Lear Corporation · NYSE:LEA
Lear — FY2002 Earnings Presentation
42 slides from Lear's earnings presentation, Jan 27, 2003
Slide 1: Fourth Quarter and Full Year 2002 Earnings Review and Guidance for 2003
January 27, 2003 a d v a n c e r e l e n t l e s s l y Fourth Quarter and Full Year 2002 Earnings Review and Guidance for 2003 1
Slide 2: Agenda
Agenda I.I. Strategic Strategic Overview Overview Bob Bob Rossiter, Rossiter, Chairman Chairman & & CEO CEO II. II. Customer Customer Focus Focus Driving Driving Growth Growth Jim Jim Vandenberghe, Vandenberghe, Vice Vice Chairman Chairman III. III. Financial Financial Review Review and and 2003 200
Slide 3: Strategic Overview
Qi LEAR. Strategic Overview
Slide 4: We've Steadily Increased our Automotive Interior Capabilities
We’ve Steadily Increased our Automotive Interior Capabilities Electronics Instrument Panels Total Floor and Acoustics Automotive Interior Capability Door Panels Overheads Seating 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Transformation from Seat Manufacturer to Integrator of Complete Automot
Slide 5: Becoming a Systems Integrator Means Moving...
Becoming a Systems Integrator Means Moving... From To INTERNAL FOCUS CUSTOMER FOCUS SUPPLIER STRATEGIC PARTNER SPECIFICATIONS COLLABORATIVE APPROACHES PIECE PRICE CONTRACTS VALUE-ADDED SERVICES BUILD-TO-PRINT FULL R&D CAPABILITY OPERATING EFFICIENCY SUPPLY-CHAIN MANAGEMENT MANUFACTURER SYSTEMS INTEG
Slide 6: Business Environment
Business Environment Overall OverallMarket Market •• Stable StableU.S. U.S.and andW.W.Europe Europeeconomic economicsituation situation •• Equity Equitymarkets markets“nervous” “nervous”about aboutgeopolitical geopoliticalevents events Automotive AutomotiveSector Sector •• ‘Trend’ ‘Trend’N.A. N.A.pr
Slide 7: 2002 Highlights: A Focus on the Customer… and Cash
2002 Highlights A Focus on the Customer… and Cash •• Continued Continuedto toimprove improvequality quality •• Further Furtherstrengthened strengthenedcustomer customerrelationships relationships •• Awarded Awardedfirst-ever first-evertotal totalinterior interiorintegrator integratorprogram programb
Slide 8: Customer Focus Driving Growth
Customer Focus Driving Growth 8
Slide 9: Global Business Strategy
Global Business Strategy North North America America -- Leverage Leverage our our leadership leadership position position in in total total interiors interiors Europe Europe -- Improve Improve our our business business structure structure and and grow grow our our market market share share Rest Rest
Slide 10: Lear Strategic Roadmap - Advance Relentlessly
Lear Strategic Roadmap - - Advance Relentlessly Lear Operating Strengths • Leading Global Market Position Premier • Diversified Customer Base Automotive • Solid Reputation for Quality Supplier • Outstanding Customer Relationships wth G ro g s n a rni Lear Financial Strengths n dE a • Strong Sales Ba
Slide 11: 2003 Lear Product Launch Highlights
2003 Lear Product Launch Highlights General GeneralMotors Motors Ford Ford European EuropeanOEMs OEMs Cadillac SRX Ford F-Series Volvo XC 90 Seats, interior trim, Seats,cockpit assembly, Seats, I/P, door panels, flooring, dash insulator, flooring, door panels electronics lift-gate Lincoln LincolnAvi
Slide 12: Lear Product Highlights: Cadillac SRX
Lear Product Highlights Cadillac SRX Seats Flooring Interior Trim Dash Insulator Lift-gate 12
Slide 13: Lear Product Highlights: Ford F-Series
Lear Product Highlights Ford F-Series Seats Door Panels Flooring Cockpit Assembly 13
Slide 14: Lear Product Highlights: Dodge Durango
Lear Product Highlights Dodge Durango Seats Flooring Overhead Electronics Dash Insulator 14
Slide 15: Lear Product Highlights: Volvo XC90
Lear Product Highlights Volvo XC 90 Seats Door Panels Electronics Instrument Panel 15
Slide 16: Lear Product Highlights: Toyota Sienna
Lear Product Highlights Toyota Sienna Seats Door Panels 16
Slide 17: Backlog Grows to $4 Billion
Backlog Grows to $4 Billion Major Areas of Growth Five Year Sales Backlog ($ Billions) $4.0 •• Total Totalinterior interiorintegrator integrator program program $3.6 •• New Newbusiness businesswith with Asian AsianOEMs OEMs •• Growing Growingelectronics electronics •• New NewIP IPand andcockpit cock
Slide 18: Examples of Growth in the Backlog
Examples of Growth in the Backlog New Business w/ Asian OEMs Total Interior Integrator •• Hyundai HyundaiSonata/Santa Sonata/SantaFe Fe (Seats, (Seats,electrical) electrical) •• First Firstprogram programof ofthis thistype typeever ever awarded •• Honda HondaPilot/Element Pilot/Element awardedby byG
Slide 19: Lear Progressing from Systems Integrator to Total Interior Integrator
Lear Progressing from Systems Integrator to Total Interior Integrator Systems Total Interior Integrator Integrator (TI) Design Design OEM OEMLead Lead Supplier SupplierLead Lead Engineering Engineering Shared Shared Supplier SupplierLead Lead Sourcing Sourcing OEM OEMDirected Directed Supplier Suppl
Slide 20: Lear Selected as Total Interior Integrator for Buick LeSabre / Cadillac DeVille
Lear Selected as Total Interior Integrator for Next Generation Buick LeSabre / Cadillac DeVille Key Program Physicals Status •• Estimated Estimatedannual annualLear Learnet net sales •• Design Designphase phasewell well salesof of$825 $825million million underway underway----clay claymodels models •
Slide 21: Financial Review and 2003 Outlook
Financial Review and 2003 Outlook 21
Slide 22: Financial Highlights - Full Year 2002
Financial Review Financial Highlights - Full Year 2002 •• Record Recordnet netsales salesof of$14.4 $14.4billion, billion,up up6% 6%from from2001 2001 •• Earnings Earningsof of$4.65 $4.65per pershare, share,up up25% 25%from fromprior prioryear year** •• Operating Operatingmargin marginof of5.2%, 5.2
Slide 23: Financial Highlights - Fourth Quarter 2002
Financial Review Financial Highlights - Fourth Quarter 2002 Fourth Quarter 2002 Fourth Quarter 2001 ($ in millions, except EPS) Reported/Adjusted Reported Adjusted * Net NetSales Sales $$ 3,760.4 3,760.4 ü $$ 3,405.0 3,405.0 $$ 3,405.0 3,405.0 Operating OperatingIncome Income $$ 246.8 246.8 $$ 68.6
Slide 24: 4Q02 versus 4Q01 - Change in Operating Income
Financial Review 4Q02 versus 4Q01 - Change in Operating Income Industry IndustryVehicle VehicleProduction Production N.A. N.A.3% 6% 3% W.E. W.E. (6)% (1)% (6)% S.A. S.A. S.A.(22)% 16% 16% $ Millions $30 $29M $25 $19M $20 $15 $10 $6M $4M $5 NM $0 Total Change Worldwide Currency and Divestitures Globa
Slide 25: Strong Free Cash Flow
Financial Review Strong Free Cash Flow 2002 Fourth Qtr Full Year (mils) (mils) Net NetIncome Income $$ 118 118 $$ 312 312** ** Depreciation Depreciation 78 78 301 301 Working WorkingCapital Capital//Other Other 74 74 55 55 Cash Cashfrom fromOperations Operations** $$ 270 270 $$ 668 668 Capital Capit
Slide 26: Continuing to Reduce Our Net Debt
Financial Review Continuing to Reduce Our Net Debt $ Billion $4.0 70% Net Debt/Capitalization 65% $3.5 $3.4 63% $3.0 58% Net Debt $3.0 $2.7 $2.5 $2.3 $2.0 1999* 2000 2001** 2002** Free Cash Flow $179M $408M $318M $395M Aggressively Reducing Our Debt * UTA acquisition 5/99 ** Includes ABS debt of $26
Slide 27: Fourth Quarter Content Per Vehicle is Up
Financial Review Fourth Quarter Content Per Vehicle is up. . . North America Western Europe % 6% $606 13 $290 Up Up $572 $256 4Q 2001 4Q 2002 4Q 2001 4Q 2002 With Major 2002 Launches Now in Place, Growth in Content per Vehicle Resumes 27
Slide 28: Continuing Our Trend of Annual CPV Growth
Financial Review Continuing Our Trend of Annual CPV Growth $577 $572 $553 $478 $262 $240 $235 $227 1999 2000 2001 2002 North America Western Europe Lear Has a Track Record of Content per Vehicle Growth 28
Slide 29: Growth to Continue with Strong Sales Backlog
Financial Review Growth to Continue with Strong Sales Backlog Present PresentBacklog Backlog(millions) Backlog By Customer (millions) 2003 2003 $$ 900 900 2004 700 Big 3 45 % 2004 700 2005 2005 1,000 1,000 European 30 % 2006 2006 900 900 Asian 25 % 2007 2007 500 500 55Year YearTotal Total $$4,000 4,
Slide 30: Financial Impact of 'New' Backlog Profile
Financial Review Financial Impact of ‘New’ Backlog Profile Backlog Highlights Strategic / Financial Impact • Total interior integrator program • Validates leading position as a total interior supplier; neutral on operating margins and a plus for ROIC • Electrical components and • Electronics is the
Slide 31: Profile of Lear's Joint Ventures
Financial Review Profile of Lear’s Joint Ventures NON-CONSOLIDATED JVs •• Provide ProvideLear Learwith withaccess accessto tonew new Non-consolidated markets, markets,new newcustomers, customers,new new 16 technologies technologiesand andnew newproducts products •• 16 16Non-consolidated Non-consolid
Slide 32: Non-Consolidated Joint Ventures Growing Rapidly
Financial Review Non-Consolidated Joint Ventures Growing Rapidly Annual Sales* Five Year Sales Backlog* (millions) (millions) w th Gr o $725 % 22% 67 $1,250 $635 Up $593 $750 2001 2002 2003 2002 - 2006 2003 - 2007 Estimate Status Status Not included in our Reported Net Sales or the $4.0 Billion New
Slide 33: Restructuring Update
Financial Review Restructuring Update Facility FacilityClosures Closures •• 18 18closures closuresof ofthe the21 21planned plannedcompleted completedtotodate date •• 44closures closuresininthe thefourth fourthquarter quarter •• Overall Overallclosure closureplan planproceeding proceedingonontarget t
Slide 34: Pension Benefit Obligation (PBO) Status
Financial Review Pension Benefit Obligation (PBO) Status PBO & Unfunded PBO Summary As of September 30 $ Millions $397 PBO Unfunded PBO $313 •• Unfunded UnfundedPBO PBOisismanageable manageable -- 7% 7%ofofmarket marketcap cap -- <<11year yearof ofFree FreeCash CashFlow Flow •• 2,000 2,000retirees r
Slide 35: Pension & OPEB Update
Financial Review Pension & OPEB Update Cash CashFlow: Flow:(millions) (millions) 2002 2003E Pension Pension $$ 35 35 $$ 4545 Healthcare Healthcare 10 10 15 15 $$ 45 45 $$ 6060 Expense: Expense:(millions) (millions) Pension Pension $$ 40 40 $$ 50 50 Healthcare Healthcare 22 22 35 35 $$ 62 62 $$ 85 85
Slide 36: Corporate Tax Rate Declining
Financial Review Corporate Tax Rate Declining Factors Influencing Our Tax Rate 33.5% •Strategic •Strategicemphasis emphasison onproactive proactivetax tax 32.0% planning planningthroughout throughoutthe thecompany company 30.0% •Efficient •Efficientmanagement managementof ofLegal LegalEntity Entity
Slide 37: 2003 Vehicle Production Assumptions
Financial Review 2003 Vehicle Production Assumptions North America Western Europe (in millions) (in millions) 16.4 16.0 16.1 16.0 2002 2003 2002 2003 Actual Outlook Actual Outlook Q1 4.1 up 1% Q1 4.2 down 3% 2003 Production Down in North America; Flat in Western Europe 37
Slide 38: 2003 Guidance
Financial Review 2003 Guidance First Quarter EPS Full Year EPS Net Sales up Net Sales of 6% to 8% Au $15 Billion $5.40 $1.00 $0.90 $4.65 $5.20 $0.70 $0.53 $3.73 2001 2002 2003 2001 2002 2003 Interest Expense $ 50 M $ 200 M Capital Expenditures $ 100 M $ 300 M Free Cash Flow $ 50 M $ 400 M (Note: Ful
Slide 39: 2003 Financial Sensitivity
Financial Review 2003 Financial Sensitivity 2003 Major Assumptions 2002 Guidance Sensitivity N.A. N.A.Production Production(Mils) (Mils) 16.4 16.4 16.0 16.0 15.5 15.5 W.E. W.E.Production Production(Mils) (Mils) 16.1 16.1 16.0 16.0 16.0 16.0 Net NetSales Sales(Bils) (Bils) $$ 14.4 14.4 $$ 15.0 15.0 $
Slide 40: Where is Lear Today...
Where is Lear Today . . . •• Well Wellpositioned positionedfor forsustainable sustainablegrowth; growth;sales salesbacklog backlogat at highest highestlevel levelever ever •• Operating Operatingmargins marginsand andreturns returnsimproving improving •• Double-digit Double-digitearnings earningsper
Slide 41: Advance Relentlessly
ADVANCE RELENTLESSLY™ NYSE: LEA www.lear.com
Slide 42: Forward Looking Statement
Forward Looking Statement This document 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 r