Slide 1: Fourth Quarter and Full Year 2002 Earnings Review and Guidance for 2003
Fourth Quarter and Full Year 2002 Earnings Review and Guidance for 2003 a d v a n c e r e l e n t l e s s l y January 27, 2003 1
Slide 2: Agenda
Agenda I. Strategic Overview Bob Rossiter, Chairman & CEO II. Customer Focus Driving Growth Jim Vandenberghe, Vice Chairman III. Financial Review and 2003 Outlook Dave Wajsgras, SVP & CFO IV. Q & A
Slide 3: Strategic Overview
Strategic Overview
Slide 4: We've Steadily Increased our Automotive Interior Capabilities
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 $ In Billions 3.1 4.7 6.2 7.3 9.1 12.4 14.1 13.6 Seating Overheads Door Panels Floor and Acoustics Instrument Panels Electronics We've Steadily Increased our Automotive Interior Capabilities Transformation from Seat Manufacturer to Integrator of Comp
Slide 5: Becoming a Systems Integrator Means Moving...
Becoming a Systems Integrator Means Moving... INTERNAL FOCUS SUPPLIER SPECIFICATIONS PIECE PRICE CONTRACTS BUILD-TO-PRINT OPERATING EFFICIENCY MANUFACTURER CUSTOMER FOCUS STRATEGIC PARTNER COLLABORATIVE APPROACHES VALUE-ADDED SERVICES FULL R&D CAPABILITY SUPPLY-CHAIN MANAGEMENT SYSTEMS INTEGRATOR Fr
Slide 6: Business Environment
Business Environment Overall Market Stable U.S. and W. Europe economic situation Equity markets "nervous" about geopolitical events Automotive Sector 'Trend' N.A. production outlook -- 16 million units Keen OEM focus on improving interiors Increasingly cooperative OEM initiatives Beginning to move t
Slide 7: 2002 Highlights
2002 Highlights A Focus on the Customer... and Cash Continued to improve quality Further strengthened customer relationships Awarded first-ever total interior integrator program by General Motors Growing our business with Asian OEMs; Backlog now at highest level ever Delivered record net sales and s
Slide 8: Customer Focus Driving Growth
Customer Focus Driving Growth
Slide 9: Lear Strategic Roadmap - Advance Relentlessly
Lear Strategic Roadmap - - Advance Relentlessly Revenue and Earnings Growth Seats Total Interior Capabilities Interior Integration Lear Operating Strengths Leading Global Market Position Diversified Customer Base Solid Reputation for Quality Outstanding Customer Relationships Premier Automotive Supp
Slide 10: 2003 Lear Product Launch Highlights
2003 Lear Product Launch Highlights General Motors Cadillac XLR Seats, electronics Chevrolet Malibu Electronics GMC Envoy XUV Door panels, mid-gate, console Pontiac Grand Prix Seats, electronics Buick Ranier Door panels, console Cadillac SRX Seats, interior trim, flooring, dash insulator, lift-gate
Slide 11: Lear Product Highlights: Cadillac SRX
Lear Product Highlights Seats Flooring Interior Trim Dash Insulator Lift-gate Cadillac SRX
Slide 12: Lear Product Highlights: Ford F-Series
Lear Product Highlights Seats Door Panels Flooring Cockpit Assembly Ford F-Series
Slide 13: Lear Product Highlights: Dodge Durango
Lear Product Highlights Seats Flooring Overhead Electronics Dash Insulator Dodge Durango
Slide 14: Lear Product Highlights: Volvo XC 90
Lear Product Highlights Seats Door Panels Electronics Instrument Panel Volvo XC 90
Slide 15: Lear Product Highlights: Toyota Sienna
Lear Product Highlights Seats Door Panels Toyota Sienna
Slide 16: Backlog Grows to $4 Billion
Backlog Grows to $4 Billion Total interior integrator program New business with Asian OEMs Growing electronics New IP and cockpit programs 1998 1999 2000 2002 Status 2003 Status TGR 12.4 11.8 10.5 3.6 4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Five Year Sales Backlog ($ Billions) Major Areas
Slide 17: Examples of Growth in the Backlog
Examples of Growth in the Backlog Leveraging Total Interior Capability to Win New Business Hyundai Sonata/Santa Fe (Seats, electrical) Honda Pilot/Element (Overhead, electrical, floor & acoustics) Nissan Maxima (Interior trim) First program of this type ever awarded by General Motors DCX C-Segment/D
Slide 18: Lear Progressing from Systems Integrator to Total Interior Integrator
Lear Progressing from Systems Integrator to Total Interior Integrator Total Interior Integrator (TI) Systems Integrator Design OEM Lead Supplier Lead Engineering Shared Supplier Lead Sourcing OEM Directed Supplier Lead Manufacturing Supplier Supplier Sub-Assembly Supplier Supplier Sequencing Supplie
Slide 19: Lear Selected as Total Interior Integrator for Buick LeSabre / Cadillac DeVille
Design phase well underway -- clay models presently being developed by Lear Sourcing matrix being developed by Lear Lear Selected as Total Interior Integrator for Next Generation Buick LeSabre / Cadillac DeVille Estimated annual Lear net sales of $825 million Lear to provide total interior, includin
Slide 20: Financial Review and 2003 Outlook
Financial Review and 2003 Outlook
Slide 21: Financial Highlights - Full Year 2002
Financial Review Financial Highlights - Full Year 2002 Record net sales of $14.4 billion, up 6% from 2001 Earnings of $4.65 per share, up 25% from prior year * Operating margin of 5.2%, up 20 basis points Return on invested capital near 10%, up 150 basis points Strong free cash flow of $395 million
Slide 22: Financial Highlights - Fourth Quarter 2002
Net Sales $ 3,760.4 $ 3,405.0 $ 3,405.0 Operating Income $ 246.8 $ 68.6 $ 217.8 O/I Margin 6.6 % 2.0 % 6.4 % Net Income $ 118.0 $ ( 48.8 ) $ 97.8 EPS $ 1.76 $ ( .76 ) $ 1.49 SG&A % of Sales 3.4 % 3.8 % 3.6 % Interest Expense $ 50.6 $ 61.3 $ 61.3 Other Expense, Net $ 18.7 $ 23.7 $ 12.5 Vehicle Produc
Slide 23: 4Q02 versus 4Q01 - Change in Operating Income
Industry Vehicle Production N.A. 6% W.E. (1)% S.A. (22)% Industry Vehicle Production N.A. 3% W.E. (6)% S.A. 16% Financial Review 4Q02 versus 4Q01 - Change in Operating Income Total Change Worldwide Prod. & Mix Currency and Related Divestitures Global New Business East 29 6 4 0.1 19 . $ Millions $29M
Slide 24: Strong Free Cash Flow
Net Income $ 118 $ 312 ** Depreciation 78 301 Working Capital / Other 74 55 Cash from Operations * $ 270 $ 668 Capital Expenditures (99 ) (273 ) Free Cash Flow * $ 171 $ 395 Fourth Qtr (mils) Financial Review Strong Free Cash Flow Full Year (mils) * Includes $16 million to fund restructuring actions
Slide 25: Continuing to Reduce Our Net Debt
Financial Review Continuing to Reduce Our Net Debt Aggressively Reducing Our Debt 1999* 2000 2001** 2002** Net Debt 3.4 3 2.7 2.3 Debt/Cap 0.7 0.65 0.63 0.58 North 45.9 46.9 45 43.9 Free Cash Flow $179M $408M $318M $395M $ Billion Net Debt * UTA acquisition 5/99 ** Includes ABS debt of $261 million
Slide 26: Fourth Quarter Content Per Vehicle is Up
Financial Review Fourth Quarter Content Per Vehicle is up. . . With Major 2002 Launches Now in Place, Growth in Content per Vehicle Resumes 4Q 2001 4Q 2002 3rd Qtr 4th Qtr East 572 606 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 North America 4Q 2001 4Q 2002 3rd Qtr 4th Qtr East 256 290
Slide 27: Continuing Our Trend of Annual CPV Growth
Financial Review Continuing Our Trend of Annual CPV Growth Lear Has a Track Record of Content per Vehicle Growth 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 North America 94 112 169 227 292 320 369 478 570 600 635 Western Europe 19 34 44 92 109 123 176 227 250 280 310 North 45.9 46.9 45 4
Slide 28: Growth to Continue with Strong Sales Backlog
Present Backlog (millions) 2003 $ 900 2004 700 2005 1,000 2006 900 2007 500 5 Year Total $ 4,000 Financial Review Growth to Continue with Strong Sales Backlog Backlog By Customer Big 3 45 % European 30 % Asian 25 % Backlog By Region North America 40 % Europe 45 % Rest of World 15 % Backlog By Produc
Slide 29: Financial Impact of 'New' Backlog Profile
Financial Review Financial Impact of 'New' Backlog Profile Lear's Five Year Backlog Supports Improved Sales Diversification and Financial Returns Backlog Highlights Total interior integrator program Electrical components and electronics systems IPs and cockpits represent 25% Asian OEMs and transplan
Slide 30: Profile of Lear's Joint Ventures
Financial Review Profile of Lear's Joint Ventures Provide Lear with access to new markets, new customers, new technologies and new products 16 Non-consolidated JVs worldwide 8 in North America 6 in Asia 2 in Europe Supporting 11 customers, including The 'Big Three', BMW, Audi, Toyota, Honda, Nissan,
Slide 31: Non-Consolidated Joint Ventures Growing Rapidly
Financial Review Non-Consolidated Joint Ventures Growing Rapidly 2001 2002 2003 Estimate 4th Qtr Sales 593 635 725 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Annual Sales* (millions) 22% Growth 2002 - 2006 Status 2003 - 2007 Status 3rd Qtr 4th Qtr East 750 1250 90 20.4 West 30.6 38.6 34.6
Slide 32: Restructuring Update
Facility Closures 18 closures of the 21 planned completed to date 4 closures in the fourth quarter Overall closure plan proceeding on target Census Reductions Over 90% of planned separations completed by end of 2002 Cash Payments $90 million in total $16 million in fourth quarter, $72 million cumula
Slide 33: Pension Benefit Obligation (PBO) Status
Financial Review Pension Benefit Obligation (PBO) Status PBO & Unfunded PBO As of September 30 Unfunded PBO is manageable 7% of market cap < 1 year of Free Cash Flow 2,000 retirees covered by defined benefit plans 20% of active workforce covered by defined benefit plans Summary $ Millions Asset Retu
Slide 34: Pension & OPEB Update
Financial Review Pension & OPEB Update Cash Flow: (millions) Pension $ 35 $ 45 Healthcare 10 15 $ 45 $ 60 Expense: (millions) Pension $ 40 $ 50 Healthcare 22 35 $ 62 $ 85 2002 2003E Key Actuarial Assumptions: Discount Rate 8.00 % 7.50 % 6.75 %(1) Expected Return on Assets(2) 9.50 % 9.00 % 7.75 %(1)
Slide 35: Corporate Tax Rate Declining
Financial Review Corporate Tax Rate Declining Strategic emphasis on proactive tax planning throughout the company Efficient management of Legal Entity structure Six Sigma discipline applied on a cross-functional basis - - process improvement maximizes opportunities Improving mix of Non-U.S. Earnings
Slide 36: 2003 Vehicle Production Assumptions
2002 2003 16.4 16 2 North America (in millions) 2002 Actual 2003 Outlook 16.0 16.4 Financial Review 2003 Vehicle Production Assumptions 2002 2003 16.1 16 2 2002 Actual 2003 Outlook 16.0 16.1 Western Europe (in millions) 2003 Production Down in North America; Flat in Western Europe 37 Q1 4.1 Up 1% Q1
Slide 37: 2003 Guidance
Financial Review 2003 Guidance First Quarter EPS Full Year EPS Net Sales up 6% to 8% 2001 2002 2003 4th Qtr East 0.53 0.7 0.9 20.4 West 0.1 31.6 North 45.9 46.9 45 43.9 Interest Expense $ 50 M $ 200 M Capital Expenditures $ 100 M $ 300 M Free Cash Flow $ 50 M $ 400 M 2001 2002 2003 4th Qtr East 3.73
Slide 38: 2003 Financial Sensitivity
Financial Review 2003 Financial Sensitivity N.A. Production (Mils) 16.4 16.0 15.5 W.E. Production (Mils) 16.1 16.0 16.0 Net Sales (Bils) $ 14.4 $ 15.0 $ 14.7 EPS $ 4.65 $ 5.20 - $ 4.70 - 5.40 5.00 O/I Margin 5.2 % 5.3 - 5.4 % 5.1 - 5.2 % Free Cash Flow (Mils) $ 395 $ 400 $ 325 Major Assumptions 2002
Slide 39: Where is Lear Today...
Where is Lear Today . . . Well positioned for sustainable growth; sales backlog at highest level ever Operating margins and returns improving Double-digit earnings per share growth Continuing strong free cash flow and debt reduction Solid and improving capital structure Operational excellence -- qua
Slide 40: Advance Relentlessly - www.lear.com
ADVANCE RELENTLESSLY(tm) NYSE: LEA www.lear.com
Slide 41: Forward-looking statements
This document 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, in