Slide 1: Second Quarter 2020 Financial Results
Second Quarter 2020 Financial Results August 4, 2020 Ray Scott, President and CEO Jason Cardew, Senior Vice President and CFO
Slide 2: Safe Harbor Statement
Safe H arbor Statement 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. The words “will,” “may,” “designed to,” “out
Slide 3: Agenda
A genda • Business Update Ray Scott, President and CEO • Financial Review Jason Cardew, Senior Vice President and CFO • Concluding Remarks Ray Scott, President and CEO 3
Slide 4: Business Update
Business Update Ray Scott, President and CEO 4
Slide 5: Business Highlights
B usiness H ighlights Demonstrated resilience of business; maintained strong balance sheet and ample liquidity Executed efficient ramp up of production following extended shutdown Awarded significant new business, including conquest awards Won 2020 Pace Award for Xevo Market; Lear’s second consecuti
Slide 6: Revenue as Percentage of Pre-COVID Expectations
R evenue as Percentage of Pre -C OVID Expectations Forecast April 2020 | May 2020 | June 2020 | 2Q 2020 | July 2020 Global 20% 40% 85% 50% 90% North America 5% 20% 85% 40% 95% Europe 5% 40% 75% 45% 85% China 100% 100% 100% 100% 100% Reflects revenue approximated as a percentage of pre-COVID expectat
Slide 7: Business Update – Seating
B usiness U pdate – Seating 1 • Global weighted-average growth over market of 3% – High-content GM trucks, Mercedes and Ford SUVs – Strong presence with luxury brands in China • Resilient business model – Able to flex cost structure in reduced volume environment – Second quarter decremental margins
Slide 8: Business Update – E-Systems
B usiness U pdate – E -Systems • Global weighted-average growth over market of 11%1 – Electric vehicle program launches, including JLR, Mazda, Volvo – Strong volume on Ford F-Series Super Duty wire harness program – Growing presence with luxury brands in China • Accelerated restructuring actions and
Slide 9: E-Systems Strategy Update – Portfolio Management
E-Systems Strategy Update – Portfolio Management Complete Architecture Perspective ➔ Software & Connected Services • Growth over market with electric vehicle, 5G connectivity, and software offerings Electrification Electronic & 5G • Margin improvement through Offerings Connectivity Offerings chang
Slide 10: Financial Review
Financial Review Second Quarter 2020 Results Jason Cardew, Senior Vice President and CFO 10
Slide 11: Second Quarter 2020 Global Vehicle Production and Currency
Second Quarter 2020 Global Vehicle Production and Currency Industry Production (units in millions) Global North America Europe and Africa China (Actual) (Actual) (Actual) (Actual) Q2 2019 21.7 Q2 2019 4.2 Q2 2019 5.8 Q2 2019 5.1 Q2 2020 11.8 Q1 2020 1.3 Q2 2020 2.1 Q2 2020 5.5 vs Prior Year vs Prior
Slide 12: Strong Growth Over Market in All Regions
Stron g Growth Over Market in A ll R egions North America 6% Global GoM1 5% Europe 2% Seating 3% | E-Systems 11% China 8% 1 Year-over-year sales growth excludes the impact of FX and acquisitions. The year-over-year change in production on a Lear sales-weighted basis is calculated using Lear’s prior
Slide 13: Key Financials
Key Financials ($ in millions, except per share amounts) Second Quarter Comments 2019 2020 Net Sales $ 5,008 $ 2,445 • Vehicle production down 69% in NA and 63% in Europe Core Operating Earnings $ 352 $ (248) • Decremental margins of 23% • Net labor inefficiencies and incremental costs of ≈$125M Ope
Slide 14: Seating Sales and Adjusted Earnings
Seating Sales and A djusted Earnings Second Quarter ($ in millions) Sales Adjusted Earnings $3,839 8.2% $315 $1,755 ($1,999) ($31) ($54) Q2 2019 Volume / Mix / Backlog FX Q2 2020 Q2 2019 Volume / Mix / Net Performance Net COVID Costs Q2 2020 Other Other $3 ($400) ($20) ($102) Please see appendix for
Slide 15: E-Systems Sales and Adjusted Earnings
E -Systems Sales and A djusted Earnings Second Quarter ($ in millions) Sales Adjusted Earnings $1,168 $690 ($452) ($6) ($20) 8.0% $94 Q2 2019 Volume / Mix / Backlog FX Q2 2020 Q2 2019 Volume / Mix / Net Performance Net COVID Costs Q2 2020 Other Other ($154) ($6) ($25) ($91) Please see appendix for d
Slide 16: COVID-19 Pandemic Business Impact
COVID-19 Pandemic Business Impact I N C R E M E N TA L C O S T D R I V E R S COST REDUCTION ACTIONS Nonrecurring Nonrecurring • Semi-fixed labor (net of government support) • Salary deferrals and pay cuts • Plant inefficiencies during restart • Lower incentive compensation • Premium freight • Reduce
Slide 17: Key Factors Expected to Impact Second Half 2020
K ey Factors Expected to Impact Second H alf 2020 Second half production outlook • Lear expects global production to be down 10% to 15% (IHS down approximately 11%) • Reflects uncertainty around COVID-19 pandemic and consumer demand Decremental margins expected to improve from ≈24% in the first half
Slide 18: Strong Balance Sheet and Ample Liquidity
Strong Balance Sheet and Ample Liquidity Liquidity Debt Maturities ($ in millions) Term Loan Available Revolver Drawn Revolver Bonds $750 • $2.5 billion in total liquidity, including $750 million available under revolver $750 $625 • No significant near-term debt maturities (3.80%) (5.25%) $375 $350
Slide 19: Concluding Remarks
Concluding Remarks Ray Scott, President and CEO 19
Slide 20: Concluding Remarks
C oncluding R emarks Strong balance sheet Experienced, industry-leading Long history of and liquidity management team operational excellence Strong strategic position Trusted relationships with key stakeholders 20
Slide 21: Appendix
LEAR Making every drive b
Slide 22: Non-GAAP Financial Information
Non-GAAP Financial Information In addition to the results reported in accordance with GAAP included throughout this presentation, the Company has provided information regarding “pretax income (loss) before equity income, interest, other (income) expense, restructuring costs and other special items”
Slide 23: Non-GAAP Financial Information: Impact of Restructuring and Special Items
N on -GA A P Financial Information Impact of R estructuring and Special Items (in millions, except per share amounts) Second Quarter 2020 Memo: Restructuring Other Q2 2019 Reported Costs Special Items Adjusted Adjusted 1 Pretax Income (Loss) Before Equity Income, Interest and Other (Income) Expense
Slide 24: Non-GAAP Financial Information
Non-GAAP Financial Information Core Operating Earnings and Adjusted Margins Second Quarter ($ in millions) 2019 2020 Net sales $ 5,007.6 $ 2,444.5 Net income (loss) attributable to Lear $ 182.8 $ (293.9) Interest expense 24.5 27.2 Other (income) expense, net 13.8 (3.2) Income taxes 73.3 (41.0) Equit
Slide 25: Non-GAAP Financial Information
Non-GAAP Financial Information Adjusted Segment Earnings and Margins Second Quarter 2019 2020 ($ in millions) Seating E-Systems Seating E-Systems Net sales $ 3,839.4 $ 1,168.2 $ 1,754.9 $ 689.6 Segment earnings $ 283.2 $ 84.7 $ (116.4) $ (113.4) Restructuring costs and other special items - Costs re
Slide 26: Non-GAAP Financial Information
Non-GAAP Financial Information Adjusted Earnings Per Share Second Quarter (In millions, except per share amounts) 2019 2020 Net income (loss) available to Lear common stockholders $ 181.9 $ (293.9) Redeemable noncontrolling interest 0.9 - Net income (loss) attributable to Lear 182.8 (293.9) Costs re
Slide 27: Non-GAAP Financial Information
Non-GAAP Financial Information Free Cash Flow Second Quarter ($ in millions) 2019 2020 Net cash provided by (used in) operating activities $ 404.3 $ (524.5) Capital expenditures (136.5) (86.1) Free cash flow $ 267.8 $ (610.6) 27