Lear Corporation · NYSE:LEA
Lear — Q2 2003 Earnings Presentation
26 slides from Lear's earnings presentation, Jul 17, 2003
Slide 1: Second Quarter 2003 Earnings Review and Updated Guidance
July 17, 2003 a d v a n c e r e le n tle s s ly Second Quarter 2003 Earnings Review and Updated Guidance
Slide 2: Agenda
Agenda I.I. Customer Customer Focus Focus Bob Bob Rossiter, Rossiter, Chairman Chairman & & CEO CEO II. II. Operating Operating Results Results Jim Jim Vandenberghe, Vandenberghe, Vice Vice Chairman Chairman III. III. Second Second Quarter Quarter Financial Financial Review Review & & Guidance Guida
Slide 3: Customer Satisfaction is Our Top Priority
Customer Satisfaction is Our Top Priority Complete Automotive Interior Systems Intertronics Customer Satisfaction Continuous Quality Improvement Craftsmanship LBO Mentality Lean Manufacturing New Product Innovation Total Value Management 3
Slide 4: Second Quarter 2003 Highlights
Second Quarter 2003 Highlights Customer-Focused Strategy Driving Success •• Record Record quarterly quarterly net net sales sales of of $4.1 $4.1 billion, billion, up up 8% 8% •• Net Net income income per per share share of of $1.54, $1.54, up up 21% 21% •• Strong Strong cash cash flow flow and and
Slide 5: Operating Results: Despite Lower Production, Lear is Performing Well
Operating Results Despite Lower Production, Lear is Performing Well •• Industry Industry continues continues to to focus focus on on automotive automotive interiors interiors •• Intertronics Intertronics is is aa competitive competitive advantage advantage and and aa growth growth opportunity opport
Slide 6: Update on GM Total Interior Program
Operating Results Update on GM Total Interior Program 9 Sourcing 9 Sourcingmatrix matrixcomplete; complete;Lear Learplants plantswill willsupply supply more morethan than90% 90%ofoftotal totalinterior interiorcontent content 9 Lear 9 Leardesign designand andengineering engineeringteams teamswork wor
Slide 7: Quality Continues to Improve
Operating Results Quality Continues to Improve Parts Per Million (PPM) Defective* 27% •• Management Managementpriority priority Imp ro vem ent •• Global Globalfocus focus •• Part Partof ofLear Learculture culture •• Six SixSigma Sigmadiscipline discipline •• Sharing Sharingbest bestpractices practic
Slide 8: Production Environment - Second Quarter 2003
Financial Review Production Environment - Second Quarter 2003 North NorthAmerica America •• Industry Industryproduction productiondown down9%; 9%;Big BigThree Threedown down12% 12% •• Content ContentPer PerVehicle Vehicleof of$597, $597,up up8% 8%from fromaayear yearago, ago, reflecting reflectingne
Slide 9: Financial Highlights - Second Quarter 2003
Financial Review Financial Highlights - Second Quarter 2003 Second Second 2Q ‘03 (in millions, except net income per share) Quarter 2003 Quarter 2002 B/(W) 2Q ‘02 Net NetSales Sales $$ 4,101.2 4,101.2 9 $$ 3,792.2 3,792.2 $$ 309.0 309.0 Income Incomebefore beforeInterest, Interest,Other OtherExpense
Slide 10: 2Q03 vs 2Q02 - Change in Core Operating Earnings
Financial Review 2Q03 vs 2Q02 - Change in Core Operating Earnings* Industry IndustryVehicle VehicleProduction Production N.A. N.A.(9)% (9)% W.E. W.E. (2)% (2)% S.A. S.A. (7)% (7)% (in millions) $23 $18 $15 $6 ($32) Total Change Net Production Net Currency & Net Operating Global New & Mix Related Eff
Slide 11: Second Quarter North American Content Per Vehicle
Financial Review Second Quarter North American Content Per Vehicle Second Quarter Impact on Content Per Vehicle Lear CPV % Up 8 •• Light $597 Lighttruck truck production productionmix mix ++ $553 •• Full Fullsize size&&luxury luxury SUV SUVproduction productionup up ++ •• Strong Strongbacklog backlo
Slide 12: 2003 Capital Spending Plan
Financial Review 2003 Capital Spending Plan (in millions) 2Q 1H 2H FY 2003 2003Actual Actual// Forecast Forecast $$ 67 67 $$ 137 137 $$ 163 163 $$ 300 300 2002 2002Actual Actual $$ 56 56 $$ 102 102 $$ 171 171 $$ 273 273 No Change to Full Year 2003 Capital Spending Plan 12
Slide 13: 2Q03 Free Cash Flow
Financial Review 2Q03 Free Cash Flow Six (in millions) 2Q03 Months Net NetIncome Income $$ 104 104 $$ 172 172 Depreciation Depreciation 78 78 152 152 Working WorkingCapital Capital//Other Other 65 65 73 73 Cash Cashfrom fromOperations* Operations* $$ 247 247 $$ 397 397 Capital CapitalExpenditures Ex
Slide 14: Further Debt Reduction & Increased Financial Flexibility
Financial Review Further Debt Reduction & Increased Financial Flexibility $3,385 Net Debt* $2,981 $2,660 $2,271 $2,064 (in millions) 1999 2000 2001 2002 June '03 Net Debt to Cap 70% 65% 63% 58% 52% * Net debt represents total debt plus utilization of our ABS facility, less cash. Please see slides ti
Slide 15: Corporate Tax Rate Declining
Financial Review Corporate Tax Rate Declining Factors Influencing our Tax Rate 33.5% •• Emphasis Emphasison onproactive proactivetax tax 30.0% planning planning 29.0% 28.0% •• Efficient Efficientmanagement managementof ofLegal Legal Entity Entitystructure structureto tooptimize optimizetax tax resul
Slide 16: 2003 Vehicle Production Outlook
Financial Review 2003 Vehicle Production Outlook North America Western Europe (in millions) (in millions) 16.4 16.4 16.5 16.5 15.9 15.9 16 16 15.7 15.7 15.5 15.5 15 15 14.5 14.5 14 14 FY 2002 Actual FY 2003 Outlook FY 2002 Actual FY 2003 Outlook Q3 3.7 Down 5% Q3 3.5 Down 7% 2003 Production Down in
Slide 17: 2003 Guidance
Financial Review 2003 Guidance Third Quarter Net Income Per Share Full Year Net Income Per Share Net Sales of Net Sales of $15.2 Billion $3.4 Billion $5.50 $1.05 $5.20 $4.65 $0.91 $0.95 2002 2003 2002 2003 Interest Expense $ 50 M $ 200 M Capital Expenditures $ 100 M $ 300 M Free Cash Flow Breakeven
Slide 18: Return on Invested Capital Improving
Operating Results Return on Invested Capital Improving Trailing Twelve Month ROIC* 11.0% 10.5% 10.5% 10.0% 9.8% 9.5% 9.0% 8.5% 8.5% 8.0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2001 2001 2001 2001 2002 2002 2002 2002 2003 2003 * Return on Invested Capital (ROIC) represents income before restructuring charges,
Slide 19: Summary and Outlook
Summary and Outlook Customer-Focused Strategy Driving our Success •• Quality Qualityand andcustomer customerservice serviceremain remainour ourtop toppriorities priorities •• Top Topline linegrowing growingas ascustomers customersrecognize recognizeLear’s Lear’svalue valueadded added •• Return Retur
Slide 20: Advance Relentlessly
ADVANCE RELENTLESSLY™ NYSE: LEA www.lear.com
Slide 21: Use of Non-GAAP Financial Information
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 measure
Slide 22: Core Operating Earnings
Use of Non-GAAP Financial Information Core Operating Earnings (in millions) Three Months Six Months Q2 2003 Q2 2002 Q2 2003 Q2 2002 Income before interest, other expense and income taxes Income before income taxes $ 148.7 $ 128.5 $ 245.7 $ 198.3 Interest expense 49.1 53.4 102.2 110.4 Other expense,
Slide 23: Return on Invested Capital Earnings
Use of Non-GAAP Financial Information Return on Invested Capital Earnings (in millions) Twelve Months Q2 2003 Q4 2001 Q1 2001 Income before restructuring charges, amortization, interest, other expense and income taxes Income before income taxes $ 515.9 $ 89.9 $ 395.9 Restructuring charges - 159.3 4.
Slide 24: Free Cash Flow
Use of Non-GAAP Financial Information Free Cash Flow (in millions) Three Months Six Months Q2 2003 Q2 2002 Q2 2003 Q2 2002 Free cash flow Net cash provided by operating activities $ 160.7 $ 131.4 $ 257.3 $ 300.3 Net change in sold accounts receivable 86.2 34.3 139.6 5.8 Net cash provided by operatin
Slide 25: Net Debt
Use of Non-GAAP Financial Information Net Debt (in millions) June 28, December 31, 2003 2002 2001 2000 1999 Net debt Short-term borrowings $ 35.1 $ 37.3 $ 63.2 $ 72.4 $ 103.6 Current portion of long-term debt 3.9 3.9 129.5 155.6 63.6 Long-term debt 2,054.4 2,132.8 2,293.9 2,852.1 3,324.8 Total debt
Slide 26: Forward Looking Statement
Forward Looking Statement 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 certa