Linda Hasenfratz - Chief Executive Officer Roger Fulton - General Counsel Dale Schneider - Chief Financial Officer Jim Jarrell - President and Chief Operating Officer Mark Stoddart - Chief Technology Officer and Executive Vice President, Sales & Marketing

Mark Neville - Scotiabank Matthew Paige - Gabelli & Company David Tyerman - Cormark Securities Todd Coupland - CIBC Michael Glen - Macquarie

Thank you. Good afternoon, everyone and welcome to our first quarter conference call.

Joining me this afternoon are members of my executive team, Jim Jarrell, Mark Stoddart, Roger Fulton, Dale Schneider and some members of our corporate, finance and legal teams. Before I begin, our General Counsel, Roger Fulton, will make a brief statement regarding forward-looking statements provided on this call.

Roger?

Thank you, Linda. Certain information regarding Linamar discussed in this teleconference, including management’s assessment of the company’s future plans and operations may constitute forward-looking statements.

This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Annual results may differ materially from those anticipated in the forward-looking statements due to factors such as customer demand and timing of buying decisions, product mix, competitive products and pricing pressure.

In addition, uncertainties and difficulties in domestic and foreign financial markets and economies could adversely affect demand from customers. These factors as well as general economic and political conditions may, in turn, have a material adverse effect on the company’s financial results.

The company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those reflected in the forward-looking statements. Linda?

Thanks, Roger. I’ll start off with sales, earnings and content.

Sales for the quarter were $1.66 billion, up 9% from last year, which is fantastic to see, with global vehicle markets up 3.6% and North America up just 2%. Noting, though, access markets did see high-single-digit growth.

Once again, this sales increase demonstrates that Linamar’s growth continues to drive from excellent market share expansion. Earnings saw another strong level of growth in Q1.

This was Linamar’s 23rd consecutive quarter of double-digit operating earnings growth, resulting in net earnings of $145 million or $2.20 per share, up 15% over last year. We’re proud of our consistent strong performance at Linamar quarter-after-quarter and year-after-year.

Net earnings as a percent of sales in Q1 were 8.8%. We continue to run at a solid margin level, thanks to sustained strong performance in both of our segments.

We expect to see strong full year margin performance for 2017 and 2018, once again, in the range of 8% to 8.5%. Earnings growth continues to drive solid performance and return on equity, above our 20% goal for the quarter.

Our focus on achieving a premium return on investment is driven by our solid disciplined process for capital procurement, our strong technical strength and constant focus on improvement. I see this as a real competitive advantage for Linamar.

Investing in our future continues to be a priority for us at Linamar. CapEx in the quarter was $93.5 million or 5.6% of sales, which is trending up somewhat as expected.

We’re expecting 2017 CapEx as a percent of sales to be higher than last year, but likely not quite into our normal 8% to 10% range. Next year, we do expect to be back in the range of 8% to 10%.

Our strong earnings and spending discipline help to offset the normal increase in working capital we usually see in Q1 to allow us to hold net debt-to-EBITDA under 1, at 0.97. In North America, content per vehicle for the quarter was $153.33, down a little compared to last year as a result of production levels with some key customers declining in comparison to a modestly increasing market in the quarter.

Changes in FX rates also had an impact on sales, noting that impact was offset on the bottom line, thanks to natural hedging. Q1 automotive sales in North America, as a result, were down a little over 2016 at $712 million, in a market that was up 2% in production volume.

In Europe, content per vehicle for the quarter was $65.69, up 7.9% over last year, thanks to Montupet and other business launches in the region. Our Q1 2017 automotive sales in Europe were up 15% compared to last year, reaching $387 million in a market that was up 6.7% in production volume.

Europe has become a significant concentration for us, currently representing 1/3 of our sales. It’s great to see this critical mass in what was the fastest-growing segment in the market this quarter.

In Asia-Pacific, content per vehicle for the quarter was $10.02, up 22.2% from last year. Our Q1 automotive sales in Asia-Pacific were up 26% compared to last year, reaching $123 million in a market that was up 3% in production volumes.

Linamar continues to target doubling our current footprint in Asia in the next 5 years. Linamar’s globalization efforts are a key element in our ability to continue to drive growth.

Not only are we in the markets our customers need us to be in to support their global needs, but more global exposure means more opportunity for growth and less risk concentration of being overly focused in one area. The growth in Europe and Asia this quarter is a great example of that risk mitigation as it more than offset a weaker North American market.

Other automotive sales not captured in these content calculations were $57 million, up from $38 million for the same quarter last year. Non-automotive sales were up 27.8% in the quarter at $377 million compared to $295 million last year, thanks to growth at Skyjack.

Turning to our market outlook, we are seeing an outlook of flat to moderate growth this year in most of our markets globally, with a couple of pockets of stronger growth. 2018 is a similar picture of flat to moderate growth in most areas, with a little more pessimistic viewpoint in Asia.

For the global light vehicle business, the forecast is for 1.8% production growth globally this year and 1.2% globally next year. Predictions are for flat light vehicle volumes this year to 17.5 million and 21.9 million vehicles in North America and Europe, respectively, with moderate growth in Asia to 50 million vehicles.

Next year is also expected to be flat, this time in all regions globally, with growth of 0.5% to 1.5%, depending on the region. Industry experts are predicting on-highway medium heavy truck volumes to grow this year in both North America and Asia, predicted to be up about 5% in North America and 9% in Asia, but be flat in Europe.

Next year is expected to see continued growth in North America at 8%; more moderate growth in Europe at 3%, but a decline in Asia, thanks to emission-related volume shifting into this year. Off-highway medium-duty and heavy-duty volumes continued to be soft, but we’ve recently seen some improvements in the mining sector, which could indicate that the market will start to recover soon.

Turning to the access market, we saw growth pick up this quarter with global volumes up in the high single digits as noted. Outlook in the industry for 2017 is an expectation for growth of 5% to 10% in the global aerial work platform market, driven by growth in all product and all regions.

2018 should see continued market momentum, but more muted with growth of up to 3% forecast. We continue to see positive industry metrics with construction starts in the U.S.

up 7.5% this year and an ARA forecast of 3% to 5% rental revenue growth for the rental business. Skyjack’s backlog is much higher than it was last year at this time, which is a good sign as well.

It is our goal to continue to outperform the market through market share growth as we have so successfully done at Skyjack in the last several quarters. Turning to new business, we continue to see solid levels of new business wins and a strong book of business being quoted.

Q1 was another very strong quarter for us. We’re seeing more outsourcing of components and systems that in the past were exclusively done in-house, such as buoy machine transmission cases or cylinder heads and more complex subsystems.

We think this trend will continue. In fact, there’s a high chance that the evolution of alternative powertrains will accelerate this outsourcing process.

First, while the percentage of internal combustion engine vehicles produced may decline, the global vehicle market is expected to grow as a whole. As such, the absolute numbers of internal combustion engine vehicles, in fact, doesn’t decline dramatically according to current forecast.

What we think is likely to also evolve is that the slice of the internal combustion engine pie available to suppliers will grow. Only 30% of powertrain values outsourced today, with more areas for the automakers to invest in and perhaps some lower-volume platforms we believe that more of the powertrain value will be outsourced.

We believe that full engine outsourcing, for instance, may very well be more of a reality in the future, thanks to the growth of alternative propulsion than it would be without. And there’s no one better positioned globally to be sourced a full engine than Linamar, the only supplier to have experienced at full engine supply.

We now have 200 programs been launched at Linamar, representing over $4.4 billion of annual sales at peak. We had a big shift of $430 million of launched business production this quarter, which brought our backlog down but was offset by a good quarter in new business wins.

Look for ramping volumes on launching transmission engine and driveline platform to reach 25% to 35% of mature levels this year. These programs saw sales last year of about $710 million.

Programs moved to production from launch this quarter are adding about $120 million in incremental sales growth this year. Programs currently in launch will add another $400 million to $500 million.

So total business launched in 2017 of $550 million to $650 million. These programs launched quite steeply next year, growing another 80% to 90% for total launches of between $900 million and $1 billion in 2018.

In addition, as noted, Skyjack is targeting to drive growth this year, again, in better markets. Temper that growth with the loss of business that naturally ends each year, noting to expect such at the low end of our normal range of 5% to 10% in 2017, but the high end of that range in 2018 as well as normal productivity givebacks each year, which are typically around $60 million to $70 million a year as you determine sales forecast.

Our strong backlog of launching business will do a great job of driving growth for us in the mid to high single-digit range this year despite flatter markets. With similar margin ranges for 2017 as seen in 2016 that same pattern of mid to high single-digit growth is expected on the earnings side for this year.

With an even stronger level of launching business and again, margin stability for next year, we do expect to see a resumption of double-digit growth, top and bottom line, in 2018. New business wins are, of course, also filling in growth for us in the mid-term as well.

At this point, we are looking at between $7.5 billion and $8 billion in booked business for 2021 based on current industry volume forecast, layered with new business wins and adjusting for business leaving. I’d like to highlight a couple of our more interesting wins this quarter.

First, we were awarded a fully machined transmission case program, a product literally never outsourced normally. The program is a hybrid application, so two benefits in one, with further development of our content in alternative powertrains and a very strategic win of what was traditionally a captive product.

Linamar is a unique supplier in that we have had the opportunity to supply fully machined cases in the past and therefore has deep expertise in such. Second, we saw an additional strategic win of a fully machined cylinder head and cylinder block program worth more than $16 million in annual revenue, combined.

Again, heads and blocks are very rarely bought fully machined from the supply base. And again, Linamar’s unique global demonstrated expertise in this work was a key deciding factor in the win.

We picked up another couple of key transmission programs for our new plants in Chongqing, worth an aggregate nearly $10 million, which is helping us to create a very strong business case for that plant. We won our first cylinder head tasking program for China, which is very exciting, and we believe will lead to significant opportunity for Montupet in the region.

We’re in the process of assessing plant for production of this program, which clearly may include a plant – a new plant in China to produce in the region. Lastly, we were awarded another fully-machined cylinder head program, this time for our plant in India.

Again, this is a huge win based on the infrequency of such outsourcing. We’re pursuing the casting for this program as well, which of course will be well positioned for given our capacity in the region.

The story of casting and machining expertise combined in Montupet and Linamar, creating an unbeatable value proposition is really compelling for our customers. Turning to strategic update, we continue to proceed extremely well with our Montupet acquisition integration.

The business is meeting expectations and continues to be a strong fit culturally with our team. We also continue to work towards developing our strategies around the long-term markets we target such as food and agriculture, water, power and age management, even as we continue to build our transportation and infrastructure businesses.

We have formally created an agriculture group in the company as an important step forward in developing and executing on strategies in this space. Turning to an innovation update.

We have lots of activity happening in all our global centers. Our innovation team continues to work with partners, bringing us interesting technology opportunities to enhance Linamar’s product offering in the material development and product innovation areas.

These are a great opportunity to explore new markets as well. We are finalizing designs for an innovation hub here in Guelph to incubate interesting innovation ideas to challenge existing markets and technologies.

We have a team working hard on several initiatives in the artificial intelligence and machine learning areas to develop basically three key areas: one, next generation robotics, including collaborative robots that can integrate seamlessly into our production line; secondly, automated visual gauging to enhance the quality and consistency of our products more efficiently; and finally, digitization, data collection and analytics to create better efficiency, improved cycle times and machine uptimes on the shop floor. We made a significant commitment last month to the new Vector Institute in Toronto, focused on artificial intelligence to ensure that we have a front-row seat to all that is happening in that space.

There is a huge amount of opportunity in this technology to dramatically improve efficiencies of our operations, both on the shop floor and in the back office as well. In terms of product innovation, our customers are working closely with us on our driveline product with particular interest in eAxle opportunities globally.

We are close to securing our first program in that regard. Of course, we are targeting to increase our content in both electric and hybrid vehicles to take advantage of these trends as they evolve.

Electric vehicles are, today, a tiny slice of the overall market, but we already have content in these cars in place, with great potential for growth in a variety of areas, from Driveline products to structural aluminum cast components, to outer chassis and gearbox components. Hybrid vehicles, in our opinion, will be an important bridging technology to the pure electric over the next decade meaning its key to increase our content in these vehicles.

We have huge content potential for hybrid vehicles, and are actively pursuing several opportunities. We have made great progress already in that regard.

In fact, our content per vehicle on hybrids in North America is already forecast to be nearly $100 per vehicle within the next couple of years, a level we achieved on our internal combustion engine product as recently as 2008, after 42 years of focus. In other areas of operations, our plants continued to perform well, both on mature business metrics and in terms of launch.

In fact, in the last 12 months, we’ve been awarded supplier of the year status for each of Ford, GM and FCA. We are continually focused on doing a fantastic job for our customers, and it is certainly paying off.

The build of our new high-pressure die cast foundry in North Carolina continues to go well, and we will be launching production there later this year. The roof is on at our fourth Chinese plant in Chongqing, and we will be moving in and spotting equipment in place in the next month or so.

Our first job starts production there later this year. With that, I can turn it over to our CFO, Dale Schneider, to lead us through a more in-depth financial review.

Dale?

Thank you, Linda. Good afternoon, everyone.

As Linda noted, Q1 was another strong quarter, as sales grew by 9.1%, and net earnings grew by 14.8%, which resulted in net margins reaching 8.8%. For the quarter, sales were $1.66 billion, up $137.9 million from $1.52 billion in Q1 2016.

Operating earnings for the quarter were $192.2 million. This compares to $172.1 million in Q1 last year, an increase of $20.1 million or 11.7%.

Net earnings increased $18.7 million from the same quarter last year to reach $145.1 million. As a result, net earnings per share on a fully diluted basis, increased $0.28 or 14.6% to reach $2.20.

Included in net earnings for the quarter was a foreign exchange gain of $640,000, which was comprised of $1 million loss on the revaluation of operating balances and $1.64 million gain in revaluation of financing balances. The FX gain impacted the quarter’s EPS by $0.01.

From a business segment perspective, the Q1 FX gain due to revaluation of operating balances of $1 million was the result of a $2.7 million loss in Powertrain/Driveline and a $1.7 million gain in industrial. Further looking at the segments, sales for Powertrain/Driveline increased by $54.6 million or 4.2% over Q1 last year to reach $1.37 billion.

The sales increase in the first quarter was impacted by the acquisition of Montupet; the program launches globally; higher volumes in certain automotive programs, partially offset by lower volumes on the off-highway vehicle programs; and lower sales due to unfavorable changes in FX rates. Q1 operating earnings for Powertrain/Driveline were higher by $2.4 million, or 1.7% over last year.

In the quarter, Powertrain/Driveline experienced earnings improvements as a result of the acquisition of Montupet, the higher production and launch volumes, partially offset by the lower off-highway vehicle volumes, the FX loss, and the revaluation of operating balances and the result of a less favorable product mix. If you remove any foreign exchange gains or losses related to the revaluation of operating balances, the adjusted operating earnings for Powertrain/Driveline would have been $149.1 million for the quarter compared to $136.7 million for the prior year’s quarter, which is a 9.1% improvement.

Turning to industrial, sales increased by 40.9%, or $83.3 million, to reach $286.9 million in the quarter. The sales increase was due to strong market share gains in scissors, booms and telehandlers in all three regions.

Solid market share growth in all three regions provided further volume increases, which was partially offset by lower sales due to the unfavorable changes in FX rates. Industrial operating earnings in Q1 increased $17.7 million or 63% over last year.

The increase in Industrial operating earnings was driven by the higher volumes from both the market share gains and the stronger markets globally. The FX gains from the revaluation of operating balances and the Q1 2016 bad debt expense that did not recur this year.

These are partially offset by lower margins from the changes in product mix and launching products, and higher management and sales costs that are supporting the growth in the segment. Removing any foreign exchange gains or losses related to the revaluation of operating balances, the operating earnings for Industrial would have been $44.1 million for the quarter compared to $33.5 million in the first quarter 2016, a 31.6% improvement in operating earnings.

Returning to the overall Linamar results, the company’s gross margin percent increased to 17.1% from 16.8% in Q1 2016. Gross margin increased by $29.2 million due to the net volume increases in both segments, the acquisition of Montupet, partially being offset by less favorable product mix in both segments.

Cost of goods sold, amortization expense for the first quarter was flat at $81.4 million. COGS amortization as a percent of sales decreased to 4.9% as compared to 5.4% in Q1 2016.

On a dollar terms basis, amortization remained flat as available equipment was redeployed to launching programs to reduce the amount of CapEx that was required. This decrease in amortization was offset by an additional amortization from the acquisition of Montupet.

Selling, general, administration costs increased to $91.1 million from $84.8 million in Q1 2016, and remains relatively at as a percent of sales at 5.5%. The increase on a dollar basis is mainly due to the higher management and sales costs incurred in the quarter and partially offset by the bad debt expense from Q1 2016 that didn’t reoccur.

Financing expenses decreased $2.1 million from Q1 2016 to $2.9 million, due to the higher interest earned on invested – on the investment of excess cash balances, which was partially offset by foreign exchange impacts on short-term borrowing positions. As a result, the consolidated effective interest rate for Q1 decreased to 2.2% compared to 2.3% last year.

This decrease from Q1 2016 in the effective interest rate is the result of refinancing related to the acquisition of Montupet since the total debt is now heavily weighted towards euro-denominated debt, which has much lower borrowing rates than our other U.S. dollar and Canadian debt.

The effective tax rate for the first quarter was 22.8% compared to 24.1% in the same quarter of 2016. The effective tax rate in Q1 2017 was reduced due to the nondeductible acquisition expenses incurred in Q1 2016 due to net adjustments recognized in Q1 ‘17 related to current taxes prior years and was partially offset by an increase on a less favorable mix of foreign tax rates in the quarter.

We are expecting the effective tax rate for 2017 to be in the range of 22.5% to 24.5%. Linamar’s cash position was $438.2 million on March 31, an increase of $29.8 million compared to March 2016.

The first quarter generated $110 million in cash from operations, and the last 12 months generated $463 million in free cash flow. Total debt has declined by $304.8 million since March 2016.

Debt-to-capitalization decreased to 36.1% from 45.8% in Q1 ‘16. It is above our target of 35%, but based on current information, we do expect to be back below the target in the next couple of quarters.

Net debt-to-EBITDA decreased to 0.97x in Q1, down from 1.52x reported in Q1 2016, and remains under our target of 1x. The amount of available credit on our credit facilities was $665.5 million at the end of the quarter.

To recap, Linamar had another strong quarter, with strong sales and earnings growth. Sales were up 9.1%, but strong sales led to solid earnings performance, which resulted in net earnings improving by almost 15% for the quarter, and return on equity approaching 22%.

That concludes my commentary. And then, I would like to open up for questions.

Good afternoon, everyone. Great quarter.

I guess I am just trying to wrap my head around the growth at Skyjack. It looks like volumes were up 40%, 50%.

I think you said the market is up high single-digits. So obviously, some pretty impressive market share gains.

Just maybe if you can provide a little color around what’s driving that whether it’s new products, pricing. Any color would help?

Yes. So we did have a great quarter at Skyjack.

We saw not only market growth, as pointed out, but we saw market share gains in every product and every region. So that was very helpful, obviously, to driving such a solid performance, top line and bottom line, for Skyjack.

So I mean, do we think 40% is going to carry on through the year? I think unlikely.

I mean, everything was kind of working together, but we do certainly think we are going to see strong double-digit growth for sure above the market, but probably not to that same extent for the rest of the year.

Again keep in mind, we launched like four booms in the last couple of years as well and those are starting to penetrate in the market and telehandlers are also been launched with the TH series now so that’s also starting to hit the market as well.

Okay. So I guess, on a year-over-year basis, sales are up, I guess, 40%.

It looks like margin on an adjusted basis is down about 100 basis points. So would that be more mix or is it surprising?

Yes. It’s really more mix.

We have been really growing the boom and telehandler sales, as Jim was saying and their margins are a little lower than the scissors. Just because their volumes are lower and I mean we just haven’t been manufacturing them as long.

So, we do think that those margins will improve as the volumes build over time and we gain more experience on the product. But that’s why we are seeing the margins down a little compared to last year.

We do think we will still be at the top end of that normal range of 12% to 16% for the year.

Okay. I guess, just generally on pricing, is there any – again, some of your competitors are talking about some pricing pressure.

I am just curious if you’re seeing the same.

Yes. I mean, absolutely, in this area, there is a lot of pricing pressure and it’s a little bit different per product line too, but there is some serious pricing pressures.

Okay. I noticed there was a $50 million increase in the long-term receivable on the balance sheet.

Again, that’s, I guess, just leasing at Skyjack?

Yes, that’s the main driver. All of our independent sales require financing.

Okay. It just seemed like a big number this quarter.

I don’t know, again, maybe it’s just because the sales are so high...

Yes, exactly.

Okay, okay. I guess, just on the CapEx, the lower guidance for this year, below the 8% to 10%.

I’m just curious if there is spending being pushed out or you are just seeing sort of better sales, I guess, predominantly at the Skyjack?

It’s a combination, not just of Skyjack either in terms of the sales. So it’s a combination.

I mean, trying to be conservative on the CapEx side. I think we were – our former estimates were a little bit too high.

We have really dialed in on the CapEx side and that’s why it’s come down a little bit in terms of where I think we will be for the year, but around 7% is the expectations okay, not quite to the 8%, but certainly, higher than we saw last year. So that trend is coming around as we thought it would.

Okay. Maybe just one last one, if I could sneak it in.

On the backlog, you mentioned Skyjack was up significantly. I don’t know if you could maybe just a little – just put some numbers around that, percentage basis or however you want to talk about it?

Yes. We haven’t typically released that information, but I can tell you that it’s up dramatically from last year.

And from what I have seen from competitors, it’s up a lot higher than their backlogs are.

Alright, thank you very much again. Great quarter.

Thank you.

Hey, good morning – sorry, good afternoon really. Great quarter.

I was just wondering if you could maybe provide a little more color on the financing expenses. Is Q1 a good running rate going forward or should we expect something closer to what we saw in 2016?

Well, you saw in 2016 we were pretty much around the same ballpark. Like last – Q1 last year, we were at 2.3%.

We are at 2.2%. And we do expect to be there, because like I said, most of our debt is euro-based, so it has much lower borrowing rates.

Alright. And next, could you speak to how you split your capital allocation decisions between the two segments?

And maybe touch on any synergies you gain from having the two businesses together?

Yes. I mean, Skyjack has very low capital requirement, so it’s not really a matter of having to decide between the two of them.

We look at CapEx decisions on a program by program basis. So we look at expected project returns and ensure they are meeting our goals.

Of course, we have an overall budget of what we are working towards in terms of CapEx spending for the year and then we look at it on a project by project basis. So it’s not about having to make a decision between Powertrain and industrial in terms of who is getting the cash.

If they have got great projects with great returns, then we are going to be funding both of them within an overall budget of what we are trying to achieve in terms of growth. Synergies between the two, they are very complementary businesses in terms of financial performance.

So Skyjack, as just noted, does not use a lot of capital. Our Powertrain business uses an enormous amount of capital.

Skyjack generates a lot of cash, and that helps to finance the Powertrain operation. We also complement each other in terms of FX.

So in terms of currencies, they help to balance each other out and help us create more of a natural hedge overall. In addition, of course, they are both manufacturing and metallic-based businesses.

So, there is lots of synergy opportunities in terms of lean manufacturing, processing and purchasing that we have been able to learn across the two businesses.

Maybe just two other points on the capital side, I mean, first, we have a capital review every month that a rigorous review. And secondly, we have a capital utilization system that if we know a plant has an available piece of capital, we then share it, which would then risk mitigate having underutilized equipment.

So we, again, watch it monthly and understand the utilization between the facilities.

Great. I appreciate the color on that.

And one more for me is we are just lapping Montupet, but could you provide an update on your acquisition pipeline and how you plan to address any acquisitions?

Sure. I mean, traditionally, our acquisitions have been very technology and market strategy based.

So we would certainly continue to look for opportunities in that regard. So there is areas we want to expand into from a processing perspective.

A good example of that of course was the Montupet acquisition to help that into the light metal casting area that continues to be an area of interest for us for certain types of product. SEISSENSCHMIDT was another example of a process diversification strategy.

So in that case, in the Forging area, to support our dealer business, so that area of process diversification, I think is still an area of interest. Of course, geographic growth is the key strategy as well.

Montupet also and SEISSENSCHMIDT played a key role there in helping us to deepen our business outside of North America. As I mentioned in my comment, we are now about one-third of our business in Europe, so we are diversifying away there.

Other areas of interest are other markets that we think are interesting from a growth perspective. I mean, Skyjack is a good example of us getting into a different market where we see a lot of growth opportunity.

We have other markets as well that we have identified that we are sort of lightly invested in today, but would like to grow our investment. Agriculture food is a good example of that where we have a long history in the market, so that’s an area that maybe of interest.

So it covers a variety of areas.

Alright, great. Well, I appreciate you taking the call and congrats again on a good quarter.

Thank you.

Yes, good afternoon. My first question is just on the earnings guidance versus the Q1.

So Q1, you did 15%. The guidance I think is mid to high single-digit for the year.

Do you see something that’s making you think that things are going to slow down in the last three quarters, Linda?

Well, we – of course, we are always stronger out of the gate in the first half of the year than we are in the back half of the year. So that’s not a surprising pattern.

We still think mid to high single-digit growth is very much a reality for this year. Of course, it will be more heavily concentrated in the first half of the year than it will be the back half, but I think that’s pretty normal.

So why do you say you are always stronger out of the gate? I know the volumes are higher in the first half.

But presumably that’s true pretty much every year. So, I am not quite understanding why it would be stronger growth in one half than the other?

Well, we do always have higher growth and higher margins in the first half of the year. Volumes are higher and that is a key factor.

The third quarter has shutdowns on the automotive side and the industrial side. Fourth quarter has shutdowns in the automotive side and is a huge seasonal low for Skyjack.

So that is a normal – it’s a normal pattern. I am not suggesting that the pattern is going to be anything but that kind of normal level.

Right. No, I understand that.

What I don’t understand is why would the growth rates change? I mean, that pattern repeats every year.

Yes.

Why would the growth rate be 15% in Q1, but for the remainder of the quarters, it’s got to slowdown to hit your average for the year being mid single-digit to high single-digit?

Yes. Well, I mean, one element that’s different in the next few quarters than the last four is the year-over-year comparison, including Montupet, right.

I mean, even in this quarter, we had Montupet, last year only for 2 months. This year, we had it for 3 months, so that beefs up the growth a little bit as of Q2.

It was fully in our numbers last year and it was fully in our numbers this year. So, that’s obviously a key piece that will be missing.

Okay, okay. Second question is just on the accounts receivable, I noticed that they were up quite a bit in the quarter and I looked back on a bunch of previous years and it looks like a fairly high number.

I was just wondering what’s going on there and any thoughts going forward? Is there going to be a big recovery in the latter part of the year?

The launch from AR is really just being driven by the amount of independent sales we have. We have been focusing and concentrating on growing our independent sales, because obviously, those sales have better margins.

And it’s just – naturally, it’s going to occur as the business continues to grow you are going to see the AR levels grow.

Okay. That’s quite a big increase in receivables as accounts receivable this time like it doubled almost.

Yes. And what we do, do look at times as bundling it up wouldn’t make sense then selling it off.

We haven’t done that in a couple of quarters either. So we are holding more from that perspective, I guess, as well.

Okay. So is it possible then, that we will see a big recovery at some point if you use that mechanism or some natural recoveries, like cash?

Well, it’s possible down the road that we will sell some office. There is an economic benefit to doing it.

Okay. And then the last question I had was just your thoughts on production cutbacks in the industry going forward.

Obviously, it hit you in Q1. GM sounds like they are going to cut back in Q3.

Any thoughts on how that may impact you?

No, David. I mean, you are seeing through Q4 with Ford making their changes for their production plants going forward.

General Motors is talking around 10 weeks of shutdown mainly attributed to a lot of new models. But other than that, our releases are continuing to stay strong.

We are not seeing any fluctuation or changes coming other than what’s already been announced.

We have baked everything in as well. And the only one area is the 9, 10-speed.

We have got that baked in at a certain launch level and we are watching that and that would be the only thing that could potentially change.

Yes. I mean, the launch volumes so far have been good.

Yes. And it looks like it is coming together in the back half.

Yes. It seems strong.

So no, we are not hearing anything further than kind of what’s already been announced.

Okay. And the 9, 10, would that – if it did slow down, would that be material to you or I mean, you are a pretty big company for one program to really move you?

No. And also partially because it wouldn’t be so big to be material, but also because if there is less 9, 10 volume, there is going to be more 6-speed volume.

So that will help to balance it out.

Exactly.

Also, I mean one other point I wanted to make, David, on the year-over-year comparison, in terms of growth is you should be taking into account the balance sheet revaluation pickup that we saw in the second, third and fourth quarter last year. Normally, those balance sheet revaluations balanced out over the year, and even balance out within a quarter between Powertrain and Industrial, just to a large extent.

So like, last year, we had a big gain in industrial, a loss in Powertrain in Q1. But if you look at subsequent quarters, it was more.

They weren’t really balancing out as much, so we ended up with a bigger pickup every quarter from that balance sheet revaluation, which is unusual for us admittedly, but did have an impact in the second, third and fourth quarters that you may want to consider when you are looking at that growth. If you were to put that back in, you would actually see a much stronger level of growth for us for the year.

Okay. So the implication being that margins were boosted last year by those, because it obviously doesn’t really hit the sales much and that this year, if we just go back to a more normal kind of level, then the margins get a bit of a drag?

Yes. I wouldn’t even call it a more normal level.

I am just saying if you look at exchange today compared to a year ago, so what’s normal, who knows. Okay.

I am just saying, like the difference to last year is its part of the reason why you – we are not expecting as high growth, because we had those additional gains last year. So I mean, obviously, what happens with the exchange rate over the next few quarters and balance sheet adjustments are going to have a potential impact.

But if you go back and look at the – what deal disclosed to each quarter on balance sheet revaluation last year for each of the segments, you will see that it was kind of a biggest number at least in a few of the quarters.

Okay, that’s a good point. Thank you.

Good evening, everyone. I just wanted to follow-up on industry volumes in North America if I could.

So April sales were down 5%, so kind of a weak start to the second quarter. But you guys are basically saying production for Q2 is essentially set and whatever adjustments that the Detroit 3 are going to make are baked into those extended shutdowns that you mentioned earlier?

That’s correct.

In terms of catch up kind of no matter what happens in the next couple of months in Q2?

Yes. I mean, keep in mind, I mean the 7 weeks that GM is talking about is not like across the board.

It’s certain plants for certain models. But they are going through an extended period just because they are retooling for the new models that come up.

This is not a total GM shutdown for 10 weeks. But no, those numbers have been released, so our plants have seen that.

So they’re in...

Yes. I mean, GM is what is.

If you look at IHS forecast for GM for Q2, they are forecasting to be up, but then down a fair bit in Q3 because of the shutdown that Mark described. If you look at the forecast for Ford, they are actually looking to have production increase at a higher rate than the market, which of course has not been the case the last couple of quarters.

So, that’s going to be a positive for us.

That’s helpful. And I just wanted to clarify the industrial comments you made.

So you said 5% to 10% in the year is the expectation with a bias towards the lower end of that meaning total revenue in the 5%, 6% range in 2017. Did I hear that right?

No. I said that the market is going to grow in the 5% to 10% range for the year, and that Skyjack would grow at a stronger rate than that because we are outperforming the market.

So we are growing market share. We will outperform a market that’s growing at between 5% and 10%, and then the first quarter was in the high single digit.

So that’s why I said strong double-digit growth for Skyjack this year. I did indicate, however, that it wouldn’t, in all likelihood, stay at that 40% up level that we saw in the first quarter.

I think that was sort of everything all cylinders firing at the same time with market share growth in every single region and every single product. So that doesn’t happen very often.

So you’re probably not going to see 40% for the year, but you are going to see strong double-digit growth.

Okay. So strong double-digit, that’s closer to 20% should be the takeaway from that, in that area?

Well, I am not giving you a number, Todd, but...

That’s fair. Okay.

Those are my two questions. Appreciate the color.

Thanks a lot.

Hi, good evening. Linda, in your comments, you talked about launches moving from $550 million to $600 million to $900 million to $1 billion next year.

Can you just talk a little bit about what exactly is driving that increase, what programs?

I am talking about incremental sales growth this year and next year from launches. That’s not a net number.

So it’s just an indication of those programs ramping up more steeply next year. So we have got a whole basket of programs that are launching right now, about 200 programs that are in launch.

They were sort of $700 millionish in sales last year. This year, they are going to be 25% to 35% of that mature level of 4.4.

So that’s where I am coming up with that $550 million to $650 million of incremental sales growth from the launching business. Next year, those programs ramp more – continue to ramp and ramp at a more accelerated rate, so that’s why you are seeing more like $900 million to $1 billion in incremental sales from the launching program.

Okay. And embedded in that is – is there a number of high-speed transmission launches taking place?

Yes. We have a whole series of programs on 9 and 10-speed transmissions that are launching.

Okay. And can you just maybe give an update in terms of the trends you are seeing in the high-speed transmission outlook?

Is that something that has been in line with expectations in terms of market growth or consumer adoption?

Yes. I mean the 9 to 10-speed programs we have talked about in other calls have been delayed, maybe a little more than what we would say is normal.

But I think just in North America, with fuel prices the way they are, the Detroit 3 kind of capitalizing on their current products and then delaying capital expenditures, but that being said, all of these 9 to 10-speed programs have now launched. Suppliers are tooling up like us.

The OEMs themselves have all the capital in place. And more importantly, you’re seeing it being advertised out there now with the new vehicles coming with the new 9 and 10-speed transmission.

So, it’s a go now and we are not seeing any delays and we will ramp up over the next couple of years.

Okay. In the off-highway market business, you gave some of the – some ideas on the trends and the outlook.

Can you give an indication of the overall size of that business and how does it fit within Linamar from an available capacity perspective?

Off-highway has come down quite a bit as a percent of sales for us. I mean, we used to be north of 10%.

Now we are well under 5% in terms of our off-highway segment. So it’s become much smaller obviously, because the market’s been very depressed over the last few years.

In terms of open capacity, we are, as Jim was describing earlier, very active at reallocating capacity. So wherever possible, if we have a line that is underutilized, we are pulling equipment out of there and putting it on to another program.

So we have certainly done a lot of that for any of our off-highway program.

Yes. I also would comment that the view from our side, I think we would say it as bottomed out a little bit and opportunities we are starting to see a few opportunities coming back our way, which is a signal that there maybe some more opportunities for growth in this sector for us.

Yes. I think, just recently, Cat indicated that they have seen increased sales in Asia-Pacific around off-highway.

So yes, I agree with Jim. I think it’s bottomed out and we are actually seeing a fair bit of cooling activity in the segment and also with commercial vehicle.

Okay. And just one more, can you give an update on the Georg Fischer JV in North Carolina?

Is it still on track for opening mid this year and how should we think about sort of a – will we notice a sales contribution coming out of that early on?

Yes. It’s going according to plan.

The construction is nearing completion and we will be launching in the facility later this year as expected. We will not see sales from that joint venture.

Don’t forget, you’ll only see an earnings on the minority earnings side.

Okay. Okay, thanks.

Thanks for clarifying that. Okay, that’s it for me.

Okay, great. Thank you.

Well, to conclude this evening, I would like to leave you as usual with three key messages. First, we are very proud to have driven double-digit operating earnings growth again for the 23rd consecutive quarter.

This record of consistent growth is fantastic. Secondly, we are thrilled to see the continued great market share gains of Skyjack on top of the market growing.

And finally, we are excited to see significant Powertrain outsourcing opportunities manifesting themselves for us in a variety of products, which we feel will accelerate in the future. Thanks very much and have a great evening.