Lear Reports Improved Second Quarter Financial Results and Increases 2011 Outlook and Sales Backlog
- Net sales of
$3.7 billion , up 21% from a year ago - Core operating earnings of
$228 million , up 20% from a year ago - 8th consecutive quarter of year-over-year earnings improvement
- Free cash flow of
$121 million - Diluted net income per share of
$1.65 - Increased full year outlook for sales, core operating earnings and free cash flow
- Continuing to win new business and diversify sales
- New
$500 million credit facility provides increased liquidity and financial flexibility
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Business Conditions
In the second quarter, global industry production declined 1% from a year ago, reflecting primarily production disruptions impacting the Japanese OEMs following the earthquake and tsunami in March. Production in
"Lear's positive momentum continued in the second quarter. We were able to increase sales and earnings at a faster rate than industry production in our major markets. Both of our business units are performing well and continue to win new business. Our balance sheet is exceptionally strong, and with
Second Quarter 2011 Financial Results
For the second quarter of 2011, Lear reported net sales of
In the Seating segment, net sales were up 19% to
In the second quarter of 2011, free cash flow was
During the second quarter, Lear increased the size of its revolving credit facility to
Full Year 2011 Financial Outlook
Lear's 2011 outlook is based on industry vehicle production of 12.7 million units in
Lear expects 2011 net sales in the range of
Pretax income before restructuring costs and other special items is estimated to be in the range of
Pretax operational restructuring costs in 2011 are estimated to be about
Three-Year Sales Backlog
The Company continues to win new business globally, and its three-year sales backlog for 2011-2013 has increased to
Webcast Information
Lear will webcast a conference call to review the Company's second quarter 2011 financial results and related matters on
Non-GAAP Financial Information
In addition to the results reported in accordance with GAAP included throughout this press release, the Company has provided information regarding "income before interest, other (income) expense, income taxes, restructuring costs and other special items (core operating earnings)," "pretax income before restructuring costs and other special items," "adjusted net income attributable to Lear," "adjusted diluted net income per share attributable to Lear (adjusted earnings per share)," "tax expense excluding restructuring costs and other special items" and "free cash flow" (each, a non-GAAP financial measure). Other (income) expense includes, among other things, equity in net income of affiliates, non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities and gains and losses on the sales of assets. Adjusted net income attributable to Lear and adjusted earnings per share represent net income attributable to Lear and diluted net income per share attributable to Lear, respectively, adjusted for restructuring costs and other special items, including the tax effect thereon, and other discrete tax items. Free cash flow represents net cash provided by operating activities less capital expenditures.
Management believes the non-GAAP financial measures used in this press release are useful to both management and investors in their analysis of the Company's financial position and results of operations. In particular, management believes that core operating earnings, pretax income before restructuring costs and other special items, adjusted net income attributable to Lear, adjusted earnings per share and tax expense excluding restructuring costs and other special items are useful measures in assessing the Company's financial performance by excluding certain items that are not indicative of the Company's core operating performance or that may obscure trends useful in evaluating the Company's continuing operating activities. Management also believes that these measures are useful to both management and investors in their analysis of the Company's results of operations and provide improved comparability between fiscal periods. Management believes that free cash flow is useful to both management and investors in their analysis of the Company's ability to service and repay its debt. Further, management uses these non-GAAP financial measures for planning and forecasting future periods.
Core operating earnings, pretax income before restructuring costs and other special items, adjusted net income attributable to Lear, adjusted earnings per share, tax expense excluding restructuring costs and other special items and free cash flow should not be considered in isolation or as a substitute for pretax income, net income attributable to Lear, diluted net income per share attributable to Lear, cash provided by operating activities or other statement of operations or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and, therefore, does not reflect funds available for investment or other discretionary uses. Also, these non-GAAP financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies.
For reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, see the attached supplemental data pages which, together with this press release, have been posted on the Company's website through the investor relations link at http://www.lear.com.
Given the inherent uncertainty regarding special items and other expense in any future period, a reconciliation of forward-looking financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP is not feasible. The magnitude of these items, however, may be significant.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results and liquidity. The words "will," "may," "designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of these forward-looking statements. The Company also may provide forward-looking statements in oral statements or other written materials released to the public. All such forward-looking statements contained or incorporated in this press release or in any other public statements which address operating performance, events or developments that the Company expects or anticipates may occur in the future, including, without limitation, statements related to business opportunities, awarded sales
contracts, sales backlog and ongoing commercial arrangements, or statements expressing views about future operating results, are forward-looking statements. Actual results may differ materially from any or all forward-looking statements made by the Company. Important factors, risks and uncertainties that may cause actual results to differ materially from anticipated results include, but are not limited to, general economic conditions in the markets in which the Company operates, including changes in interest rates or currency exchange rates; the financial condition and restructuring actions of the Company's customers and suppliers; changes in actual industry vehicle production levels from the Company's current estimates; fluctuations in the production of vehicles or the loss of business with respect to, or the lack of commercial success of, a vehicle model for which the Company is a
significant supplier; disruptions in the relationships with the Company's suppliers; labor disputes involving the Company or its significant customers or suppliers or that otherwise affect the Company; the outcome of customer negotiations and the impact of customer-imposed price reductions; the impact and timing of program launch costs and the Company's management of new program launches; the costs, timing and success of restructuring actions; increases in the Company's warranty, product liability or recall costs; risks associated with conducting business in foreign countries; competitive conditions impacting the Company and its key customers and suppliers; the cost and availability of raw materials, energy, commodities and product components and the Company's ability to mitigate such costs; the outcome of legal or regulatory proceedings to which the Company is or may become a party; the
impact of pending legislation and regulations or changes in existing federal, state, local or foreign laws or regulations; unanticipated changes in cash flow, including the Company's ability to align its vendor payment terms with those of its customers; limitations imposed by the Company's existing indebtedness and the Company's ability to access capital markets on commercially reasonable terms; impairment charges initiated by adverse industry or market developments; the Company's ability to execute its strategic objectives; changes in discount rates and the actual return on pension assets; costs associated with compliance with environmental laws and regulations; developments or assertions by or against the Company relating to intellectual property rights; the Company's ability to utilize its net operating loss, capital loss and tax credit carryforwards; the impact of any failure by
This press release makes reference to the Company's sales backlog. The Company's sales backlog reflects anticipated net sales from formally awarded new programs net of lost and cancelled programs. The calculation of the sales backlog does not reflect customer price reductions on existing or newly awarded programs. The sales backlog may be impacted by various assumptions embedded in the calculation, including vehicle production levels on new programs, foreign exchange rates and the timing of major program launches. Sales backlog assumes volumes based on the most recent
The forward-looking statements in this press release are made as of the date hereof, and the Company does not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof.
Lear Corporation and Subsidiaries | ||||
Condensed Consolidated Statements of Income | ||||
(Unaudited; in millions, except per share amounts) | ||||
Three Month | ||||
Period Ended | ||||
July 2, | July 3, | |||
2011 | 2010 | |||
Net sales | $ 3,676.3 | $ 3,039.3 | ||
Cost of sales | 3,329.7 | 2,746.5 | ||
Selling, general and administrative expenses | 119.2 | 112.8 | ||
Amortization of intangible assets | 7.2 | 6.6 | ||
Interest expense | 10.7 | 13.3 | ||
Other (income) expense, net | 4.1 | (22.5) | ||
Consolidated income before income taxes | 205.4 | 182.6 | ||
Income taxes | 19.7 | 17.3 | ||
Consolidated net income | 185.7 | 165.3 | ||
Net income attributable to noncontrolling interests | 8.2 | 5.5 | ||
Net income attributable to Lear | $ 177.5 | $ 159.8 | ||
Diluted net income per share attributable to Lear | $ 1.65 | $ 1.48 | ||
Weighted average number of diluted shares outstanding | 107.4 | 108.1 | ||
Lear Corporation and Subsidiaries | ||||
Condensed Consolidated Statements of Income | ||||
(Unaudited; in millions, except per share amounts) | ||||
Six Month | ||||
Period Ended | ||||
July 2, | July 3, | |||
2011 | 2010 | |||
Net sales | $ 7,188.0 | $ 5,977.8 | ||
Cost of sales | 6,518.0 | 5,430.2 | ||
Selling, general and administrative expenses | 236.7 | 240.7 | ||
Amortization of intangible assets | 14.0 | 13.3 | ||
Interest expense | 14.0 | 32.3 | ||
Other income, net | (2.8) | (1.5) | ||
Consolidated income before income taxes | 408.1 | 262.8 | ||
Income taxes | 59.7 | 23.7 | ||
Consolidated net income | 348.4 | 239.1 | ||
Net income attributable to noncontrolling interests | 14.9 | 13.2 | ||
Net income attributable to Lear | $ 333.5 | $ 225.9 | ||
Diluted net income per share attributable to Lear | $ 3.09 | $ 2.09 | ||
Weighted average number of diluted shares outstanding | 107.8 | 108.0 | ||
Lear Corporation and Subsidiaries | ||||
Condensed Consolidated Balance Sheets | ||||
(In millions) | ||||
July 2, | December 31, | |||
2011 | 2010 | |||
ASSETS | (Unaudited) | (Audited) | ||
Current: | ||||
Cash and cash equivalents | $ 1,771.2 | $ 1,654.1 | ||
Accounts receivable | 2,279.7 | 1,758.4 | ||
Inventories | 657.6 | 554.2 | ||
Other | 529.7 | 418.8 | ||
5,238.2 | 4,385.5 | |||
Long-Term: | ||||
PP&E, net | 1,084.7 | 994.7 | ||
Goodwill | 651.6 | 614.6 | ||
Other | 564.5 | 626.3 | ||
2,300.8 | 2,235.6 | |||
Total Assets | $ 7,539.0 | $ 6,621.1 | ||
LIABILITIES AND EQUITY | ||||
Current: | ||||
Short-term borrowings | $ 2.5 | $ 4.1 | ||
Accounts payable and drafts | 2,311.0 | 1,838.4 | ||
Accrued liabilities | 1,073.0 | 976.0 | ||
3,386.5 | 2,818.5 | |||
Long-Term: | ||||
Long-term debt | 695.1 | 694.9 | ||
Other | 555.5 | 538.9 | ||
1,250.6 | 1,233.8 | |||
Equity | 2,901.9 | 2,568.8 | ||
Total Liabilities and Equity | $ 7,539.0 | $ 6,621.1 | ||
Lear Corporation and Subsidiaries | |||||
Supplemental Data | |||||
(Unaudited; in millions, except content per vehicle and per share amounts) | |||||
Three Month | |||||
Period Ended | |||||
July 2, | July 3, | ||||
2011 | 2010 | ||||
Net Sales | |||||
Europe | $ 1,525.3 | $ 1,297.5 | |||
North America | 1,269.7 | 1,034.4 | |||
Asia | 560.1 | 433.2 | |||
Rest of World | 321.2 | 274.2 | |||
Total | $ 3,676.3 | $ 3,039.3 | |||
Content Per Vehicle (1) | |||||
Europe | $ 325 | $ 275 | |||
North America | $ 408 | $ 329 | |||
Free Cash Flow (2) | |||||
Net cash provided by operating activities | $ 206.7 | $ 227.1 | |||
Capital expenditures | (85.7) | (41.6) | |||
Free cash flow | $ 121.0 | $ 185.5 | |||
Depreciation and Amortization | $ 64.3 | $ 57.1 | |||
Core Operating Earnings (2) | |||||
Pretax income | $ 205.4 | $ 182.6 | |||
Interest expense | 10.7 | 13.3 | |||
Other (income) expense, net | 4.1 | (22.5) | |||
Restructuring costs and other special items - | |||||
Costs related to restructuring actions | 3.4 | 12.2 | |||
Other | 4.0 | 4.1 | |||
Core Operating Earnings | $ 227.6 | $ 189.7 | |||
Adjusted Net Income Attributable to Lear (2) | |||||
Net income attributable to Lear | $ 177.5 | 159.8 | |||
Restructuring costs and other special items - | |||||
Costs related to restructuring actions | 3.4 | 12.2 | |||
Other | 4.0 | 2.6 | |||
Tax impact of special items and other net tax adjustments (3) | (19.7) | (15.7) | |||
Adjusted net income attributable to Lear | $ 165.2 | $ 158.9 | |||
Weighted average number of diluted shares outstanding | 107.4 | 108.1 | |||
Diluted net income per share attributable to Lear | $ 1.65 | $ 1.48 | |||
Adjusted earnings per share | $ 1.54 | $ 1.47 | |||
(1) Content Per Vehicle for 2010 has been updated to reflect actual production levels. | |||||
(2) See "Non-GAAP Financial Information" included in this press release. | |||||
(3) Represents the tax effect of restructuring costs and other special items, as well as several discrete tax items. The identification of these tax items is judgmental in nature and their calculation is based on various assumptions and estimates. | |||||
Lear Corporation and Subsidiaries | |||||
Supplemental Data | |||||
(Unaudited; in millions, except content per vehicle and per share amounts) | |||||
Six Month | |||||
Period Ended | |||||
July 2, | July 3, | ||||
2011 | 2010 | ||||
Net Sales | |||||
Europe | $ 3,050.2 | $ 2,553.1 | |||
North America | 2,476.6 | 2,022.0 | |||
Asia | 1,066.1 | 885.3 | |||
Rest of World | 595.1 | 517.4 | |||
Total | $ 7,188.0 | $ 5,977.8 | |||
Content Per Vehicle (1) | |||||
Europe | $ 317 | $ 274 | |||
North America | $ 379 | $ 333 | |||
Free Cash Flow (2) | |||||
Net cash provided by operating activities | $ 360.9 | $ 266.0 | |||
Capital expenditures | (156.2) | (76.4) | |||
Free cash flow | $ 204.7 | $ 189.6 | |||
Depreciation and Amortization | $ 125.8 | $ 115.6 | |||
Diluted Shares Outstanding at end of quarter (3) | 106,600,963 | 107,962,064 | |||
Core Operating Earnings (2) | |||||
Pretax income | $ 408.1 | $ 262.8 | |||
Interest expense | 14.0 | 32.3 | |||
Other income, net | (2.8) | (1.5) | |||
Restructuring costs and other special items - | |||||
Costs related to restructuring actions | 5.5 | 26.4 | |||
Other | 7.8 | 7.9 | |||
Core Operating Earnings | $ 432.6 | $ 327.9 | |||
Adjusted Net Income Attributable to Lear (2) | |||||
Net income attributable to Lear | $ 333.5 | $ 225.9 | |||
Restructuring costs and other special items - | |||||
Costs related to restructuring actions | 5.5 | 26.4 | |||
Gain related to affiliate transaction | (3.9) | - | |||
Other | 7.8 | 6.4 | |||
Tax impact of special items and other net tax adjustments (4) | (20.0) | (33.6) | |||
Adjusted net income attributable to Lear | $ 322.9 | $ 225.1 | |||
Weighted average number of diluted shares outstanding | 107.8 | 108.0 | |||
Diluted net income per share attributable to Lear | $ 3.09 | $ 2.09 | |||
Adjusted earnings per share | $ 2.99 | $ 2.08 | |||
(1) Content Per Vehicle for 2010 has been updated to reflect actual production levels. | |||||
(2) See "Non-GAAP Financial Information" included in this press release. | |||||
(3) Calculated using stock price at end of quarter. Diluted shares outstanding at end of quarter for 2010 has been restated to reflect the two-for-one stock split. | |||||
(4) Represents the tax effect of restructuring costs and other special items, as well as several discrete tax items. The identification of these tax items is judgmental in nature and their calculation is based on various assumptions and estimates. | |||||
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