Lear Corporation · NYSE:LEA
Lear — Q2 2004 Earnings Presentation
33 slides from Lear's earnings presentation, Jul 22, 2004
Slide 1: Second Quarter 2004 Earnings Review
R Second Quarter 2004 Earnings Review July 22, 2004 world’s leading automotive interior supplier advance relentlessly ® fast forward
Slide 2: Agenda
Agenda I. Strategy Update Bob Rossiter, Chairman and CEO II. Operating Review Jim Vandenberghe, Vice Chairman III. Financial Review and Guidance Dave Wajsgras, SVP and CFO IV. Q & A 2
Slide 3: Strategy Update
CORPORATION otrategy Update
Slide 4: Customer-Focused Strategy Driving Results
Strategy Update Customer-Focused Strategy Driving Results Overall Lear strategy unchanged; operating fundamentals have never been stronger Continuing to meet challenging customer requirements and turn in solid financial results Global growth of Asian automakers driving need for supplier diversificat
Slide 5: A Consistent, Disciplined Strategy
Strategy Update A Consistent, Disciplined Strategy Aggressively expand our presence in Asia and with Improve our Asian OEMs business structure and globally Leverage our grow our market leadership share in Europe position in total interiors in North America 55
Slide 6: Our Presence in Asia is Growing Rapidly
Strategy Update Our Presence in Asia is Growing Rapidly* China Korea • 11 facilities • 2 facilities • 1 engineering center • 1 engineering center • 21 customers • 2 customers • Seats, interiors, electrical • Seats distribution, electronics, IP India Japan • 3 facilities • 3 engineering centers • 1 e
Slide 7: Progress Report on Asian Strategy
Strategy Update Progress Report on Asian Strategy Infrastructure strengthened to support future Asian growth Continuing to develop key strategic partnerships to enhance market position, particularly in China and Korea Low-cost engineering/manufacturing capabilities in place, providing competitivenes
Slide 8: Asia/Asian Automakers Revenue
Strategy Update Asia/Asian Automakers Revenue* (millions) ≈$1,600 $1,250 $850 2002 2003 2004 Future Asian Sales About Double from 2002 to 2004; Solid Growth Expected to Continue** * Consolidated and unconsolidated sales ** Please see slide titled “Forward-Looking Statements” at the end of this prese
Slide 9: Operating Review
CORPORATION Operating Review
Slide 10: Second Quarter Results Solid in Challenging Environment
Operating Review Second Quarter Results Solid in Challenging Environment Financials Achieved record second quarter net sales of $4.3 billion and net income per share of $1.65 Agreements reached for major facility actions Quality Quality metrics continued to improve worldwide Received four World Exce
Slide 11: Quality Initiatives Continue to Drive Results
Operating Review Quality Initiatives Continue to Drive Results Parts Per Million (PPM) Defective* 85% Improvement 2000 2001 2002 2003 2004 YTD On Track for 5th Consecutive Year of Improvement * Based on customer data. 11
Slide 12: Developments in China in the Second Quarter
Operating Review Developments in China in the Second Quarter New Business This Year: Lear awarded first contract with First Autoworks (SOP - Oct. 04) New electronics plant to supply Shanghai GM, Honda and Saturn (SOP - July 04) Business Development: Lear / Yunhe JV awarded first seat business with P
Slide 13: Lear Awarded New Seat Business with Mazda
Operating Review Lear Awarded New Seat Business with Mazda Effective June 1, 2004, Lear was awarded seats and seat component business for: Mazda 6 Mazda Tribute / Ford Escape Expected annual sales of approximately $100 million Making Progress with North American Transplants 13
Slide 14: Selected Second Half 2004 Lear Product Launches
Operating Review Selected Second Half 2004 Lear Product Launches Domestic Automakers Buick LaCrosse – Seats, electronics Dodge Dakota – Seats, headliner, IP, wire harness, electronics Ford Freestyle / Five Hundred – Seats, flooring & acoustics, headliner, electronics Jeep Grand Cherokee – Wire harne
Slide 15: European CPV Growth will Moderate in 2005
Operating Review European CPV Growth will Moderate in 2005 * European CPV has steadily UP ≈ 10+% improved $309 $247 Approximately 70% of the 2004 backlog concentrated in Europe 2002 2003 2004 2005 Growth in European CPV to Continue in 2004 * Please see slide titled “Forward-Looking Statements” at th
Slide 16: North American CPV to Improve in 2005
Operating Review North American CPV to Improve in 2005 * 2004 North American CPV down year-over-year $593 Down $579 ≈ 2% Phase out of Ford Windstar and GM Grand Am/Alero Approximately 15% of the 2004 backlog concentrated in North America CPV expected to improve 2002 2003 2004 2005 in 2005 with r
Slide 17: Financial Review and Guidance
Financial Review and Guidance 17
Slide 18: Production Environment – Second Quarter 2004
Financial Review Production Environment – Second Quarter 2004 North America Industry production about flat versus the same period in 2003 Big Three production down 1%; key Lear platforms down more than average Europe Industry production up 1%; Western Europe production down about 2% Euro 7% stronger
Slide 19: Financial Highlights – Second Quarter 2004
Financial Review Financial Highlights – Second Quarter 2004 Second Second 2Q ‘04 Quarter 2004 Quarter 2003 B/(W) 2Q ‘03 (millions, except net income per share) Net Sales $4,284.0 9 $4,101.2 $182.8 Income before Interest, Other Expense & Income Taxes (core operating earnings)* $212.9 $211.7 $1.2 Marg
Slide 20: 2Q04 vs. 2Q03 Change in Net Sales, Core Operating Earnings and Margin
Financial Review 2Q04 vs. 2Q03 Change in Net Sales, Core Operating Earnings and Margin Net Sales (up $183 million) Addition of new business globally ($151 million) Impact of foreign currency, primarily stronger Euro ($124 million) offset in part by Vehicle production mix, primarily in North America
Slide 21: Second Quarter Cash Flow
Financial Review Second Quarter Cash Flow Six Months (millions) 2Q 2004 2004 Net Income $ 116 $ 208 Depreciation 87 170 Working Capital / Other 52 5 Cash from Operations* $ 255 $ 383 Capital Expenditures (115) (193) Free Cash Flow $ 140 $ 190 Generating Cash while Growing the Business * Cash from Op
Slide 22: Full Year Vehicle Production Assumptions
2004 Guidance Full Year Vehicle Production Assumptions* North America Europe (millions) (millions) Total 18.2 ≈ 18.5 Europe 15.9 ≈ 16.0 Western 16.3 ≈ 16.1 Europe 2003 Actual 2004 Guidance 2003 Actual 2004 Guidance Third Quarter Third Quarter 3.7 ≈ 3.6 Total Europe 4.0 ≈ 4.1 Western Europe 3.6 ≈ 3.6
Slide 23: Third Quarter and Full Year Net Sales
2004 Guidance Third Quarter and Full Year Net Sales* First Third Full (billions) Half Quarter Year ≈ $16.8 2004 Guidance $8.8 ≈ $3.8 2003 $15.7 $8.0 $3.5 $14.4 2002 $7.3 $3.3 Anticipate Record Third Quarter and Full Year Net Sales in 2004 * Please see slide titled “Forward-Looking Statements” at the
Slide 24: Capital Spending and Free Cash Flow
2004 Guidance Capital Spending and Free Cash Flow Capital Spending* Free Cash Flow* (millions) (millions) $509 High- $300 range Two Year Average $376 Low- to Mid- $300 range 2003 Actual 2004 Guidance 2003 Actual 2004 Guidance Interest Deprec. $322 ≈ $375 Expense $187 ≈ $170 Capital Spending In-line
Slide 25: Factors Impacting Capital Spending
2004 Guidance Factors Impacting Capital Spending Short investment cycles on recently awarded programs Asian awards (specifically China and Korea) New cockpit business / new electronics Conquest business Advance spending to ensure successful launch of critical programs GM Total Interior progr
Slide 26: Net Income Per Share
2004 Guidance Net Income Per Share** $5.85 - $6.25 $5.55 Full Year $4.65* $1.05 - $1.20 $1.10 Third Quarter $0.91 First Half $1.97* $2.55 $2.95 2002 2003 2004 Guidance Anticipate Record Full Year Net Income Per Share in 2004 * Represents income per share before cumulative effect of a change in accou
Slide 27: Comments on Earnings Guidance
Financial Review Comments on Earnings Guidance Factors impacting second half financial results: Material costs, reflects increasing commodity prices New business development costs, reflects important new program awards, rapid expansion in Asia N.A. vehicle production mix, primarily trucks and SUVs E
Slide 28: Summary and Financial Outlook
Financial Review Summary and Financial Outlook Growth strategy in place; meaningful progress this year Asian expansion and new business development globally requiring capital investment Second quarter financial results solid; major facility actions resolved Full-year guidance unchanged, despite chal
Slide 29: Advance Relentlessly
R ADVANCE RELENTLESSLY™ LEA Listed NYSE www.lear.com
Slide 30: 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 31: Use of Non-GAAP Financial Information: Core Operating Earnings
Use of Non-GAAP Financial Information Core Operating Earnings (millions) Q2 2004 Q2 2003 Income before interest, other expense and income taxes Income before income taxes $ 158.9 $ 148.7 Interest expense 39.2 48.3 Other expense, net 14.8 14.7 Income before interest, other expense and income taxes $
Slide 32: Use of Non-GAAP Financial Information: Free Cash Flow
Use of Non-GAAP Financial Information Free Cash Flow (millions) Six Months Q2 2004 2004 Free cash flow Net cash provided by operating activities $ 255.3 $ 312.1 Net change in sold accounts receivable - 70.4 Net cash provided by operating activities before net change in sold accounts receivable 255.3
Slide 33: 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