Slide 1: Agenda
Agenda Strategy Update Bob Rossiter, Chairman and CEO Operating Review Jim Vandenberghe, Vice Chairman Financial Review and Guidance Dave Wajsgras, SVP and CFO Q & A
Slide 2: Strategy Update
Q@ear.,, Strategy Update
Slide 3: 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 4: A Consistent, Disciplined Strategy
Strategy Update A Consistent, Disciplined Strategy Leverage our leadership position in total interiors in North America Improve our business structure and grow our market share in Europe Aggressively expand our presence in Asia and with Asian OEMs globally 5
Slide 5: Our Presence in Asia is Growing Rapidly
Strategy Update Our Presence in Asia is Growing Rapidly China 11 facilities 1 engineering center 21 customers Seats, interiors, electrical distribution, electronics, IP Korea 2 facilities 1 engineering center 2 customers Seats Japan 3 engineering centers 5 customers Interior integration Philippines
Slide 6: 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 7: Asia/Asian Automakers Revenue
2001 2002 2003 2004 Future Cons 736.1 850 1250 1600 Non 121.5 Strategy Update Asia/Asian Automakers Revenue* $850 $1,250 ^$1,600 Asian Sales About Double from 2002 to 2004; Solid Growth Expected to Continue** (millions) * Consolidated and unconsolidated sales ** Please see slide titled "Forward-Look
Slide 8: Operating Review
Q@ear.,, Operating Review
Slide 9: 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 10: Quality Initiatives Continue to Drive Results
Operating Review Quality Initiatives Continue to Drive Results * Based on customer data. 2000 2001 2002 2003 2004 YTD 3rd Qtr 4th Qtr East 217 127 108 77 29 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Parts Per Million (PPM) Defective* On Track for 5th Consecutive Year of Improvement 85
Slide 11: 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 12: 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
Slide 13: 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 14: European CPV Growth will Moderate in 2005
European CPV has steadily improved Approximately 70% of the 2004 backlog concentrated in Europe Growth in European CPV to Continue in 2004 1998 2002 2003 2004 2005 TGR 12.4 247 309 358 West 30.6 North 45.9 Operating Review European CPV Growth will Moderate in 2005 * UP ^ 10+% * Please see slide titl
Slide 15: North American CPV to Improve in 2005
2005 New Business Backlog Expected to Support North American CPV Improvement 1998 Q2 2003 2002 2003 2004 2005 2003 1Q04 TGR 12.4 596 579 593 581 308 357 West 30.6 31.6 North 45.9 43.9 Operating Review North American CPV to Improve in 2005 * 2004 North American CPV down year-over-year Phase out of Fo
Slide 16: Financial Review and Guidance
Financial Review and Guidance
Slide 17: Production Environment - Second Quarter
Financial Review Production Environment - Second Quarter 2004 Production Mix Remains Challenging in North America 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%; West
Slide 18: Financial Highlights - Second Quarter 2004
Second Quarter 2004 Second Quarter 2003 Record 2Q '04 B/(W) 2Q '03 (millions, except net income per share) Financial Review Financial Highlights - Second Quarter 2004 * Income before income taxes for the second quarter 2004 and 2003 was $158.9 and $148.7, respectively. Please see slides titled "Use
Slide 19: 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 20: Second Quarter Cash Flow
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 2Q 2004 * Cash from Operations represents net cash provided by operating activities ($255.3 for second quarter 2004 and $312.1 for six
Slide 21: 2004 Guidance: Full Year Vehicle Production Assumptions
North America (millions) 2004 Guidance Full Year Vehicle Production Assumptions* 2003 Actual 2004 Guidance 3rd Qtr 4th Qtr East 15.9 16 90 20.4 West 34.6 31.6 North 45 43.9 2003 Actual 2004 Guidance 3rd Qtr 4th Qtr East 16.4 16.2 90 20.4 West 1.9 2.3 34.6 31.6 North 45 43.9 15.9 18.2 ^ 16.0 ^ 18.5 E
Slide 22: 2004 Guidance: Third Quarter and Full Year Net Sales
2004 Guidance Third Quarter and Full Year Net Sales* Anticipate Record Third Quarter and Full Year Net Sales in 2004 2002 2003 2004 Guidance East 7.3 8 8.7 West 3.3 3.5 3.8 North 3.8 4.2 4.3 (billions) ^ $16.8 $15.7 $7.3 Please see slide titled "Forward-Looking Statements" at the end of this present
Slide 23: Capital Spending and Free Cash Flow
Capital Spending* (millions) 2004 Guidance Capital Spending and Free Cash Flow 2003 Actual 2004 Guidance 3rd Qtr 4th Qtr East 376 400 90 20.4 West 34.6 31.6 North 45.9 46.9 45 43.9 2003 Actual 2004 Guidance 3rd Qtr 4th Qtr East 509 300 90 20.4 West 0 34.6 31.6 North 45.9 46.9 45 43.9 $376 $509 High-
Slide 24: 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 program Ford
Slide 25: 2004 Guidance: Net Income Per Share
2004 Guidance Net Income Per Share** Anticipate Record Full Year Net Income Per Share in 2004 2002 2003 2004 Guidance Net Sales 1.97 2.55 2.94 Increase in Net Sales 0.91 1.1 1.18 2.68 3 3.12 $4.65* $5.55 $5.85 - $6.25 First Half Full Year * Represents income per share before cumulative effect of a c
Slide 26: 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 27: 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 28: Advance Relentlessly
ADVANCE RELENTLESSLY(tm) www.lear.com LEA NYSE Listed R
Slide 29: 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 "income before interest, oth
Slide 30: Core Operating Earnings
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 $ 212.9 $ 211.7 (core operating earnings) (millions) Use of Non-GAAP Financ
Slide 31: Free Cash Flow
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 255.3 382.5 Capital expenditures ( 115.3 ) ( 192.6 ) Free cash flow $ 140.0 $ 18
Slide 32: 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