Lear Corporation · NYSE:LEA
Lear — AANY Detroit Automotive Conference 2004
42 slides from Lear's conference presentation, Jan 8, 2004
Slide 1: AANY Detroit Automotive Conference
AANY Detroit Automotive Conference January 8, 2004 fast forward advance relentlessly world's leading automotive interior supplier R Exhibit 99.1
Slide 2: "This is Lear" Video
"This is Lear" Video (5:00 minutes)
Slide 3: Agenda
Agenda I. Strategic Overview Bob Rossiter, Chairman & CEO Industry Challenges Jim Vandenberghe, Vice Chairman Sales Backlog Update and 2004 Financial Guidance Dave Wajsgras, SVP & CFO Panel Q & A Session
Slide 4: Customer-Focused and Performance-Driven Culture
Customer-Focused and Performance-Driven Culture Strategic Focus Highest Rated Tier I Supplier in Quality and Customer Satisfaction #1, #2 or #3 Market Share in Core Products / Markets Best Equity Value in the Industry
Slide 5: Regional Business Strategy
Regional Business Strategy Partnering With Our Customers to Pursue Profitable Growth Worldwide North America Leverage our leadership position in total interiors Europe Improve our business structure and grow our market share Asia/Asian OEMs Aggressively expand our presence with Asian OEMs Outlook Qu
Slide 6: Lear Continues to Deliver Superior Value to Customers and Shareholders
Lear Continues to Deliver Superior Value to Our Customers and Shareholders 2003 Highlights Internal quality improved 27%; received quality and service awards from all our major customers Ranked as America's 'Most Admired' Company in the Motor Vehicle Parts Industry by Fortune(r) Magazine Record net
Slide 7: Maintaining our Momentum Amid a Highly Competitive Environment
Maintaining our Momentum Amid a Highly Competitive Environment Highlights of Today's Presentation Customer-focused strategy driving our success Lear is well positioned to meet industry challenges Sales backlog supports continued growth 2004 outlook reflects record net sales, record earnings and stro
Slide 8: Industry Challenges
Q@ ear... Industry Challenges
Slide 9: Automotive Industry Challenges
Automotive Industry Challenges Global Overcapacity / Slow Growth in Demand Continuous Quality Improvement Profitability Under Pressure Manage Through Business Cycles Financial Results in Europe Industry Environment Remains Difficult in North America and Western Europe
Slide 10: Lear is Well Positioned in the Fastest Growing Segment
Lear is Well Positioned in the Fastest Growing Segment in the Automotive Industry Industry Challenge: Slow Growth Lear Response: Profitable Growth Strategy Interiors are the fastest growing automotive segment Intense focus on improving interiors by all major automakers Lear's sales backlog supports
Slide 11: Quality First Initiative: Parts Per Million Defective
Management priority Global focus Part of Lear culture Six Sigma discipline Sharing best practices Teamwork Nine Months 2002 Nine Months 2003 3rd Qtr 4th Qtr East 110 86 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 27% Improvement Driven to Provide the Highest Level Quality Products and S
Slide 12: J.D. Power Survey Shows Continuous Improvement in Quality
11% improvement in 2003 4th consecutive year of improvement in TGW Highest quality seat manufacturer that supplies multiple OEMs Independent J.D. Power Survey Shows Continuous Improvement in Lear's TGW Source: 2003 J.D. Power Seat Survey Lear's 2003 J.D. Power Results 1998 1999 2000 2001 2002 2003 T
Slide 13: Lear Works in Partnership with Customers to Eliminate Waste
Lear Works in Partnership with Customers to Eliminate Waste and Add Value Industry Challenge: Profitability Lear Response: Deliver High Value-Added Outstanding customer relationships Total interior capability True partner vs. supplier Economies of scale / common architecture Aggressive VA / VE initi
Slide 14: Industry Challenge: Business Cycles, Flexible Cost Structure
Industry Challenge: Business Cycles Lear Response: Flexible Cost Structure Representative Core Operating Margin * Variable Fixed Materials as a % of Sales: 65% * Core operating margin represents income before interest, other expense and income taxes divided by net sales. Please see slides titled "Us
Slide 15: Steadily Improving our Results in Europe
In a Challenging Environment, We are Steadily Improving our Results in Europe Industry Challenge: Europe Lear Response: Improvement Plan in Place Aggressively grow content per vehicle Grow seats, electronics and cockpits Source to low cost countries Improve overall business structure Intense focus o
Slide 16: Sales Backlog Update and 2004 Financial Guidance
Sales Backlog Update and 2004 Financial Guidance
Slide 17: Competitive Strengths
Competitive Strengths Customer Focus Operational Excellence Economies of Scale Innovation Customer & Shareholder Value High Quality Customer Satisfaction Improving Financials Strong Cash Flow Competitive Strengths Deliver Superior Value Total Automotive Interior Capability 'Advance Relentlessly' Cul
Slide 18: Meeting Our Commitments and Delivering Shareholder Value
Meeting Our Commitments and Delivering Shareholder Value Financial Priorities We are focused on: Profitable growth Improving ROIC Generating cash Financial discipline
Slide 19: Focused Strategy has Supported Rapid Growth for Lear
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Guidance Net Sales 1.4 2 3.1 4.7 6.2 7.3 9.1 12.4 14.1 13.6 14.4 15.5 EPS North 45.9 46.9 45 43.9 Focused Strategy has Supported Rapid Growth for Lear Net sales have steadily increased since IPO to about $15.5 billion today 17 major acquisi
Slide 20: Going Forward, Strong Revenue Growth Continues
Going Forward, Strong Revenue Growth Continues 2004 2005 2006 2007 2008 East 750 1250 1000 900 500 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 $500 Cumulative 3-Year and 5-Year Sales Backlog Increases to Highest-Ever Absolute Levels $1,250 $750 $2,000 $4,400 $3,900 $3,000 Sales Backlog (in mill
Slide 21: How We Define Sales Backlog
+ New / Replacement Programs - Roll-off / Lost Programs - The Projected Pricing / Content Growth Impact on Lear's Total Business = Sales Backlog Here's How We Define Sales Backlog* Please refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operat
Slide 22: Sales Backlog Assumptions
North America - 16 million No Change Western Europe - 16 million No Change South America - 1.9 million No Change Asia Pacific - Program Specific No Change Currency - $1.20 / Euro Stronger Euro Change from Prior Industry Production* * Assumes J.D. Power and Associates market share projections Sales B
Slide 23: Major Backlog Programs - North America
Major Backlog Programs - North America Vehicle/Program 2004 Next 3 Years Ford F-150 ? ? Dodge Durango ? ? Cadillac SRX ? ? Nissan Titan / Armada ? ? Ford 500 ? ? Ford Freestyle ? ? LeSabre / DeVille ? Chrysler Minivans ? Hyundai Sonata / Santa Fe ? GM Cavalier / Sunfire ? ? Ford Windstar ? ? GM Gran
Slide 24: Major Backlog Programs - International
Major Backlog Programs - International Vehicle/Program 2004 Next 3 Years Peugeot 407 ? ? Volvo S80 / V70 ? ? Ford Focus C-Max ? ? Peugeot 107 ? ? Mazda Familia ? ? Hyundai Terracon ? ? Volvo S40 / V50 ? Citroen C6 ? Toyota / PSA Sub-B ? Backlog for International Operations Strong, Reflecting Key New
Slide 25: Sales Backlog Highlights
Sales Backlog Highlights Key assumptions and overall composition essentially unchanged Strict ROIC discipline on all new awards Continued customer, product and geographic diversification: Asian and European customers represent nearly half of all new business IPs and cockpits represent about one-quar
Slide 26: Strategic Joint Ventures
Strategic Joint Ventures Diversifying Our Customer Base and Positioning Lear for Future Growth North America Asia Europe North America 12 14 3 Asian JVs China 10 * India 1 * Thailand 1 * Japan 2 ** Total 14 - - - - - * Manufacturing JVs ** Sales and Engineering JVs Asia 14 North America 12 Europe 3
Slide 27: Lear China Overview
Ten Joint Ventures 4,000 employees Shenyang - - CBA-BMW Nanjing - - Fiat Shanghai (3) - - SGM, SVW Nanchang - - Isuzu, Suzuki, Ford Chongqing - - ChangAn, Suzuki - - Ford Lear China Overview Wuhan (2) - - Citroen - - Renault/Nissan Shiyan / Xiangfan - - Nissan Products - - Seats - Door Panels - - Wi
Slide 28: Lear Korea Overview
Products - - Seats (95%) - Other (5%) Customers - - Hyundai - Kia - - Ssangyong Key Strategic Points - - Resulted in N.A. Hyundai business Seats in Alabama Wiring through JV - - Expanding JVs with Hyundai suppliers - - Stay within core products - - Controlled growth and investment Kyungju (HQ / plan
Slide 29: Return on Invested Capital Improving
Return on Invested Capital Improving Trailing Twelve Month ROIC* 1Q 2001 2Q 2001 3Q 2001 4Q 2001 1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 East 0.098 0.09 0.087 0.085 0.088 0.091 0.095 0.099 0.102 0.105 0.106 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 8.5% 10.6% 9.8% * Return on
Slide 30: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation Net Debt to Cap 70 % 65 % 63 % 58 % < 50 % Cumulative Free Cash Flow* Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. Net debt represents total debt plus utilization of
Slide 31: 2004 Production Stable in North America and Western Europe
North America (in millions) 2004 Production Stable in North America and Western Europe 2004 Outlook Vehicle Production Assumptions* 2003 Forecast 2004 Guidance 3rd Qtr 4th Qtr East 15.9 16 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 2003 Forecast 2004 Guidance 3rd Qtr 4th Qtr East 15.9
Slide 32: 2004 Outlook: Net Sales
2004 Outlook Net Sales* Record Net Sales in 2004 Anticipated 2002 2003 Guidance 2004 Guidance East 14.4 15.5 16 West 30.6 38.6 34.6 North 45.9 46.9 45 (in billions) ^ $16.2 ^ $15.5 $14.4 Please see slide titled "Forward Looking Statements" at the end of this presentation.
Slide 33: 2004 Outlook: Net Income Per Share
2004 Outlook Net Income Per Share** Record Net Income Per Share Anticipated 2002 2003 Guidance 2004 Guidance Net Sales 4.65 5.4 5.85 Increase in Net Sales 0.1 0.4 Approx. Effective Tax Rate 33.5% 29.0% 28.0% Represents income per share before cumulative effect of a change in accounting principle, wh
Slide 34: Capital Spending Increases to Fund Major New Program Launches
Capital Spending Increases to Fund Major New Program Launches 2004 Outlook Capital Spending* 2002 2003 Guidance 2004 Guidance CapX 273 315 350 Increase in Net Sales 0.1 0.5 Depreciation $301 ^ $325 ^ $370 (in millions) $273 ^ $315 ^ $350 Please see slide titled "Forward Looking Statements" at the en
Slide 35: Free Cash Flow Remains Strong
Free Cash Flow Remains Strong 2004 Outlook Free Cash Flow* 2002 2003 Guidance 2004 Guidance FCF 395 410 410 Increase in Net Sales 0.1 0.5 Interest Expense $211 ^ $190 ^ $175 (in millions) $395 ^ $400 Please see slides titled "Use of Non-GAAP Financial Information" and "Forward Looking Statements" at
Slide 36: Summary
Summary 'Quality First' Initiative driving continuous process and quality improvements Lear is well positioned for profitable growth with highest ever sales backlog and improving operating fundamentals Key financial metrics improving: Strong net income per share growth Continuing strong free cash fl
Slide 37: Advance Relentlessly
ADVANCE RELENTLESSLY(tm) www.lear.com LEA NYSE Listed R
Slide 38: 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 measures include "core operating margin," "fr
Slide 39: Use of Non-GAAP Financial Information: Free Cash Flow
2002 2001 2000 1999 Free cash flow Net cash provided by operating activities $ 545.1 $ 829.8 $ 753.1 $ 560.3 Net change in sold accounts receivable 122.2 ( 245.0 ) ( 21.2 ) 10.4 Net cash provided by operating activities before net change in sold accounts receivable 667.3 584.8 731.9 570.7 Capital ex
Slide 40: Use of Non-GAAP Financial Information: Return on Invested Capital
Use of Non-GAAP Financial Information Return on Invested Capital Earnings Q3 2003 Q4 2001 Q1 2001 Income before restructuring charges, amortization, interest, other expense and income taxes Income before income taxes $ 528.9 $ 89.9 $ 395.9 Restructuring charges - 159.3 4.2 Amortization - 90.2 90.1 I
Slide 41: Use of Non-GAAP Financial Information: Net Debt
(in millions) Net debt Short term borrowings $ 37.3 $ 63.2 $ 72.4 $ 103.6 Current portion of long-term debt 3.9 129.5 155.6 63.6 Long-term debt 2,132.8 2,293.9 2,852.1 3,324.8 Total debt 2,174.0 2,486.6 3,080.1 3,492.0 Cash ( 91.7 ) ( 87.6 ) ( 98.8 ) (106.9 ) Asset backed securitization 189.0 260.7
Slide 42: 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 certain risks and uncertainties