Lear Corporation · NYSE:LEA
Lear — FY2006 Earnings Presentation
34 slides from Lear's earnings presentation, Jan 25, 2007
Slide 1: Fourth Quarter/Full Year 2006 Results and 2007 Financial Guidance
Exhibit 99.2 R Fourth Quarter/Full Year 2006 Results and 2007 Financial Guidance January 25, 2007 fast forward advance relentlessly 1
Slide 2: Agenda
Agenda 2006 Highlights Bob Rossiter, Chairman and CEO Operating Review Doug DelGrosso, President and COO 2006 Financial Results and 2007 Guidance Jim Vandenberghe, Vice Chairman and CFO Q and A Session 2
Slide 3: 2006 Highlights
2006 Highlights 3
Slide 4: 2006 Highlights
2006 Highlights Company Overview Improved overall financial results and liquidity position Implemented comprehensive restructuring actions Expanded infrastructure in Asia; grew total Asian sales Continued to diversify mix of sales by region and customer Maintained strong market positions and superio
Slide 5: Improved Financial Results and Liquidity Position
2006 Highlights Improved Financial Results and Liquidity Position* Net Sales Free Cash Flow (in billions) (in millions) 2005 2006 Core Operating Earnings 2007 – 2009 Debt Maturities (in millions) (in billions) * Core operating earnings represent income before interest, other expense, income taxes, r
Slide 6: Continued To Diversify Our Sales Mix
2006 Highlights Continued To Diversify Our Sales Mix 1994 2006 Europe Geographic Europe 17% 36% North America Rest Of World North America 83% 9% 55% Customer Classic Ford & GM Saab, Volvo, Jaguar and Land Rover 47% Ford & GM - 75% 8% All Other Lear’s Total Asian Sales Were 10% Of Lear’s Total Sales
Slide 7: Strong Market Positions and Superior Quality
2006 Highlights Strong Market Positions and Superior Quality Lear is a true partner to all of the world’s major automakers, with strong market positions and superior quality in our core businesses: Seating Systems #2 Position globally, in a market estimated to be about $45 to $50 billion in size: #2
Slide 8: Repositioned Interior Business For Future Success
2006 Highlights Repositioned Interior Business For Future Success* Interior components are no longer a core business for Lear Contributed substantially all of Lear’s European Interior business to International Automotive Components Group – Europe, which already owned Collins & Aikman’s European Inte
Slide 9: Operating Review
Operating Review 9
Slide 10: Emerging Trends Within Supply Base
Emerging Trends Within Supply Base* Further consolidation of supply base Sourcing of individual components Global cost and quality benchmarks Increased emphasis on technology and innovation Lear’s Response Global restructuring actions Focus on core businesses; JVs for Interior business Selectively i
Slide 11: Summary of Global Restructuring Activity
Summary of Global Restructuring Activity* Completed Actions Planned Actions New streamlined, product-focused global organizational structure Consolidated several administrative Additional consolidation of functions / divisions administrative functions / divisions Plant efficiency actions involving F
Slide 12: Action Plans To Improve Margins
Action Plans To Improve Margins* Revenue Labor Cost Proprietary products and technology Increased low-cost sourcing Selective vertical integration (e.g., seat Plant and facility consolidations structures, trim and foam, as well as, Census reduction actions terminals & connectors) Improved program ma
Slide 13: Maintaining A Competitive Global Footprint
Maintaining A Competitive Global Footprint* Shown below is a summary of 22 new facilities Lear opened in 2006 or plans to open this year: Increase Lear’s Infrastructure in Asia (10 Facilities) Evolve Low-Cost China Nanjing Support Growth with Asian Component Strategy Ford / Mazda – Seating Automaker
Slide 14: Aggressively Growing Total Asian Business
Aggressively Growing Total Asian Business* Revenue in Asia and with Asian Manufacturers** Major New Awards in 2006** (in millions) Consolidated Future Non-consolidated ≈ $3,150 Vehicle Automaker Market Lear Content Program(s) $2,550 Chery China Seating, IntelliTire ® Several cars/vans Nanjing Auto C
Slide 15: 2006 Financial Results and 2007 Guidance
2006 Financial Results and 2007 Guidance 15
Slide 16: Fourth Quarter 2006 Major Factors Impacting Financial Results
Fourth Quarter 2006 Major Factors Impacting Financial Results* Major special items in fourth quarter: Loss on the divestiture of North American Interior business Loss on the extinguishment of debt Costs related to restructuring actions Operating results exceeded previous guidance, reflecting: Less a
Slide 17: Fourth Quarter 2006 Industry Environment
Fourth Quarter 2006 Industry Environment Fourth Quarter Fourth Quarter 2006 2006 vs. 2005 North American Production Industry 3.6 mil Down 8% Big Three 2.3 mil Down 13% European Production Industry 4.7 mil Down 1% Lear's Top 5 Customers 2.4 mil Down 2% Key Commodities (Quarterly Average) vs. Prior Qu
Slide 18: Fourth Quarter 2006 Financial Summary
Fourth Quarter 2006 Financial Summary* Fourth Fourth 4Q '06 (in millions, except net loss per share) Quarter 2006 Quarter 2005 B/(W) 4Q '05 Net Sales $4,280.5 $4,397.3 ($116.8) Loss Before Interest, Other Expense and Income Taxes ($522.5) ($259.9) ($262.6) Pretax Loss ($635.9) ($346.1) ($289.8) Net
Slide 19: Fourth Quarter 2006 Restructuring and Special Items
Fourth Quarter 2006 Restructuring and Special Items* Fourth Quarter Memo: Loss Before Interest, Other Expense and (in millions) Income Taxes Pretax Loss Income Statement Category Interest / Other COGS SG&A Expense 2006 Reported Results $ (522.5) $ (635.9) Reported results include the following items
Slide 20: Net Sales Changes and Margin Impact Versus Prior Year
Fourth Quarter 2006 Net Sales Changes and Margin Impact Versus Prior Year Net Sales Margin Performance Factor Change Impact Comments (in millions) Industry Production / $ (436) Negative Primarily lower industry production in Platform Mix / Net Pricing / North America (down 8%) and unfavorable Other
Slide 21: Full Year 2006 Restructuring and Special Items
Full Year 2006 Restructuring and Special Items* Full Year Memo: Loss Before Interest, Other Expense and (in millions) Income Taxes Pretax Loss Income Statement Category Interest/Other COGS SG&A Expense 2006 Reported Results $ (357.9) $ (655.5) Reported results include the following items: Loss on di
Slide 22: Fourth Quarter and Full Year 2006 Business Segment Results
Fourth Quarter and Full Year 2006 Business Segment Results* ($ in millions) Fourth Quarter Full Year 2006 2005 2006 2005 Seating Net Sales $ 2,903.2 $ 2,842.1 $ 11,624.8 $ 11,035.0 Segment Earnings* $ 181.0 $ 153.4 $ 604.0 $ 323.3 % of Sales 6.2 % 5.4 % 5.2 % 2.9 % Adjusted % of Sales** 6.7 % 5.9 %
Slide 23: Fourth Quarter and Full Year 2006 Free Cash Flow
Fourth Quarter and Full Year 2006 Free Cash Flow* (in millions) Fourth Quarter Full Year 2006 2006 Net Loss $ (645.0) $ (707.5) Divestiture of Interior Business 607.3 636.0 Depreciation / Amortization 92.8 392.2 Working Capital / Other 278.4 142.6 Cash from Operations $ 333.5 $ 463.3 Capital Expendi
Slide 24: 2007 Guidance Full Year Production Assumptions
2007 Guidance Full Year Production Assumptions* Full Year Change from 2007 Guidance Prior Year North American Production Total Industry ≈ 15.3 mil about flat Big Three ≈ 10.0 mil down 2% European Production Total Industry ≈ 19.2 mil flat Lear's Top 5 Customers ≈ 9.5 mil down 3% Euro $1.30 / Euro up
Slide 25: 2007 Guidance Factors Impacting Core Business Margins
2007 Guidance Factors Impacting Core Business Margins* 2007 Margin Impact vs. 2006 Electronic and Seating Electrical Volume and Mix – – New Business Globally + neutral Commodity Costs/Recovery + + Restructuring Savings + + Ongoing Cost Reductions + + Low-Cost Sourcing/Engineering + + Selective Verti
Slide 26: 2007 Guidance Full Year Financial Projections
2007 Guidance Full Year Financial Projections* Full Year 2007 Financial Guidance for Core Business (excludes Interior business) Net Sales ≈ $15.0 billion Core Operating Earnings $560 to $600 million Income before interest, other expense, income taxes, restructuring costs and other special items Inte
Slide 27: Advance Relentlessly
R ADVANCE RELENTLESSLY™ LEA Listed NYSE www.lear.com 27
Slide 28: Non-GAAP Financial Information
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 ”income before interest, other expense, income taxes, res
Slide 29: Cash from Operations And Free Cash Flow
Non-GAAP Financial Information Cash from Operations And Free Cash Flow (in millions) Three Months Full Year Full Year Q4 2006 2006 2005 Net cash provided by operating activities $ 179.2 $ 285.3 $ 560.8 Net change in sold accounts receivable 154.3 178.0 (411.1) Net cash provided by operating activiti
Slide 30: Core Operating Earnings
Non-GAAP Financial Information Core Operating Earnings Three Months Ended Twelve Months Ended (in millions) Q4 2006 Q4 2005 Q4 2006 Q4 2005 Pretax loss $ (635.9) $ (346.1) $ (655.5) $ (1,187.2) Interest expense 52.3 45.1 209.8 183.2 Other expense, net 61.1 41.1 87.8 96.6 Loss before interest, other
Slide 31: Pretax Income Before Restructuring Costs And Other Special Items
Non-GAAP Financial Information Pretax Income Before Restructuring Costs And Other Special Items (in millions) Q4 2005 2005 Pretax loss $ (346.1) $ (1,187.2) Goodwill impairment charges 342.8 1,012.8 Costs related to restructuring actions 42.6 102.8 Fixed asset impairment charges 8.5 82.3 Litigation
Slide 32: Segment Earnings Reconciliation
Non-GAAP Financial Information Segment Earnings Reconciliation Three Months Ended Twelve Months Ended (in millions) Q4 2006 Q4 2005 Q4 2006 Q4 2005 Seating $ 181.0 $ 153.4 $ 604.0 $ 323.3 Electronic and Electrical (5.1) 34.1 102.5 180.0 Interior (34.2) (52.3) (183.8) (191.1) Segment earnings $ 141.7
Slide 33: Adjusted Segment Earnings
Non-GAAP Financial Information Adjusted Segment Earnings Three Months Q4 2006 Three Months Q4 2005 Electronic and Electronic and (in millions) Seating Electrical Interior Seating Electrical Interior Segment earnings $ 181.0 $ (5.1) $ (34.2) $ 153.4 $ 34.1 $ (52.3) Fixed asset impairment charges - -
Slide 34: 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 and liquidity. Actual results may differ materially from anticipated results as a