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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 25, 2007

LEAR CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

 

 

 

Delaware

 

1-11311

 

13-3386776

 

 

 

 

 

(State or other
jurisdiction of
incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification
Number)

 

 

21557 Telegraph Road, Southfield, Michigan

48033

 

 

(Address of principal executive offices)

(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))


Lear Corporation (“Lear” or the “Company”) is filing this Form 8-K to (i) furnish information regarding Lear’s results of operations for the fourth quarter and full year of 2006, (ii) provide financial guidance for 2007 and (iii) supplement Lear’s Current Report on Form 8-K initially filed on June 27, 2005, as supplemented on August 30, 2005, January 25, 2006, October 26, 2006 and January 11, 2007, in order to update certain disclosures with respect to Lear’s restructuring strategy (the “Restructuring”).

FORWARD-LOOKING STATEMENTS

The Current Report on Form 8-K 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 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 2.02 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 25, 2007, Lear Corporation issued a press release reporting its financial results for the fourth quarter and full year of 2006 and providing financial guidance for 2007. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

2


On January 25, 2007, Lear Corporation made available the presentation slides attached hereto as Exhibit 99.2 in a webcast of its fourth quarter 2006 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.

Item 2.05 Costs Associated with Exit or Disposal Activities.

As part of its previously announced Restructuring, Lear has continued consolidation and census actions. In 2006, these actions resulted in charges of $99.7 million, consisting of employee termination costs of $79.3 million, fixed asset impairment charges of $5.8 million, contract termination costs of $6.5 million and other costs of $8.1 million (including $6.5 million of manufacturing inefficiency costs resulting from the Restructuring). The severance and other incremental costs represent cash charges, while the asset impairment charges represent non-cash charges. Cash payments related to the Restructuring totaled $73.3 million in 2006.

Although all aspects of the Restructuring have not been finalized, the Company continues to expect to incur total pretax costs of approximately $300 million in connection with the Restructuring, of which $204.1 million of costs have been incurred to date. The remaining costs are expected to be incurred in 2007. Lear continues to estimate that approximately 80% of the restructuring costs will result in cash expenditures.

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.

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

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

 

 

 

(d)

Exhibits

 

 

 

 

99.1

Press release issued January 25, 2007, furnished herewith.

 

 

 

 

99.2

Presentation slides from the Lear Corporation webcast of its fourth quarter 2006 earnings call held on January 25, 2007, furnished herewith.

3


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.

 

 

 

 

 

 

 

 

Lear Corporation

 

 

 

 

Date: January 25, 2007

 

 

By: /s/ James H. Vandenberghe

 

 

 

 

 

 

 

 

 

 

 

 

Name:

James H. Vandenberghe

 

 

 

Title:

Vice Chairman and
Chief Financial Officer

4


EXHIBIT INDEX

 

 

 

Exhibit No.

 

Description

 

 

 

 

99.1

 

Press release issued January 25, 2007, furnished herewith.

 

 

 

99.2

 

Presentation slides from the Lear Corporation webcast of its fourth quarter 2006 earnings call held on January 25, 2007, furnished herewith.

5


Exhibit 99.1

FOR IMMEDIATE RELEASE

 

 

 

Investor Relations:

 

Mel Stephens

 

(248) 447-1624

 

 

 

Media:

 

Andrea Puchalsky

 

(248) 447-1651

Lear Reports Fourth-Quarter and Full-Year 2006 Results
and Provides 2007 Financial Guidance

          Southfield, Mich., January 25, 2007 — Lear Corporation [NYSE: LEA], a leading global supplier of automotive seating, electronics and electrical distribution systems, today reported financial results for the fourth quarter and full year of 2006 and provided financial guidance for 2007.

 

 

Fourth-Quarter Highlights:

 

 

•

Reported net sales of $4.3 billion

 

 

•

Achieved positive free cash flow of $254 million

 

 

•

Agreement to transfer North American Interior business to joint venture

 

 

•

Completed offering of $900 million in new senior notes

 

 

•

Hyundai seating plant honored as Assembly Plant of the Year

          For the fourth quarter of 2006, Lear reported net sales of $4.3 billion and a pretax loss of $635.9 million, including a loss of $607.3 million related to the divestiture of the Interior business, restructuring costs of $42.5 million and a loss on the extinguishment of debt of $48.5 million. For the fourth quarter of 2005, Lear reported net sales of $4.4 billion and a pretax loss of $346.1 million. Excluding the loss on divestiture, restructuring costs and other special items, Lear had pretax income of $63.2 million in the fourth quarter of 2006. This compares with pretax income before special items of $77.6 million in the same period a year earlier. A reconciliation of pretax income excluding the loss on divestiture, restructuring costs and other special items to pretax loss as determined by generally accepted accounting principles is provided in the supplemental data pages.

          The decline in net sales for the quarter reflects primarily lower production in North America and the divestiture of Lear’s European Interior business. Operating results also declined, reflecting the lower production, offset in part by the addition of new business and cost improvements.

(more)


2

          Lear reported a net loss of $645.0 million, or $8.90 per share, including the loss on divestiture, restructuring costs and other special items, for the fourth quarter of 2006. This compares with a net loss of $602.6 million, or $8.97 per share, including special items, for the fourth quarter of 2005.

          Fourth-quarter free cash flow was $254.4 million, compared with $46.0 million in the fourth quarter of 2005. The improvement reflects primarily lower capital spending and the timing of commercial recoveries. (Net cash provided by operating activities was $179.2 million and $332.0 million in the fourth quarters of 2006 and 2005, respectively. A reconciliation of free cash flow to net cash provided by operating activities is provided in the supplemental data pages.)

          During the quarter, the Company made important progress on strategic priorities by reaching an agreement to transfer its North American Interior business to the International Automotive Components – North America joint venture (IAC North America) in return for a 25% equity stake. Lear also successfully completed the offering of $900 million in senior notes and the subsequent tender offer for substantially all of its outstanding 2008 and 2009 senior notes. In addition, Lear maintained its quality and customer service momentum and received several awards of recognition, including Assembly Plant of the Year by Assembly magazine for its Hyundai seating plant in Montgomery, Alabama.

2006 Full-Year Results

          For the full-year 2006, Lear reported record net sales of $17.8 billion and a pretax loss of $655.5 million, including a loss of $636.0 million related to the divestiture of the Interior business, restructuring costs of $99.7 million and a fourth-quarter loss on the extinguishment of debt of $48.5 million. For 2005, Lear reported net sales of $17.1 billion and a pretax loss of $1,187.2 million. Excluding the loss on divestiture, restructuring costs and other special items, Lear had pretax income of $114.7 million in 2006. This compares with pretax income before special items of $96.6 million in 2005. A reconciliation of pretax income excluding the loss on divestiture, restructuring costs and other special items to pretax loss as determined by generally accepted accounting principles is provided in the supplemental data pages.

          Full-year net sales were up, reflecting primarily the addition of new business, partially offset by lower production in North America and unfavorable platform mix. Operating results improved, reflecting the addition of new business and ongoing cost and efficiency actions, largely offset by lower production in North America and unfavorable platform mix.

          “In a challenging environment last year, we improved our financial results for the full year, improved our liquidity position and took a number of important steps to reposition Lear for future success,” said Bob Rossiter, Lear Chairman


3

and Chief Executive Officer. “We refocused our strategy to manage our business on a product-line basis. We increased our emphasis on new technology and innovation with our Core DimensionTM strategy. We also continued to make steady progress in diversifying our sales on a customer, regional and vehicle segment basis.”

          Lear reported a net loss of $707.5 million, or $10.31 per share, including the loss on divestiture, restructuring costs and other special items, for the full-year 2006. This compares with a net loss of $1,381.5 million, or $20.57 per share, including special items, in 2005.

          Free cash flow in 2006 was positive $115.7 million. This compares with negative free cash flow of $418.7 million in 2005. The improvement reflects primarily the non-recurrence of the one-time net negative impact of changes in customer payment terms, lower capital spending and the timing of commercial recoveries. (Net cash provided by operating activities was $285.3 million and $560.8 million in 2006 and 2005, respectively. A reconciliation of free cash flow to net cash provided by operating activities is provided in the supplemental data pages.)

Full-Year 2007 Guidance

          Summarized below is 2007 financial guidance for Lear’s core businesses. The guidance shown excludes results for Lear’s Interior business for the full year. On this basis, Lear expects 2007 worldwide net sales of approximately $15 billion, reflecting primarily the addition of new business globally and the positive impact of foreign exchange, partially offset by unfavorable platform mix.

          Lear anticipates 2007 income before interest, other expense, income taxes, restructuring costs and other special items (core operating earnings) to be in the range of $560 to $600 million. The improvement in core operating earnings reflects the addition of new business and cost improvements, offset in part by unfavorable platform mix.

          Restructuring costs in 2007 are estimated to be about $100 million.

          Interest expense is estimated to be in the range of $215 to $225 million. Pretax income before restructuring costs and other special items is estimated to be in the range of $270 to $310 million. Tax expense is expected to be between $100 and $120 million, depending on the mix of earnings by country.

          Capital spending in 2007 is estimated at approximately $250 million. Depreciation and amortization expense is estimated at about $310 million.

          Free cash flow is expected to be positive at about $225 million for the year.


4

          Key assumptions underlying Lear’s financial outlook include expectations for industry vehicle production of approximately 15.3 million units in North America and 19.2 million units in Europe. Lear continues to see production for the Big Three in North America being down slightly. In addition, we are assuming an exchange rate of $1.30/Euro.

          Lear will webcast its fourth-quarter earnings conference call through the Investor Relations link at http://www.lear.com at 8:00 a.m. EST on January 25, 2007. In addition, the conference call can 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) and will be available until February 8, 2007, with a Conference I.D. of 2434064.

          Lear Corporation is one of the world’s largest suppliers of automotive interior systems and components. Lear provides complete seat systems, electronic products and electrical distribution systems and other interior products. With annual net sales of $17.8 billion in 2006, Lear ranks #127 among the Fortune 500. Lear’s world-class products are designed, engineered and manufactured by a diverse team of 104,000 employees at 275 facilities in 33 countries. Lear’s headquarters are in Southfield, Michigan, and Lear is traded on the New York Stock Exchange under the symbol [LEA]. Further information about Lear is available on the Internet at http://www.lear.com.

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 “income before interest, other expense, income taxes, restructuring costs and other special items” (core operating earnings), “pretax income before loss on divestiture, restructuring costs and other special items” and “free cash flow” (each, 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 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 and pretax income before loss on divestiture, 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 earnings or that may obscure trends useful in evaluating the Company’s continuing operating


5

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.

          Core operating earnings, pretax income before loss on divestiture, restructuring costs and other special items and free cash flow should not be considered in isolation or as a substitute for pretax income (loss), net income (loss), cash provided by operating activities or other income statement 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 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 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.

Forward-Looking Statements

          This new 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. 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


6

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.

          The forward-looking statements in this news 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
Consolidated Statements of Operations

(In millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

December 31,
2006

 

December 31,
2005

 

 

 

 

 

 

Net sales

 

$

4,280.5

 

$

4,397.3

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

4,042.9

 

 

4,168.4

 

Selling, general and administrative expenses

 

 

152.8

 

 

146.0

 

Goodwill impairment charge on Interior business

 

 

—

 

 

342.8

 

Loss on divestiture of Interior business

 

 

607.3

 

 

—

 

Interest expense

 

 

52.3

 

 

45.1

 

Other expense, net

 

 

61.1

 

 

41.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(635.9

)

 

(346.1

)

Income taxes

 

 

9.1

 

 

256.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(645.0

)

$

(602.6

)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(8.90

)

$

(8.97

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - basic and diluted

 

 

72.5

 

 

67.2

 

 

 

 

 

7


Lear Corporation and Subsidiaries
Consolidated Statements of Operations

(In millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

 

 

 

December 31,
2006

 

December 31,
2005

 

 

 

 

 

 

Net sales

 

$

17,838.9

 

$

17,089.2

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

16,911.2

 

 

16,353.2

 

Selling, general and administrative expenses

 

 

646.7

 

 

630.6

 

Goodwill impairment charges on Interior business

 

 

2.9

 

 

1,012.8

 

Loss on divestiture of Interior business

 

 

636.0

 

 

—

 

Interest expense

 

 

209.8

 

 

183.2

 

Other expense, net

 

 

87.8

 

 

96.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes and cumulative effect of a change in accounting principle

 

 

(655.5

)

 

(1,187.2

)

Income taxes

 

 

54.9

 

 

194.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before cumulative effect of a change in accounting principle

 

 

(710.4

)

 

(1,381.5

)

Cumulative effect of a change in accounting principle

 

 

2.9

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(707.5

)

$

(1,381.5

)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

 

 

 

 

 

 

Loss before cumulative effect of a change in accounting principle

 

$

(10.35

)

$

(20.57

)

Cumulative effect of a change in accounting principle

 

 

0.04

 

 

—

 

 

 

 

 

Basic and diluted net loss per share

 

$

(10.31

)

$

(20.57

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - basic and diluted

 

 

68.6

 

 

67.2

 

 

 

 

 

8


Lear Corporation and Subsidiaries
Consolidated Balance Sheets

(In millions)

 

 

 

 

 

 

 

 

 

 

December 31,
2006

 

December 31,
2005

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

502.7

 

$

197.3

 

Accounts receivable

 

 

2,006.9

 

 

2,000.1

 

Inventories

 

 

581.5

 

 

595.6

 

Recoverable customer engineering and tooling

 

 

87.7

 

 

160.4

 

Current assets of business held for sale

 

 

427.8

 

 

607.7

 

Other

 

 

283.7

 

 

285.3

 

 

 

 

 

 

 

 

3,890.3

 

 

3,846.4

 

 

 

 

 

Long-Term:

 

 

 

 

 

 

 

PP&E, net

 

 

1,471.7

 

 

1,614.7

 

Goodwill, net

 

 

1,996.7

 

 

1,939.8

 

Long-term assets of business held for sale

 

 

—

 

 

485.2

 

Other

 

 

491.8

 

 

402.3

 

 

 

 

 

 

 

 

3,960.2

 

 

4,442.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

7,850.5

 

$

8,288.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

Short-term borrowings

 

$

39.3

 

$

23.4

 

Accounts payable and drafts

 

 

2,317.4

 

 

2,516.0

 

Accrued liabilities

 

 

1,099.3

 

 

1,008.6

 

Current liabilities of business held for sale

 

 

405.7

 

 

549.3

 

Current portion of long-term debt

 

 

25.6

 

 

9.4

 

 

 

 

 

 

 

 

3,887.3

 

 

4,106.7

 

 

 

 

 

Long-Term:

 

 

 

 

 

 

 

Long-term debt

 

 

2,434.5

 

 

2,243.1

 

Long-term liabilities of business held for sale

 

 

48.5

 

 

27.6

 

Other

 

 

878.2

 

 

800.0

 

 

 

 

 

 

 

 

3,361.2

 

 

3,070.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

602.0

 

 

1,111.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

 

$

7,850.5

 

$

8,288.4

 

 

 

 

 

9


Lear Corporation and Subsidiaries
Supplemental Data

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

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

December 31,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

North America

 

$

2,240.1

 

$

2,474.3

 

 

Europe

 

 

1,591.8

 

 

1,564.0

 

 

Rest of World

 

 

448.6

 

 

359.0

 

 

 

 

 

 

 

Total

 

$

4,280.5

 

$

4,397.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Content Per Vehicle *

 

 

 

 

 

 

 

 

North America

 

$

623

 

$

630

 

 

Total Europe

 

$

339

 

$

329

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow **

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

179.2

 

$

332.0

 

 

Net change in sold accounts receivable

 

 

154.3

 

 

(131.9

)

 

 

 

 

 

 

Net cash provided by operating activities before net change in sold accounts receivable

 

 

333.5

 

 

200.1

 

 

Capital expenditures

 

 

(79.1

)

 

(154.1

)

 

 

 

 

 

 

Free cash flow

 

$

254.4

 

$

46.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

$

92.8

 

$

102.5

 

 

 

 

 

 

 

 

 

 

 

Pretax income excluding loss on divestiture, restructuring and other special charges **

 

 

 

 

 

 

 

 

Pretax loss

 

$

(635.9

)

$

(346.1

)

 

Loss on divestiture of Interior business

 

 

607.3

 

 

—

 

 

Goodwill and fixed asset impairment charges

 

 

0.8

 

 

351.3

 

 

Costs related to restructuring actions

 

 

42.5

 

 

42.6

 

 

Loss on extinguishment of debt

 

 

48.5

 

 

—

 

 

Capital restructuring of joint ventures

 

 

—

 

 

29.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

63.2

 

$

77.6

 

 

 

 

 

 

 

 

*

Content Per Vehicle for 2005 has been updated to reflect actual production levels.

 

 

**

See “Non-GAAP Financial Information” included in this news release.

10


Lear Corporation and Subsidiaries
Supplemental Data

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

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

 

 

 

December 31,
2006

 

December 31,
2005

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

North America

 

$

9,840.9

 

$

9,231.7

 

Europe

 

 

6,426.2

 

 

6,542.6

 

Rest of World

 

 

1,571.8

 

 

1,314.9

 

 

 

 

 

Total

 

$

17,838.9

 

$

17,089.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Content Per Vehicle *

 

 

 

 

 

 

 

North America

 

$

646

 

$

586

 

Total Europe

 

$

335

 

$

345

 

 

 

 

 

 

 

 

 

Free Cash Flow **

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

285.3

 

$

560.8

 

Net change in sold accounts receivable

 

 

178.0

 

 

(411.1

)

 

 

 

 

Net cash provided by operating activities before net change in sold accounts receivable

 

 

463.3

 

 

149.7

 

Capital expenditures

 

 

(347.6

)

 

(568.4

)

 

 

 

 

Free cash flow

 

$

115.7

 

$

(418.7

)

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

$

392.2

 

$

393.4

 

 

 

 

 

 

 

 

 

Basic Shares Outstanding at end of year

 

 

76,251,990

 

 

67,186,806

 

 

 

 

 

 

 

 

 

Diluted Shares Outstanding at end of year ***

 

 

76,251,990

 

 

67,186,806

 

 

 

 

 

 

 

 

 

Pretax income excluding loss on divestiture, restructuring and other special charges **

 

 

 

 

 

 

 

Pretax loss

 

$

(655.5

)

$

(1,187.2

)

Loss on divestiture of Interior business

 

 

636.0

 

 

—

 

Goodwill and fixed asset impairment charges

 

 

12.9

 

 

1,095.1

 

Costs related to restructuring actions

 

 

99.7

 

 

102.8

 

Litigation charges

 

 

—

 

 

39.2

 

Loss on extinguishment of debt

 

 

48.5

 

 

—

 

Sale and capital restructuring of joint ventures

 

 

(26.9

)

 

46.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

114.7

 

$

96.6

 

 

 

 

 

 

 

*

Content Per Vehicle for 2005 has been updated to reflect actual production levels.

 

 

**

See “Non-GAAP Financial Information” included in this news release.

 

 

***

Diluted shares outstanding exclude shares related to outstanding convertible debt, as well as options, restricted stock units, performance units and stock appreciation rights, all of which were antidilutive.

11


fast forward

advance relentlessly

R

Fourth Quarter/Full Year 2006 Results
and 2007 Financial Guidance

January 25, 2007

Exhibit 99.2

1

Agenda

2006 Highlights

Bob Rossiter, Chairman and CEO

Operating Review

Doug DelGrosso, President and COO

2006 Financial Results and 2007 Guidance

Jim Vandenberghe, Vice Chairman and CFO

Q and A Session

2

2006 Highlights

3

2006 Highlights
Company Overview

Improved overall financial results and liquidity position

Implemented comprehensive restructuring actions

Expanded infrastructure in Asia; grew total Asian sales

Continued to diversify mix of sales by region and customer

Maintained strong market positions and superior quality in
core products

Repositioned Interior business for future success

4

2006 Highlights
Improved Financial Results and Liquidity Position*

Net Sales

(in billions)

Core Operating Earnings

(in millions)

Free Cash Flow

(in millions)

2007 – 2009 Debt Maturities

(in billions)

2005

2006

5

*  Core operating earnings represent income before interest, other expense, income taxes, restructuring costs and other special items.  Loss before income

taxes was $655.5 million and $1,187.2 million for the years ended December 31, 2006 and 2005, respectively.  Free cash flow represents net cash

provided by operating activities before the net change in sold accounts receivable, less capital expenditures.  Net cash provided by operating activities

was $285.3 million and $560.8 million for the years ended December 31, 2006 and 2005, respectively.  Please see slides titled “Non-GAAP Financial

Information” at the end of this presentation for further information.

North America

55%

Europe

36%

Rest Of World

9%

Europe

17%

North America

83%

Geographic


2006 Highlights
Continued To Diversify Our Sales Mix

Ford & GM - 75%

All Other

Saab, Volvo,

Jaguar and Land Rover

8%

Classic Ford & GM

47%

Customer

1994

2006

Lear’s Total Asian Sales Were 10% Of
Lear’s Total Sales In 2006

6

2006 Highlights

Strong Market Positions and Superior Quality

Strong Global Market Positions And
Superior Quality In Our Core Businesses

                  Seating Systems

#2 Position globally, in a market estimated to be about
$45 to $50 billion in size:

#2 Positions in North America and Europe

#3 Position in Asia, including #2 Position in China

Lear is recognized as the highest quality major seat
manufacturer for the past 6 years, according to the J.D.
Power Seat Survey

                  Electrical Distribution Systems

#3 Position in North America, #4 Position in Europe and
#3 Position in China

Lear is a true partner to all of the world’s major automakers, with
strong market positions and superior quality in our core businesses:

Source:  Lear Market Share Study / CSM Worldwide Survey Data

7

Interior components are no longer a core business for Lear

Contributed substantially all of Lear’s European Interior business to
International Automotive Components Group – Europe, which
already owned Collins & Aikman’s European Interior business, in
return for a one-third equity interest

Reached agreement to contribute substantially all of Lear’s North
American Interior business to International Automotive Components
Group – North America in return for a 25% equity interest:

Expect to close transaction during the first quarter of 2007

*    Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.

Interior Business Now Positioned For Future Success;
Lear To Participate In Upside With Minority Interests



2006 Highlights
Repositioned Interior Business For Future Success*

8

Operating Review

9

Further consolidation of supply base

Sourcing of individual components

Global cost and quality benchmarks

Increased emphasis on technology and innovation

Emerging Trends Within Supply Base*

*    Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.

Lear’s Response

Global restructuring actions

Focus on core businesses; JVs for Interior business

Selectively increase vertical integration

Continue to evolve low-cost footprint

Core DimensionTM product and technology strategy

10

Summary of Global Restructuring Activity*

Additional census reductions

Worldwide census reductions of
5% of total

Opening of 12 new Lear or Lear
joint venture facilities to support
low-cost footprint, growth in Asia
and continued diversification

Opening of 10 new Lear or Lear
joint venture facilities to support
low-cost footprint, growth in Asia
and continued diversification

Further plant actions; including
additional closures

Plant efficiency actions involving
numerous locations and the closure
of 14 facilities

Additional consolidation of
administrative functions / divisions

Consolidated several administrative
functions / divisions

New streamlined, product-focused
global organizational structure

Planned Actions

Completed Actions

*    Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.

11

Action Plans To Improve Margins*

Revenue

Proprietary products and technology

Selective vertical integration (e.g., seat
structures, trim and foam, as well as,
terminals & connectors)

Superior quality and service

Diversification of sales

Material Cost

Evolving low-cost footprint

Global restructuring savings

CTO benchmarking initiative

Design cost savings

Commodity cost recovery actions

Commercial negotiations

SG & A / Overhead

Streamlined organizational structure

Consolidation of administrative
functions / divisions

Ongoing cost and efficiency actions

Divestiture of Interior business

Increased low-cost engineering

Froze U.S. salaried pension plan;
defined benefit plan replaced by
defined contribution plan

Labor Cost

Increased low-cost sourcing

Plant and facility consolidations

Census reduction actions

Improved program management and
launch efficiency

Productivity improvement actions

Fully competitive labor contracts

*    Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.

12

Lear Continues To Evolve Its Global Footprint
To Improve Competitiveness And Support
Future Sales Growth And Diversification

Shown below is a summary of 22 new facilities Lear opened in 2006 or
plans to open this year:

Maintaining A Competitive Global Footprint*

Evolve Low-Cost
Component Strategy
(9 Facilities)

Increase Lear’s
Infrastructure in Asia
(10 Facilities)

Support Growth with Asian
Automakers Globally
(3 JV Facilities)

                    

                     China   

Nanjing

  Ford / Mazda – Seating

Shanghai       

  Cadillac – Seating

  CTO Center

  Engineering Center

Wuhu

  Chery – Seating

                                

                    India

Chennai         

  BMW/Ford – Seating        

  Hyundai – Seating

Halol

  GM – Seating

Nashik

  M&M/Renault – Seating

Pune                   

  TATA – Seating

                                
                             

                  

China – Seating Components        

Honduras – Wire Harnesses

India – Seating Components

Mexico – Seating Components (3)

Slovakia – Seating Components

South Africa – Seat Trim

Turkey – Seat Trim

         TACLE JVs – Nissan Seating

                             Guangzhou, China

                             Sunderland, England

                             Smyrna, TN (U.S.)

*    Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.

13

Lear Continues To Aggressively Sign New Business
In Asia And With Asian Automakers Globally

14

*   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.

Major New Awards in 2006**

≈ $3,150

$2,550

$2,200

Consolidated

Non-consolidated

(in millions)

Revenue in Asia and with

Asian Manufacturers**

Aggressively Growing Total Asian Business*

Automaker

Market

Lear Content

Future

Vehicle

Program(s)

Chery

China

Seating, IntelliTire

®

Several cars/vans

Nanjing Auto

China

Seating, Electronics

Rover

Toyota

U.S.

Flooring/Acoustics, Headliner

Tacoma

Chinese

China

Seating, Electronics

Various

GM

China

Seating, Flooring/Acoustics

Epsilon

Asian

Global

Seating, Electronics

Various

BMW

China

Seating, Entertainment System

5-Series

Mazda

China

Seating

Mazda2

Nissan

China

Seating, Junction Box

Qashqai

Honda

U.S./Canada

ProTec

TM

Accord, Pilot, TSX

2006 Financial Results
and 2007 Guidance

15

Major special items in fourth quarter:

Loss on the divestiture of North American Interior business

Loss on the extinguishment of debt

Costs related to restructuring actions

Operating results exceeded previous guidance, reflecting:

Less adverse Lear platform mix globally

Lower depreciation, resulting from asset write-downs in Interior
business

Favorable cost performance and operating efficiencies

Free cash flow exceeded previous guidance by approximately $100
million, reflecting:

Higher operating earnings and lower capital spending

Lower than expected cash for restructuring, due to timing

Timing of commercial recoveries



Fourth Quarter 2006
Major Factors Impacting Financial Results*

16

*

Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information.

Fourth Quarter 2006
Industry Environment

17

Fourth Quarter

Fourth Quarter

2006

2006 vs. 2005

North American Production

Industry

3.6 mil

Down 8%

Big Three

2.3 mil

Down 13%

European Production

Industry

4.7 mil

Down 1%

Lear's Top 5 Customers

2.4 mil

Down 2%

Key Commodities (Quarterly Average)

vs. Prior Quarter

Steel (Hot Rolled)

Down 7%

Up 3%

Resins (Polypropylene)

Down 10%

Down 8%

Copper

Down 7%

Up 72%

Crude Oil

Down 15%

Down 1%


Fourth Quarter 2006
Financial Summary*

18

(in millions, except net loss per share)

Fourth

Quarter 2006

Fourth

Quarter 2005

4Q '06

B/(W) 4Q '05

Net Sales

$4,280.5

$4,397.3

($116.8)

Loss Before Interest, Other Expense and

Income Taxes

($522.5)

($259.9)

($262.6)

Pretax Loss

($635.9)

($346.1)

($289.8)

Net Loss

($645.0)

($602.6)

($42.4)

Net Loss Per Share

($8.90)

($8.97)

$0.07

SG&A % of Net Sales

3.6

%

3.3

%

(0.3)

pts.

Interest Expense

$52.3

$45.1

($7.2)

Depreciation / Amortization

$92.8

$102.5

$9.7

Other Expense, Net

$61.1

$41.1

($20.0)

*

Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information.


Fourth Quarter 2006  
Restructuring and Special Items*

19

(in millions)

Loss Before

Interest, Other

Expense and

Income Taxes

Pretax Loss

COGS

SG&A

Interest / Other

Expense

2006 Reported Results

$                   (522.5)

$           (635.9)

Reported results include the following items:

Loss on divestiture of Interior business

$                     607.3

$             607.3

$       -   

$     -   

$                 -   

Costs related to restructuring actions

                          44.0

                  42.5

34.0

   

10.0

  

(1.5)

               

Fixed asset impairment charges

                            0.8

                     0.8

0.8

      

         -  

                      -  

Loss on extinguishment of debt

                                -  

                  48.5

           -  

         -  

48.5

               

2006 Core Operating Results

129.6

$                    

$               63.2

2005 Core Operating Results

138.5

$                    

$               77.6

Fourth Quarter

Income Statement Category

Memo:

*

Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information.

Fourth Quarter 2006
Net Sales Changes and Margin Impact Versus Prior Year

20

Net Sales

Margin

Performance Factor

Change

Impact

Comments

(in millions)

Industry Production /

$     (436)

Negative

Primarily lower industry production in

Platform Mix / Net Pricing /

Other

North America (down 8%) and unfavorable

platform mix (Big 3 down 13%)

Global New Business

         279

Positive

In North America, Hyundai Santa Fe, DCX

Caliber/Compass, GM large SUVs: In

Europe, Opel Corsa, Ford Galaxy,

Peugeot 207; In China, BMW 5-Series

and various programs in South America

F/X Translation

         138

Neutral

Euro up 8%, Canadian dollar up 3%

Commodity / Raw Material

Negative

Unfavorable year over year increases--

copper up 72%

Acquisition / Divestiture

         (98)

Neutral

Divestiture of European Interior business

Performance

Positive

Favorable operating performance in core

businesses, including benefits from

restructuring actions


Full Year 2006  
Restructuring and Special Items*

21

(in millions)

Loss Before

Interest, Other

Expense and

Income Taxes

Pretax Loss

COGS

SG&A

Interest/Other

Expense

2006 Reported Results

$                   (357.9)

$           (655.5)

Reported results include the following items:

Loss on divestiture of Interior business

$                     636.0

$             636.0

-

$   

-

$   

-

$            

Costs related to restructuring actions

                        105.6

                  99.7

88.4

     

17.2

   

              (5.9)

Goodwill and fixed asset impairment charges

                          12.9

                  12.9

10.0

     

-

        

-

Loss on extinguishment of debt

                                -  

                  48.5

-

         

-

        

48.5

            

Sale and capital restructuring of joint ventures

                                -  

                 (26.9)

-

         

-

        

            (26.9)

2006 Core Operating Results

396.6

$                    

$             114.7

2005 Core Operating Results

324.5

$                    

$               96.6

Full Year

Income Statement Category

Memo:

*

Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information.

Fourth Quarter and Full Year 2006
Business Segment Results*

22

($ in millions)

2006

2005

2006

2005

Seating

Net Sales

2,903.2

$   

2,842.1

$      

11,624.8

$  

11,035.0

$

Segment Earnings*

181.0

$        

153.4

$         

604.0

$      

323.3

$      

% of Sales

6.2

              

%

5.4

               

%

5.2

            

%

2.9

            

%

Adjusted

% of Sales**

6.7

              

%

5.9

               

%

5.6

            

%

3.5

            

%

Electronic and Electrical

Net Sales

739.3

$        

718.8

$         

2,996.9

$   

2,956.6

$   

Segment Earnings*

(5.1)

$           

34.1

$           

102.5

$      

180.0

$      

% of Sales

(0.7)

            

%

4.7

               

%

3.4

            

%

6.1

            

%

Adjusted

% of Sales**

2.4

              

%

7.4

               

%

4.9

            

%

7.4

            

%

Interior

Net Sales

638.0

$        

836.4

$         

3,217.2

$   

3,097.6

$   

Segment Earnings*

(34.2)

$         

(52.3)

$         

(183.8)

$      

(191.1)

$     

% of Sales

(5.4)

%

(6.3)

%

(5.7)

%

(6.2)

%

Adjusted

% of Sales**

(4.9)

%

(3.5)

%

(5.0)

%

(2.5)

%

Full Year

Fourth Quarter

*

Segment earnings represent income (loss) before goodwill impairment charge, loss on divestiture, interest, other expense and income taxes.  Income before

goodwill impairment charge, loss on divestiture, interest, other expense and income taxes for the Company was $84.8 million and $82.9 million for the three

months ended 12/31/06 and 12/31/05, respectively, and $281.0 million and $105.4 million for the twelve months ended 12/31/06 and 12/31/05, respectively.

Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information.

**

Adjusted % of Sales excludes impairments, restructuring costs and other special items of $39.4 million (Seating - $13.9, Electronic and Electrical - $22.8,

Interior - $2.7) and $54.7 million (Seating - $12.9, Electronic and Electrical - $19.1, Interior - $22.7) for the three months ended 12/31/06 and 12/31/05,

respectively, and $109.1 million (Seating - $41.7, Electronic and Electrical - $44.8,  Interior - $22.6) and $217.1 million (Seating - $63.5, Electronic and

Electrical - $39.0, Interior - $114.6) for the twelve months ended 12/31/06 and 12/31/05, respectively.

Fourth Quarter and Full Year 2006
Free Cash Flow*

(in millions)

23

Fourth

Quarter

2006

Full Year

2006

Net Loss

$    (645.0)

$    (707.5)

Divestiture of Interior Business

607.3

636.0

Depreciation / Amortization

92.8

392.2

Working Capital / Other

278.4

142.6

Cash from Operations

$     333.5

$     463.3

Capital Expenditures

         (79.1)

       (347.6)

Free Cash Flow

$     254.4

$     115.7

*

Free Cash Flow represents net cash provided by operating activities ($179.2 million for the three months and $285.3 million for

the twelve months ended 12/31/06) before net change in sold accounts receivable ($154.3 million for the three months and

$178.0 million for the twelve months ended 12/31/06) (Cash from Operations), less capital expenditures.  Please see slides titled

“Non-GAAP Financial Information” at the end of this presentation for further information.

2007 Guidance
Full Year Production Assumptions*

24

Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.

Full Year

Change from

2007 Guidance

Prior Year

North American Production

Total Industry

≈ 15.3 mil

about flat

Big Three

≈ 10.0 mil

down 2%

European Production

Total Industry

≈ 19.2 mil

flat

Lear's Top 5 Customers

≈ 9.5 mil

down 3%

Euro

$1.30 / Euro

up 4%

Key Commodities

moderating

trending lower

2007 Guidance
Factors Impacting Core Business Margins*

Seating

     Electronic and
         Electrical

2007 Margin Impact vs. 2006

Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.

25

Volume and Mix

–

–

New Business Globally

+

neutral

Commodity Costs/Recovery

+

+

Restructuring Savings

+

+

Ongoing Cost Reductions

+

+

Low-Cost Sourcing/Engineering

+

+

Selective Vertical Integration

+

+

Proprietary Products/Technology

+

+

2007 Guidance
Full Year Financial Projections*

26

**  Subject to actual mix of financial results by country.

Full Year 2007

Financial Guidance

for Core Business

(excludes Interior business)

Net Sales

≈ $15.0 billion

Core Operating Earnings

$560 to $600 million

Income before interest, other expense,

income taxes, restructuring

costs and other special items

Interest Expense

$215 to $225 million

Pretax Income

$270 to $310 million

before restructuring costs  

and other special items

Estimated Tax Expense

$100 to $120 million

**

Pretax Restructuring Costs

≈ $100 million

Capital Spending

≈ $250 million

Depreciation and Amortization

≈ $310 million

Free Cash Flow

≈ $225 million

* Please see slides titled “Non-GAAP Financial Information” and “Forward-Looking Statements” at the end of this presentation for

further information.

ADVANCE RELENTLESSLY™

www.lear.com

LEA

NYSE

Listed

R

27

Non-GAAP Financial Information

28

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 ”income before interest, other expense, income taxes, restructuring costs and other special items” (core operating earnings), “loss before interest, other expense and income taxes,” "pretax income before restructuring costs and other special items" and "free cash flow" (each, 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 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, loss before interest, other expense and income taxes and pretax income before 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 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.

Core operating earnings, loss before interest, other expense and income taxes, pretax income before restructuring costs and other special items and free cash flow should not be considered in isolation or as a substitute for pretax income (loss), net income (loss), cash provided by operating activities or other income statement 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.

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.  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
Cash from Operations And Free Cash Flow

29

(in millions)

Three Months

Full Year

Full Year

Q4 2006

2006

2005

Net cash provided by operating activities

$               179.2

$               285.3

$               560.8

Net change in sold accounts receivable

                  154.3

                  178.0

                (411.1)

Net cash provided by operating activities

before net change in sold accounts receivable

(cash from operations)

                  333.5

                  463.3

                  149.7

Capital expenditures

                  (79.1)

                (347.6)

                (568.4)

Free cash flow

$               254.4

$               115.7

$             (418.7)

Non-GAAP Financial Information
Core Operating Earnings

30

Three Months Ended

Twelve Months Ended

(in millions)

Q4 2006

Q4 2005

Q4 2006

Q4 2005

Pretax loss

$    (635.9)

$    (346.1)

$    (655.5)

$ (1,187.2)

Interest expense

           52.3

           45.1

         209.8

         183.2

Other expense, net

           61.1

           41.1

           87.8

           96.6

Loss before interest, other expense

and income taxes

$    (522.5)

$    (259.9)

$    (357.9)

$    (907.4)

Goodwill impairment charges

                 -  

         342.8

              2.9

      1,012.8

Loss on divestiture of Interior business

         607.3

                 -  

         636.0

                 -  

Costs related to restructuring actions

           44.0

           47.1

         105.6

         106.3

Fixed asset impairment charges

              0.8

              8.5

           10.0

           82.3

Litigation charges

                 -  

                 -  

                 -  

           30.5

Income before interest, other expense,

income taxes, restructuring costs and

other special items

$      129.6

$      138.5

$      396.6

$      324.5

(core operating earnings)

Non-GAAP Financial Information
Pretax Income Before Restructuring Costs
  And Other Special Items

31

(in millions)

Q4 2005

2005

Pretax loss

$    (346.1)

$ (1,187.2)

Goodwill impairment charges

         342.8

      1,012.8

Costs related to restructuring actions

           42.6

         102.8

Fixed asset impairment charges

              8.5

           82.3

Litigation charges

                 -  

           39.2

Sale and capital restructuring of joint ventures

           29.8

           46.7

Pretax income before restructuring costs

and other special items

$        77.6

$        96.6

Non-GAAP Financial Information
Segment Earnings Reconciliation

32

(in millions)

Q4 2006

Q4 2005

Q4 2006

Q4 2005

Seating

$    181.0

$    153.4

$    604.0

$      323.3

Electronic and Electrical

          (5.1)

         34.1

       102.5

         180.0

Interior

        (34.2)

        (52.3)

      (183.8)

        (191.1)

Segment earnings

$    141.7

135.2

$   

$    522.7

312.2

$      

Corporate and geographic headquarters and

elimination of intercompany activity

        (56.9)

        (52.3)

      (241.7)

        (206.8)

Income before goodwill impairment charges, loss

on divestiture, interest, other expense and

income taxes

$      84.8

$      82.9

$    281.0

$      105.4

Goodwill impairment charges

              -  

       342.8

           2.9

     1,012.8

Loss on divestiture of Interior business

       607.3

              -  

       636.0

                -  

Interest expense

         52.3

         45.1

       209.8

         183.2

Other expense, net

         61.1

         41.1

         87.8

           96.6

Pretax loss

$   (635.9)

$   (346.1)

$   (655.5)

$  (1,187.2)

Three Months Ended

Twelve Months Ended

Non-GAAP Financial Information
Adjusted Segment Earnings

33

Three Months Q4 2006

Three Months Q4 2005

Electronic and

Electronic and

(in millions)

Seating

Electrical

Interior

Seating

Electrical

Interior

Segment earnings

181.0

$     

(5.1)

$                 

(34.2)

$      

153.4

$   

34.1

$               

(52.3)

$      

Fixed asset impairment charges

-

            

-

                     

0.8

           

-

           

-

                     

8.5

           

Costs related to restructuring actions

13.9

        

22.8

                  

1.9

           

12.9

        

19.1

                  

14.2

         

Adjusted segment earnings

194.9

$     

17.7

$               

(31.5)

$      

166.3

$   

53.2

$               

(29.6)

$      

Full Year 2006

Full Year 2005

Electronic and

Electronic and

(in millions)

Seating

Electrical

Interior

Seating

Electrical

Interior

Segment earnings

604.0

$     

102.5

$              

(183.8)

$   

323.3

$   

180.0

$              

(191.1)

$   

Fixed asset impairment charges

-

            

-

                     

10.0

         

-

           

-

                     

82.3

         

Costs related to restructuring actions

41.7

        

44.8

                  

12.6

         

33.0

        

39.0

                  

32.3

         

Litigation charges

-

            

-

                     

-

            

30.5

        

-

                     

-

            

Adjusted segment earnings

645.7

$     

147.3

$              

(161.2)

$   

386.8

$   

219.0

$              

(76.5)

$      

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.

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.


Forward-Looking Statements

34