Lear Corporation · NYSE:LEA
Lear — Q4 2004 Earnings Presentation
27 slides from Lear's earnings presentation, Jan 26, 2005
Slide 1: Fourth Quarter and Full Year 2004 Results and First Quarter 2005 Guidance
R Fourth Quarter and Full Year 2004 Results and First Quarter 2005 Guidance January 26, 2005 world’s leading automotive interior supplier fast forward advance relentlessly 1
Slide 2: Agenda
Agenda Company Review – Jim Vandenberghe, Vice Chairman Financial Review and First Quarter 2005 Guidance – Dave Wajsgras, SVP and CFO Q&A 2
Slide 3: Company Review
CORPORATION Company Review
Slide 4: Highlights – Full Year 2004
Highlights – Full Year 2004 Record net sales of $17.0 billion, up 8% from 2003 Net income of $5.77 per share, up 9% from 2003 (see note below) Expanded infrastructure in Asia; grew sales with Asian automakers Increased low-cost country manufacturing and engineering capability Used cash flow to fund
Slide 5: Shareholder Value Scorecard
Shareholder Value Scorecard Strategy 2004 Actions Invest in high return programs Awarded significant new business Increased revenue in Asia Pursue strategic acquisitions Acquired terminals & connectors business Continued to grow joint ventures Return cash to shareholders Paid first-ever dividend Rep
Slide 6: Lear's Strategy has Supported Rapid Growth
Lear’s Strategy has Supported Rapid Growth Net Sales (in billions) $17.0 $18.0 $16.0 Inc ome Net 22% $14.0 G R CA SALES $12.0 CAGR $10.0 18% $8.0 $6.0 $3.1 $4.0 $2.0 $0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Steadily increased net sales over the last ten years to $17 billion in 200
Slide 7: Perspective On 2005 Operating Environment
Perspective On 2005 Operating Environment* First Quarter Rest of Year Industry Production North America Neutral to improving, depending down 5%, reflecting on consumer demand inventory correction; Europe also down Platform Mix Very adverse Moderately adverse Raw Material Impact Adverse Negative impa
Slide 8: Sales Backlog Supports Continued Growth
Sales Backlog Supports Continued Growth Sales Backlog* (in millions) 2005 2005backlog backlogupup$150 $150 million millionfrom fromlast lastyear yearon on $1,550 aacomparable comparablebasis basis $1,350 $900 Three-year Three-yearbacklog backlogup up $750 $750million millionfrom fromlast last year y
Slide 9: Continuing to Strengthen Financial Position
Continuing to Strengthen Financial Position 65% * 63% Net Debt /Capital 58% 46% 42% 2000 2001 2002 2003 2004 * Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. Please see slides titled “Use of Non-GAAP Financial Information” at the end of this pres
Slide 10: Financial Review and First Quarter 2005 Guidance
Financial Review and First Quarter 2005 Guidance 10
Slide 11: Challenging Fourth Quarter Production Environment
Challenging Fourth Quarter Production Environment North NorthAmerica America Industry Industryproduction productiondown down2% 2% Big BigThree Threedown down5% 5% Europe Europe Industry Industryproduction productiondown down2% 2% Key KeyLear Learplatforms platformshad haddouble-digit double-digitdec
Slide 12: Financial Highlights – Fourth Quarter 2004
Financial Highlights – Fourth Quarter 2004 Fourth Fourth 4Q ‘04 Quarter 2004 Quarter 2003 B/(W) 4Q ‘03 (in millions, except net income per share) Net Sales $4,286.1 9 $4,255.3 $30.8 Income before Interest, Other Expense & Income Taxes (core operating earnings)* $217.2 $236.1 $(18.9) Margin 5.1% 5.5%
Slide 13: 4Q04 vs. 4Q03 Change in Net Sales and Core Operating Earnings
4Q04 vs. 4Q03 Change in Net Sales and Core Operating Earnings Net Sales (up $31 million) + Addition of new business globally + Impact of foreign exchange, primarily stronger Euro + Acquisitions offset in part by – Global vehicle production and platform mix Core Operating Earnings* (down $19 million)
Slide 14: Fourth Quarter and Full Year Free Cash Flow
Fourth Quarter and Full Year Free Cash Flow* Three Twelve (in millions) Months Months Net NetIncome Income $$ 123 123 $$ 422 422 Depreciation Depreciation//Amortization Amortization 97 97 355 355 Working WorkingCapital Capital//Other Other 12 12 (31) (31) Cash Cashfrom fromOperations* Operations* $$
Slide 15: 2005 Outlook Vehicle Production Assumptions
2005 Outlook Vehicle Production Assumptions* North America Europe (in millions) (in millions) 15.7 ≈ 15.7 – 16.0 18.7 ≈ 18.3 – 18.6 Full Full Year Year First First Quarter 4.1 ≈ 3.9 Quarter 4.8 ≈ 4.7 2004 Actual 2005 Forecast 2004 Actual 2005 Forecast First Quarter 2005 Production Down In Both North
Slide 16: 2005 Outlook Net Sales
2005 Outlook Net Sales* First Full (in billions) Quarter Year ≈ $17.6 – $18.0 2005 Guidance ≈ $4.3 – $4.5 $17.0 2004 $4.5 $15.7 2003 $3.9 2005 Net Sales Increase Reflects Strong Backlog * Please see slide titled “Forward-Looking Statements” at the end of this presentation. 16
Slide 17: 2005 Outlook Net Income Per Share
2005 Outlook Net Income Per Share* First Full Quarter Year $0.50 – ≈ $5.00 – $6.00 2005 Guidance $0.70 $5.77 (see note below) 2004 Reported $1.24 Key Swing Factors Production levels and platform mix Impact on supply chain from sustained high level of raw material prices Customer productivity negotia
Slide 18: Other 2005 Full Year Financial Guidance
Other 2005 Full Year Financial Guidance* Free Cash Flow $250 million Interest Expense $170 – $175 million Tax Rate 25% – 27% Depreciation $400 – $425 million Capital Expenditures $425 – $475 million Euro $1.25 – $1.35 / Euro * Please see slides titled “Use of Non-GAAP Financial Information” and “For
Slide 19: Three-Year Sales Backlog
Three-Year Sales Backlog Backlog By Region Backlog By Product North America – 58% Seats – 49% Asia – 8% Electronics/ Interiors – 33% Europe – 34% Electrical – 18% 19
Slide 20: Alternative Uses of Cash Flow While Maintaining a Strong Balance Sheet
Alternative Uses of Cash Flow. . . Where We See Value Creation Invest internally Repurchase in high return shares programs Pursue strategic Dividends acquisitions . . . While Maintaining a Strong Balance Sheet 20
Slide 21: Summary
Summary Despite a more challenging environment, 2004 was a solid year Challenges continue in 2005, with most significant negative impact on the first quarter Dividend increase reflects management’s confidence in the long term outlook of the Company Lear Has A Balanced, Long-Term Approach To Creating
Slide 22: Advance Relentlessly
R R ADVANCE RELENTLESSLY™ LEA Listed NYSE www.lear.com 22
Slide 23: Use of Non-GAAP Financial Information
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 presentation, the Company has provided information regarding certain non-GAAP financial measures. These measure
Slide 24: Use of Non-GAAP Financial Information: Core Operating Earnings
Use of Non-GAAP Financial Information Core Operating Earnings (in millions) Three Months Q4 2004 Q4 2003 Income before interest, other expense and income taxes Income before income taxes $ 159.5 $ 182.8 Interest expense 43.9 41.9 Other expense, net 13.8 11.4 Income before interest, other expense and
Slide 25: Use of Non-GAAP Financial Information: Free Cash Flow
Use of Non-GAAP Financial Information Free Cash Flow (in millions) Three Months Twelve Months Q4 2004 2004 Free cash flow Net cash provided by operating activities $ 231.9 $ 675.9 Net change in sold accounts receivable - 70.4 Net cash provided by operating activities before net change in sold accoun
Slide 26: Use of Non-GAAP Financial Information: Net Debt
Use of Non-GAAP Financial Information Net Debt (in millions) December 31, Net debt 2004 2003 2002 2001 2000 Short-term borrowings $ 35.4 $ 17.1 $ 37.3 $ 63.2 $ 72.4 Current portion of long-term debt 632.8 4.0 3.9 129.5 155.6 Long-term debt 1,866.9 2,057.2 2,132.8 2,293.9 2,852.1 Total debt 2,535.1 2
Slide 27: Forward-Looking Statements
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. Actual results may differ materially from anticipated results as a result of cert