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) August 2, 2007
LEAR CORPORATION
(Exact name of Registrant as specified in its charter)
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Delaware |
1-11311 |
13-3386776 |
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(State or other |
(Commission File Number) |
(IRS
Employer |
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21557 Telegraph Road, Southfield, Michigan |
48033 |
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(Address of principal executive offices) |
(Zip Code) |
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(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 second quarter of 2007, (ii) update Lear’s financial outlook 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, January 11, 2007, January 25, 2007 and April 25, 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 success of the Company’s restructuring initiative and other risks described from time to time in the Company’s Securities and Exchange Commission filings.
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 August 2, 2007, Lear Corporation issued a press release reporting its financial results for the second quarter of 2007 and updating its financial outlook for 2007. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
On August 2, 2007, Lear Corporation made available the presentation slides attached hereto as Exhibit 99.2 in a webcast of its second quarter 2007 earnings call. Exhibit 99.2 is incorporated by reference herein.
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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 the first six months of 2007, these actions resulted in net charges of $50.6 million, consisting of employee termination costs of $42.5 million, fixed asset impairment charges of $6.8 million, contract termination costs of ($7.3) million (including a net pension and other postretirement benefit plan curtailment gain of $12.2 million) and other costs of $8.6 million (including $4.7 million of estimated 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 $66.8 million in the first six months of 2007.
Although all aspects of the Restructuring have not been finalized, the Company continues to expect to incur total pretax costs of approximately $300 million through 2007 in connection with the Restructuring, of which $254.7 million of costs have been incurred to date. Lear continues to estimate that approximately 90% 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.
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(d) |
Exhibits |
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99.1 |
Press release issued August 2, 2007, furnished herewith. |
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99.2 |
Presentation slides from the Lear Corporation webcast of its second quarter 2007 earnings call held on August 2, 2007, furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Lear Corporation |
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Date: August 2, 2007 |
By: /s/ James H. Vandenberghe |
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Name: |
James H. Vandenberghe |
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Title: |
Vice Chairman and |
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EXHIBIT INDEX
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Exhibit No. |
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Description |
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5
Exhibit 99.1
FOR IMMEDIATE RELEASE
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Investor Relations: |
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Mel Stephens |
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(248) 447-1624 |
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Media: |
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Andrea Puchalsky |
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(248) 447-1651 |
Lear Reports Improved Second-Quarter Financial Results
and Updates Full-Year Outlook
SOUTHFIELD, Mich., August 2, 2007 — Lear Corporation [NYSE: LEA], a leading global supplier of automotive seating systems, electrical distribution systems and electronic products, today reported financial results for the second quarter of 2007 and updated its full-year 2007 financial outlook.
Second-Quarter Highlights:
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Reported net sales of $4.2 billion and improved pretax income |
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Achieved positive free cash flow of $204 million |
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Core operating earnings of $229 million |
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Significant progress on global restructuring initiative |
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n |
First market application of SoyFoam™ in 2008 Ford Mustang |
For the second quarter of 2007, Lear reported net sales of $4.2 billion and pretax income of $143.9 million, including restructuring costs of $34.8 million and other special items of $3.4 million. For the second quarter of 2006, Lear reported net sales of $4.8 billion and pretax income of $31.5 million, including restructuring costs and other special items of $24.3 million.
In Lear’s seating and electrical and electronic segments, net sales were $4.1 billion and income before interest, other expense, income taxes, restructuring costs and other special items (core operating earnings) were $229.3 million for the second quarter of 2007. This compares with net sales of $3.9 billion and core operating earnings of $164.7 million for the second quarter of 2006. A reconciliation of core operating earnings to pretax income as determined by generally accepted accounting principles is provided in the supplemental data pages.
“The Lear team was able to deliver improved financial results as benefits from restructuring activities, ongoing cost and efficiency actions and new business globally more than offset lower production in North America,” said Bob Rossiter, Lear Chairman and Chief Executive Officer. “Going forward, we plan to continue
2
with our strategy of global restructuring and further sales diversification to improve our longer-term competitiveness.”
The decline in reported net sales for the quarter reflects primarily the divestiture of Lear’s Interior business and lower production in North America, offset in part by the benefit of new business mainly outside of North America and favorable foreign exchange. Operating improvement reflects favorable cost performance, the benefit of new business and the divestiture of Lear’s Interior business, offset in part by lower production in North America.
In the seating segment, operating margins improved, reflecting favorable cost performance from restructuring and ongoing efficiency actions, selective vertical integration and the benefit of new business primarily outside of North America. In the electrical and electronic segment, operating margins declined, reflecting unfavorable net pricing, lower volume in North America, the roll-off of two programs in North America as well as litigation costs and other commercial items.
Lear reported net income of $123.6 million, or $1.58 per share, for the second quarter of 2007. This compares with a net loss of $6.4 million, or $0.10 per share, for the second quarter of 2006.
Free cash flow in the second quarter of 2007 was $204.0 million as compared to $0.8 million in the second quarter of 2006. The improvement reflects primarily the improvement in earnings and lower capital spending. (Net cash provided by operating activities was $289.3 million in the second quarter of 2007 as compared to $74.8 million in the second quarter of 2006. A reconciliation of free cash flow to net cash provided by operating activities is provided in the supplemental data pages.)
During the second quarter, the Company continued to make solid progress on its global restructuring initiative, including actions related to low-cost country sourcing, capacity alignment and further administrative consolidation actions. Also during the quarter, the Company continued to win new business in Asia and with Asian manufacturers globally. In addition, Lear announced an industry first with its agreement to supply Ford Motor Company with SoyFoam™ for the seats in the 2008 Ford Mustang.
Full-Year 2007 Outlook
Summarized below is the 2007 financial outlook for Lear’s core businesses. The outlook excludes results for Lear’s Interior business for the full year. On this basis, Lear expects 2007 net sales of approximately $15.0 billion. This is up about $200 million from the prior outlook, reflecting primarily a stronger Euro and increased production outside of North America.
3
Lear anticipates 2007 core operating earnings to be in the range of $600 to $640 million. This is unchanged from the last full-year outlook provided, but the Company now sees earnings at or near the high end of this range.
Restructuring costs in 2007 are estimated to be about $100 million.
Interest expense is estimated to be in the range of $210 to $215 million. Pretax income before restructuring costs and other special items is estimated to be in the range of $335 to $375 million. Tax expense is expected to be approximately $120 million, depending on the mix of earnings by country.
Capital spending in 2007 is estimated at approximately $235 million, down $15 million from the prior outlook, reflecting primarily program timing and spending efficiencies. Depreciation and amortization expense is estimated at about $310 million.
Free cash flow is expected to be positive at about $275 million for the year.
Key assumptions underlying Lear’s full-year financial outlook include expectations for industry vehicle production of approximately 15.1 million units in North America and 19.7 million units in Europe. In addition, we are assuming an exchange rate of $1.34/Euro.
Lear will webcast its second-quarter earnings conference call through the Investor Relations link at http://www.lear.com at 9:00 a.m. EDT on August 2, 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 August 16, 2007, with a Conference I.D. of 10224663.
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 press release, the Company has provided information regarding “seating and electrical and electronic income before interest, other expense, income taxes, restructuring costs and other special items” (core operating earnings), “pretax income before restructuring costs and other special items” and “free cash flow” (each, a non-GAAP financial measure). Other expense includes, among other things, state and local non-income taxes, foreign exchange gains and losses, fees associated with the Company’s asset-backed securitization and factoring facilities, minority interests in consolidated subsidiaries, equity in net income of affiliates and gains and losses on the sale of assets. 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
4
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 restructuring costs and other special items are useful measures in assessing the Company’s financial performance by excluding certain items (including those items that are included in other expense) 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, 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, net income, 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, other expense and the net change in sold accounts receivable in any future period, a reconciliation of forward-looking financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP is not feasible. The magnitude of these items, however, may be significant.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results and liquidity. 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
5
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 success of the Company’s restructuring initiative and other risks described from time to time in the Company’s Securities and Exchange Commission filings.
The forward-looking statements in this press release are made as of the date hereof, and the Company does not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof.
Lear Corporation is one of the world’s largest suppliers of automotive seating systems, electrical distribution systems and electronic products. Lear’s world-class products are designed, engineered and manufactured by a diverse team of more than 90,000 employees at 236 facilities in 33 countries. Lear’s headquarters are in Southfield, Michigan. 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.
# # #
Lear Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
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Three Months Ended |
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June 30, |
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July 1, |
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Net sales |
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$ |
4,155.3 |
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$ |
4,810.2 |
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Cost of sales |
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3,817.7 |
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4,526.1 |
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Selling, general and administrative expenses |
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142.8 |
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170.9 |
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Goodwill impairment charge |
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— |
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2.9 |
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Divestiture of Interior business |
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(0.7 |
) |
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— |
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Interest expense |
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51.3 |
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53.2 |
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Other expense, net |
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0.3 |
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25.6 |
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Income before income taxes |
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143.9 |
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31.5 |
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Income tax provision |
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20.3 |
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37.9 |
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Net income (loss) |
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$ |
123.6 |
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$ |
(6.4 |
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Basic net income (loss) per share |
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$ |
1.61 |
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$ |
(0.10 |
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Diluted net income (loss) per share |
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$ |
1.58 |
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$ |
(0.10 |
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Weighted average number of shares outstanding |
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Basic |
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76.7 |
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67.3 |
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Diluted |
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78.2 |
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67.3 |
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6
Lear Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
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Six Months Ended |
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June 30, |
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July 1, |
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Net sales |
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$ |
8,561.4 |
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$ |
9,488.7 |
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Cost of sales |
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7,912.9 |
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8,985.4 |
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Selling, general and administrative expenses |
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269.3 |
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335.9 |
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Goodwill impairment charge |
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— |
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2.9 |
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Divestiture of Interior business |
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24.9 |
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— |
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Interest expense |
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102.8 |
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100.9 |
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Other expense, net |
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25.3 |
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17.3 |
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Income before income taxes and cumulative effect of a change in accounting principle |
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226.2 |
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46.3 |
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Income tax provision |
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52.7 |
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37.7 |
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Income before cumulative effect of a change in accounting principle |
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173.5 |
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8.6 |
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Cumulative effect of a change in accounting principle, net of tax |
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— |
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2.9 |
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Net income |
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$ |
173.5 |
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$ |
11.5 |
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Basic net income per share |
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Income before cumulative effect of a change in accounting principle |
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$ |
2.27 |
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$ |
0.13 |
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Cumulative effect of a change in accounting principle |
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— |
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0.04 |
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Basic net income per share |
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$ |
2.27 |
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$ |
0.17 |
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Diluted net income per share |
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Income before cumulative effect of a change in accounting principle |
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$ |
2.22 |
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$ |
0.13 |
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Cumulative effect of a change in accounting principle |
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— |
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0.04 |
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Diluted net income per share |
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$ |
2.22 |
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$ |
0.17 |
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Weighted average number of shares outstanding |
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Basic |
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76.5 |
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67.3 |
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Diluted |
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78.1 |
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68.0 |
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7
Lear Corporation and Subsidiaries
Consolidated Balance Sheets
(In millions)
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June 30, |
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December 31, |
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(Unaudited) |
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(Audited) |
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ASSETS |
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Current: |
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Cash and cash equivalents |
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$ |
565.2 |
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$ |
502.7 |
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Accounts receivable |
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2,537.2 |
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2,006.9 |
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Inventories |
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564.7 |
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581.5 |
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Current assets of business held for sale |
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— |
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427.8 |
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Other |
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321.0 |
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371.4 |
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3,988.1 |
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3,890.3 |
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Long-Term: |
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PP&E, net |
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1,370.6 |
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1,471.7 |
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Goodwill, net |
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2,011.9 |
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1,996.7 |
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Other |
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551.2 |
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491.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,933.7 |
|
|
|
|
3,960.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
$ |
7,921.8 |
|
|
|
$ |
7,850.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
$ |
9.9 |
|
|
|
$ |
39.3 |
|
|
|
Accounts payable and drafts |
|
|
|
2,623.2 |
|
|
|
|
2,317.4 |
|
|
|
Accrued liabilities |
|
|
|
1,182.9 |
|
|
|
|
1,099.3 |
|
|
|
Current liabilities of business held for sale |
|
|
|
— |
|
|
|
|
405.7 |
|
|
|
Current portion of long-term debt |
|
|
|
100.3 |
|
|
|
|
25.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,916.3 |
|
|
|
|
3,887.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term: |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
2,352.4 |
|
|
|
|
2,434.5 |
|
|
|
Long-term liabilities of business held for sale |
|
|
|
— |
|
|
|
|
48.5 |
|
|
|
Other |
|
|
|
819.5 |
|
|
|
|
878.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,171.9 |
|
|
|
|
3,361.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
833.6 |
|
|
|
|
602.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity |
|
|
$ |
7,921.8 |
|
|
|
$ |
7,850.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Lear Corporation and Subsidiaries
Supplemental Data
(Unaudited; in millions, except content per vehicle and share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
||||||||
|
|
|
|
|
||||||||
|
|
|
June 30, |
|
July 1, |
|
||||||
|
|
|
|
|
|
|
||||||
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
$ |
1,909.2 |
|
|
|
$ |
2,714.5 |
|
|
|
Europe |
|
|
|
1,790.5 |
|
|
|
|
1,713.1 |
|
|
|
Rest of World |
|
|
|
455.6 |
|
|
|
|
382.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
$ |
4,155.3 |
|
|
|
$ |
4,810.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales - Core Businesses |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
$ |
1,877.6 |
|
|
|
$ |
2,006.9 |
|
|
|
Europe |
|
|
|
1,756.4 |
|
|
|
|
1,503.6 |
|
|
|
Rest of World |
|
|
|
455.6 |
|
|
|
|
373.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
$ |
4,089.6 |
|
|
|
$ |
3,883.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Per Vehicle* |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
$ |
474 |
|
|
|
$ |
660 |
|
|
|
North America - core businesses |
|
|
$ |
466 |
|
|
|
$ |
488 |
|
|
|
Europe |
|
|
$ |
347 |
|
|
|
$ |
334 |
|
|
|
Europe - core businesses |
|
|
$ |
340 |
|
|
|
$ |
293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow ** |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
$ |
289.3 |
|
|
|
$ |
74.8 |
|
|
|
Net change in sold accounts receivable |
|
|
|
(46.2 |
) |
|
|
|
18.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities before net change in sold accounts receivable |
|
|
|
243.1 |
|
|
|
|
92.9 |
|
|
|
Capital expenditures |
|
|
|
(39.1 |
) |
|
|
|
(92.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
|
$ |
204.0 |
|
|
|
$ |
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
$ |
75.7 |
|
|
|
$ |
103.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Operating Earnings ** |
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income |
|
|
$ |
143.9 |
|
|
|
$ |
31.5 |
|
|
|
Interest expense |
|
|
|
51.3 |
|
|
|
|
53.2 |
|
|
|
Other expense, net |
|
|
|
0.3 |
|
|
|
|
30.6 |
|
*** |
|
Restructuring costs and other special items - |
|
|
|
|
|
|
|
|
|
|
|
|
Costs related to divestiture of Interior business |
|
|
|
1.1 |
|
|
|
|
— |
|
|
|
Fixed asset impairment charges related to Interior business |
|
|
|
— |
|
|
|
|
7.2 |
|
|
|
Goodwill impairment charge related to Interior business |
|
|
|
— |
|
|
|
|
2.9 |
|
|
|
Costs related to restructuring actions |
|
|
|
34.8 |
|
|
|
|
15.2 |
|
|
|
Costs related to merger transaction |
|
|
|
2.3 |
|
|
|
|
— |
|
|
|
Gain on joint venture transaction |
|
|
|
— |
|
|
|
|
(1.0 |
) |
|
|
Less: Interior business |
|
|
|
(4.4 |
) |
|
|
|
25.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core operating earnings |
|
|
$ |
229.3 |
|
|
|
$ |
164.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Content Per Vehicle for 2006 has been updated to reflect actual production levels. |
|
|
|
|
** |
See “Non-GAAP Financial Information” included in this press release. |
|
|
|
|
*** |
Reported 2006 other expense, net of $25.6 million includes gains of $5.0 million related to restructuring costs and other special items detailed above. |
9
Lear Corporation and Subsidiaries
Supplemental Data
(Unaudited; in millions, except content per vehicle and share data)
|
|
|
|
|
|
|
|
|
||||
|
|
|
Six Months Ended |
|
||||||||
|
|
|
|
|
||||||||
|
|
|
June 30, |
|
July 1, |
|
||||||
|
|
|
|
|
|
|
||||||
|
Net Sales |
|
|
|
|
|
|
|
||||
|
North America |
|
|
$ |
4,135.0 |
|
|
|
$ |
5,356.3 |
|
|
|
Europe |
|
|
|
3,557.2 |
|
|
|
|
3,390.3 |
|
|
|
Rest of World |
|
|
|
869.2 |
|
|
|
|
742.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
$ |
8,561.4 |
|
|
|
$ |
9,488.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales - Core Businesses |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
$ |
3,523.0 |
|
|
|
$ |
3,963.0 |
|
|
|
Europe |
|
|
|
3,489.2 |
|
|
|
|
2,975.5 |
|
|
|
Rest of World |
|
|
|
860.3 |
|
|
|
|
725.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
$ |
7,872.5 |
|
|
|
$ |
7,663.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Per Vehicle * |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
$ |
528 |
|
|
|
$ |
650 |
|
|
|
North America - core businesses |
|
|
$ |
450 |
|
|
|
$ |
481 |
|
|
|
Europe |
|
|
$ |
343 |
|
|
|
$ |
331 |
|
|
|
Europe - core businesses |
|
|
$ |
337 |
|
|
|
$ |
291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow ** |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
$ |
247.5 |
|
|
|
$ |
114.2 |
|
|
|
Net change in sold accounts receivable |
|
|
|
(7.3 |
) |
|
|
|
(20.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities before net change in sold accounts receivable |
|
|
|
240.2 |
|
|
|
|
94.2 |
|
|
|
Capital expenditures |
|
|
|
(68.3 |
) |
|
|
|
(184.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
|
$ |
171.9 |
|
|
|
$ |
(90.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
$ |
150.2 |
|
|
|
$ |
201.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Shares Outstanding at end of quarter |
|
|
|
76,700,558 |
|
|
|
|
67,338,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Shares Outstanding at end of quarter *** |
|
|
|
78,156,875 |
|
|
|
|
67,338,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Operating Earnings ** |
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income |
|
|
$ |
226.2 |
|
|
|
$ |
46.3 |
|
|
|
Interest expense |
|
|
|
102.8 |
|
|
|
|
100.9 |
|
|
|
Other expense, net |
|
|
|
21.4 |
|
**** |
|
|
48.6 |
|
**** |
|
Restructuring costs and other special items - |
|
|
|
|
|
|
|
|
|
|
|
|
Costs related to divestiture of Interior business |
|
|
|
34.9 |
|
|
|
|
— |
|
|
|
Fixed asset impairment charges related to Interior business |
|
|
|
— |
|
|
|
|
9.2 |
|
|
|
Goodwill impairment charge related to Interior business |
|
|
|
— |
|
|
|
|
2.9 |
|
|
|
Costs related to restructuring actions |
|
|
|
50.6 |
|
|
|
|
39.8 |
|
|
|
U.S. salaried pension plan curtailment gain |
|
|
|
(36.4 |
) |
|
|
|
— |
|
|
|
Costs related to merger transaction |
|
|
|
11.7 |
|
|
|
|
— |
|
|
|
(Gain) loss on joint venture transactions |
|
|
|
3.9 |
|
|
|
|
(26.9 |
) |
|
|
Less: Interior business |
|
|
|
(15.6 |
) |
|
|
|
75.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core operating earnings |
|
|
$ |
399.5 |
|
|
|
$ |
296.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Content Per Vehicle for 2006 has been updated to reflect actual production levels. |
|
|
|
|
** |
See “Non-GAAP Financial Information” included in this press release. |
|
|
|
|
*** |
Calculated using stock price at end of quarter. Excludes certain shares related to outstanding convertible debt, as well as certain options, restricted stock units, performance units and stock appreciation rights, all of which were antidilutive. |
|
|
|
|
**** |
Reported 2007 and 2006 other expense, net of $25.3 million and $17.3 million, respectively, include |
|
|
(gains) losses of $3.9 million and $(31.3) million, respectively, related to restructuring costs and other |
|
|
special items detailed above. |
|
|
|
10
August 2, 2007
Second-Quarter 2007 Results and
Full-Year 2007 Financial Outlook
Exhibit 99.2
Agenda
Company Overview and Business Plan
Bob Rossiter, Chairman and CEO
Second-Quarter 2007 Results and 2007 Outlook
Jim Vandenberghe, Vice Chairman and CFO
Q and A Session
2
Company Overview
and Business Plan
3
What Does the Shareholder Vote
Against the AREP Merger Proposal Mean?*
Lear’s shareholders have voted, and we respect their decision
At the time of the Merger Proposal, we had a clear strategy
and business plan for the future
Nevertheless, the Board was obligated to evaluate the AREP
offer and make a recommendation
Following a comprehensive and objective review, the Board
concluded the AREP offer was fair
While we believed there were benefits to the transaction, we
also believe a standalone, publicly traded Lear has a positive
long-term outlook
The Board and management team are focused on executing
the strategic plan we have in place
We Will Operate The Company Going Forward With The
Same Level Of Intensity And Commitment To Customer
Satisfaction And Shareholder Value We Have Always Had
*
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
4
Following the Offer,
Near-Term Factors Turned More Positive*
Investor Sentiment Regarding The Auto Sector
Improved In The First Half Of 2007
*
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
5
Auto sector valuations increased significantly
Big Three production in the first half was relatively stable
and somewhat stronger than we had forecast
Distress in the supply chain has moderated somewhat
There were no labor disruptions in the auto sector, and
there is optimism regarding the outcome of this year’s
union contract negotiations
Lear’s second-quarter operating results and full-year 2007
outlook improved
Business Assessment*
*
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
6
Near-Term Business Conditions Relatively Stable
Continuing priority focus on quality and business
fundamentals
Seating business performing well globally
Electrical and Electronic business needs further
improvement
Further Industry Restructuring and Volatility Expected
Substantial progress on global restructuring initiative
Continuing to diversify our sales with rapid growth in
total Asian sales
New Asian Program Awards in Second Quarter
New Asian Business Awarded In Second Quarter
Worth About $100 Million Annually *
* Includes consolidated and non-consolidated sales.
** Please see slide titled “Forward-Looking
Statements” at the end of this presentation for further information.
Automaker
Market
Lear Content
Vehicle
Program(s)
SOP**
China
Seats
B13 CV
Jun-08
China
Seats
A4
Nov-08
China
Seats
FC2/3
Apr-08
China
Wire Harness/Junction Box/TPMS
FC2/3
Jun-08
North America
Junction Box
Sonata/Santa Fe
Feb-08
Australia
Tier II Seat Components
380
Apr-07
7
Going Forward,
What is Lear’s Business Plan?*
Product-Line Focus
Operating Priorities
Continue to execute the customer-focused business plan we
have in place:
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
8
Focus on strengthening our core businesses:
Leverage leadership position in Seating systems
Strengthen capabilities in Electrical and Electronic segment
Expand capabilities in value-added components
Deliver world-class quality and customer satisfaction
Implement global restructuring and footprint actions
Aggressively pursue growth in Asia and with Asian OEMs globally
Continue product innovation with focus on safety and technology
Second-Quarter Results
and 2007 Outlook
9
Financial Summary*
* Core operating earnings represent seating and electrical and electronic income before interest, other expense, income taxes, restructuring costs and
other special items. Free cash flow
represents net cash provided by operating activities before the net change in sold accounts receivable, less capital
expenditures. Please see slides titled “Non-GAAP Financial Information” and “Forward Looking Statements”
at the end of this presentation for further
information.
10
Second-Quarter special items include:
Costs related to restructuring actions
Costs related to AREP merger transaction
Costs related to divestiture of Interior business
Second-Quarter core operating earnings were $229 million,
up $65 million from a year ago, reflecting:
Favorable cost performance and operating efficiencies
Improved operating performance in Europe and Asia
Benefit of new business, mainly Seating outside of North America
Full-Year outlook unchanged from latest status, but we now expect
earnings at or near the high end of the range:
Core operating earnings range remains at $600 to $640 million
Operating performance positive; production outlook uncertain
Free cash flow increased to $275 million, reflecting lower capital
spending
Second Quarter 2007
Industry Environment
Second Quarter
Second Quarter
2007
2007 vs. 2006
North American Production
Industry
4.0 mil
Down 2%
Big Three
2.7 mil
Down 7%
Lear's Top 15 Platforms
1.3 mil
Down 6%
European Production
Industry
5.2 mil
Up 1%
Up 1%
Lear's Top 5 Customers
2.6 mil
Up 1%
Key Commodities (Quarterly Average)
vs. Prior Quarter
Steel (Hot Rolled)
Up 5%
Down 6%
Crude Oil
Up 11%
Down 8%
Copper
Up 28%
Up 11%
11
Second Quarter 2007
Reported Financial Results
(in millions, except net income per share)
Second
Quarter 2007
Second
Quarter 2006
2Q '07
B/(W) 2Q '06
Net Sales
$4,155.3
$4,810.2
($654.9)
Income Before Interest, Other Expense and
Income Taxes*
$194.8
$113.2
$81.6
Pretax Income
$143.9
$31.5
$112.4
Net Income (Loss)
$123.6
($6.4)
$130.0
Net Income (Loss) Per Share
$1.58
($0.10)
$1.68
SG&A % of Net Sales
3.4
%
3.6
%
0.2
pts.
Interest Expense
$51.3
$53.2
$1.9
Depreciation / Amortization
$75.7
$103.5
$27.8
Other Expense, Net
$0.3
$25.6
$25.3
* Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information.
12
Second Quarter 2007
Restructuring Costs and Other Special Items*
(in millions)
Income Before
Interest, Other
Expense and
Income Taxes
Reported Results
2007 Total Company
$ 194.8
2007 Residual Interior business
(0.6)
2007 Seating/Electrical and Electronic businesses
$ 195.4
Reported Results Include the Following Items:
COGS
SG&A
Costs related to restructuring actions
$ 29.8
24.4
$
5.4
$
Costs related to merger transaction
2.3
-
2.3
Costs related to divestiture of Interior business
1.8
1.3
0.5
2007 Core Operating Earnings
229.3
$
2006 Core Operating Earnings
164.7
$
Second Quarter
Income Statement Category
Memo:
* Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information.
13
Second Quarter 2007
Net Sales Changes and Margin Impact Versus Prior Year
Net Sales
Margin
Performance Factor
Change
Impact
Comments
(in millions)
Industry Production /
$ (171)
Negative
Primarily lower production in
Platform Mix / Net Pricing /
All Other
North America
Global New Business
266
Positive
Nissan Qashqai, Range Rover, Fiat Bravo
and Audi TT in Europe; Hyundai Veracruz
in Asia; GMT 900 pickup and Hyundai
Santa Fe in N.A.
F/X Translation
143
Neutral
Euro up 7%, Canadian dollar up 2%
Acquisition / Divestiture
(893)
Positive
Divestiture of Interior business
Commodity
Neutral
Steel down 6% and copper up 11%, with
some prior period recovery; crude oil
down 8%
Performance
Positive
Favorable operating performance in core
businesses, including benefits from
restructuring actions and vertical
integration
14
Second Quarter 2007
Business Segment Results
Seating
Margin
Margin
Net Sales
3,264.5
$
3,096.1
$
Reported Segment Earnings*
238.8
$
7.3%
171.5
$
5.5%
Adjusted Earnings**
250.4
$
7.7%
175.4
$
5.7%
Electrical and Electronic
Net Sales
825.1
$
787.7
$
Reported Segment Earnings*
23.5
$
2.8%
38.0
$
4.8%
Adjusted Earnings**
38.6
$
4.7%
50.8
$
6.4%
Headquarters Costs
Reported Segment Earnings*
(66.9)
$
(62.0)
$
Adjusted Earnings**
(59.7)
$
(61.5)
$
Core Business
Net Sales
4,089.6
$
3,883.8
$
Reported Earnings*
195.4
$
4.8%
147.5
$
3.8%
Adjusted Earnings**
229.3
$
5.6%
164.7
$
4.2%
Total Company
Net Sales
4,155.3
$
4,810.2
$
Reported Earnings*
194.8
$
4.7%
113.2
$
2.4%
Adjusted Earnings**
233.7
$
5.6%
139.6
$
2.9%
2007
2006
Second Quarter
($ in millions)
* Reported segment earnings represent income (loss) before interest, other expense and income taxes. Please see slides titled “Non-GAAP Financial
Information”
at the end of this presentation for further information.
** Adjusted earnings and margin exclude restructuring costs and other special items as follows – In the Second Quarter ended 06/30/07, adjustments for
Seating - $11.6M, Electrical and
Electronic - $15.1M, HQ - $7.2M, Core Business - $33.9M and Total Company - $38.9M and in the Second Quarter
ended 07/01/06, adjustments for Seating - $3.9M, Electrical and Electronic - $12.8M, HQ
- - $0.5M, Core Business - $17.2M and Total Company -
$26.4M.
15
Second Quarter 2007
Seating Segment Performance*
Explanation of
Year-to-Year Change
5.7%
7.7%
Q2 2006
Q2 2007
Adj. Seg.
Earnings
(in millions)
$175.4 $250.4
Adjusted Seating Margin
16
+
Favorable cost performance from
restructuring and ongoing efficiency
actions
+
Margin improvement actions, including
selective vertical integration
+
Benefit of new business, primarily
outside of North America
+
Net raw material favorable
-
Lower production in North America
*
Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information and refer to
slide 28 in this presentation for a reconciliation of reported segment earnings to adjusted segment earnings.
Second Quarter 2007
Electrical and Electronic Segment Performance*
Explanation of
Year-to-Year Change
6.4%
4.7%
Q2 2006
Q2 2007
Adj. Seg.
Earnings
(in millions)
$50.8 $38.6
Adjusted
Electrical and Electronic Margin
17
-
Litigation costs and other
commercial items
-
Unfavorable net pricing
-
Lower industry production in N. A.
-
Roll-off of two programs in N. A.
-/+ Higher copper prices offset by prior
period recovery
-
Improving results in Asia
*
Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information and refer to
slide 28 in this presentation for a reconciliation of reported segment earnings to adjusted segment earnings.
Adjusted Headquarters Expense**
Explanation of
Year-to-Year Change
Second Quarter 2007
Headquarters Performance*
(in millions)
$61.5
$59.7
Q2 2006
Q2 2007
18
SG&A efficiencies
Restructuring savings
*
Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information and refer to slide 28 in
this presentation for a reconciliation of reported segment earnings to adjusted segment earnings.
**
Adjusted expense excludes restructuring costs of $0.5 million in 2006 and restructuring costs of $3.1 million, merger-related costs of
$2.3 million and costs related to the Interior divestiture of $1.8 million in 2007.
Second Quarter 2007
Free Cash Flow*
(in millions)
Second
Quarter
2007
Net Income
$ 123.6
Depreciation / Amortization
75.7
Working Capital / Other
43.8
Cash from Operations
$ 243.1
Capital Expenditures
(39.1)
Free Cash Flow
$ 204.0
19
*
Free Cash Flow represents net cash provided by operating activities ($289.3 million for the three months ended 6/30/07) before
net change in sold accounts receivable (($46.2) million for the three months ended 06/30/07) (Cash from Operations), less
capital expenditures. Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further
information.
2007 Outlook
Full-Year Production Assumptions*
Full-Year
Change from
2007 Outlook
Prior Year
North American Production
Total Industry
~ 15.1 mil
~
down 1%
Big Three
~ 9.8 mil
~
down 4%
Lear’s Top 15 Platforms
~ 4.6 mil
~
down 7%
European Production
Total Industry
~ 19.7 mil
~
up 3%
Lear’s Top 5 Customers
~ 9.9 mil
~
up 2%
Euro
$1.34 / Euro
up 6%
Key Commodities
moderating
slightly lower
(except copper)
(except copper)
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
20
2007 Outlook
Full-Year Financial Forecast*
2007 Full-Year
Financial Forecast
for Core Business
(Seating and Electrical and Electronic businesses)
Net Sales
~
~
$15 billion
Core Operating Earnings
$600 to $640 million
Income before interest, other expense,
income taxes, restructuring
costs and other special items
Interest Expense
$210 to $215 million
Pretax Income
$335 to $375 million
before restructuring costs
and other special items
Estimated Tax Expense
~
~
$120 million
**
Pretax Restructuring Costs
~
~
$100 million
Capital Spending
~
~
$235 million
Depreciation and Amortization
~
~
$310 million
Free Cash Flow
~
~
$275 million
** Subject to actual mix of financial results by country.
* Please see slides titled “Non-GAAP Financial Information” and “Forward-Looking Statements” at the end of this presentation for
further information.
21
Summary and Outlook*
Lear is Financially Sound
Successfully refinanced major debt maturities through 2010
Operating results improving; cash flow now solidly positive
Making Progress on Strategic Priorities
Completed divestiture of Interior business
Expanding our presence in Asia and growing Asian sales
globally
Implementing global restructuring actions
Automotive industry conditions, particularly in North
America, remain challenging
Longer-term outlook for Lear continues to be positive
Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
22
ADVANCE RELENTLESSLY™
www.lear.com
LEA
NYSE
Listed
R
23
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 presentation, the Company has provided information regarding “income before interest, other expense and income taxes,”
“seating and electrical and electronic income before interest, other expense, income taxes, restructuring costs and other special items” (core
operating earnings), “pretax income before restructuring costs and other special items” and “free cash flow” (each, a non-GAAP financial
measure). Other expense includes, among other things, state and local non-income taxes, foreign exchange gains and losses, fees
associated with the Company’s asset-backed securitization and factoring facilities, minority interests in consolidated subsidiaries, equity in
net income of affiliates and gains and losses on the sale of assets. 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 income before interest, other
expense and income taxes, core operating earnings and pretax income before restructuring costs and other special items are useful
measures in assessing the Company’s financial performance by excluding certain items (including those items that are included in other
expense) 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.
Income before interest, other expense and income taxes, core operating earnings, 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, net income, 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, other expense and
the net change in sold accounts receivable in any future period, a reconciliation of forward-looking financial measures to the most directly
comparable financial measures calculated and presented in accordance with GAAP is not feasible. The magnitude of these items, however,
may be significant.
24
Non-GAAP Financial Information
Cash from Operations and Free Cash Flow
Three Months
(in millions)
Q2 2007
Net cash provided by operating activities
$ 289.3
Net change in sold accounts receivable
(46.2)
Net cash provided by operating activities
before net change in sold accounts receivable
(cash from operations)
243.1
Capital expenditures
(39.1)
Free cash flow
$ 204.0
25
Non-GAAP Financial Information
Core Operating Earnings
Three Months
(in millions)
Q2 2007
Q2 2006
Pretax income
$ 143.9
$ 31.5
Goodwill impairment charge related to Interior business
-
2.9
Divestiture of Interior business
(0.7)
-
Interest expense
51.3
53.2
Other expense, net *
0.3
25.6
Income before interest, other expense and income taxes
$ 194.8
$ 113.2
Costs related to divestiture of Interior business (included in COS and SG&A)
1.8
-
Fixed asset impairment charges related to Interior business
-
7.2
Costs related to restructuring actions
34.8
19.2
Costs related to merger transaction
2.3
-
Income before interest, other expense, income taxes,
restructuring costs and other special items
233.7
$
139.6
$
Less: Interior business
(4.4)
25.1
Seating and electrical and electronic income before interest, other
expense, income taxes, restructuring costs and other special items
$ 229.3
$ 164.7
(core operating earnings)
* Includes minority interests in consolidated subsidiaries and equity in net income of affiliates.
26
Non-GAAP Financial Information
Segment Earnings Reconciliation
Three Months
(in millions)
Q2 2007
Q2 2006
Seating
$ 238.8
$ 171.5
Electrical and electronic
23.5
38.0
Interior
(0.6)
(34.3)
Segment earnings
261.7
175.2
Corporate and geographic headquarters and elimination of
intercompany activity
(66.9)
(62.0)
Income before interest, other expense and income taxes
$ 194.8
$ 113.2
Goodwill impairment charge related to Interior business
-
2.9
Divestiture of Interior business
(0.7)
-
Interest expense
51.3
53.2
Other expense, net
0.3
25.6
Pretax income
$ 143.9
$ 31.5
27
Non-GAAP Financial Information
Adjusted Segment Earnings
Three Months Q2 2007
Three Months Q2 2006
Electrical and
HQ/
Core
Electrical and
HQ/
Core
(in millions)
Seating
Electronic
Other
Business
Seating
Electronic
Other
Business
Segment earnings
238.8
$
23.5
$
(66.9)
$
195.4
$
171.5
$
38.0
$
(62.0)
$
147.5
$
Costs related to divestiture of
Interior business
-
-
1.8
1.8
-
-
-
-
Costs related to restructuring actions
11.6
15.1
3.1
29.8
3.9
12.8
0.5
17.2
Costs related to merger transaction
-
-
2.3
2.3
-
-
-
-
Adjusted segment earnings
250.4
$
38.6
$
(59.7)
$
229.3
$
175.4
$
50.8
$
(61.5)
$
164.7
$
28
Forward-Looking Statements
This presentation contains forward-looking statements within
the meaning of the Private Securities
Litigation Reform Act of 1995, including statements regarding anticipated financial results and
liquidity. Actual results may differ materially from anticipated results as a result of certain risks and
uncertainties, including but not limited to, general economic conditions in the markets in which the
Company operates, including changes in interest rates or currency exchange rates, the financial
condition of the Company’s customers or suppliers,
fluctuations in the production of vehicles for
which the Company is a supplier, disruptions in the relationships with the Company’s suppliers,
labor disputes involving the Company or its significant
customers or suppliers or that otherwise
affect the Company, the Company’s ability to achieve cost reductions that offset or exceed
customer-mandated selling price reductions, the outcome of customer productivity negotiations, the
impact and timing
of program launch costs, the costs and timing of facility closures, business
realignment or similar actions, increases in the Company's warranty or product liability costs, risks
associated with conducting business in foreign countries, competitive
conditions impacting the
Company's key customers and suppliers, raw material costs and availability, the Company's ability
to mitigate the significant impact of increases in raw material, energy and commodity costs, the
outcome of legal or regulatory
proceedings to which the Company is or may become a party,
unanticipated changes in cash flow, including the Company’s ability to align its vendor payment
terms with those of its customers, the success of the Company's restructuring initiative
and other
risks described from time to time in the Company's Securities and Exchange Commission filings.
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.
29