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 11, 2007
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) |
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| 21557
Telegraph Road, Southfield, Michigan (Address of principal executive offices) |
48033 (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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Lear Corporation (“Lear” or the “Company”) is filing this Form 8-K/A to (i) amend Lear’s Current Report on Form 8-K initially filed on June 27, 2005, as amended on August 30, 2005, January 25, 2006 and October 26, 2006, in order to update certain disclosures with respect to Lear’s restructuring strategy (the “Restructuring”) and (ii) furnish the slides from the presentation to be made by certain officers of Lear Corporation at the 2007 Auto Analysts of New York Detroit Auto Show Conference on January 11, 2007.
FORWARD-LOOKING STATEMENTS
The Current Report on Form 8-K/A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results and liquidity. 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, including changes in interest rates or currency exchange rates, the financial condition of the Company’s customers or suppliers, fluctuations in the production of vehicles for which the Company is a 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 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, business realignment 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 and suppliers, raw material costs and availability, the Company’s ability to mitigate the significant impact of increases in raw material, energy and commodity costs, the outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in cash flow, including the Company’s ability to align its vendor payment terms with those of its customers, the finalization of the Company’s restructuring strategy and other risks described from time to time in the Company’s Securities and Exchange Commission filings. In particular, the Company’s financial outlook for 2007 is based on several factors, including the Company’s current vehicle production and raw material pricing assumptions. The Company’s actual financial results could differ materially as a result of significant changes in these factors. In addition, the Company’s agreement to contribute its North American interior business to IAC North America is subject to various conditions, including the receipt of required third-party consents, as well as other closing conditions customary for transactions of this type. No assurances can be given that the proposed transaction will be consummated on the terms contemplated or at all.
The forward-looking statements in this Current Report on Form 8-K/A 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.
Section 2 – Financial Information
Item 2.05 Costs Associated with Exit or Disposal Activities.
As part of its previously announced Restructuring, Lear incurred costs of approximately $200 million through the fourth quarter of 2006 and expects to incur additional costs of approximately $100 million in 2007, bringing total expected restructuring costs to approximately $300 million. The Restructuring strategy was designed to realign the Company’s manufacturing capacity in light of changing market conditions and to allow the Company to capitalize on structural cost reduction opportunities. The additional restructuring costs will include employee severance and asset impairment charges, as well as other incremental costs resulting from the Company’s restructuring activities. The severance and other incremental costs represent cash charges, while the asset impairment charges represent non-cash charges.
2
Lear continues to estimate that approximately 80% of the restructuring costs will result in cash expenditures. Please refer to Exhibit 99.1 for further information regarding the Company’s Restructuring strategy.
Item 2.06 Material Impairments.
The information set forth under Item 2.05 relating to impairment charges is incorporated herein by reference.
Section 7 – Regulation FD
Item 7.01 Regulation FD Disclosure.
On January 11, 2007, certain officers of Lear Corporation will make a presentation at the 2007 Auto Analysts of New York Detroit Auto Show Conference. The visual slides from the presentation are attached hereto as Exhibit 99.1 and incorporated by reference herein.
This information 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 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
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Exhibits |
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99.1 |
Visual slides from the presentation to be made by certain officers of Lear Corporation at the 2007 Auto Analysts of New York Detroit Auto Show Conference on January 11, 2007, furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Lear Corporation | |
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By: |
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Name: |
James H. Vandenberghe |
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Title: |
Vice Chairman and |
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EXHIBIT INDEX
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Exhibit No. |
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Description |
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99.1 |
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Visual slides from the presentation to be made by certain officers of Lear Corporation at the 2007 Auto Analysts of New York Detroit Auto Show Conference on January 11, 2007, furnished herewith. |
5
January 11, 2007
Auto Analysts of
New York Conference
Exhibit 99.1
1
Agenda
2006 Accomplishments
Bob Rossiter, Chairman and CEO
Operating Priorities
Doug DelGrosso, President and COO
2007 Outlook and Sales Backlog Update
Jim Vandenberghe, Vice Chairman and CFO
2
Major 2006 Accomplishments
Repositioned our product portfolio for future
success
Core DimensionTM product and technology strategy
Continued to aggressively grow total Asian sales
Completed refinancing of near-term debt maturities
Significantly Strengthened The Company’s
Financial Flexibility And Competitive Position
3
Repositioned Our Product
Portfolio For Future Success*
Seating
Electronic
and Electrical
Interior
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
Lear’s Product
Portfolio
2006 Initiatives
Outlook
Maintained superior quality levels
New product-focused organization
Increased technology focus
Further diversified sales mix
Restructuring actions
Increased low-cost sourcing
Cost and efficiency improvements
Agreements to contribute Lear’s
operations to IAC joint ventures
Retained minority interest
Core Products
Strategic Investment
Margins Improve
Further Global Consolidation;
Improving Financial Results
4
Core DimensionTM
Product And Technology Strategy
ComforTecTM
Climate Seat
Pneumatic Seat
Integrated Seat
Adjuster Module
RF Passive Entry
Car2UTM Home
Automation
System
RF CarFinder
Lear Flexible Seat
Architecture Gen 2
Quick Connect
Seat Assembly
Modular Rear Seat
Gateway Module
Passive / Smart
Junction Boxes
Solid-State Smart
Junction Box
Technology
Smart Trailer Tow
Module
Cushion Tilt 2nd
Row
Remote Release
2nd Row Easy
Entry
Thin Profile
Folding Rear
SmartFoldTM
3rd Row
ProTecTM PLuS
Adaptive Front
Light System
IntelliTire®
Car2UTM Two-
Way Remote
Keyless Entry
RF Vehicle
Immobilizer
EnviroTecTM
SoyFoamTM
Battery
Monitoring
System
DC/AC
Inverters
DC/DC
Converters
Premium
Audio
Amplifier
Family
Entertainment
System
TV Receiver
Analog
Lear Premium
Leather
Sculpted Seat
Technology
Trim Clip
Ambient Lighting
Flat Flexible
Cable
COMFORT &
CONVENIENCE
ENVIRONMETAL
SYSTEMS
INFOTAINMENT
SYSTEMS
FLEXIBILITY
SAFETY
SYSTEMS
CRAFTSMANSHIP
COMMONIZATION
Seating
Electronic and Electrical
5
2002
2003
2004
2005
2006
2007
Forecast
2010
Target
Continued To Aggressively
Grow Total Asian Sales **
Revenue in Asia and with
Asian Manufacturers*
Rapid Growth In Asian-Related Sales Led By Expanding
Relationships With Hyundai, Nissan And Toyota,
As Well As Growth In Emerging Markets Such As China
(in millions)
Consolidated
Non-consolidated
* Total Asian-related sales target includes consolidated and non-consolidated sales.
** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
$1,800
$1,200
$800
$2,200
$2,500
China
Korea &
India
Europe
Other Asia
North
America
Lear’s Targeted
Asian Sales by Major Market
$3,100
6
$1,000
$73 *
$600
$400
$300
$41
$1,700
$0
$500
$1,000
$1,500
$2,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Term Loan
Public Bonds
Revolving Credit Facility
Lear’s Maturity Profile – as of 12/31/06
($ in millions)
* Assumes 12/31/06 Euro exchange rate of 1.32
Proven access to capital markets with recent debt and equity
issuances
Liquidity remains strong; $1.7 billion revolver committed to 2010
Focused on maintaining a strong and flexible balance sheet
No Significant Debt Maturities Until 2010
Completed Refinancing
Of Near-Term Debt Maturities
7
Operating Priorities
8
World-class quality and customer service
Lowest cost supplier in Seating and Electrical Distribution
Increased focus on innovation and new technology
Continued sales diversification by customer, region and vehicle
segment
Operating Priorities*
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
Return Business To Historic Levels Of
Operating Margins And Free Cash Flow
9
Operating Priorities
World-Class Quality And Customer Service
“Supplier of the Year for Seating Systems” (Global)
“Special Recognition for Customer Service” (Global)
“Outstanding Effort in Design Engagement” (Europe)
“Superior Supplier Diversity and Excellence in Quality” (North America)
“Supplier Award of Excellence” (Sweden)
“Excellence in Quality and Product Development” (Mexico)
“Best Quality and Among Top Three in Cost Reduction” (Brazil)
“Zero Defect Award” (Mexico)
“Value Engineering Award for Number of Ideas Submitted” (Japan)
“Best Supplier Award” (Russia)
“Supplier Cost Reduction Award” (Brazil)
“Superior Quality and Delivery” (Mexico)
“Best Performance in Product Development” (India)
10
China
Guangzhou
TACLE JV – Nissan Seating
Nanjing
Ford / Mazda – Seating
Shanghai
Cadillac – Seating
CTO Center
Engineering Center
Seating Components
Wuhu
Chery – Seating
South Africa
Seat Trim
Turkey
Seat Trim
India
Chennai
BMW/Ford – Seating
Hyundai – Seating
Pune
TATA – Seating
Seating Components
Nashik
M&M/Renault – Seating
Halol
GM – Seating
Slovakia
Seating Components
Operating Priorities
Maintaining A Competitive Global Footprint*
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
Mexico
Piedras Negras
Seating Components (2)
Monclova
Seating Components
Honduras
Wire Harnesses
England
TACLE JV -
Nissan Seating
U.S. (Tennessee)
TACLE JV-
Nissan Seating
New Lear Facilities in 2006 and 2007
11
Operating Priorities
Evolving Component Manufacturing Footprint*
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16
35
41
2005
2007
2005
2007
Traditional
Low-Cost
Number of Component Facilities
Excluding Interior Business
Today 30% of Lear’s components
come from 20 low-cost countries
(LCC), including
essentially all
wire harnesses and seat trim
covers
Targeting 45% content from LCC
with future sourcing of headrests
and increased portions
of seat
frames and substructures, as well
as selected electronics
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
12
North America
Major 2007 Launches -- High Volume
Chevrolet Silverado
Premium Seating (Craftsmanship), including
Lear’s
Flexible Architecture (Commonization) and Door Panels
Car2UTM Home Automation
(Comfort & Convenience)
GMC Sierra
13
BMW 3-Series Convertible
North America
Major 2007 Launches -- Premium Vehicle
Passive Junction Box
Module (Commonization)
Prefuse Battery Box
and Powerfuses
(Commonization)
Hifi Amplifier
(Infotainment)
Advanced Front
Lighting (Safety)
Premium Seating (Craftsmanship)
Light Electronics Module
(Commonization)
Terminals & Connectors
(Commonization)
14
Hyundai Veracruz
North America
Major 2007 Launches -- Asian
IntelliTire® (Safety)
Seating System (Flexibility)
15
North America
Major 2007 Launches -- Crossover Entries
Acura MDX
Wire Harnesses (Commonization)
Ford Edge / Lincoln MKX
IntelliTire® (Safety)
Ford Escape / Mercury Mariner
Wire Harnesses (Commonization)
Honda CR-V – Wire Harnesses (Commonization)
Saturn VUE – Seating (Flexibility)
BMW X5 SAV – Premium Seating (Craftsmanship),
Electronics and Family Entertainment System (Infotainment)
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Europe And Rest Of World
Major 2007 Launches
Europe
Rest of World
BMW 3-Series M-Sport
Seating, Electronics
Fiat Bravo
Seating
Ford Mondeo
Seating (first common seat architecture program
in Europe)
Jaguar S-Type
Seating, Overhead System
Mercedes C-Class
Seating
Nissan Qashqai
Seating, Electrical Distribution
Volvo V70
Seating
Chang’an CV6, CV8, CV11, CM5 (China)
Seating
Fiat Punto (Brazil)
Seating, Electrical Distribution
Ford Mondeo (China)
Seating, Door Panels, Overhead System
Hyundai Santro Minicar (India)
Seating
Mahindra Scorpio (India)
Seating
Nissan Geniss MPV and Sylphy Sedan (China)
Seating
PSA B53 (Argentina)
Seating, Electrical Distribution
Cadillac SLS (China)
Seating, Door Panels, Flooring & Acoustics
Audi A4
Seating, Electronics
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Operating Priorities
Innovation - SoyFoam™
SoyFoam™ is a soybean oil-based flexible foam material for use in
automotive applications
Lear, working in partnership with Ford, has developed market-ready
seating applications for SoyFoam™
- Lear Markets SoyFoam™ and Other Environmentally-Friendly
Automotive
Interior Products Under the EnviroTec™ Trade Name
Advantages of SoyFoam™
Lower environmental impact to produce
Up to 24% renewable vs. traditional non-renewable
petroleum-based foam
Reduces dependency on volatile energy markets
Potential for reducing automotive seating foam
costs as use reaches critical mass
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Operating Priorities
Innovation - Solid-State Smart Junction Box
A Smart Junction Box (SJB) is the main hub of a vehicle’s electrical
system
SJBs control power to electrical features, such as power windows, power
door locks, lighting, instrumentation and audio/visual systems
Advantages of Solid-State SJB
50% to 80% reduction in volume
70% reduction in weight
Increased packaging flexibility
5% to 20% reduction in cost
Improved reliability and durability
Enhanced diagnostics capability
S
M
A
R
T
J
U
N
C
T
I
O
N
B
O
X
Current
Solid-State
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2007 Outlook and Sales
Backlog Update
20
2007 Outlook
Industry Production Key Assumptions*
2006 Estimate
2007 Outlook
North American Production
Total Industry
15.3 mil
About Flat
Big Three
10.2 mil
Down 2%
European Production
Total Industry
19.0 mil
Up 1%
Lear's Top 5 Customers
9.6 mil
About Flat
Euro
$1.25 / Euro
$1.30 / Euro
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
21
2007 Outlook
Key Lear Factors Turn Positive*
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
A Number Of Lear Factors Turn Positive In 2007
Definitive direction for Interior business
Continued sales diversification
Growth in Asia and with Asian manufacturers globally
Improved launch efficiency and lower launch-related costs
Potential for moderation in commodity costs
Increasing savings from global restructuring actions
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$104
2007 Outlook
Global Restructuring Initiative*
Lear's major restructuring initiative was launched in mid-2005 in response
to depressed industry conditions, changing market trends and significant
customer restructuring actions and is
expected to be completed in 2007
On track to close 15 facilities, consolidate numerous administrative
centers and reduce census by 5% or more and increase sourcing and
engineering in low-cost countries
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
$100
Ongoing
Annual
Estimated Annual Savings
(in millions)
Restructuring Investments
(in millions)
2007
Outlook
2006
Estimate
2007
Outlook
2006
Estimate
2005
$100
$100
$70
$125
23
2007 Outlook
Assessment Of Key Financials*
Assuming an industry production environment that is roughly in line
with 2006. . . we see the following outlook for 2007:
Within our core Seating and Electronic and Electrical businesses:
Global new business of about $800 million,
Seating margins continue to improve to the mid-5% level, excluding
restructuring costs and other special items,
Electronic and Electrical margins improve during the course of the
year to the 5.5% to 6% range, also excluding restructuring costs
and other special items,
Capital spending is expected to be approximately $250 million and
Free cash flow is expected to be solidly positive.
Please see slides titled “Non-GAAP Financial Information” and “Forward-Looking Statements” at the
end of this presentation for further information.
*
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2007 Outlook
Net Sales –
Core Businesses**
$800 million of new Seating
and Electronic and Electrical
business
Roughly flat industry volume
Slightly negative platform mix
Favorable foreign exchange,
primarily stronger Euro
2007 Net Sales Outlook
Net Sales – Core Businesses*
(in billions)
* Excludes Interior business:
- 2005 $3.1 billion
- 2006 Approximately $3.2 billion
** Please see slides titled “Non-GAAP Financial Information” and “Forward Looking Statements” at the end of this presentation for
further information.
$14.0
$14.5
$15.0
2005
2006
Estimate
2007
Outlook
25
Margin Improvement Actions
For Core Businesses*
Seating Business
New global Seating business
Selective vertical integration (e.g.,
seat structures, trim and foam)
Savings from restructuring actions
Ongoing cost and efficiency actions
Commercial/commodity negotiations
New products and technology
* Please see slides titled “Forward Looking Statements” at the end of this presentation for further information.
Savings from restructuring actions
Copper cost recovery
Ongoing cost and efficiency actions
Increased low-cost sourcing
Proprietary products and technology
Electronic & Electrical Business
To offset the adverse impact of unfavorable platform mix and a continued
challenging pricing environment, we are implementing the following actions:
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2007 Outlook
Core Operating Earnings – Core Businesses**
New global business
Improving Margins
Lower launch activity and cost
Restructuring savings
Moderating commodity prices
Adverse platform mix
Challenging pricing environment
2007 Core Operating
Earnings Outlook
Core Operating Earnings*
(Core Businesses)
* Excludes Interior Business:
- 2005 $(77) million
- 2006 Approximately $(175) million
** Core Operating Earnings reflects income before interest, other expense, income taxes, impairments, restructuring costs and other special
items.
Please see slides titled “Non-GAAP Financial Information” and “Forward Looking Statements”
at the end of this presentation for further information.
(in millions)
$401
$520 - $550
$560 - $600
2005
2006
Guidance
2007
Outlook
27
Sales Backlog Update*
$0.8
$1.4
For a definition of sales backlog and underlying backlog development assumptions, please see slide titled “Forward-Looking
Statements” at the end of this presentation.
2007 – 2009 Sales Backlog
Three-year sales backlog down from
recent levels, reflecting:
Majority of Lear’s North American
production volume recently changed
over to new models
Evolving business model, with fewer
pass-through sales and increased
emphasis on components
Downsizing by the Big Three
N.A. market shift away from pickups
and large SUVs
Composition of sales backlog is also
changing, reflecting:
Increased importance of
non-consolidated sales from strategic
joint ventures
Key sourcing decisions over planning
horizon still open
(in billions)
New Business in Asia and with
Asian Manufacturers Globally.
Base
Sales Backlog
Base Plus
Non-Consolidated
Sales Backlog
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Q and A Session
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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 “core operating earnings – core businesses” (income before interest, other expense, income taxes, impairments, restructuring costs
and other special items), “net
sales – core businesses” and “free cash flow.” 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 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 core operating earnings –
core businesses and net sales – core businesses are useful measures 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 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 in future periods.
These non-GAAP financial measures should not be considered in isolation or as substitutes for net income (loss), pretax income (loss), cash
provided by operating activities or other 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 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.
Set forth on the following slides are reconciliations of historical non-GAAP financial measures to the most directly comparable financial
measures calculated and presented in accordance with GAAP. Given
the inherent uncertainty regarding special items and the net change
in sold accounts receivable in any future period, a reconciliation of forward-looking financial measures is not feasible. The magnitude of
these items, however, may be significant.
Non-GAAP Financial Information
30
Non-GAAP Financial Information
2005
Subtotal -
Electronic and
Corporate
Core
(in millions)
Seating
Electrical
and Other
Businesses
Interior
Consolidated
Net sales
11,035.0
$
2,956.6
$
-
$
13,991.6
$
3,097.6
$
17,089.2
$
Segment earnings
323.3
$
180.0
$
(206.8)
$
296.5
$
(191.1)
$
105.4
$
Fixed asset impairment charges
-
-
-
82.3
82.3
Costs related to restructuring actions
33.0
39.0
2.0
74.0
32.3
106.3
Litigation charges
30.5
-
30.5
-
30.5
Adjusted segment earnings
(core operating earnings)
386.8
$
219.0
$
(204.8)
$
401.0
$
(76.5)
$
324.5
$
Reconciliations of net sales – core businesses
and core operating earnings – core businesses
31
Non-GAAP Financial Information
(in millions)
2005
Seating
$ 323.3
Electronic and Electrical
180.0
Interior
(191.1)
Segment earnings
312.2
$
Corporate and geographic headquarters and
elimination of intercompany activity
(206.8)
Income before goodwill impairment charge,
interest, other expense and income taxes
$ 105.4
Goodwill impairment charge
1,012.8
Interest expense
183.2
Other expense, net
38.0
Loss before income taxes and cumulative effect
of a change in accounting principle
$ (1,128.6)
Reconciliation of segment earnings to
loss before income taxes and cumulative effect of a
change in accounting principle
32
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results and liquidity. 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, including changes in interest rates or currency exchange rates, the financial condition of the Company’s customers or suppliers, fluctuations in the production of vehicles for which the Company is a 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 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, business realignment 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 and suppliers, raw material costs and availability, the Company’s ability to mitigate the significant impact of increases in raw material, energy and commodity costs, the outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in cash flow, including the Company’s ability to align its vendor payment terms with those of its customers, the finalization of the Company’s restructuring strategy and other risks described from time to time in the Company’s Securities and Exchange Commission filings. In particular, the Company’s financial outlook for 2007 is based on several factors, including the Company’s current vehicle production and raw material pricing assumptions. The Company’s actual financial results could differ materially as a result of significant changes in these factors. In addition, the Company’s agreement to contribute essentially all of its North American interior business to IAC North America is subject to various conditions, including the receipt of required third-party consents, as well as other closing conditions customary for transactions of this type. No assurances can be given that the proposed transaction will be consummated on the terms contemplated or at all.
This presentation also contains information on the Company’s sales backlog. The Company’s incremental sales backlog reflects:
anticipated net sales from formally awarded new programs and
open replacement programs, less phased-out and cancelled programs.
The calculation of backlog does not reflect customer price reductions on existing or newly awarded programs. The 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 major program launches. Lear’s 2007 –
2009 sales backlog is based on an exchange rate of
$1.30/per Euro and the following industry production assumptions: in North America, 15.3 million units in 2007; 15.7 million in 2008 and
16 million in 2009 and, in Europe, 19.1 million units in 2007;
19.5 million in 2008 and 19.9 million in 2009.
The forward-looking statements in this presentation 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.
33