually happened? And can you give an idea of what you would consider sort of a normal run rate?.

Yeah, I look at Q4 from a warranty perspective, and from our perspective, it's an unusually high quarter from a warranty cost perspective. And I think when you look at Magna in 2015, then you look at Magna in 2016 and Magna in 2017, I would say, if you compare 2016 and 2017 to 2015, I'd expect our warranty run rate is going to be higher.

And that as a result, certainly the acquisition of Getrag, where they have accruals for warranty. And I think as we continue to grow in particular in powertrain and electronics, the incidence of warranty is probably going to be little higher than our other businesses.

But I look at Q4 2016 as I mentioned earlier, there were some unusual type items that we booked in the quarter that should go away as we move into 2017..

Okay.

So Q4 unusually high, but you're definitely at a higher rate than you were in 2015, it sounds like?.

Right..

Okay, that's great. Thank you..

And our next question comes from the line of Peter Sklar with BMO Capital Markets. Your line is open. Please go ahead..

I've got a question on the Countryman, Paceman wind down. Like I understand your – like that business is moving out from the vehicle assembly perspective at Steyr. But I also noticed that you said in your MD&A that you lost quite a bit of content on the replacement program.

So I'm just wondering if you could give some backdrop as to like why you lost the content on the successor and is the fact that you're not assembling the vehicle, does that play into it?.

Well I think location has to do with that. I mean they moved – the Countryman and Paceman moved out, ended production in the fourth quarter. We have a lot of facilities, lot of capabilities locally to support the Graz assembly plant, that's why we typically have a lot of content in the Graz programs.

And when that got relocated, it just wasn't – we couldn't get the same by content on the Countryman and Paceman in the next generation. So really is related to location..

Okay.

And then just lastly, I'm just confused like what's in the equity income line now? Can you just review all the major items that are in the equity income line, like obviously there is the Getrag China stuff, but what else is in there?.

Yeah. I think when you look at the equity income, what we've got in there is we have Getrag and Getrag is actually Asia as well as Europe. So it's not just Asia. We have some equity accounted investments in Asia. We have in North America, Europe and Asia, we have our Litens Group.

So it operates and we've had Litens for the longest time that I can remember and it operates in the three areas. We also have, if you recall, we sold our Bestop operations last year, they're now equity accounted, that's in North America.

That pretty well covers the most substantial ones, it's actually an investment in an interior operation in North America that we accounted as well.

And that accounts for majority of the equity accounted investments, Peter?.

Yeah.

But I can't remember Litens, that's the powertrain business, isn't it?.

That's correct..

That's right..

Okay. Thank you..

And our next question comes from the line of John Murphy with Bank of America Merrill Lynch. Your line is open. Please go ahead..

Good morning, guys. Just, a first question, Vince, to follow-up on your comments on your NAFTA footprint.

Just curious as look at how that footprint was setup over time, what's the rationale for the location of the facility, does it have to do with low cost, sourcing a labor or is there a lot more you're going to have to do with certain co-location of you plants with your customer plants?.

It's a mixture. But we don't build plants obviously without orders and if the plants will competitively bid.

So I don't know the percentage, there has been a trend in the past number of years where the OEMs are trying and get especially the larger components located close to their plants because of the logistics costs, but typically I think they'll look at the most efficient landed cost to their plant.

The exception I'd say is, in Mexico, where we have very high labor content work and that's specifically would be the cut and sew operation for a seating group, that has a lot of employees either in the maquiladora area or up in the northern Mexico and we will ship that back to our seating facilities, because it's easy to ship, it's high labor content and that gets shipped into the southern U.S., northern U.S.

and Canada. And then, we have other operations just historically, where they located – if you look at latches, for example. It's a easy to ship product, we have a really efficient plant up in Canada and we ship from there to U.S., we ship from there to China as well.

So the bigger plants typically are close to the assembly plants, high labor content, if they're really high labor content, probably come under Mexico's easy to ship product and the rest is just for historical reasons where the plant started, fascias and large Class A stampings are typically located pretty close to the assembly plant..

Don, is it fair to say that I mean seat covers are kind of the one thing that's highly labor intensive, your plants in the U.S. are obviously highly profitable and just as profitable as Canada and Mexico.

So if you had to move capacity around, it will be a question of timing and maybe some capital, but you could do what you would need to do, if things start shifting on the customer base..

Yeah. And I think that would be over time. I think no matter what happens with this border adjustment tax in NAFTA. Some things they are easy to move then the car companies don't like moving things since you got to recertify everything, but some things could be moved around.

I wouldn't expect their margins change other than maybe the cost to move, but some things are easy, some things are more difficult. I think the big issue will be, where our future investments going to be located.

And I can't speak for the car companies, but I would think that if somebody is thinking we're making a major investment in a new assembly plant based on everything that's going on. There is probably larger likelihood that they'll put that in the U.S.

if they're making that decision now, but people will wait and see what the end result is here and make their decisions.

I've said publicly, one of the things, which I think might be good for the industry in North America, is if you think of the trading blocks, I think the NAFTA is kind of a trading block that's competing with other trading blocks in the world, which should be Europe, China and Asia.

And I don't think at the end of the day, hopefully nothing is going to be done by the U.S. administration that will make the trading block less competitive as compared to other areas, and I think that's why it's good to have access to Mexico for some of the low labor cost parts.

The parts otherwise can be bought in China, what you brought back into Canada and the U.S. anyway. So maybe one of the end results if you think long – big picture long-term is the NAFTA area would become more competitive, so look at other trade deals.

If you had asked me 15 year ago I was worried where the assembly plants would be, we've actually seen more come to North America, hopefully that continues..

Okay. That's helpful. And then a second question. As we think about the ramp in Steyr through the course of 2017, it sounds like it's going to be fairly backend loaded, I'm just curious when you think that kind of hits – the 5-Series hits stride.

And then also as we think about the ramp in Steyr through 2019, it's a pretty big step up here in revenue about $5 billion in growth.

Is there a lot of capital that's going to be need to committed to execute on that or can you do that sort of in the parameters of this $2 billion or so CapEx per year, I'm just trying to understand if we would see a big CapEx ramp in 2018 and 2019 with that kind of growth so....

Yeah. In the – what we said publicly in CapEx that includes everything that's going on in Steyr, including the new paint job we've got, of course, Steyr being a low cost region. The 5-Series launch, we're ready for it, we've done a run rate. It starts in early March, it will be ramped up by – I think it's June, it's full ramp up.

So it's a lot of launch activity, but so far everything seems to be under control, and the $2 billion we've talked about for next year includes everything..

And I think the....

Okay. And then just lastly, when you highlighted a lot of your electronic capability, and I know given your portfolio, it's tough to kind of draw a line around ADAS and define everything that's in it. But I mean if you could give us sort of a general ballpark of what percentage of your revenue base is applied to sort of its ADAS category more broadly.

And once again, I recognize it's a little bit tougher for you guys, because you're in a lot of stuff that a lot of other suppliers aren't, but I mean, could you give us sort of ballpark of where you think your ADAS revenue is as a percent of total or even hard dollars?.

Yeah. Our electronics group is $800 million, roughly. The ADAS related sales are about $450 million, that's growing we think to about $1 billion in I think it's the 2020 time period. So if you looked at the pure ADAS-related sales of other large suppliers, we're in there.

Our electronic sales – because we're not in wire and harnesses and other products, we're not [technical difficulty] (49:51) ADAS area where we are big and it's going to grow, it's going to be a growing market.

I personally think that full autonomous driving vehicles are way out there, but the features are growing and we are pretty pleased with the position we've got, the growth we've got and it's going to be an interesting [indiscernible] (50:15) best technology and has the fastest growth in those two numbers..

Yeah. John, between kind of 2016 to 2019, we're expecting to grow our ADAS business at a compound growth rate between kind of 18% to 21%. And I can tell you, the guys are keeping me pretty busy looking at a whole bunch of quotes. So hopefully we're going to improve on what we talked about publicly.

I know we're pretty active and on the quoting side, part of the area – on this part of the business..

That's very helpful. Thank you very much..

And our next question comes from the line of Michael Glen with Macquarie. Your line is open. Please go ahead..

Hi. Good morning. Thanks for taking the question. Just a clarification. On slide 8, you gave us the organic growth versus market.

Did you provide that anywhere for the Q4 period?.

We don't – we have it – we just – we don't give that (51:18). Give me a call, we can go through it..

Okay.

And I am just wondering as well, can you give an outlook or an update on the outlook that you have for Getrag in terms of the Asian market, what you're seeing there?.

Yeah. I guess, in terms of an update on what we're seeing on the market in Asia, it's consistent with what we talked about in January. So, as we continue to ramp up business in Getrag and Vince is getting the backup notes for me.

We are seeing overall the margins in Asia for us as a result of Getrag in kind of 2017 that should be accretive to us on a year-over-year basis.

And as we continue to ramp up program, expect by the time we get to kind of the 2019, 2020 timeframe, we'll see a significant improvement in overall operating performance from our Getrag operating units because they are ramping up quite a bit of business..

And I'll say, generally, Getrag is on track to the numbers that we talked both in January of last year about U.S.$6 billion in sales, and the bulk of that growth is in Asia..

And you – in terms of the dual-clutch product penetration in Asia, you're seeing a lot of – you're continuing to see a lot of OEM interest over there in that product?.

Yeah. When we bought the company, we looked at the technology. We liked the technology; it's for fuel efficiency for lots of technical reasons. It's also – the new product they've got coming to market also makes it very easy to put an electric motor in there for electrification of it.

So the sales that Louis had talked about, we're going to $6 billion, some of that had assumed that we're going to be getting some new business, and we're on track to that. So we're still seeing a lot of interest. And even the manual transmission they have got and lighter weight, more fuel efficiency. So, yeah, real interest in the DCT technology..

Okay.

And just finally, in terms of customer price concessions, have you guys seen any change in behavior among the OEMs there?.

No. I mean, it's always pretty intense discussions, but it is nothing different – nothing different..

Okay. Thanks for taking the questions..

Okay..

Yeah..

And our next question comes from the line of Rich Kwas with Wells Fargo Securities. Your line is open. Please go ahead..

Good morning. This is Ron Jewsikow on for Rich Kwas.

It looks like there was a rather sizable increase in the value of patents and licenses on the balance sheet this quarter, what drove that increase?.

Yeah. What we – this first quarter we're actually splitting intangibles from goodwill and other assets. If you just go back to some of the earlier financials, everything was combined in one line.

So we actually completed our purchase price accounting exercise for Getrag, and that resulted in the finalization of goodwill and adjustment to fixed assets as well as intangibles. Intangibles moved up as a result of that exercise.

But what you're noticing is – the biggest thing you're noticing is the fact we're disclosing it, which we hadn't disclosed in the past..

Okay. Just – yeah, I just want to make sure there wasn't anything really material there..

Right..

And then just high level on your ADAS business, appreciate the details you guys gave.

Are you still looking at potentially acquiring radar assets or partnering with – I mean – or partnering with radar suppliers?.

Yeah. We have access to technology in radar. We're also looking at developing some new technology from scratch, so it's a – we're really strong in cameras, the ultrasonics. We just talked about the investment in what we think is a promising LiDAR technology. So we have access to radar as well as sort of – we're hoping it'll be a leapfrog technology.

The real expertise that we've got and where we're really focused is on taking out data from any sensor and fusing it together. And so that to me is real expertise required if you want to really grow sales in the ADAS, is having the ability to manipulate the data and make some decisions and send a signal out, so that's the area we're focused on..

Really appreciate the color. Thanks, guys..

And our next question comes from the line of Itay Michaeli with Citigroup. Your line is open. Please go ahead..

Great. Thanks. Good morning. Just maybe on free cash flow, and I apologize if I missed this. Are you still looking at sort of the same free cash flow guidance for the year as you communicated in January? Then maybe just remind us besides CapEx what some of the drivers are for your 2019 and 2018 free cash flow outlook..

Yeah, Itay, I think when you look at CapEx for 2017; we're about the $2 billion mark. There's a big chunk of capital in there for a new main facility for Magna Steyr in Eastern Europe. And then with just ongoing capital for some programs that obviously have been awarded.

And as we kind of move out into 2018 and 2019, we're expecting capital as a percentage of sales and absolute dollars start coming off. We've had some lumpy capital spending in terms of putting in longer term capital office (57:20) equipment.

I would say kind of 2015 – 2016 is going to carry us forward, a little bit in 2017; it should start to come down. In terms of cash flow, you talked about kind of 2017, 2018 and 2019.

We continue to expect to see growth in cash flow – free cash flow generation as well coming from growth in margins, growth in sales, and capital as a percent of sales coming down. I think there is going to be a little bit of sort of switch between kind of our expectations for 2017 and 2016.

We actually received more cash from working capital in Q4 than I had anticipated. And that's just a pull forward of cash from 2017 and 2016. But if you kind of normalize for that, we're still on track to, over the next three years to generate about – over $5 billion of free cash flow from operations.

So, significant growth in the amount of cash that we're going to generate that we can use to continue to invest in business or continue to increase dividends, do buybacks, a whole bunch of things we could do..

Great.

So sounds like the $5 billion has not changed, even though you had a bit of a tailwind in the fourth quarter?.

No. I mean, the end number hasn't changed. I'd just say, you look at 2016 and 2017 what has changed in that, the change for that is the additional cash we guided in Q4 of 2016..

Great. That's very helpful. Thanks so much..

And our next question comes from the line of Brian Morrison with TD Securities. Your line is open. Please go ahead..

Yeah. Thank you. Just a quick follow-up, Vince, on the equity pickup line. In Detroit, I think you said it should increase materially, the 65% through 2019, about $125 million, $150 million after tax. So, just wonder how you see that evolving. Prior disclosure for Getrag has a ramp and unconsolidated sales is pretty steady.

So, is the pickup going to be about one-third, one-third through 2019 or is it a little bit more back-half weighted?.

Louis, can you help me out on that? You know what, I don't have that information in front of me, so I don't want to speculate. I would be happy to kind of follow up with you afterwards once I've got some data in front for me..

Okay. That's....

I don't have it front of me. It's ticking up, I just don't know whether it's equal or back ended. I know it continues to improve, I just don't know on a relative basis how that's happening..

That's fine. I'll follow-up with Louis. Thank you..

And our next question comes from the line of Todd Coupland with CIBC World Markets. Your line is open. Please go ahead..

Good morning, everyone. I wanted to get your comments on the pace of the European – a rhythm of European margins in 2017. Should we expect it to bounce back into your target range in seasonally strong Q1, or do we need to wait for assembly to pickup later in the year? Color on that rhythm would be helpful. Thanks..

Todd, we haven't given quarterly guidance for our businesses. When I look at 2017 for Europe, yeah, I still think we are going to be in the kind of 4% to 4.5% range for the year, which is unchanged from our previous guidance. And there's a number of things that are impacting that margin number.

When you look at Magna Steyr, if we didn't have Magna Steyr in our numbers, our kind of 4% to 4.5% range will be 4.5% to 5%. And the growth in margins compared to 2016 comes from a number of things.

It comes from contribution in margins from new programs (01:01:33) operational improvements and obviously, some improvements as we had expected from launching the new programs in Getrag.

And when you get up to 2019, the previous guidance on a consolidated basis was 4.5% to 5%, which represents (01:02:00) half a point improvement over 2017, but what's really clouding the growth in production margin in Europe (01:02:10) the Magna Steyr. Magna Steyr's impact is about 1.5% on European margins.

So, ex-Magna Steyr, our range in Europe would be somewhere between kind of 6% to 6.5%. And what's driving that growth (01:02:27) focused on improving margins and certainly contributions from Getrag and the program that obviously we're talking about come into production..

Okay. Sorry. You kind of broke up at the front-end of your answer.

You said that you still expect to get into the 4% to 4.5% range in 2017 with the comments that you made?.

Right. That's correct..

Okay. Thanks very much..

And our next question comes from the line of David Tamberrino with Goldman Sachs. Your line is open. Please go ahead..

Great. Thank you for taking the questions.

You mentioned earlier that you haven't seen any additional pressure from OEMs on a pricing standpoint, but I'm curious as to the discipline in the market versus your peers, and if you're seeing anything in any specific components or verticals where there is more unhealthy competition and other suppliers are looking to price a little bit below it in order to gain market share..

I don't think there's anything really unusual.

Whenever there is a new technology or a new growing area, and I would say, electronics or ADAS is probably a good example of that, people may be more aggressive in their quotes and look at what their return on invested capital would be, just because they see as a growth area whether that's something they want to get into or whether the market perceives it as a real positive.

So, other than that, I don't think there's any major changes. Many years ago, interiors was really popular. I think everybody was really aggressive with the quoting.

For the most part, most of the suppliers are pretty good suppliers, pretty professional, understand their costs and I don't see a (01:04:17) volume business, but I'd have to go through every one of our groups and ask, but I haven't seen that other than maybe electronics..

Okay. Yes, and nothing, I was really trying to see if you'd mentioned anything about seating just with one player coming back into the market, I think there is a couple of questions as to whether they're a little bit more aggressive on pricing or not. And I think one of your larger competitors there had said some – they're seeing some choppiness.

I was just wondering if you've seen that as well from a seating perspective..

I don't think we've seen anything particularly – we're certainly not changing our expectations in our quoting (01:04:51) business. And if somebody wants to get more aggressive and they win business, then we're not going to chase pricing and we never have. So, I don't know, but I haven't really heard anything too much..

Okay. Thank you very much..

And our next question comes from the line of Colin Langan with UBS. Your line is open. Please go ahead..

Oh, great. Thanks for taking my questions. You talked about border tax; one of the other issues is the potential U.S. corporate tax change. Since you're Canadian-based, you don't provide the disclosures on your U.S. taxable income. Any color there, if U.S.

rate goes down from 35% to a 20% type range, what kind of benefits that would be to your overall rate?.

Certainly we're taxable in the United States, and we pay our fair share of taxes on the income we generate in the U.S. It's a really difficult question to answer. So, if tax rates stay the same and the tax base remains unchanged, it's going to be a benefit to bottom line.

I'd expect that if tax rates come down, it's going to be a broadening of the tax base. So, you really got to look at the specifics to see if that's going to be a benefit to Magna. I mean, lowering rates and keeping everything else constant is going to help us..

Well, I guess I was trying to get at any sense to the percent decline in your overall 25% to 35% – sorry, 25% to 26% range if the U.S.

rate just sort of come down on its own? Any sensitivity there?.

No, I don't have that calculation. Again, I haven't really done the numbers because I don't believe that there is just going to be a reduction in the rate. I think there is going to be a broadening of the base, and it's going to be a mix of the two, and that's what I'm going to be more interested in how that impacts us..

Got it. You also mentioned that you had $250 million of ADAS sales, but at the Investor Day....

4.....

...you mentioned it was – sorry, $450 million, and at the Investor Day, it was like $427 million, so is the $450 million a 2016 number, because it seems like a fairly small increase given the growth in ADAS.

Any color there?.

2015. Yeah. The number you have in there was 2015, there wasn't as much growth in 2016, but it's picking up after that..

Okay.

And any color – and I'm sure that's dealt in the past, on your exposure between gas and diesel, is there any impact at all when you – if you see a switch there in terms of dollar constant for you?.

No, I don't think there is going to be much of an impact at all..

Okay. And just lastly, corporate other was about $5 million, last quarter; it was $29 million, which is pretty strong. Any – how should we think about the line going forward and any reason for the sequential decline? Thanks a lot..

Yeah. I guess, the sequential decline – couple of things. I think the biggest thing there is FX. I think you look at Q3, FX was positive in Q3 and it was negative in Q4 and you kind of take the A minus B and it creates a bigger variance.

And I guess where I'd like to run corporate at is pretty well as a breakeven perspective, like to kind of push down our costs to our operating groups, so we can take all the cost in accounting or quoting. So expect it's going to bounce around, because there is ins and outs all the time, but fairly flat kind of where I think it to be.

I mean, subject – we're running $5 million in the quarter; it might be running kind of $7 million to $10 million per quarter..

Okay..

...a run rate you should consider appropriate..

Okay. All right. Thank you very much..

And our next question comes from the line of Richard Hilgert with Morningstar. Your line is open. Please go ahead..

Good morning and thanks for taking my question..

Hey, Richard..

Just really couple of minor things, most of my questions have already been asked. The Asia production revenue and adjusted EBIT, looking at it on a quarterly basis, it's been kind of choppy. The margins were pretty good in the first half of 2015 and they dropped in the third quarter, came back in the fourth quarter.

This year, the progression has been really very nice and we hit very nice high of 12.9% adjusted EBIT margin for the fourth quarter.

Is that solely operating leverage in volume or is there anything else going on in the region that you can kind of shed a little light on?.

Richard, there's a couple of things going on. If you recall in 2015 in Q3, there was revenue that – our revenue expectations for Q3 were higher than what we actually came in at, and we were expecting Q4 of 2015 to also be negatively impacted.

But Q4 revenue bumped up again, and part of that relates to China and what they're doing on taxes on new cars and more the tax back in 2015 was going to be continuing in 2016, same sort of impact in 2016.

I think when you look at the quarter in particular in Asia Q4 of 2016, I'd say the only one unusual item which I talked about earlier – an earlier question is, we reallocated some income from Europe to Asia and it related to development cost on programs and how you split those development cost between the regions that benefits from that.

So we had too much expense in Asia. And we needed to move some of that expense into Europe..

No, it was moved into Asia..

We moved expense into Europe, we reduced Europe. We reduced Europe, plus we moved some expenses to Europe, we moved income into Asia, and we reduced income in Europe. But other than that, the growth relates to just a mix of business. Remember, we're dealing with pretty small numbers..

Yeah..

So $2 million, $3 million, when you are looking at balance sheet and you're looking at accruals and you're looking over several divisions, it could be plus 1%, it could be minus 1% in a particular quarter..

All right..

Some of those adjustments won't have as much of a significant impact, but the only unusual thing I would say is Europe, Europe (01:12:21)..

Yeah. Okay.

And then, that dynamic in addition to the drop in operating leverage for termination of the MINI programs, those things combined together for the 2.2% adjusted EBIT margin for Europe for the fourth quarter?.

And warranty was higher..

And warranty, okay.

There is a number of things in Europe that – there was higher warranty costs that we talked about recently (01:12:53) over what we had expected. I talked about this reallocation into Asia which impacted negatively Europe.

We had some higher new facility and new launch costs, and that's kind of why you're looking kind of sequentially what's happened to overall margins coming down in Europe 2.2%..

Okay. All right. Hey, and congrats on the innovation awards you mentioned earlier in the call..

Thank you..

Thanks, Richard..

Now, we'll take one more question..

All right. Have a great day, guys..

Thank you..

And our next question – certainly. Thank you. Our next question is from Andrew Crespo with SIG. Your line is open. Please go ahead..

Thanks. This is actually Matt. Thanks for taking my call. Two questions. One is, will it be possible to identify the value of the warranty impact in the fourth quarter? And then the second question relates on the net flows in North America.

I'm sure I'm doing something wrong, but if I did the math on your flows that you articulated, it would look like you have about $4.8 billion of imports, $900 million of exports for a net import position of about $3.9 billion.

So is it something about sub cost sourcing or I'm just doing the math wrong?.

So let me talk a little bit about warranty.

I'm assuming you're looking at warranty on a consolidated basis, Matt?.

Just a comment that you identified relative to Getrag..

Yeah..

So, there was an....

Well, we got a warranty note and that talks about kind of warranty expense in the quarter. So if you look at our warranty expense of $44 million. It's an expense item compared to kind of $7 million in 2015. If you go look at Q4 versus Q3, your warranty expense is up $18 million in Q4.

I'd say a little over half of that growth from Q3 to Q4 relates to an increase in Getrag. Now, Getrag does have warranty accruals in every quarter. So that's the additional warranty expense I talked about, which is over half of that $18 million increase in warranty expense for 2016..

With respect to kind of flows, I guess there are a couple of things that you need to – when I look at it anyway, you may look at it little bit differently.

But first thing I focus on is, our manufacturing operations in the United States, and if there's a border-adjustment tax, what happens to our manufacturing operations and because they import components and things that they (01:16:01) and they also export things.

And they import not necessarily from Canada and Mexico, but it could be all over the world. So, there – when I look at imports and exports in our manufacturing operation, it's relatively flat from a production standpoint.

The second thing to look at is when we got a manufacturing operation that actually makes a sale to an OEM, where is that sale? And you look at Canada, and we have a number of – obviously manufacturing operations in Canada, our sales in Canada last year – production sales were about $6 billion and about half of that – those production sales end up with the OEMs in Canada, and the other half go to the United States assembly plants.

So, those are – I would look at those as imports that our customer has in the United States from a facility in Canada, because we're selling in Canada, the customer is picking up the product or responsible for picking up the product in our plants in Canada.

With respect to Mexico, 2016, our overall production sales were about $4.5 million, just slightly under that. About 60% of what we produce in Mexico gets shipped to our customers in Mexico. And the balance of that roughly is going into assembly plants in the United States.

But again, those are from our customers perspective, they're importing our parts from Mexico. And then in the U.S., we were over about $9 billion in production sales. Maybe about 90% of that $9 billion actually is – ends up in assembly plants in the United States.

And the balance of that is roughly split between Canadian assembly plants and Mexican assembly plants. So, those sales ended up going outside of the country..

Okay. I'll follow up. And I don't want to waste time here in the call, I'll follow up with you..

Okay. All right. And I'd like to do that with you, Matt..

Thank you very much..

Okay. Everybody, thanks for calling in today. It's – 2016 was a good year. We're excited about what's going to happen in 2017. Appreciate everybody's time. Thank you..

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you to please disconnect your lines..