Slide 1: Third Quarter 2004 Results and Fourth Quarter Guidance
fast forward advance relentlessly world's leading automotive interior supplier R Third Quarter 2004 Results and Fourth Quarter Guidance October 21, 2004 Exhibit 99.2
Slide 2: Agenda
Agenda Lear's Game Plan Bob Rossiter, Chairman and CEO Operating Review Jim Vandenberghe, Vice Chairman Financial Review and Guidance Dave Wajsgras, SVP and CFO Q & A
Slide 3: Lear's Game Plan
Q@ear.,, Lear’s Game Plan
Slide 4: Lear's Game Plan
Lear's Game Plan Our #1 priority is delivering superior value to our customers We are also continuously working to improve our operating fundamentals Relentless customer focus and our drive for operational excellence will support profitable growth for Lear going forward
Slide 5: Third Quarter Highlights
Third Quarter Highlights We achieved record sales and improved earnings, but our operating margin was down Solid financial results in Europe; on-track for continued improvement Integration of terminals and connectors acquisition proceeding well Steel and other raw material prices continued to escala
Slide 6: Business Outlook and Lear's Response
Business Outlook and Lear's Response Fourth Quarter 2004 Unfavorable vehicle production mix Rising raw material costs Infrastructure realignment costs Full Year 2005 Continue to improve our cost structure Deliver record sales backlog Lear Team Fully Engaged with Customers/Suppliers to Offset Challen
Slide 7: Operating Review
Q@ear.,, Operating Review
Slide 8: Second Half External Factors
Second Half External Factors Overall vehicle demand and production in our major markets relatively stable Key vehicle platforms have experienced weaker demand / lower production Continued pressure from our customers to reduce costs Rapid escalation of raw material and energy prices since the first q
Slide 9: Major Commodities - Impact of Price Increases
Major Commodities - Impact of Price Increases Unprecedented increases in key commodity prices Financial impact to Lear varies by commodity: Commodity Impact Product Steel Most significant Seat frames, tracks, mechanisms Resins/Plastics Partially mitigated near-term Instrument panels, door panels, tr
Slide 10: Strategy to Mitigate Higher Material Costs
Strategy to Mitigate Higher Material Costs Aggressively pursue value-based solutions with all customers and suppliers Continue to consolidate supply base Selectively in-source components where we have available capacity Consolidate administrative functions and reduce costs Accelerate low-cost countr
Slide 11: Cost Technology Optimization (CTO) Centers
Cost Technology Optimization (CTO) Centers Cost Technology Optimization (CTO) Centers Cost Technology Optimization (CTO) Centers CTO Evaluates All Areas for Cost Reduction
Slide 12: Low Cost Manufacturing Capabilities and Engineering Centers
Poland - 4 Hungary - 4 Czech Republic - 3 Turkey - 1 Slovakia - 1 Romania - 1 Philippines - 4 Africa - 7 Mexico - 24 Honduras - 3 ? ? ? ? ? ? ? ? ? ? ? Low Cost Manufacturing Capabilities and Engineering Centers China - 1 India - 1 Korea - 1 Philippines - 1 ? ? ? ? India - 1 China - 2 Thailand - 1
Slide 13: Lear's Terminals and Connectors Business
Lear's Terminals and Connectors Business Evaluated manufacturing footprint - consolidation actions underway Leveraging acquired technical expertise throughout Lear's electronics division Seeking to expand relationships with customers Assessing in-sourcing of current terminals & connectors buy, in pr
Slide 14: Operating Factors in Perspective for the First Nine Months of 2004
Operating Factors in Perspective for the First Nine Months of 2004 Lear has performed well, despite rising raw material and energy prices Quality and customer satisfaction continue to improve Aggressively working to minimize adverse impact of external factors Continuing to invest in growth strategy
Slide 15: Financial Review and Guidance
Financial Review and Guidance
Slide 16: Production Environment - 3Q04 vs. 3Q03
Production Environment - 3Q04 vs. 3Q03 North America Industry production down 1% Big Three production down 4% Europe Industry production up 3% Western Europe production flat Key Lear platforms down more than average Production Mix Remains Challenging
Slide 17: Financial Highlights - Third Quarter 2004
Third Quarter 2004 Third Quarter 2003 Record 3Q '04 B/(W) 3Q '03 (millions, except net income per share) Financial Highlights - Third Quarter 2004 * Income before income taxes for the third quarter 2004 and 2003 was $105.8 and $105.7, respectively. Please see slides titled "Use of Non-GAAP Financial
Slide 18: 3Q04 vs. 3Q03 Change in Net Sales and Core Operating Earnings
3Q04 vs. 3Q03 Change in Net Sales and Core Operating Earnings Net Sales (up $406 million) Addition of new business globally Impact of foreign currency, primarily stronger Euro Acquisitions offset in part by Global vehicle production mix Core Operating Earnings* (down $4 million) Net operating perfor
Slide 19: Free Cash Flow
Free Cash Flow Net Income $ 92 $ 299 Depreciation 87 257 Working Capital / Other ( 47 ) ( 41 ) Cash from Operations* $ 132 $ 515 Capital Expenditures ( 91 ) ( 284 ) Free Cash Flow $ 41 $ 231 * Cash from Operations represents net cash provided by operating activities ($132 for three months and $444 f
Slide 20: Changes in Fourth Quarter Outlook
Changes in Fourth Quarter Outlook* North America Production ?Production cut selectively to adjust inventory levels Europe Production ?Jaguar / Opel production cuts Mix of Production ?Key Lear vehicle lines impacted by production cuts Volume and Mix Other Factors Raw Material Prices ?Costs have conti
Slide 21: Sales and Net Income Guidance
Sales and Net Income Guidance* Production (units) North America ^3.9 million ^15.8 million Europe ^4.7 million ^18.5 million Sales ^$4.1 billion ^$16.8 billion Net Income Per Share $1.70 - 1.80 $5.97 - 6.07 Tax Rate ^24% 4Q04 Full Year * Please see slide titled "Forward-Looking Statements" at the en
Slide 22: Other 2004 Guidance
Other 2004 Guidance* Capital Spending ^$400 million Depreciation ^$365 million Free Cash Flow* ^$300 million Interest Expense ^$165 million Full Year * Please see slides titled "Use of Non-GAAP Financial Information" and "Forward-Looking Statements" at the end of this presentation for further inform
Slide 23: Factors Impacting 2005 Financials
Factors Impacting 2005 Financials* High energy and raw material prices Aggressive customer demands for cost reduction to continue Several major automakers have changed payment terms, which will have a negative impact on our reported cash flow Aggressive cost structure efficiency actions continue Rec
Slide 24: Directional 2005 Outlook
Directional 2005 Outlook* Record backlog supports a sales increase of 5% to 7% Operating earnings are expected to increase 5% to 10% Additional details of 2005 financial guidance to be reviewed in January * Please see slide titled "Forward-Looking Statements" at the end of this presentation for furt
Slide 25: Alternative Uses of Cash Flow
Alternative Uses of Cash Flow. . . 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 25 25 25 25 Invest internally in high return programs Pursue strategic acquisitions Increase the dividend Repurchase Shares Where We See Value Creation .. . . While Maintaining a Strong Balance Sheet
Slide 26: Summary
Summary The hallmark of the Lear team is to pro-actively meet industry challenges and to work hand-in-hand with our customers to deliver superior value Despite the challenges of higher raw material and energy prices, the Lear team remains focused on serving our customers and profitably growing our b
Slide 27: Advance Relentlessly
ADVANCE RELENTLESSLY(tm) www.lear.com LEA NYSE Listed R
Slide 28: 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 29: Core Operating Earnings
Q3 2004 Q3 2003 Income before interest, other expense and income taxes Income before income taxes $ 105.8 $ 105.7 Interest expense 43.3 44.0 Other expense, net 10.0 13.4 Income before interest, other expense and income taxes $ 159.1 $ 163.1 (core operating earnings) (millions) Use of Non-GAAP Financ
Slide 30: Free Cash Flow
Q3 2004 2004 Free cash flow Net cash provided by operating activities $ 131.9 $ 444.0 Net change in sold accounts receivable - 70.4 Net cash provided by operating activities before net change in sold accounts receivable 131.9 514.4 Capital expenditures ( 91.1 ) ( 283.7 ) Free cash flow $ 40.8 $ 230.