Linamar Corporation

Linda Hasenfratz - CEO Roger Fulton - EVP, General Counsel Dale Schneider - CFO Jim Jarrell - President and COO

Mark Neville - Scotia Bank Peter Sklar - BMO Capital Markets Todd Copeland - CIBC

Thank you. Good afternoon everyone and welcome to our fourth quarter and yearend conference call.

Joining me this afternoon are members of my executive team, Jim Jarrell, Roger Fulton, Dale Schneider, and some members of our corporate and group 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. Actual 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 $1.24 billion, up 24% from last year, and again exceeding our double-digit growth target, to finish the year at $5.2 billion, up 24%, and a new record for us, the fifth year in a row of achieving record sales. Once again the sales increase well exceeds growth in our markets where global light vehicle and access markets were up 1% to 2% for the year, demonstrating that Linamar's growth continues to drive from excellent market share expansion.

I think this is a really critical point in this timeframe as market concern around cheap [ph] auto volumes. First, I don't agree we're at cheap [ph] auto in North America.

We're still seeing production growth over the next couple of years, according to the industry forecasters and the reality of sales and production numbers. But regardless, our growth at Linamar does not come from market growth.

Of course it impacts mature business if market volumes contract, but we're strongly growing market share in every region, which is the primary driver of our growth. It would absolutely be our intent, even in a scenario of flat or down volumes, still grow at Linamar.

Earnings saw another fantastic level of growth in the quarter with net earnings up 33% over last year to $95.3 million or $1.46 per share. This took us to full year earnings of $436.7 million or $6.71 per share, an outstanding growth level of 36%, and another record for us at Linamar, the fourth consecutive year of record earnings.

Net earnings as a percent of sales in Q4 were 7.7%, and for the year, 8.5%, remaining in a very strong overall level, as expected, of 8% to 8.5%. We continue to run well above the top end of what we consider our normal net margin range of 5% to 7%, thanks to continued control of launch costs, great results from lean initiatives, a strong performance of Skyjack, and a favorable mix of business.

We believe these positive factors will continue into 2016 with very similar margin performance expected for this year as seen last year overall and on a segmented basis. We see results in net margins for 2016 again in the range of 8% to 8.5%.

Coupled with the sales growth I will shortly, driving both out of organic growth and our Montupet acquisition, I am confident of saying we will again enjoy double-digit earnings growth in 2016 as targeted. Earnings growth continues to drive solid performance in return on capital employed and return on equity, 24% and 22%, respectively, for the year, a fantastic result that again exceeds our 20% goal.

We're very proud of this industry-leading performance in shareholder return. Investing in our future continues to be a priority for us at Linamar.

In the fourth quarter we saw very strong cash flows which were used to invest in CapEx for launching programs. CapEx in the quarter was $100 million or 8% of sales, up a little over the last few quarters as expected.

That trend will continue over the next couple of quarters. That took our full year expense for 2015 to $342 million or 6.6% of sales, up slightly as a percent of sales from last year.

In 2016, expect CapEx to be back in the 8% to 10% range we normally guide to. Investment in acquisitions in 2015 was $109 million and in 2016 will of course be much higher due to the success of our Montupet acquisition.

Our balance sheet remained strong at yearend despite these investments with net debt to EBITDA ending the year well below 1 and cash available for growth sitting at close to $925 million. Of course, expect leverage to pop up in Q1 due to Montupet, but it is our target to bring it back down under 1 within 12 to 18 months.

In North America, content per vehicle for the quarter was $155.08, up 18% compared to last year, thanks to both higher content on growing platforms [inaudible] customers and our new forging business. Our Q4 automotive sales in North America were up 21% over a year ago, reaching $688 million, compared to $570 million last year, in a market that was up 2% in production volume.

Linamar's trend line for content per vehicle growth in North America has been consistently positive over the past several years. In Europe, content per vehicle for the quarter was $40.02, nearly double last year's levels, thanks to our new forging acquisition and other business launches.

Our Q4 automotive sales in Europe were also nearly double Q4 a year ago, reaching $204 million compared to $107 million last year, in a market that was up 5% in production volume. Business in hand [ph] in Europe, including various launching programs and acquisitions, is expected to more than double 2015 levels over the next four years, driving meaningful content growth for us.

In Asia Pacific, content per vehicle for the quarter was $6.75, up 14% from last year. Vehicle production levels were $12.2 million in the quarter, up 6%, which resulted in Q4 automotive sales in Asia Pacific up 20% compared to last year, to a total of $82.1 million.

In Asia, booked business will see sales increase by more than 50% from their 2015 level in the next four years. Other sales were up 4% in the quarter at $268 million, compared to $258 million last year, due to growth at Skyjack, which was tempered by slower off-highway market sales.

Turning to market outlet, we're seeing a positive outlet moderate growth in most of our markets globally. So the global light vehicle business forecast is for 3.2% production growth globally this year.

Predictions are for growth in light vehicle volumes in North America and Asia, and more moderate growth in Europe to 18.2 million, 46.6 million, and 21.2 million vehicles, respective. That represents growth of 4.2%, 3.9% and 1.7% in North America, Asia and Europe, respectively, over 2015.

Industry experts are predicting on-highway medium heavy truck volume to grow globally this year, up 4.5%, 3.2% and 6.5% in North America, Europe and Asia, respectively. The outlook for North America is more positive than it was last quarter in both passenger car and commercial truck, which has certainly been validated with a strong start to the year so far.

These customers are pulling strongly and showing no signs of slowing down. Off-highway medium duty and heavy duty volumes continue to be soft, with no indication of pick-up just yet.

Turning to the access market, 2015 was another solid year for both the industry and Skyjack. Total units globally in the market increased 8%, mainly from increased [inaudible] units, whereas Skyjack unit growth hit 13%, indicating another year of excellent market share growth, which of course show very strong performance for the business.

Outlook in the industry remains positive, with our expectation for continued growth in the global aerial work platform market of 5% to 10% this year. Outlet has softened slightly from last quarter, thanks to a positive start to the year than originally expected for our larger national customers specifically, although notably we see continued growth with our independent customers in the double digits.

Despite that soft start on the national side, industry fundamentals still appear strong. Rental associations continue to predict growth in North America of 5% to 10% and in Europe of up to 5%.

Non-residential construction starts were up 13% over prior year January and asset utilization levels of rental equipment continue to show an indication for additional growth. We're of course cautious given volatile markets and the impact that they're having on behavior, but feel that the fundamentals that drive growth in this market are positive.

In addition, it's our goal to continue to outperform the market through continued market share growth globally and specifically in our boom and telehandler lines. It is our target to drive double-digit growth in this business again this year and we feel good about our ability to do that.

Skyjack's strategy continues to be global growth and product line expansion to drive increased market share in all products and regions, and the team is executing very well on that strategy. Our target is to see Skyjack hit $1 billion in sales by 2020 and we're well on our way to that with the performance this year.

Turning to new business, we continue to see solid levels in new business wins and a strong book of business being quoted. Q4 was a particularly strong quarter for us.

Launching business continues to be a significant driver of substantial growth for us. We now have 169 programs in launch at Linamar, representing nearly $3.8 billion of annual sales at peak.

Last year we saw these launching programs and others add more than $560 million to our top line. Look for ramping volumes on launching transmission engine and driveline platform to reach 30% to 40% of mature levels this year.

Sales last year on these programs were $830 million. Note, $175 million of programs shifted from launch to production last quarter, which does give you an indication of how strong new business wins were in the fourth quarter.

This means, depending on industry volumes, programs currently in launch will add a total of another $500 million to $600 million to our top line in 2016. In addition, of course, we have growth from our successful acquisition of Montupet.

Average analyst estimates pre-acquisition for 2016 sales for Montupet were EUR548 million, with EUR115 million of EBITDA. As noted, Skyjack is targeting double-digit growth again this year as market share penetration continues in a market that continues to grow.

Temper that growth with the loss of business that naturally end each year, noting to expect somewhat near the low end of our normal range of 5% to 10% in 2016 and normal productivity give-back [ph] to get an estimate for sales for this year. Clearly, given the level of launches, acquisitions and market conditions, we're expecting to again see solid sales growth at Linamar this year in the double digits.

With margins staying strong as discussed, strong sales growth, we'll drive solid earnings growth as well, also in the double-digit level. We target double-digit top and bottom line growth each year at Linamar and feel very confident in our ability to deliver that based on launching business and expected margin performance.

New business wins are of course also filling in growth for us in the midterm as well. At this point we are looking at nearly $7.7 billion in booked business for 2020, based on current industry volume forecasts layered with new business wins and acquisitions and after adjusting for business leaving.

I'd like to highlight a couple of our more interesting wins this quarter. First, we had another great quarter in new business wins for camshaft programs.

We picked up another significant program for one of our European plants. This takes our total cam wins for the year to $170 million of annual sales, which is fantastic, and really cementing our global leadership in this key product.

We had a significant win of a package of components for Asia, representing nearly $70 million in annual sales altogether. We will be building a new facility to house this program in the western part of China starting this year.

In an important strategic win, we won a program for a helical gear machining program with a Japanese OEM. This was a huge win for us after many months of intense engineering and sales work with this customer.

Gears are among the most complex and difficult to manufacture parts in the vehicle, and we are really proud to have secured the confidence of this customer for the program. Again, on the gear side, we also picked up a program for gears for a CBT transmission in Europe.

The combination of these two gear programs represents in aggregate about $40 million in annual sales and takes our total wins in gears in 2015 to nearly $100 million. Our gear business is important to continue to grow.

It's a vital part of every vehicle architecture, whether electric, hybrid or traditional internal combustion engine, which makes gears a key part of our strategic growth plans. Today our annual level of booked sales for gears is set to reach more than $650 million a year, including our forged gear business, and it's growing every day, which is fantastic.

Speaking of electric and hybrid vehicles, we have two interesting development projects underway for electrified light commercial delivery vehicles. One is going on in Canada and the other in the U.S., which we've recently had Department of Energy funding approved for.

We are excited about developing products for both the electric and hybrid vehicle markets in order to expand our growth potential into these dynamic new markets. Turning to our strategic update, you will see in our press release announcing a successful tender for 100% of the outstanding shares of voting rights of Montupet SA.

This was an important step -- next step in the development of our light metal casting strategy. We have our team working closely with the Montupet leaders as we work through the integration of our operations.

As a reminder, Montupet specializes in the design and manufacture of gravity and low-pressure die cast aluminum components for the automotive industry, mainly aluminum cylinder heads, and the company is recognized as a leading player in this field. Linamar of course is a global leader in the machining of cylinder heads, both rough machines and fully-machined ensembles.

Together we'll provide our customers with collaboratively designed products to optimize lightweight solutions and offer an integrated one-stop shopping approach to manufacturing, to minimize logistics costs and maximize quality. Together we will have enormous opportunity to penetrate the significant and opportunistic cylinder head market estimated at more than $16 billion of global market potential.

We're also looking to grow their capabilities in structural components that complements the capabilities in our GF-Linamar JV for large high-pressure die cast aluminum components. Speaking of our JV, planning is proceeding very well with GF Automotive.

We recently announced the decision to locate our joint venture foundry in Ashville, North Carolina, close by our existing two machining facilities in the region. We're targeting startup production mid next year at this greenfield site.

Construction is planned to start within the next several weeks. Light metals are a key element in lightweighting vehicles to drive lower emissions and better fuel economy, and a key element in our strategy for driving innovation in the vehicle.

We're excited about the progress in the light metal area and look forward to bringing both the Montupet operations and the GF JV into the Linamar family. In other areas of operations, our plants continue to perform extremely well both on mature business metrics and in terms of launch.

Our forging business continues to perform expectations financially, strategically and technically. Our launching plants in India, China, North Carolina and Guelph are also performing to plan.

So with that, I'm going to turn it over to Dale to lead us through a more in-depth financial review. Dale?

Thank you, Linda. Good afternoon everyone.

As Linda noted, Q4 was another solid quarter for sales and earnings growth, with sales reaching $1.24 billion, which resulted in strong net margins of 7.7%. The fourth quarter finished off another record year with sales of $5.2 billion and net margins of 8.5%.

For the quarter, sales were $1.24 billion, up $240 million or 24% from $1 billion in Q4 2014. For 2015, sales also increased 24% over 2014 to reach $5.2 billion.

Operating earnings for the quarter were $131.4 million. This compares to $101.1 million in Q4 2014, an increase of $30.3 million or 30%.

For 2015, operating earnings increased 33.4% for 2014 to reach $597 million. Net earnings increased by 32.7% from the fourth quarter 2014 to reach $95.3 million.

For 2015, net earnings were $436.7 million, compared to $320.6 million in 2014, which represents a 36.2% increase. Net earnings per share for the quarter increased $0.35 or 31.5% from the fourth quarter 2014 to reach $1.46.

For the full year, net earnings per share were $6.71, an increase of 35.6% or $1.76 per share. Included in net earnings for the quarter was a foreign exchange gain of $6.6 million caused by the revaluation of our balance sheet which was comprised of a $6.3 million gain due to the revaluation of our operating balances and a $300,000 gain due to the evaluation of our financing balances.

For 2015, the foreign exchange impact was a gain of $13.1 million, which is made up of a $10.6 million gain from the evaluation of our operating balances and a $2.5 million gain from the evaluation of our financing balances. The FX gain impacted the fourth quarter's EPS by $0.07 and impacted the full year by $0.15.

From a business segment perspective, the Q4 FX gain due to revaluation of operating balances of $6.3 million was a result of $100,000 gain -- or sorry, $100,000 loss in powertrain/driveline and a $6.4 million gain in industrial. The full year FX gain of $10.6 million was a result of a $6.9 million loss in powertrain/driveline and a $17.5 million gain in industrial.

Further looking at the segments, sales for powertrain/driveline increased by $220.6 million or 25.1% in Q4 2015, compared to Q4 2014, to reach $1.1 billion. The sales increase in the fourth quarter 2015 was impacted by favorable changes in the foreign exchange rate, additional sales from the acquisition of reporting businesses and launching programs in North America and Europe.

In 2015, powertrain/driveline sales increased $830.9 million or 23.9%, to reach $4.3 billion. The growth is a result of similar factors that impacted the quarter.

Q4 2015 operating earnings for powertrain/driveline were higher by $24 million or 27.6% over Q4 2014. In Q4 2015, powertrain/driveline experienced earning improvements as a result of increased launch volumes, favorable changes in foreign exchange rates across multiple currencies, and earnings from our forging business, partially offset by increased management in sales costs supporting our growth.

If we remove any foreign exchange gains or losses related to the revaluation of our operating balances, the adjusted operating earnings for powertrain/driveline would have been $111.2 million for the quarter, compared to $84.2 million in the fourth quarter 2014, a 32.1% improvement. In 2015, powertrain/driveline's operating earnings increased $103.1 million or 30.5%, to reach $440.8 million.

The growth is as a result of similar factors that impacted the quarter. If we remove any foreign exchange gains or losses related to the balance sheet revaluations, then the adjusted operating earnings for powertrain/driveline would have been $447.7 million for the year compared to the $338.7 million in 2014, which represents a 32.2% improvement.

Turning to industrial, sales increased 15.8% or $19.4 million to $122.5 million in Q4 2015 from Q4 2014. The sales increase was due to the favorable changes in foreign exchange rate, the stiffening [ph] market share growth in booms in North America, Europe and Asia, market share growth in scissors in Asia, market share growth for telehandlers in North America, partially offset by somewhat lower sales in scissors in North America.

In 2015, industrial sales increased $159.9 million or 23.1%, to reach $852.2 million. The growth is as a result of similar factors that impacted the quarter.

Industrial operating earnings in Q4 2015 increased $6.3 million or 45% over Q4 2014. The increase in industrial operating earnings was predominantly driven by the favorable exchange rate, the increased volumes, partially offset by management and sales costs supporting the growth.

Removing any foreign exchange gains or losses related to the revaluation of our operating balances, the operating earnings for industrial would have been $13.9 million for the quarter compared to $13.5 million fourth quarter 2014, 3% improvement in operating earnings. In 2015, industrial operating earnings increased $46.5 million or 42.4%, to reach $156.2 million.

The growth is as a result of similar factors that impacted the quarter. If we remove any foreign exchange gains or losses related to the balance sheet revaluations, then the operating earnings for industrial would have been $138.7 million for the year compared to $107.1 million in 2014, which represents a 29.5% improvement.

Returning to the overall Linamar results, the Company's gross margin percent increased to 15.9% in Q4 2015 from 15.2% in Q4 2014. The gross margin in the fourth quarter 2015 increased by $45.1 million due to the favorable changes in the foreign exchange rates, the increased volumes in both segments, and the earnings related to our new forging businesses.

For the full year, gross margin was 16.5%, compared to 16.9% in 2014, and the same factors that impacted the quarter also drove the increased margin for the full year. Cost of goods sold amortization expense for the fourth quarter was up $7.6 million from the fourth quarter of 2014.

COGS amortization as a percentage of sales decreased to 5.6% of sales as compared to 6.1% in Q4 2014, which represents the improved utilization of our fixed assets as a result of the increased volumes. Selling, general and administration costs increased to $72.4 million from $54.2 million in Q4 2014, an increase as a percent of sales to 5.8% from 5.4% when compared to Q4 2014.

The increase on a dollar basis was mainly a result of increased management and sales costs supporting the growth, additional costs from acquired and expanded facilities, and costs associated with the acquisition of Montupet. For 2015, the SG&A as a percent of sales remained flat at 5.2%.

Finance costs decreased $2 million from Q4 2015 to Q4 2014 to $2.8 million, due to the interest earned on the higher levels of long-term finance receivables, partially offset by interest expense incurred in Europe as a result of the acquisition of our forging businesses. As a result, the consolidated effective interest rate for Q4 2014 was flat at 4.2% compared to Q4 2014.

The effective tax rate for the fourth quarter of 2015 was 25.9%, compared to 25.5% in the same quarter 2014. The full year 2015 effective tax rate remained flat at 24.8%.

Effective tax rate for Q4 2015 was increased due to the downward adjustments recognized in Q4 2014 related to the revaluation allowances in Mexico, as well as U.S. and European adjustments tax reserves.

These adjustments did not re-incur in Q4 2015. The effective tax rate was decreased due to the more favorable mix of foreign exchange tax rate -- foreign tax rates in Q4 2015 compared to 2014, and decreased those adjustments related to the current tax of prior years that were recognized in Q4 2015.

We are expecting the effective tax rate of 2016 to be similar to 2015 rates and to be in the range of 24% to 26%. Linamar's cash position was $339 million on December 31, 2015, an increase of $135 million compared to December 30, 2014.

Fourth quarter 2015 generated $266 million in cash from operating activities. Net debt to capitalization remained flat at 21.4% and continues to be well within our range -- our target range of 35%.

Net debt to EBITDA decreased to 0.2 times during the quarter from 0.4 times in Q4 2014. The amount of available credit on our syndicated revolving credit facility was $586 million at the end of the quarter.

To recap, Linamar enjoyed a terrific quarter of strong sales growth and earnings growth in Q4 to finish off another record year for Linamar. Sales are up 24% for both the quarter and the year.

The strong sales led to earnings performance in both segments, resulting in net earnings improving by 33% for the quarter and 36% for the full year. That concludes my commentary and now we'd like to open up for questions.

Hi, good afternoon. Just first on Skyjack.

It looks like, if I'm not mistaken, organic sales are roughly flat for the quarter. Is that right?

Well, sales were up for the quarter if you look at the segment around 15%, 16%. So I wouldn't call that flat.

No, no. I guess with FX.

Oh, I see. Yeah.

So I mean FX obviously did play a role in the sales growth.

Okay.

But even within the FX, there was -- sales was still up.

Yeah, absolutely.

Okay. So if I look at your guidance for next year, the 5% to 10%, and sort of kind of look at what some of the competitors are saying and some of the national rental companies' CapEx guidance, I mean there's obviously two different pictures.

Could you just help us bridge the gap, understand, to explain, maybe help bridge the gap on the difference, just how you're seeing the growth versus what they're saying, whether it's end-market exposure, you mentioned some gain share with independents? Just anything you can sort of help us to reconcile the difference.

Yeah, sure. I mean we're gathering intelligence from some of the figures that I quoted in my comments.

So, you know, national rental association prediction for North America and for Europe are right in that ballpark, right? I mean, 5% to 10% in North America and up to 5% in Europe, is what the national associations themselves are predicting for 2016.

So it's a little confusing to ask why some of our competitors are suggesting that the market is going to be down this year. We do agree that Q1 is starting out a little softer, because the national accounts are putting on hold CapEx buying, but to me it's not so much a cancellation and more of a delay.

I mean from what we're hearing from them, they are planning on upping their Q2, Q3 purchases, so. And then we look at other fundamentals like construction activity, up 13% in January over last year.

I mean that's a key indicator for the market. We're looking at utilization levels which are in the 70% range and up, which is typically a tipping point at which you see continued purchases.

So I think a lot of the fundamentals are in place. The rental houses are a little soft in the first quarter, but saying that they're going to continue to buy.

So I mean, we did soften up our forecast for the year a little bit. We're saying 5% to 10% is the current outlook for the market.

I think last quarter we said 10% to 15%. So we're down a little from that.

So I agree the outlook is a little bit softer. But I absolutely still think that we're going to see growth.

We certainly are expecting to grow our market share, which should again drive double-digit growth for us. They may be looking at their own business and potentially market loss because, if we're gaining market share, that's who we're gaining it from.

So perhaps they're taking that into consideration when they're looking at the markets as well. But I mean these are the figures that we're seeing.

Yeah. I think just to add, maybe the product portfolio that we're offering is expanding as well.

So we are more of a market taker of share, as Linda was stating. But I think again, looking at this, we always are looking at four different things.

We look at the rental, the big rental companies, we look at the independents, the rest of the world, and the service parts side. And then we look at the weekly indicators, as Linda said, the fleet utilization which is in a really good sweet spot, we look at order intake for the upcoming quarter, which is starting to come now from some of the bigger rentals, and just the day-to-day interface with the customers which is very positive.

So if some of these guys had toned down their view, I mean it could be an opportunity for us as well to capture more share. So again, we don't see that type of negative side.

We see a fairly positive outlook.

Okay. I don't know if you have this level of granularity, but just Skyjack's exposure maybe to non-res construction versus more industrial, oil and gas type business?

Just --

The link is to non-residential construction.

Yes.

That's the primary link.

Right. Okay.

Maybe just one more question. I'm just curious, just given where the stock is trading, I'm just curious if you guys could give any consideration to a buyback.

Well, not at this time. I mean our primary utilization for cash is get repayment given the acquisition of Montupet and the impact on debt levels and leverage in the first quarter.

So, definitely looking to do that first before we would look to do anything else.

Sure. Thank you very much.

We feel confident that, given strong results of the fourth quarter and our very positive outlook going forward, that we should see the share price naturally reflect that performance.

Okay. Thank you.

In your -- on the Skyjack business, in your comments you said that, while the booms and telehandlers were stronger, the scissors were weaker. So I just wanted to get some insight on why you're seeing the weaker scissors sales.

Is it just the category is down or just you have too much market share and you're losing share? Anything you can add?

Yeah. I mean it wasn't a major factor.

I mean it was, you know, somewhat softer in the fourth quarter. We had a customer who decided to do some vertical integration and bought a scissor lift company.

So, obviously they're going to make their own now instead of buying from us, and we felt a little bit of impact from that situation specifically. But I don't feel like it's fundamental in the market or anything significant to be concerned about.

Yeah, I agree, Peter. I think that the fundamentals of our scissor are paramount in the industry.

And I think what Linda said is one customer basically decided to do it themselves. So we don't see any drawback from that going forward.

Okay. In your MD&A, for both of your segments, you talked about increased management and sales costs.

And I'm just wondering, is -- was that just kind of boilerplate language or is there some change in the way you're managing the business that would have caused you to incur those costs?

No change, Peter. I mean we acquired a forging business, there's additional overhead that comes along with that.

We're growing our overall business. We have new plants launching in a few different places, each one of those adds infrastructure.

I mean on a dollar basis it's an increase, but as a percent of sales it's not. So it's not something that should really be catching your attention.

If you're growing your business, you're kind of naturally going to be growing your management and sales box.

Okay. And on dual-clutch transmissions, which is going to have a lot of growth for the foreseeable future, where is Linamar positioned on supplying to do a clutch transmission?

Are you talking about in Europe? Because in North America it most certainly is not a growing area.

I meant Europe and Asia.

Right. So we actually have quite a bit of experience in the dual-clutch area.

We manufacture a significant amount of gear products for dual-clutch transmissions, we have here in North America and also have lots of opportunities that we see that we -- either one business owner are quoting in Europe and Asia.

Yeah, both are true, like in Europe and Asia that's ramping up and we're getting a lot of requests because we've had customers have seen what we've done here in North America on dual-clutch gears, the complicated gears that we do in a couple of plants. So a lot of quoting activity in both the regions of Asia and Europe right now.

Yes. So I think it's interesting but I have to say I don't see it being a dominant technology in either of those marketplaces.

So, of course we want to have, and we do have, huge content potential in those products, but they are not at all forecast to be dominant technologies.

Okay. And lastly, just you announced that you had a big award package of parts in Asia and you're going to be building a new facility.

I'm just trying to count, is this going to be your fourth China facility?

That's correct.

And what's the timeline from that in terms of breaking ground, start of production?

Yeah, breaking ground probably in the second quarter of this year. And we would probably start production on a current program about July next year, July, August next year.

And can you just give me an update on where you are on the third plant? I believe that's ramping now.

Yes. Construction is complete.

We've got a small project running out of there now. And then we have a major program that's going to be launching --

Late 2017, to do the [inaudible] and then ramping up through 2018.

Right. So, about a year from now.

But we've got some sales flowing through from a small project to get things rolling in the plant.

Okay. Thanks very much.

Yeah, good evening everyone. I had a couple of housekeeping items if I could first.

So I did the math correctly, CapEx would be somewhere between $550 million and $600 million in 2016. Is that in the zone?

Yeah. It will be in that 8% to 10% range of sales, so I think is a good estimation.

Okay. And what is the pro forma debt and cash position now that Montupet is closed?

Yeah. So I mean we'll obviously be disclosing all the details around that come Q1.

But as I was mentioning in my comments, we do expect that the leverage levels to get back down under 1 within 12 to 18 months. So we are expecting a pretty quick de-levering, even with leverage having popped up to I guess 1.5 on acquisition.

Okay. And then just if I could just have a quick follow-up on Skyjack.

So if I'm not mistaken, I think United Rental's commentary had been around the replacement cycle had been quite strong and they just saw that softening versus the other drivers that you'd mentioned being dominant for yourself, but replacement being the key driver to their growth CapEx last year. So I guess what you're saying is, yes, replacement is a point for the national players, but the non-res construction and the other factors are more than enough to get you the revenue growth in 2016, is that the takeaway?

Yeah. I mean if -- we're not just relying on that.

We're relying, as Jim was saying, on actual discussions that we're having with these customers who were telling us that they're going to be buying more this year than last.

Yeah. And I think again the intent would be monitoring it very closely, but again the drivers that we talked and we looked at from their side is fleet utilization.

So that's very, very important. And then the second is the age of the fleet.

And the ages of the fleet are coming down. I mean, telehandlers, scissors on fleet utilization and age are coming down.

Booms are probably about where they were last year. But those are really key drivers.

Fleet utilization goes up and their ages coming down, they've got to replace. So again, but overall the key is talking to the customer and starting to see the order intake, which we're seeing a little bit of that happening now with the bigger rental companies.

One quick follow-up. Is the broader product line a bigger driver than the lower Canadian dollar in terms of driving those share gains?

Yeah, I mean, absolutely we've got new products that we're rolling out fairly consistently on the boom and telehandler side, which is every new product that we launch is getting us another potential area of growing market share. So that's been by far the biggest driver of our growth.

Thanks very much.

Hi. Thanks for letting me back in.

Just on the Montupet, I don't know if you want to comment, but it looks like they had a very good sales quarter in Q4. I was just curious if you could talk to the profitability performance of that business in Q4.

Well, it was to plan, I can say that. It was what we had anticipated, both the sales and earnings side.

Okay.

One thing to keep in mind, Mark, is they're still a public company at that point. So until they close, we have to be careful what we could say.

Right, right.

Yeah. And I mean, don't forget, Montupet is a very profitable company.

I mean they perform at very strong levels. The EBITDA in the range of 20%, which is fantastic.

It's totally related to their technical expertise and their -- and the levels of investment in the company. So we're really pleased to see them continuing to perform strongly.

And I think the first few months of integration here, the signals are really good, really positive about sales growth and earnings as well.

Okay. And maybe just a few housekeeping, I think there's some numbers I missed.

Linda, could you throw the number for 2020 for net business?

$7.7 billion.

Okay. And Dale, I'm not sure if you mentioned, I think you mentioned some one-time costs in the quarter, I guess most specific to Montupet.

Did you put a number around that?

No. But it wasn't a huge material impact.

Okay. All right.

Thank you very much.

Okay, great. Well, to conclude this evening, I'd like to leave you with three key messages.

First, we're really proud of the financial performance in 2015, with another record year in sales and earnings and growth again, more than 20%, driving excellent returns. Second, really happy with careful cash management that's keeping the balance sheet very strong.

Very little leverage levels means the Montupet acquisition will be easily absorbed and the balance sheet quickly delevered. Thanks to the continued strong performance expected.

And finally, 2015 marked an impressive year in terms of strategic progress, with three significant deals completed, cementing our position in high-precision steel forging and light metal castings, and complementing key priority products for us such as gears, cylinder heads and cylinder blocks. Thanks very much and have a great evening.