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Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 26, 2005

LEAR CORPORATION

(Exact name of registrant as specified in its charter)
         
Delaware
(State or other jurisdiction of incorporation)
  1-11311
(Commission File Number)
  13-3386776
(IRS Employer Identification Number)
     
21557 Telegraph Road, Southfield, MI
(Address of principal executive offices)
  48034
(Zip Code)

(248) 447-1500
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 


TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
Item 9.01 Financial Statements and Exhibits.
SIGNATURE
EXHIBIT INDEX
Press Release issued January 26, 2005
Presentation Slides


Table of Contents

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition.

The following information is provided pursuant to Item 2.02 of Form 8-K, “Results of Operations and Financial Condition,” and Item 7.01 of Form 8-K, “Regulation FD Disclosure.”

On January 26, 2005, Lear Corporation issued a press release reporting its financial results for the fourth quarter and full year of 2004 and updating its earnings guidance for 2005. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

On January 26, 2005, Lear Corporation made available the presentation slides attached hereto as Exhibit 99.2 in a webcast of its fourth quarter and full year 2004 earnings call. Exhibit 99.2 is incorporated by reference herein.

The information contained in Exhibits 99.1 and 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Section 7 — Regulation FD

Item 7.01 Regulation FD Disclosure.

See “Item 2.02 Results of Operations and Financial Condition” above.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c)  
Exhibits

  99.1  
Press release issued January 26, 2005, furnished herewith.
 
  99.2  
Presentation slides from the Lear Corporation webcast of its fourth quarter and full year 2004 earnings call held on January 26, 2005, furnished herewith.

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Table of Contents

SIGNATURE

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

         
  LEAR CORPORATION,
a Delaware corporation
 
 
Date: January 26, 2005  By:   /s/ David C. Wajsgras    
    Name:   David C. Wajsgras   
    Title:   Senior Vice President and Chief Financial Officer   
 

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Table of Contents

EXHIBIT INDEX

     
Exhibit No.   Description
99.1
  Press release issued January 26, 2005, furnished herewith.
 
   
99.2
  Presentation slides from the Lear Corporation webcast of its fourth quarter and full year 2004 earnings call held on January 26, 2005, furnished herewith.

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exv99w1
 

Exhibit 99.1

FOR IMMEDIATE RELEASE

Anne Bork — Investor Relations
(248) 447-5914

Andrea Puchalsky — Media
(248) 447-1651

Lear Reports Fourth Quarter and Full Year Results

          Southfield, Mich., January 26, 2005 — Lear Corporation [NYSE: LEA], one of the world’s largest automotive interior systems suppliers, today reported financial results for the fourth quarter and full year of 2004 and updated earnings guidance for 2005.

Fourth Quarter Highlights:

•   Record net sales of $4.3 billion
 
•   Net income per share of $1.70 vs. $1.81 a year ago
 
•   Lear continues as the highest quality seat supplier to multiple automakers
 
•   Repurchased nearly 900,000 shares, bringing full year purchases to 1.8 million
 
•   Announced an increase in quarterly dividend on January 13th to $0.25 per share

          For the fourth quarter of 2004, Lear posted record net sales of $4.29 billion and net income of $123.0 million, or $1.70 per share. These results compare with net sales of $4.26 billion and net income of $132.4 million, or $1.81 per share, in the year earlier period.

          The increase in fourth quarter net sales from the prior year period reflects the addition of new business globally and the benefit of currency exchange, offset by lower industry production and unfavorable vehicle platform mix. The decline in fourth quarter net income per share compared to the prior year was driven primarily by the mix of sales and the impact of higher raw material prices.

          “Challenging industry conditions in both of our major markets had an adverse impact on our fourth quarter financial results,” said Bob Rossiter, Lear Chairman and Chief Executive Officer. “Our longer-term outlook, however, remains positive, supported by our $3.8 billion three-year sales backlog, solid financial position and strong operating fundamentals.”

          For the quarter, free cash flow was $86.6 million, reflecting the conversion of earnings and efficient working capital management. (Net cash provided by operating activities was $231.9 million. A reconciliation of free cash flow to net cash provided by operating activities is provided in the attached supplemental data page.)

(more)

 


 

2004 Full Year Results

          For the full year 2004, Lear reported record sales of $17.0 billion and net income of $422.2 million, or $5.77 per share, including a $0.20 income tax benefit primarily related to the settlement of prior years’ tax matters. These results compare with full year 2003 net sales of $15.7 billion and net income of $380.5 million, or $5.31 per share.

          The increase in net sales compared to 2003 reflects the addition of new business globally and the benefit of currency exchange, partially offset by unfavorable vehicle platform mix in our major markets. The improvement in net income per share reflects the impact of higher sales and operating efficiencies, as well as lower interest expense and income taxes, offset in part by less favorable vehicle platform mix and the impact of higher raw material prices.

          Free cash flow in 2004 was $317.3 million. (Net cash provided by operating activities was $675.9 million. A reconciliation of free cash flow to net cash provided by operating activities is provided in the attached supplemental data page.)

          In the latest J.D. Power Seat Quality Survey, Lear continues to rank as the highest quality manufacturer serving multiple customers. “I am pleased that we continued to maintain high quality and customer service levels and profitably grew our business in 2004,” Rossiter added. “Our record sales, driven by our strengthening backlog, demonstrate that our strategy to put our customers first is working.”

          Earlier this month, Lear increased its three-year sales backlog to $3.8 billion to reflect new business awards globally and announced a 25% increase in its quarterly cash dividend. (Information on the calculation of sales backlog is provided in the Forward-Looking Statements section of this news release.)

2005 Outlook

          For the first quarter of 2005, Lear expects net sales to be in the range of $4.3 to $4.5 billion, compared with $4.5 billion for the first quarter of 2004, primarily reflecting a less favorable industry production environment, offset in part by the addition of new business globally. Net income is expected to be in the range of $0.50 to $0.70 per share, compared with $1.24 for the first quarter of 2004. The decline in net income per share from a year ago primarily reflects the impact of higher raw material prices, as well as the less favorable production environment.

          For the full year, the industry production planning assumptions are 15.7 to 16.0 million units for North America and 18.3 to 18.6 million units for Europe. Net sales are expected to be $17.6 to $18.0 billion, compared with $17.0 billion for 2004. This increase primarily reflects the addition of new business globally. Net income is expected to be in the range of $5.00 to $6.00 per share.

          Full year capital spending is estimated to be in the range of $425 to $475 million, and free cash flow is expected to be in the range of $250 million, which includes

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the one-time adverse impact of changes in customer payment terms. (Information regarding anticipated financial results is provided in the Forward-Looking Statements section of this news release.)

          “We have a balanced long-term approach to creating shareholder value. In addition to providing our customers with the best service and quality in the industry, we plan to leverage our capabilities as a leader in automotive interiors to improve the value equation and grow sales by keeping our focus on the fundamental business drivers,” said Bob Rossiter. “Coupled with our commitment to maintain a strong balance sheet and return cash to shareholders, we are confident that we have the right strategy to make 2005 another successful year for our customers and shareholders,” Rossiter concluded.

          Lear Corporation, a Fortune 500 company headquartered in Southfield, Mich., USA, focuses on integrating complete automotive interiors, including seat systems, interior trim and electrical systems. With annual net sales of $17.0 billion in 2004, Lear is one of the world’s largest automotive interior systems suppliers. The Company’s world-class products are designed, engineered and manufactured by more than 110,000 employees in 34 countries.

          Lear’s news releases and other information, including certain financial and statistical information presented during its periodic earnings conference calls, are available on the Company’s website at www.lear.com. Lear will webcast live its fourth quarter earnings conference call through the Investor Relations link at www.lear.com at 9:00 a.m. (Eastern) on January 26, 2005. In addition, the conference call may be accessed by dialing 1-800-789-4751 (domestic) or 1-706-679-3323 (international). The audio replay will be available two hours following the call at 1-800-642-1687 (domestic) or 1-706-645-9291 (international) with the access code number of 2252895 and will be available until February 9, 2005.

Use of Non-GAAP Financial Information

          In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included throughout this news release, the Company has provided information regarding “free cash flow” (a non-GAAP financial measure). Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. The Company believes it is appropriate to exclude the net change in sold accounts receivable in the calculation of free cash flow since the sale of receivables may be viewed as a substitute for borrowing activity.

          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 free cash flow for planning and forecasting in future periods.

          Free cash flow should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other 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

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therefore, does not reflect funds available for investment or other discretionary uses. Also, free cash flow, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies.

          For a reconciliation of historical free cash flow to net cash provided by operating activities, see the supplemental data page which, together with this news release, has been posted on the Company’s website through the Investor Relations link at www.lear.com.

Forward-Looking Statements

          This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to, general economic conditions in the markets in which the Company operates, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers or suppliers or that otherwise affect the Company, the Company’s ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions, the outcome of customer productivity negotiations, the impact and timing of program launch costs, the costs and timing of facility closures or similar actions, increases in the Company’s warranty or product liability costs, risks associated with conducting business in foreign countries, competitive conditions impacting the Company’s key customers, raw material cost and availability, the Company’s ability to mitigate the significant impact of recent increases in raw material prices, the outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in free cash flow and other risks described from time to time in the Company’s Securities and Exchange Commission filings.

          This press release also contains information on the Company’s sales backlog. The Company’s incremental three-year sales backlog reflects: anticipated net sales from awarded new programs, less net sales from phased-out and cancelled programs. The calculation of backlog does not reflect customer price reductions on existing or newly-awarded programs. The three-year backlog may be impacted by various assumptions embedded in the calculation, including vehicle production levels on new and replacement programs, foreign exchange rates and the timing of program launches.

          In addition, the first quarter and full year 2005 per share earnings guidance is based on an assumed 74 million shares outstanding and includes 4.8 million shares related to our outstanding contingently convertible debt.

          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 them.

#  #  #

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Lear Corporation and Subsidiaries
Consolidated Statements of Income

(In millions, except per share amounts)

                 
    Three Months Ended  
    December 31,     December 31,  
    2004     2003  
 
               
Net sales
  $ 4,286.1     $ 4,255.3  
 
               
Cost of sales
    3,922.7       3,874.4  
Selling, general and administrative expenses
    146.2       144.8  
Interest expense
    43.9       41.9  
Other expense, net
    13.8       11.4  
 
           
 
               
Income before income taxes
    159.5       182.8  
Income taxes
    36.5       50.4  
 
           
 
               
Net income
  $ 123.0     $ 132.4  
 
           
 
               
Basic net income per share
  $ 1.82     $ 1.95  
 
           
 
               
Diluted net income per share
  $ 1.70     $ 1.81  
 
           
 
               
Weighted average number of shares outstanding — basic
    67.6       67.8  
 
           
 
               
Weighted average number of shares outstanding — diluted
    73.9       74.5  
 
           

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Lear Corporation and Subsidiaries
Consolidated Statements of Income

(In millions, except per share amounts)

                 
    Twelve Months Ended  
    December 31,     December 31,  
    2004     2003  
 
               
Net sales
  $ 16,960.0     $ 15,746.7  
 
               
Cost of sales
    15,557.9       14,400.3  
Selling, general and administrative expenses
    633.7       573.6  
Interest expense
    165.5       186.6  
Other expense, net
    52.7       52.0  
 
           
 
               
Income before income taxes
    550.2       534.2  
Income taxes
    128.0       153.7  
 
           
 
               
Net income
  $ 422.2     $ 380.5  
 
           
 
               
Basic net income per share
  $ 6.18     $ 5.71  
 
           
 
               
Diluted net income per share
  $ 5.77     $ 5.31  
 
           
 
               
Weighted average number of shares outstanding — basic
    68.3       66.7  
 
           
 
               
Weighted average number of shares outstanding — diluted
    74.7       73.3  
 
           

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Lear Corporation and Subsidiaries
Consolidated Balance Sheets

(In millions)

                 
    December 31,     December 31,  
    2004     2003  
ASSETS
               
Current:
               
Cash and cash equivalents
  $ 584.9     $ 169.3  
Accounts receivable
    2,584.9       2,200.3  
Inventories
    621.2       550.2  
Recoverable customer engineering and tooling
    205.8       169.0  
Other
    375.2       286.6  
 
           
 
    4,372.0       3,375.4  
 
           
Long-Term:
               
PP&E, net
    2,019.8       1,817.8  
Goodwill, net
    3,039.4       2,940.1  
Other
    513.2       437.7  
 
           
 
    5,572.4       5,195.6  
 
           
Total Assets
  $ 9,944.4     $ 8,571.0  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current:
               
Short-term borrowings
  $ 35.4     $ 17.1  
Accounts payable and drafts
    2,777.6       2,444.1  
Accrued liabilities
    1,202.1       1,116.9  
Current portion of long-term debt
    632.8       4.0  
 
           
 
    4,647.9       3,582.1  
 
           
 
               
Long-Term:
               
Long-term debt
    1,866.9       2,057.2  
Other
    699.5       674.2  
 
           
 
    2,566.4       2,731.4  
 
           
 
               
Stockholders’ Equity
    2,730.1       2,257.5  
 
           
 
               
Total Liabilities and Stockholders’ Equity
  $ 9,944.4     $ 8,571.0  
 
           

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Lear Corporation and Subsidiaries
Supplemental Data

(Unaudited; in millions, except content per vehicle data)

                 
    Three Months Ended  
    December 31,     December 31,  
    2004     2003  
Net Sales
               
North America
  $ 2,265.3     $ 2,391.9  
Europe
    1,721.7       1,626.9  
Rest of World
    299.1       236.5  
 
           
Total
  $ 4,286.1     $ 4,255.3  
 
           
 
               
Content Per Vehicle *
               
North America
  $ 605     $ 595  
Total Europe
  $ 379     $ 335  
Western Europe
  $ 409     $ 357  
 
               
Free Cash Flow **
               
Net cash provided by operating activities
  $ 231.9     $ 226.7  
Net change in sold accounts receivable
          107.2  
 
           
Net cash provided by operating activities before net change in sold accounts receivable
    231.9       333.9  
Capital expenditures
    (145.3 )     (161.4 )
 
           
Free cash flow
  $ 86.6     $ 172.5  
 
           
 
               
Depreciation
  $ 93.7     $ 87.1  
                 
    Twelve Months Ended  
    December 31,     December 31,  
    2004     2003  
Net Sales
               
North America
  $ 9,252.0     $ 9,394.2  
Europe
    6,643.8       5,642.6  
Rest of World
    1,064.2       709.9  
 
           
Total
  $ 16,960.0     $ 15,746.7  
 
           
 
               
Content Per Vehicle *
               
North America
  $ 588     $ 593  
Total Europe
  $ 354     $ 310  
Western Europe
  $ 379     $ 324  
 
               
Free Cash Flow **
               
Net cash provided by operating activities
  $ 675.9     $ 586.3  
Net change in sold accounts receivable
    70.4       298.1  
 
           
Net cash provided by operating activities before net change in sold accounts receivable
    746.3       884.4  
Capital expenditures
    (429.0 )     (375.6 )
 
           
Free cash flow
  $ 317.3     $ 508.8  
 
           
 
               
Depreciation
  $ 350.6     $ 321.8  
 
               
Basic Shares Outstanding at December 31,
    67,416,702       68,162,381  
 
               
Diluted Shares Outstanding at December 31, ***
    73,896,780       74,878,689  

*   Content Per Vehicle for 2003 has been updated to reflect actual production levels.
 
**   See “Use of Non-GAAP Financial Information” included in this news release.
 
***   Calculated using December 31 stock price.

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exv99w2
 

fast forward advance relentlessly world's leading automotive interior supplier R Fourth Quarter and Full Year 2004 Results and First Quarter 2005 Guidance January 26, 2005 Exhibit 99.2


 

Agenda Company Review Jim Vandenberghe, Vice Chairman Financial Review and First Quarter 2005 Guidance Dave Wajsgras, SVP and CFO Q & A


 

Company Review


 

Highlights - Full Year 2004 Record net sales of $17.0 billion, up 8% from 2003 Net income of $5.77 per share, up 9% from 2003 (see note below) Expanded infrastructure in Asia; grew sales with Asian automakers Increased low-cost country manufacturing and engineering capability Used cash flow to fund growth and return cash to shareholders Maintained strong balance sheet Despite A Challenging Environment, 2004 Was Another Year Of Solid Progress For Lear Note: Includes a $0.20 income tax benefit primarily related to the settlement of prior years' tax matters.


 

Shareholder Value Scorecard Invest in high return programs Awarded significant new business Increased revenue in Asia Pursue strategic acquisitions Acquired terminals & connectors business Continued to grow joint ventures Return cash to shareholders Paid first-ever dividend Repurchased 1.8 million shares Maintain strong balance sheet Generated strong cash flow Achieved investment grade from Moody's Strategy 2004 Actions


 

Steadily increased net sales over the last ten years to $17 billion in 2004 Transformed from a seat assembly operation to one of the world's largest automotive interior systems suppliers 129 ranking and 23rd fastest growing company over the last ten years among the Fortune 500 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 EPS 3.147 4.7 6.2 7.3 9.1 12.4 14.1 13.6 14.4 15.7 17 North Lear's Strategy has Supported Rapid Growth Net Sales (in billions) Net Income CAGR 22% SALES CAGR 18% $3.1 $17.0


 

Industry Production North America Neutral to improving, depending down 5%, reflecting on consumer demand inventory correction; Europe also down Platform Mix Very adverse Moderately adverse Raw Material Impact Adverse Negative impact moderates as cost offsets are implemented and negotiations concluded Rest of Year Perspective On 2005 Operating Environment* Please see slide titled "Forward-Looking Statements" at the end of this presentation. First Quarter


 

2005 backlog up $150 million from last year on a comparable basis Three-year backlog up $750 million from last year on a comparable basis Upside opportunity in 2007 from open sourcing Sales Backlog* (in millions) Sales Backlog Supports Continued Growth 2004 2005 2006 2007 2008 East 750 1550 1350 900 500 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Net New Business Supports Continued Growth And Diversification Of Sales Please see slide titled "Forward-Looking Statements" at the end of this presentation for further information. $900 $1,550 $1,350 Cumulative $2,900 $3,800 2004 2005 2006 2007 2008 East 750 1550 1350 900 500 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9


 

1999* 2000 2001 2002 2003 2004 Net Debt 3.4 Debt/Cap 0.7 0.65 0.63 0.58 0.458 0.42 North 45.9 46.9 45 43.9 Net Debt*/Capital Continuing to Strengthen Financial Position * Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation for further information.


 

Financial Review and First Quarter 2005 Guidance


 

Challenging Fourth Quarter Production Environment Industry Production In Major Markets Down; Euro Continues To Be Strong North America Industry production down 2% Big Three down 5% Europe Industry production down 2% Key Lear platforms had double-digit declines Euro 9% stronger than a year ago


 

Fourth Quarter 2004 Fourth Quarter 2003 Record 4Q '04 B/(W) 4Q '03 (in millions, except net income per share) Financial Highlights - Fourth Quarter 2004 * Income before income taxes for the fourth quarter 2004 and 2003 was $159.5 and $182.8, respectively. Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation for further information. ** Includes the dilutive impact of our outstanding contingently convertible senior notes. Net Sales $4,286.1 $4,255.3 $30.8 Income before Interest, Other Expense & Income Taxes (core operating earnings)* $217.2 $236.1 $(18.9) Margin 5.1% 5.5% (40)bps Net Income $123.0 132.4 $(9.4) Net Income Per Share** $1.70 $1.81 $(0.11) SG&A % of Net Sales 3.4% 3.4% 0 bps Interest Expense $43.9 $41.9 $(2.0) Other Expense, Net $13.8 $11.4 $(2.4) Effective Tax Rate 22.9% 27.6% 4.7pts


 

4Q04 vs. 4Q03 Change in Net Sales and Core Operating Earnings Net Sales (up $31 million) Addition of new business globally Impact of foreign exchange, primarily stronger Euro Acquisitions offset in part by Global vehicle production and platform mix Core Operating Earnings* (down $19 million) Global vehicle production and platform mix Impact of higher raw material prices offset in part by Net operating performance Profit contribution from new business globally * Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation for further information.


 

Net Income $ 123 $ 422 Depreciation / Amortization 97 355 Working Capital / Other 12 (31) Cash from Operations* $ 232 $ 746 Capital Expenditures ( 145 ) ( 429 ) Free Cash Flow $ 87 $ 317 Three Months Twelve Months Fourth Quarter and Full Year Free Cash Flow* (in millions) * Cash from Operations represents net cash provided by operating activities ($232 for three months and $676 for twelve months ended 12/31/04) before net change in sold accounts receivable ($0 for three months and $70 for twelve months ended 12/31/04). Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation.


 

North America (in millions) First Quarter 2005 Production Down In Both North America And Europe 2005 Outlook Vehicle Production Assumptions* 2004 Actual 2005 Forecast 3rd Qtr 4th Qtr 4.1 4.2 East 11.6 11.6 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 2004 Actual 2005 Forecast 3rd Qtr 4th Qtr 4.8 4.8 East 13.9 13.7 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Europe (in millions) Please see slide titled "Forward-Looking Statements" at the end of this presentation. 15.7 18.7 Full Year First Quarter Full Year First Quarter ^ 15.7 - 16.0 ^ 18.3 - 18.6 ^ 3.9 ^ 4.7 4.1 4.8


 

2005 Outlook Net Sales* 2005 Net Sales Increase Reflects Strong Backlog (in billions) Please see slide titled "Forward-Looking Statements" at the end of this presentation. 2003 2004 2005 Guidance East 3.9 4.5 4.7 West 11.8 12.6 12.9 North 1 $17.0 $15.7 First Quarter Full Year ^ $17.6 - $18.0 ^ $4.3 - $4.5


 

2005 Outlook Net Income Per Share* 2004 Reported 2005 Guidance East 1.4 1.4 1 West 4.37 4.17 4.3 North 1.2 $5.77 (see note below) First Quarter Full Year ^ $5.00 - $6.00 $0.50 - $0.70 $1.24 Production levels and platform mix Impact on supply chain from sustained high level of raw material prices Customer productivity negotiations Key Swing Factors Note: Includes a $0.20 income tax benefit primarily related to the settlement of prior years' tax matters. * Please see slides titled "Forward-Looking Statements" at the end of this presentation.


 

Free Cash Flow $250 million Interest Expense $170 - $175 million Tax Rate 25% - 27% Depreciation $400 - $425 million Capital Expenditures $425 - $475 million Euro $1.25 - $1.35 / Euro Other 2005 Full Year Financial Guidance* * Please see slides titled "Use of Non-GAAP Financial Information" and "Forward-Looking Statements" at the end of this presentation.


 

Seating Systems Electronics Interior Systems East 0.49 0.33 0.18 Three-Year Sales Backlog North America - 58% Backlog By Region Backlog By Product North America Europe Asia East 0.58 0.34 0.08 Europe - 34% Asia - 8% Seats - 49% Interiors - 33% Electronics/ Electrical - 18%


 

Alternative Uses of Cash Flow. . . .. . . While Maintaining a Strong Balance Sheet 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 25 25 25 25 Invest internally in high return programs Pursue strategic acquisitions Dividends Repurchase shares Where We See Value Creation


 

Summary Despite a more challenging environment, 2004 was a solid year Challenges continue in 2005, with most significant negative impact on the first quarter Dividend increase reflects management's confidence in the long term outlook of the Company Lear Has A Balanced, Long-Term Approach To Creating Shareholder Value


 

ADVANCE RELENTLESSLY(tm) www.lear.com LEA NYSE Listed R


 

In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included throughout this presentation, the Company has provided information regarding certain non-GAAP financial measures. These measures include "income before interest, other expense and income taxes" (core operating earnings), "free cash flow" and "net debt." Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. The Company believes it is appropriate to exclude the net change in sold accounts receivable in the calculation of free cash flow since the sale of receivables may be viewed as a substitute for borrowing activity. Net debt represents total debt plus utilization under the Company's ABS facility, less cash and cash equivalents. Management believes that the non-GAAP financial measures used in this presentation 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 income before interest, other expense and income taxes is a useful measure in assessing the Company's financial performance by excluding certain items that are not indicative of the Company's core operating earnings or that may obscure trends useful in evaluating the Company's continuing operating activities. 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. Management believes that net debt provides useful information regarding the Company's financial condition. Further, management uses these non-GAAP measures for planning and forecasting in future periods. Neither income before interest, other expense and income taxes, free cash flow nor net debt should be considered in isolation or as substitutes for net income, net cash provided by operating activities, total debt or other balance sheet, income statement or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and thus, 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. Set forth on the following slides are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Use of Non-GAAP Financial Information


 

Q4 2004 Q4 2003 Income before interest, other expense and income taxes Income before income taxes $ 159.5 $ 182.8 Interest expense 43.9 41.9 Other expense, net 13.8 11.4 Income before interest, other expense and income taxes $ 217.2 $ 236.1 (core operating earnings) Three Months (in millions) Use of Non-GAAP Financial Information Core Operating Earnings


 

Q4 2004 2004 Free cash flow Net cash provided by operating activities $ 231.9 $ 675.9 Net change in sold accounts receivable - 70.4 Net cash provided by operating activities before net change in sold accounts receivable 231.9 746.3 Capital expenditures ( 145.3 ) ( 429.0 ) Free cash flow $ 86.6 $ 317.3 Three Months Twelve Months (in millions) Use of Non-GAAP Financial Information Free Cash Flow


 

(in millions) Net debt Short-term borrowings $ 35.4 $ 17.1 $ 37.3 $ 63.2 $ 72.4 Current portion of long-term debt 632.8 4.0 3.9 129.5 155.6 Long-term debt 1,866.9 2,057.2 2,132.8 2,293.9 2,852.1 Total debt 2,535.1 2,078.3 2,174.0 2,486.6 3,080.1 Cash and cash equivalents ( 584.9 ) ( 169.3 ) ( 91.7 ) ( 87.6 ) ( 98.8 ) Asset backed securitization - - 189.0 260.7 - Net debt 1,950.2 $ 1,909.0 $ 2,271.3 $ 2,659.7 $ 2,981.3 2003 2002 2001 2000 Use of Non-GAAP Financial Information Net Debt December 31, Note: Net Debt to Capital is defined as Net Debt divided by Net Debt plus Stockholders' Equity. 2004


 

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to, general economic conditions in the markets in which the Company operates, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers or suppliers or that otherwise affect the Company, the Company's ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions, the outcome of customer productivity negotiations, the impact and timing of program launch costs, the costs and timing of facility closures or similar actions, increases in the Company's warranty or product liability costs, risks associated with conducting business in foreign countries, competitive conditions impacting the Company's key customers, raw material cost and availability, the Company's ability to mitigate the significant impact of recent increases in raw material prices, the outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in free cash flow and other risks described from time to time in the Company's Securities and Exchange Commission filings. This presentation also contains information on the Company's sales backlog. The Company's incremental sales backlog reflects: anticipated net sales from awarded new programs, less net sales from phased-out and cancelled programs. The calculation of backlog does not reflect customer price reductions on existing or newly-awarded programs. The three-year backlog may be impacted by various assumptions embedded in the calculation, including vehicle production levels on new and replacement programs, foreign exchange rates and the timing of program launches. In addition, the first quarter and full year 2005 per share earnings guidance is based on an assumed 74 million shares outstanding and includes 4.8 million shares related to our outstanding contingently convertible debt. The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume any obligation to update them. Forward-Looking Statements