Slide 1: Second Quarter 2003 Earnings Review and Updated Guidance
Second Quarter 2003 Earnings Review and Updated Guidance a d v a n c e r e l e n t l e s s l y July 17, 2003
Slide 2: Agenda
I. Customer Focus Bob Rossiter, Chairman & CEO II. Operating Results Jim Vandenberghe, Vice Chairman III. Second Quarter Financial Review & Guidance Dave Wajsgras, SVP & CFO IV. Q & A Agenda
Slide 3: Customer Satisfaction is Our Top Priority
Complete Automotive Interior Systems Continuous Quality Improvement New Product Innovation Lean Manufacturing Total Value Management Craftsmanship LBO Mentality 1 Customer Satisfaction # Intertronics Customer Satisfaction is Our Top Priority
Slide 4: Second Quarter 2003 Highlights
Record quarterly net sales of $4.1 billion, up 8% Net income per share of $1.54, up 21% Strong cash flow and continued debt reduction Twenty-one customer awards for quality and delivery Quality and cost improvements providing value to our customers and shareholders Another Quarter of Solid Operating
Slide 5: Despite Lower Production, Lear is Performing Well
Industry continues to focus on automotive interiors Intertronics is a competitive advantage and a growth opportunity $4.0 billion sales backlog strongest ever Continuing quality improvements Ongoing operating efficiencies Our Strong Customer Relationships and Total Interior Capabilities are Driving
Slide 6: Update on GM Total Interior Program
Lear Works in Close Partnership with GM to Deliver "World Class" Interiors for Next Generation Large and Luxury Vehicles Sourcing matrix complete; Lear plants will supply more than 90% of total interior content Lear design and engineering teams work collaboratively with GM; on track for 'prototype'
Slide 7: Quality Continues to Improve
Management priority Global focus Part of Lear culture Six Sigma discipline Sharing best practices Teamwork 1st Half 2002 1st Half 2003 3rd Qtr 4th Qtr East 105 77 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 Quality Products and Services in t
Slide 8: Production Environment Remains Difficult in North America and Western Europe
North America Industry production down 9%; Big Three down 12% Content Per Vehicle of $597, up 8% from a year ago, reflecting new business and positive mix Western Europe Industry production down 2%; key Lear customers/platforms down more than industry average Content Per Vehicle of $317, up about 3%
Slide 9: Financial Highlights - Second Quarter 2003
Net Sales $ 4,101.2 $ 3,792.2 $ 309.0 Income before Interest, Other Expense & Income Taxes* $ 211.7 $ 196.4 $ 15.3 Margin 5.2 % 5.2 % - Net Income $ 104.1 $ 85.5 $ 18.6 Net Income Per Share $ 1.54 $ 1.27 $ 0.27 SG&A % of Net Sales 3.5 % 3.5 % - Interest Expense $ 49.1 $ 53.4 $ 4.3 Other Expense, Net
Slide 10: 2Q03 vs 2Q02 - Change in Core Operating Earnings
Industry Vehicle Production N.A. (9)% W.E. (2)% S.A. (7)% Total Change Net Production & Mix Currency & Related Net Operating Efficiencies Global New Business East 15 -32 6 18 23 . (in millions) $15 $6 $23 ($32) Change in Net Sales $309 $(291) $300 $300 Financial Review 2Q03 vs 2Q02 - Change in Core
Slide 11: Second Quarter North American Content Per Vehicle
Light truck production mix + Full size & luxury SUV production up + Strong backlog + Increased Lear product content + 1998 2002 2003 2001 2002 TGR 12.4 553 597 8.3 7.9 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Second Quarter Content Per Vehicle Financial Review Second Quarter North American C
Slide 12: 2003 Capital Spending Plan
2003 Actual / Forecast $ 67 $ 137 $ 163 $ 300 2002 Actual $ 56 $ 102 $ 171 $ 273 Financial Review 2003 Capital Spending Plan 2Q 1H 2H FY (in millions) No Change to Full Year 2003 Capital Spending Plan
Slide 13: 2Q03 Free Cash Flow
Net Income $ 104 $ 172 Depreciation 78 152 Working Capital / Other 65 73 Cash from Operations* $ 247 $ 397 Capital Expenditures ( 67 ) ( 137 ) Free Cash Flow $ 180 $ 260 2Q03 * Cash from Operations represents net cash provided by operating activities ($161 for second quarter and $257 for six months
Slide 14: Further Debt Reduction & Increased Financial Flexibility
1998 1999 2000 2001 2002 June '03 2003 Estimate Target EPS 1533 3385 2981 2660 2271 2064 2000 1800 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Net Debt to Cap 70% 65% 63% 58% 52% (in millions) * Net debt represents total debt plus utilization of our ABS facility, less cash. Please see slides ti
Slide 15: 2003 Vehicle Production Outlook
North America (in millions) Western Europe (in millions) 2003 Production Down in North America and Western Europe Q3 3.7 Down 5% FY 2002 Actual FY 2003 Outlook East 16.4 15.7 West 0.2 FY 2002 Actual FY 2003 Outlook East 16.4 15.7 0.2 Q3 3.5 Down 7% Financial Review 2003 Vehicle Production Outlook
Slide 16: 2003 Guidance
Third Quarter Net Income Per Share Full Year Net Income Per Share Net Sales of $3.4 Billion 2001 2002 2003 4th Qtr East 0.74 0.91 0.95 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 Breakeven $ 400 M 2001 2002 2003 4th Q
Slide 17: Return on Invested Capital Improving
Operating Results 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 East 0.098 0.09 0.087 0.085 0.088 0.091 0.095 0.099 0.102 0.105 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 8.5% 10.5% 9.8% * Return
Slide 18: Summary and Outlook
Quality and customer service remain our top priorities Top line growing as customers recognize Lear's value added Return on Invested Capital trending upward as we drive cost efficiencies and operating improvements worldwide Strong cash flow continues to strengthen balance sheet 2003 financial guidan
Slide 19: Advance Relentlessly
ADVANCE RELENTLESSLY(tm) NYSE: LEA www.lear.com
Slide 20: Use 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 21: Use Information: Core Operating Earnings
Use of Non-GAAP Financial Information Core Operating Earnings 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, net 13.9 14.5 25.7 28.7 Income before
Slide 22: Use Information: Free Cash Flow
Use of Non-GAAP Financial Information Free Cash Flow 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 operating activities before net change in sold
Slide 23: Use Information: Net Debt
Use of Non-GAAP Financial Information Net Debt (in millions) $ 35.1 $ 37.3 $ 63.2 $ 72.4 $ 103.6 3.9 3.9 129.5 155.6 63.6 2,054.4 2,132.8 2,293.9 2,852.1 3,324.8 2,093.4 2,174.0 2,486.6 3,080.1 3,492.0 ( 103.1 ) ( 91.7 ) ( 87.6 ) ( 98.8 ) (106.9 ) 73.6 189.0 260.7 - - $ 2,063.9 $ 2,271.3 $ 2,659.7 $
Slide 24: 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