Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 2003
LEAR CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation) |
1-11311 (Commission File Number) |
13-3386776 (IRS Employer Identification Number) |
||
| 21557 Telegraph Road, Southfield, MI (Address of principal executive offices) |
48034 (Zip Code) |
(248) 447-1500
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
| SIGNATURE | ||||||||
| EXHIBIT INDEX | ||||||||
| Press Release | ||||||||
| Slides | ||||||||
Table of Contents
Item 5. Other Events and Regulation FD Disclosure
On October 17, 2003, Lear Corporation issued a press release reporting its financial results for the third quarter of 2003 and updating its earnings guidance for 2003. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
Item 7. Financial Statements and Exhibits
| (c) | Exhibits |
| 99.1 | Press release issued October 17, 2003, filed herewith. | |
| 99.2 | Slides from the Lear Corporation webcast of its third quarter of 2003 earnings call held on October 17, 2003, filed herewith. |
Item 9. Regulation FD Disclosure
See “Item 12. Results of Operations and Financial Condition” below.
Item 12. Results of Operations and Financial Condition
The following information is provided pursuant to Item 12 of Form 8-K, “Results of Operations and Financial Condition.”
On October 17, 2003, Lear Corporation issued a press release reporting its financial results for the third quarter of 2003 and updating its earnings guidance for 2003. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
The following information is provided pursuant to Item 9 of Form 8-K, “Regulation FD Disclosure,” and Item 12 of Form 8-K, “Results of Operations and Financial Condition.”
On October 17, 2003, Lear Corporation made available the slides attached hereto as Exhibit 99.2 in a webcast of its third quarter of 2003 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.
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Table of Contents
SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LEAR CORPORATION, a Delaware corporation |
||||
| Date: October 17, 2003 | By: | /s/ David C. Wajsgras | ||
| Name: | David C. Wajsgras | |||
| Title: | Senior Vice President and | |||
| Chief Financial Officer | ||||
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Table of Contents
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press release issued October 17, 2003, filed herewith. | |
| 99.2 | Slides from the Lear Corporation webcast of its third quarter of 2003 earnings call held on October 17, 2003, filed herewith. |
4
Exhibit 99.1
FOR IMMEDIATE RELEASE
| Investor Relations: Mel Stephens VP – IR and Corporate Communications (248) 447-1624 |
| Media: Andrea Puchalsky Director — Corporate Communications (248) 447-1651 |
Lear Reports Record Third-Quarter Net Sales of $3.5 Billion
Southfield, Mich., October 17, 2003 — Lear Corporation [NYSE: LEA], the world’s largest automotive interior systems supplier, today reported financial results for the third quarter of 2003.
Third-Quarter Highlights Include:
| • | Record net sales of $3.5 billion, up 5% from a year ago | ||
| • | Net income per share of $1.10, up 21% from a year ago | ||
| • | Investment grade credit rating achieved | ||
| • | Interior Excellence award from DaimlerChrysler |
For the third quarter of 2003, Lear posted record net sales of $3.5 billion and net income of $76.1 million, or $1.10 per share. These results compare to net sales of $3.3 billion and net income of $61.6 million, or $0.91 per share, for the third quarter of 2002. Third-quarter net income per share was slightly above guidance, as implementation costs for some of the productivity and facility actions planned to commence in the third quarter will now begin in the fourth quarter.
“We continued our positive momentum by setting a third-quarter sales record, achieving investment grade credit ratings from Standard & Poor’s and Fitch and earning an award of recognition from a top customer,” said Bob Rossiter, Lear Chairman and Chief Executive Officer.
The 5% increase in net sales from the year-earlier third quarter reflects primarily the addition of new business globally. The favorable impact of a stronger Euro was largely offset by lower vehicle production in North America (down 5%) and in Western Europe (down 5%).
The 21% improvement in third-quarter net income per share compared to the year-earlier period reflects primarily the profit contribution from productivity initiatives, global new business, lower interest expense and a lower corporate tax rate, offset in part by weaker industry production.
(more)
For the quarter, free cash flow was $77 million. (Net cash provided by operating activities was $102 million; a reconciliation of free cash flow to net cash provided by operating activities is provided in the attached supplemental data page.)
The upgrade by Standard & Poor’s Rating Services and the decision by Fitch Ratings to initiate coverage of Lear with an investment grade rating reflect Lear’s reduced leverage and solid financial performance amid challenging industry conditions.
“Our focus on customer satisfaction and operational excellence is allowing us to grow our business, strengthen our financial position and deliver value to our shareholders,” Rossiter added. “As we move forward, the Lear team will work relentlessly to further improve our quality and operating performance to meet the aggressive targets set by our customers.”
Fourth-Quarter and Full-Year 2003 Outlook
For the fourth quarter of 2003, net sales are expected to be approximately $4.0 billion. The increase from a year ago reflects the addition of new business globally and a stronger Euro, offset by lower vehicle production in Western Europe (down 7%). Net income is expected to be in the range of $1.75 to $1.85 per share. Fourth-quarter net income includes the impact of up-front implementation costs of ongoing facility actions which were previously planned to commence in the third quarter. Capital spending is expected to be approximately $100 million, and free cash flow is forecasted to be about $75 million. For the fourth quarter, the corporate tax rate is anticipated to be 28%.
For the full year, net sales are expected to be about $15.5 billion, compared with $14.4 billion in 2002. This increase reflects the addition of new business globally and a stronger Euro, offset in part by lower vehicle production in North America (down from 16.4 million units last year to approximately 15.9 million units this year) and in Western Europe (down from 16.4 million units to 15.9 million units). Net income is expected to be in the range of $5.40 to $5.50 per share. Full-year capital spending is projected to be approximately $315 million, and free cash flow is anticipated to be slightly above $400 million.
Lear Corporation, a Fortune 500 company headquartered in Southfield, Mich., USA, focuses on integrating complete automotive interiors, including seat systems, interior trim and electrical systems. With annual net sales of $14.4 billion in 2002, Lear is the world’s largest automotive interior systems supplier. The Company’s world-class products are designed, engineered and manufactured by more than 115,000 employees at 280 facilities located in 33 countries.
Lear’s news releases and other information, including certain financial and statistical information presented during its periodic earnings conference calls, are available on the Company’s website at www.lear.com. Lear will webcast live its third-quarter earnings conference call through the Investor Relations link at www.lear.com at 9:00 a.m. (Eastern) on October 17, 2003. In addition, one may access the conference call by dialing 1-800-789-4751 (domestic) or 1-706-679-3323 (international) with the access code number of 1943875. The audio replay will be available two hours following the call at 1-800-642-1687 (domestic) or 1-706-645-9291 (international) with the access code number of 1943875 and will be available until October 24, 2003.
2
Use of Non-GAAP Financial Information
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included throughout this news release, the Company has provided information regarding “free cash flow” (a non-GAAP financial measure). Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. The Company believes it is appropriate to exclude the net change in sold accounts receivable in the calculation of free cash flow since the sale of receivables may be viewed as a substitute for borrowing activity.
Management believes that free cash flow is useful to both management and investors in their analysis of the Company’s ability to service and repay its debt. Further, management uses free cash flow for planning and forecasting in future periods.
Free cash flow should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and thus, does not reflect funds available for investment or other discretionary uses. Also, free cash flow, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies.
For a reconciliation of free cash flow to net cash provided by operating activities, see the attached supplemental data page which, together with this press release, has been posted on the Company’s website through the Investor Relations link at www.lear.com.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to general economic conditions in the markets in which the Company operates, including changes in interest rates and fuel prices, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers or that otherwise affect the Company, the Company’s ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions, increases in warranty costs, risks associated with conducting business in foreign countries, fluctuations in currency exchange rates, adverse changes in economic conditions or political instability in the jurisdictions in which the Company operates, competitive conditions impacting the Company’s key customers, raw material cost and availability, the outcome of legal proceedings, unanticipated changes in free cash flow and other risks detailed from time to time in the Company’s Securities and Exchange Commission filings. These forward-looking statements are made as of the date hereof, and the Company does not assume any obligation to update them.
# # # # #
3
Lear Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
| Three Months Ended | ||||||||
| September 27, | September 28, | |||||||
| 2003 | 2002 | |||||||
Net sales |
$ | 3,491.5 | $ | 3,337.4 | ||||
Cost of sales |
3,187.8 | 3,053.1 | ||||||
Selling, general and administrative expenses |
140.6 | 125.4 | ||||||
Interest expense |
44.5 | 53.0 | ||||||
Other expense, net |
12.9 | 13.2 | ||||||
Income before income taxes |
105.7 | 92.7 | ||||||
Income taxes |
29.6 | 31.1 | ||||||
Net income |
$ | 76.1 | $ | 61.6 | ||||
Basic net income per share |
$ | 1.13 | $ | 0.94 | ||||
Diluted net income per share |
$ | 1.10 | $ | 0.91 | ||||
Weighted average number of shares outstanding — basic |
67.1 | 65.7 | ||||||
Weighted average number of shares outstanding — diluted |
69.0 | 67.5 | ||||||
4
Lear Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
| Nine Months Ended | |||||||||
| September 27, | September 28, | ||||||||
| 2003 | 2002 | ||||||||
Net sales |
$ | 11,491.4 | $ | 10,664.2 | |||||
Cost of sales |
10,525.9 | 9,778.0 | |||||||
Selling, general and administrative expenses |
428.8 | 389.9 | |||||||
Interest expense |
146.7 | 163.4 | |||||||
Other expense, net |
38.6 | 41.9 | |||||||
Income before income taxes and cumulative effect of a change in accounting principle |
351.4 | 291.0 | |||||||
Income taxes |
103.3 | 97.5 | |||||||
Income before cumulative effect of a change in accounting principle |
248.1 | 193.5 | |||||||
Cumulative effect of a change in accounting principle, |
|||||||||
net of tax |
— | 298.5 | (a) | ||||||
Net income (loss) |
$ | 248.1 | $ | (105.0 | ) | ||||
Basic income per share before cumulative effect of a change in accounting principle |
$ | 3.74 | $ | 2.97 | |||||
Basic net income (loss) per share |
$ | 3.74 | $ | (1.61 | ) | ||||
Diluted income per share before cumulative effect of a change in accounting principle |
$ | 3.65 | $ | 2.89 | |||||
Diluted net income (loss) per share |
$ | 3.65 | $ | (1.57 | ) | ||||
Weighted average number of shares outstanding — basic |
66.3 | 65.2 | |||||||
Weighted average number of shares outstanding — diluted |
68.1 | 67.1 | |||||||
| (a) | On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” Under this statement, goodwill is no longer amortized but is subject to annual impairment analysis. The Company’s initial impairment analysis compared the fair values of each of its reporting units, based on discounted cash flow analyses, to the related net book values. As a result, the Company recorded impairment charges of $310.8 million ($298.5 million after-tax or $4.46 per diluted share) as of January 1, 2002. These charges are reflected as a cumulative effect of a change in accounting principle, net of tax in the consolidated statement of operations for the nine months ended September 28, 2002. |
5
Lear Corporation and Subsidiaries
Consolidated Balance Sheets
(In millions)
| September 27, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | (Audited) | |||||||||
ASSETS |
||||||||||
Current: |
||||||||||
Cash and cash equivalents |
$ | 102.5 | $ | 91.7 | ||||||
Accounts receivable |
2,252.6 | 1,508.0 | ||||||||
Inventories |
512.1 | 489.7 | ||||||||
Recoverable customer engineering and tooling |
185.1 | 153.2 | ||||||||
Other |
244.6 | 265.1 | ||||||||
| 3,296.9 | 2,507.7 | |||||||||
Long-Term: |
||||||||||
PP&E, net |
1,717.7 | 1,710.6 | ||||||||
Goodwill, net |
2,897.5 | 2,860.4 | ||||||||
Other |
441.3 | 404.3 | ||||||||
| 5,056.5 | 4,975.3 | |||||||||
Total Assets |
$ | 8,353.4 | $ | 7,483.0 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||
Current: |
||||||||||
Short-term borrowings |
$ | 11.3 | $ | 37.3 | ||||||
Accounts payable and drafts |
2,404.8 | 1,966.4 | ||||||||
Accrued liabilities |
1,195.0 | 1,037.6 | ||||||||
Current portion of long-term debt |
4.4 | 3.9 | ||||||||
| 3,615.5 | 3,045.2 | |||||||||
Long-Term: |
||||||||||
Long-term debt |
2,042.2 | 2,132.8 | ||||||||
Other |
665.4 | 642.7 | ||||||||
| 2,707.6 | 2,775.5 | |||||||||
Stockholders’ Equity |
2,030.3 | 1,662.3 | ||||||||
Total Liabilities and Stockholders’ Equity |
$ | 8,353.4 | $ | 7,483.0 | ||||||
6
Lear Corporation and Subsidiaries
Supplemental Data
(Unaudited; in millions, except content per vehicle data)
| Three Months Ended | ||||||||
| September 27, | September 28, | |||||||
| 2003 | 2002 | |||||||
Net Sales |
||||||||
U.S. and Canada |
$ | 1,858.0 | $ | 1,948.3 | ||||
Europe |
1,228.5 | 1,022.0 | ||||||
Rest of World |
405.0 | 367.1 | ||||||
Total |
$ | 3,491.5 | $ | 3,337.4 | ||||
Content Per Vehicle * |
||||||||
North America |
$ | 582 | $ | 579 | ||||
Western Europe |
331 | 265 | ||||||
South America |
104 | 75 | ||||||
Free Cash Flow ** |
||||||||
Net cash provided by operating activities |
$ | 102.3 | $ | 69.8 | ||||
Net change in sold accounts receivable |
51.3 | 21.6 | ||||||
Net cash provided by operating activities before net change
in sold accounts receivable |
153.6 | 91.4 | ||||||
Capital expenditures |
(76.9 | ) | (70.8 | ) | ||||
Free cash flow |
$ | 76.7 | $ | 20.6 | ||||
Depreciation |
$ | 82.6 | $ | 75.3 | ||||
| Nine Months Ended | ||||||||
| September 27, | September 28, | |||||||
| 2003 | 2002 | |||||||
Net Sales |
||||||||
U.S. and Canada |
$ | 6,285.7 | $ | 6,319.4 | ||||
Europe |
4,015.7 | 3,263.1 | ||||||
Rest of World |
1,190.0 | 1,081.7 | ||||||
Total |
$ | 11,491.4 | $ | 10,664.2 | ||||
Content Per Vehicle * |
||||||||
North America |
$ | 592 | $ | 568 | ||||
Western Europe |
313 | 253 | ||||||
South America |
90 | 85 | ||||||
Free Cash Flow** |
||||||||
Net cash provided by operating activities |
$ | 359.6 | $ | 370.1 | ||||
Net change in sold accounts receivable |
190.9 | 27.4 | ||||||
Net cash provided by operating activities before net change
in sold accounts receivable |
550.5 | 397.5 | ||||||
Capital expenditures |
(214.2 | ) | (173.3 | ) | ||||
Free cash flow |
$ | 336.3 | $ | 224.2 | ||||
Depreciation |
$ | 234.7 | $ | 223.0 | ||||
| * | Content Per Vehicle for 2002 has been updated to reflect actual production levels. | |
| ** | See “Use of Non-GAAP Financial Information” included in this news release. |
# # # # #
7
| Third Quarter 2003 Earnings Review October 17, 2003 fast forward advance relentlessly world's leading automotive interior supplier Exhibit 99.2 |
| Agenda I. Operating Highlights Jim Vandenberghe, Vice Chairman II. Financial Review & Outlook Dave Wajsgras, SVP & CFO III. Summary and Closing Remarks Bob Rossiter, Chairman & CEO IV. Q & A |
| In a Challenging Environment, with Industry Production Down and Intense Competitive Pressures in Both our Major Markets, the Lear Team is Focused on: Third Quarter 2003 Operating Highlights Customer-Focused Strategy Driving Success Delivering high value-add to our customers Continuing to improve quality and service Aggressively reducing our costs Successfully launching new products |
| Lear Works in Partnership with Customers to Eliminate Waste and Add Value Third Quarter 2003 Operating Highlights Delivering High Value-Add Global total interior capabilities Economies of scale / common architecture Aggressive VA / VE initiatives Higher levels of craftsmanship |
| Management priority Global focus Part of Lear culture Six Sigma discipline Sharing best practices Teamwork Nine Months 2002 Nine Months 2003 3rd Qtr 4th Qtr East 118 86 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 27% Improvement Driven to Provide High Level Quality Products and Services in the Automotive Industry Third Quarter 2003 Operating Highlights Quality Continues to Improve Parts Per Million (PPM) Defective* * Based on internal and customer data. |
| Third Quarter 2003 Operating Highlights Major Launches - Second Half 2003 North America Ford F-150 Dodge Durango Nissan Titan/Armada Lexus RX 330 Mitsubishi Galant Cadillac SRX Chevrolet Monza Chrysler Concorde/Magnum Ford Escape Europe Opel Vectra Wagon BMW X3 Fiat Lancia Y Maserati Quattroporte Golf A5 Peugeot 407 Saab 9-3 Convertible Alfa Spider Mercedes SLK Rest of World Ford Fiesta Mitsubishi Airtrek Opel Celta Mazda Familia Chevrolet Optra Chevrolet Lacetti Fiat Palio Ford Everest BMW 3-Series |
| Financial Review Production Environment - Third Quarter 2003 Production Environment Remains Difficult; OEMs Continue to Focus on Cost, Productivity and Quality North America Industry production down 5%; Big Three down 10% Content Per Vehicle of $582, about even with a year ago Western Europe Industry production down 5%; key Lear customers / platforms down more than industry average Content Per Vehicle of $331, up 10% from a year ago adjusted for currency Euro 14% stronger than a year ago |
| Net Sales $ 3,491.5 $ 3,337.4 $ 154.1 Income before Interest, Other Expense & Income Taxes* $ 163.1 $ 158.9 $ 4.2 Margin 4.7 % 4.8 % ( 10 )bps Net Income $ 76.1 $ 61.6 $ 14.5 Net Income Per Share $ 1.10 $ 0.91 $ 0.19 SG&A % of Net Sales 4.0 % 3.8 % ( 20 )bps Interest Expense $ 44.5 $ 53.0 $ 8.5 Other Expense, Net $ 12.9 $ 13.2 $ 0.3 Vehicle Production (000) North America 3,650 3,848 ( 198 ) Big Three 2,617 2,895 ( 278 ) Western Europe 3,538 3,714 ( 176 ) Third Quarter 2003 Third Quarter 2002 Third Quarter Record 3Q '03 B/(W) 3Q '02 (in millions, except net income per share) Financial Review Financial Highlights - Third Quarter 2003 * Income before income taxes for the third quarter 2003 and 2002 was $105.7 and $92.7, respectively. Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation. |
| Financial Review 3Q03 vs 3Q02 - Change in Net Sales Industry Vehicle Production N.A. (5)% W.E. (5)% S.A. (5)% Total Change Industry Production & Platform Mix FX Global New Business Net Performance Net Sales 154 -223 184 193 0 Directional Impact on Core Operating Earnings Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation. |
| Net Income $ 76 $ 248 Depreciation 83 235 Working Capital / Other ( 5 ) 67 Cash from Operations* $ 154 $ 550 Capital Expenditures ( 77 ) ( 214 ) Free Cash Flow $ 77 $ 336 3Q03 * Cash from Operations represents net cash provided by operating activities ($102 for third quarter and $360 for nine months ended 9/27/03) before net change in sold accounts receivable ($51 for third quarter and $191 for nine months ended 9/27/03). Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation. Nine Months Financial Review 3Q03 Free Cash Flow (in millions) |
| 1998 1999 2000 2001 2002 Sept '03 2003 Estimate Target EPS 1533 3385 2981 2660 2271 2005.9 2000 1800 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Net Debt to Cap 70% 65% 63% 58% 50% (in millions) * Net debt represents total debt plus utilization of our ABS facility, less cash. Please see slides titled "Use of Non-GAAP Financial Information" at the end of this presentation. Financial Review Further Debt Reduction & Increased Financial Flexibility Net Debt* |
| Rating Outlook Standard and Poor's BBB- Stable Upgraded 7/28/03 Moody's Ba1 Positive Outlook raised 10/14/03 Fitch Ratings BBB- Stable Initiated coverage 9/22/03 Financial Review Rating Agency Update Solid Financial Performance Has Led to Positive Action From the Rating Agencies |
| North America (in millions) Western Europe (in millions) 2003 Production Down in North America and Western Europe Q4* 4.0 Up 2% FY 2002 Actual FY 2003 Outlook East 16.4 15.9 West 4 FY 2002 Actual FY 2003 Outlook East 16.4 15.9 Q4 3.8 Down 7% Financial Review 2003 Vehicle Production Outlook * Big Three down 3% |
| Fourth Quarter Net Income Per Share Full Year Net Income Per Share Net Sales of $4.0 Billion 2001 2002 2003 4th Qtr East 0.74 1.76 1.75 20.4 West 0.1 31.6 North 45.9 46.9 45 43.9 Capital Expenditures $ 100 M $ 315 M Free Cash Flow $ 75 M $ 400 M 2001 2002 2003 4th Qtr East 3.73 4.65 5.4 20.4 West 0.1 31.6 North 45.9 46.9 45 43.9 Note: Full year 2002 net income per share excludes the impact of goodwill impairment of $298.5M after-tax, or $4.46 per share. Net Sales of $15.5 Billion Financial Review Fourth Quarter and Full Year 2003 Guidance |
| Summary and Outlook Future Cash Flow Opportunities Enhance Value All Investment Opportunities will be Evaluated to Maximize Shareholder Value Support strategic growth opportunities Asia Pacific region and electronics globally Internally generated or acquired Maintain financial flexibility Continue to strengthen the balance sheet Return capital to shareholders As appropriate in light of existing opportunities |
| Global Strategy Remains Unchanged; Leveraging our Total Interior Capabilities to Deliver Value to our Customers Summary and Outlook Customer-Focused Strategy Driving our Success Quality and customer service remain our top priorities Top line growing as customers recognize Lear's value-add Credit ratings upgrade reflects improving balance sheet Aggressive cost reduction targets necessary to meet ever increasing customer requirements |
| ADVANCE RELENTLESSLY(tm) www.lear.com LEA NYSE Listed R |
| In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included throughout this presentation, the Company has provided information regarding certain non-GAAP financial measures. These measures include "income before interest, other expense and income taxes," "free cash flow" and "net debt." Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. The Company believes it is appropriate to exclude the net change in sold accounts receivable in the calculation of free cash flow since the sale of receivables may be viewed as a substitute for borrowing activity. Net debt represents total debt plus utilization under its ABS facility, less cash. Management believes that the non-GAAP financial measures used in this presentation are useful to both management and investors in their analysis of the Company's financial position and results of operations. In particular, management believes that income before interest, other expense and income taxes is a useful measure in assessing the Company's financial performance by excluding certain items that are not indicative of the Company's core operating earnings or that may obscure trends useful in evaluating the Company's continuing operating activities. Management believes that free cash flow is useful in analyzing the Company's ability to service and repay its debt. Management believes that net debt is generally accepted as providing useful information regarding a company's financial condition. Further, management uses these non-GAAP measures for planning and forecasting in future periods. Neither income before interest, other expense and income taxes, free cash flow nor net debt should be considered in isolation or as substitutes for net income, net cash provided by operating activities, total debt or other balance sheet, income statement or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and thus, does not reflect funds available for investment or other discretionary uses. Also, these non-GAAP financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies. Set forth on the following slides are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Use of Non-GAAP Financial Information |
| Q3 2003 Q3 2002 Q3 2003 Q3 2002 Income before interest, other expense and income taxes Income before income taxes $ 105.7 $ 92.7 $ 351.4 $ 291.0 Interest expense 44.5 53.0 146.7 163.4 Other expense, net 12.9 13.2 38.6 41.9 Income before interest, other expense and income taxes $ 163.1 $ 158.9 $ 536.7 $ 496.3 (core operating earnings) Three Months Nine Months (in millions) Use of Non-GAAP Financial Information Core Operating Earnings |
| Q3 2003 Q3 2002 Q3 2003 Q3 2002 Free cash flow Net cash provided by operating activities $ 102.3 $ 69.8 $ 359.6 $ 370.1 Net change in sold accounts receivable 51.3 21.6 190.9 27.4 Net cash provided by operating activities before net change in sold accounts receivable 153.6 91.4 550.5 397.5 Capital expenditures ( 76.9 ) ( 70.8 ) ( 214.2 ) ( 173.3 ) Free cash flow $ 76.7 $ 20.6 $ 336.3 $ 224.2 Three Months Nine Months (in millions) Use of Non-GAAP Financial Information Free Cash Flow |
| (in millions) Net debt Short-term borrowings $ 11.3 $ 37.3 $ 63.2 $ 72.4 $ 103.6 Current portion of long-term debt 4.4 3.9 129.5 155.6 63.6 Long-term debt 2,042.2 2,132.8 2,293.9 2,852.1 3,324.8 Total debt 2,057.9 2,174.0 2,486.6 3,080.1 3,492.0 Cash ( 102.5 ) ( 91.7 ) ( 87.6 ) ( 98.8 ) (106.9 ) Asset backed securitization 50.5 189.0 260.7 - - Net debt $ 2,005.9 $ 2,271.3 $ 2,659.7 $ 2,981.3 $ 3,385.1 September 27, 2003 2002 2001 2000 1999 Use of Non-GAAP Financial Information Net Debt December 31, |
| This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to general economic conditions in the markets in which the Company operates, including changes in interest rates and fuel prices, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers or that otherwise affect the Company, the Company's ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions, increases in warranty costs, risks associated with conducting business in foreign countries, fluctuations in currency exchange rates, adverse changes in economic conditions or political instability in the jurisdictions in which the Company operates, competitive conditions impacting the Company's key customers, raw material cost and availability, the outcome of legal proceedings, unanticipated changes in free cash flow and other risks detailed from time to time in the Company's Securities and Exchange Commission filings. These forward-looking statements are made as of the date hereof, and the Company does not assume any obligation to update them. Forward-Looking Statements |