Slide 1: First Quarter 2020 Financial Results
First Quarter 2020 Financial Results May 8, 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 • Quarter Overview Ray Scott, President and CEO • Financial Review Jason Cardew, Senior Vice President and CFO • Business Update Ray Scott, President and CEO 3
Slide 4: Quarter Overview
Quarter Overview Ray Scott, President and CEO 4
Slide 5: Key Messages
Key Messages Quickly Mobilized Around Global Leader in COVID-19 Crisis Operational Excellence Near-Term Priorities • Employee Safety Balancing Near-Term Priorities with • Liquidity and Capital Advancing Long-Term Strategy • Strategy and Operations Experienced Management Team Well Strong Financial Po
Slide 6: First Quarter 2020 Overview
First Quarter 2020 Overview Sales Core Operating Earnings Free Cash Flow $4.5B $205M $113M ≈$0.9B impact from COVID-19(1) ≈$200M impact from COVID-19(1) ($71M) in Q1 2019 Growth Over Market(2) Cash Balance 14% 11% 10% 3% $2.45B North Europe China Global $3.2B Total Liquidity America (1) Based on man
Slide 7: Financial Review
Financial Review First Quarter 2020 Results Jason Cardew, Senior Vice President and CFO 7
Slide 8: First Quarter 2020 Global Vehicle Production and Currency
First Quarter 2020 Global Vehicle Production and C urrency (Units in millions) Q1 2019 Q1 2020 vs. Prior Year Actual Actual China 5.6 3.0 Down 47% Europe and Africa 5.8 4.7 Down 19% North America 4.2 3.8 Down 10% Global 22.5 17.3 Down 23% Source: IHS Markit as of April 27, 2020 Key Currencies Euro $
Slide 9: Key Financials
Key Financials First Quarter ($ in millions, except per share amounts) 2019 2020 B/(W) Net Sales $ 5,160 $ 4,458 (14)% Core Operating Earnings $ 378 $ 205 (46)% Operating Margin % 7.3% 4.6% Adjusted Net Income $ 253 $ 124 (51)% Adjusted Earnings per Share $ 4.00 $ 2.05 (49)% Memo: Other Expense, Net
Slide 10: Seating First Quarter Sales and Margin Drivers
Seating First Quarter Sales and Margin D rivers ($ in millions) Sales Adjusted Earnings and Margin 11% GOM >$4,000 $3,914 > 8% 7.6% Excluding Excluding 50 bps COVID-19(1) COVID-19(1) $83 15 bps 6.0% (225 bps) ($557) ($73) ≈23% $3,367 $297 conversion $201 Q1 2019 Volume / Mix / Backlog FX Q1 2020 Q1
Slide 11: E-Systems First Quarter Sales and Margin Drivers
E -Systems First Quarter Sales and Margin D rivers ($ in millions) Sales 11% Adjusted Earnings and Margin GOM 11.3% >$1,300 $1,246 Excluding $47 COVID-19(1) > 8% ($167) ($35) (385 bps) Excluding ≈37% (70 bps) (15 bps) (10 bps) COVID-19(1) $1,091 conversion $140 (170 bps) 4.8% $53 Q1 2019 Volume / Mi
Slide 12: Strong Balance Sheet and Ample Liquidity
Strong Balance Sheet and Ample Liquidity Capital Markets Activity Debt Maturities ($ in millions) Term Loan Available Revolver Drawn Revolver Bonds • Issued bonds due 2030 and 2049 and $750 redeemed bonds due 2025 – Extended weighted average maturity to over $750 14.5 years* $625 (3.80%) (5.25%) – R
Slide 13: Phased Approach to Managing Downturn
Phased A pproach to Managing D ownturn • Executing cost reduction and cash preservation actions while protecting longer-term value – Salary deferrals and executive pay cuts instead of mass layoffs – Temporarily reducing R&D spending and strategic investments – Reducing capital spending on discretion
Slide 14: Multiple Levers to Preserve Liquidity
Multiple Levers to Preserve Liquidity Phase 1 – Initial Response Phase 2 – Current Outlook Phase 3 – Further Declines ✓ Salary Deferrals ▪ Further Reduce SG&A ✓ Reduce Discretionary Spending ✓ CEO/NEO Salary Deferral and Pay Cut ▪ Capacity Reduction / Restructuring ✓ Contractors and Consultants ✓ Bo
Slide 15: Business Update
Business Update Ray Scott, President and CEO 15
Slide 16: Near-term Priorities
N ear -term Priorities Employee Safety Liquidity and Capital Operations and Strategy • Developed and publicly • Balance sheet actions • Production ramp up shared Safe Work Playbook • Restructuring actions • Supply chain preparedness and financial health • Restricted travel • Compensation reductions
Slide 17: Safe Work Playbook
Safe Work Playbook • Developed best practices guide to combine Company practices with guidelines issued by the WHO and CDC • Detailed protocols to best protect employees in a safe work environment – Step-by-step guides for establishing a pandemic prevention team – Cleaning and disinfection procedure
Slide 18: Safe Work Playbook – Pillars of Execution
Safe Work Playbook – Pillars of Execution Employee Outreach & Education • Communicate with employees prior to their return to work • Leverage mobile technology, video presentations, and social media to share facility updates, policies, and procedures • Staying safe and healthy at home • What to expe
Slide 19: Strategic Landscape
Strategic Landscape • Evaluation of strategic priorities in light of disruptive force of COVID-19 • Strategic alignment – Anticipate changes in societal norms and consumer preferences – Technology megatrend shifts • Value capture from evolving industry structure – Changes in customer capital investm
Slide 20: Lear in the Community
Lear in the C ommunity • Adjusted capacity at certain plants in North America, Europe and Africa to produce masks and face shields – Began producing masks in February – On pace to manufacture over one million masks per week • Provided over one million masks to employees and their families, hospitals
Slide 21: 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 21
Slide 22: Appendix
LEAR Making every drive b
Slide 23: Non-GAAP Financial Information
N on -GA A P Financial Information In addition to the results reported in accordance with GAAP included throughout this presentation, the Company has provided information regarding “pretax income before equity income, interest, other expense, restructuring costs and other special items” (core operat
Slide 24: Non-GAAP Financial Information
N on -GA A P Financial Information Core Operating Earnings and Adjusted Margins First Quarter ($ in millions) 2019 2020 Net sales $ 5,160.1 $ 4,457.7 Net income attributable to Lear $ 228.9 $ 76.4 Interest expense 20.9 24.4 Other expense, net 4.4 40.5 Income taxes 43.1 26.5 Equity in net income of a
Slide 25: Non-GAAP Financial Information
N on -GA A P Financial Information Adjusted Segment Earnings and Margins First Quarter First Quarter 2019 2020 ($ in millions) Seating E-Systems Seating E-Systems Net sales $ 3,913.7 $ 1,246.4 $ 3,366.6 $ 1,091.1 Segment earnings $ 252.3 $ 128.3 $ 186.1 $ 32.4 Restructuring costs and other special i
Slide 26: Non-GAAP Financial Information
N on -GA A P Financial Information Adjusted Net Income and Earnings Per Share First Quarter (In millions, except per share amounts) 2019 2020 Net income available to Lear common stockholders $ 235.6 $ 76.4 Redeemable noncontrolling interest (6.7) - Net income attributable to Lear 228.9 76.4 Costs re
Slide 27: Non-GAAP Financial Information
N on -GA A P Financial Information Adjusted other expense, net First Quarter ($ in millions) 2019 2020 Other expense, net $ 4.4 $ 40.5 Loss on extinguishment of debt - (21.1) Other 4.5 (5.7) Adjusted other expense, net $ 8.9 $ 13.7 27
Slide 28: Non-GAAP Financial Information
N on -GA A P Financial Information Free Cash Flow First Quarter ($ in millions) 2019 2020 Net cash provided by operating activities $ 51.6 $ 222.3 Capital expenditures (122.8) (109.1) Free cash flow $ (71.2) $ 113.2 28
Slide 29: Employee Outreach & Education
Employee Outreach & Education • Communicate with employees prior to their return to work – Provide peace of mind – Answer frequently asked questions – Ease the transition to the new workplace • Leverage mobile technology, video presentations, and social media to share facility updates, policies, pro
Slide 30: Training & Auditing/Certification
Training & Auditing/Certification • All site leaders trained on the Safe Work Playbook • Training modules and content delivered globally through recorded webcasts • Visual aids and signage throughout sites to reinforce protocols and new behaviors • All sites must be “Certified” before opening; must
Slide 31: Employee Surveys & Feedback Channels
Employee Surveys & Feedback Channels • Captures "Voice of the Lear Employee“ • Provides insight into the sentiments and opinions of team members; holds leadership accountable • Surveys lead to best practice solutions – Delivered to employees through mobile technology or emails; results are displayed