Lear Corporation Reports Preliminary Fourth-Quarter and Full-Year 2008 Financial Results
(NYSE: LEA), a leading global supplier of automotive seating systems,
electrical distribution systems and electronic products, today reported
preliminary financial results for the fourth quarter and full year of 2008, as
follows:
-- Net sales of $2.6 billion in Q4 and $13.6 billion for full year
-- Core operating earnings positive in Q4 and strong for full year
-- Year end cash and cash equivalents balance of $1.6 billion
-- Accelerated and expanded global restructuring and cost reduction
efforts
-- Continued to diversify sales, with 64% of 2008 revenue generated
outside of N.A.
-- Awarded electrical and electronic content on Chevy Volt and other new
hybrids
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Business Conditions
The production environment in the fourth quarter was extremely challenging
due to significantly lower production volumes globally. In
industry production compared with a year ago was down 26%, the Domestic Three
were down 30%, and our top fifteen platforms were down 26%. In
industry production was down 29%, and our top five customers were down 31%.
Globally, automotive production was down 21%.
“These sharp declines in automotive production in
globally dramatically impacted our financial results in the fourth quarter,”
said
“We have been aggressively restructuring our global operations in response to
changing business conditions. Lear’s strategy to manage through the downturn
is to accelerate and expand global restructuring and cost reduction efforts,
to narrow our investment focus to minimize cash burn and to continue to
provide our customers with superior value.”
Fourth-Quarter 2008 Financial Results
For the fourth quarter of 2008, Lear reported net sales of
and a pretax loss of
impairment charge of
Income before interest, other (income) expense, income taxes, restructuring
costs and other special items (core operating earnings) was
the fourth quarter of 2008. This compares with net sales of
pretax income of
in the fourth quarter of 2007. A reconciliation of core operating earnings to
pretax income (loss) as determined by generally accepted accounting principles
(“GAAP”) is provided in the attached supplemental data pages.
The decline in net sales for the quarter primarily reflects a significant
reduction in production in
In the seating segment, net sales were down 32% to
Operating margins declined sharply, reflecting primarily the impact of lower
vehicle production offset partially by favorable cost performance. In the
electrical and electronic segment, net sales were down 33% to
Operating margins declined significantly, driven by lower vehicle production
offset partially by favorable cost performance.
Net loss was
goodwill impairment charge and restructuring costs, for the fourth quarter of
2008. This compares with net income of
the year earlier quarter.
In the fourth quarter of 2008, free cash flow was negative
as compared with free cash flow of
2007. The decline in free cash flow compared with a year ago primarily
reflects lower earnings. Net cash provided by (used in) operating activities
was
2007, respectively. A reconciliation of free cash flow to net cash provided
by (used in) operating activities as determined by GAAP is provided in the
attached supplemental data pages.
Full-Year 2008 Financial Results
For the full year 2008, Lear reported net sales of
pretax loss of
impairment charge of
Core operating earnings were
compares with net sales of
core operating earnings of
operating earnings to pretax income (loss) as determined by GAAP is provided
in the attached supplemental data pages.
The decline in net sales for the full year primarily reflects a
significant reduction in production in
divestiture of the interior business, partially offset by favorable foreign
exchange. The decline in core operating earnings reflects the decline in net
sales offset in part by favorable cost performance, including the benefit of
restructuring actions.
Lear reported a net loss of
the non-cash goodwill impairment charge and restructuring costs, for the
full-year 2008. This compares with net income of
share, for the full-year 2007.
Free cash flow in 2008 was negative
cash flow of
earnings and higher cash costs for restructuring. Net cash provided by
operating activities was
respectively. A reconciliation of free cash flow to net cash provided by
operating activities as determined by GAAP is provided in the attached
supplemental data pages.
For the year, Lear continued to make progress on its strategic priorities,
including further diversification of its global sales, business development in
emerging markets and the implementation of an operating improvement plan for
the electrical and electronic segment. Approximately two-thirds of Lear’s
2008 net sales were generated outside of
continues to improve quality and win new business globally. Our business
backlog for the 2009 to 2011 period currently stands at
in the seating segment and 40% in the electrical and electronic segment,
including recent awards on the Chevy Volt and several other new hybrid models.
In terms of liquidity, the Company had approximately
and cash equivalents as of
resources to satisfy ordinary course business obligations. During the fourth
quarter of 2008, Lear chose to borrow
facility in order to protect against disruptions in the capital markets and to
further bolster its liquidity position. The Company elected not to repay the
amounts borrowed at year end in light of continued market and industry
uncertainty. As a result of this decision, the Company is no longer in
compliance with the leverage ratio contained in its primary credit facility.
The Company has initiated discussions with the co-agents under its primary
credit facility to seek a long-term amendment. The discussions have been
constructive and are continuing. Because the amendment will require support
from lenders holding a majority of outstanding commitments and borrowings
under the primary credit facility, the Company intends to pursue discussions
with a broader lender group before finalizing the amendment proposal and
launching the formal amendment process. If the Company is unable to obtain an
amendment, upon a majority vote of the lenders under the primary credit
facility, the lenders would have the right to exercise all remedies
thereunder, which would have a material adverse effect on the Company’s
financial position.
Lear will webcast a conference call to review the Company’s fourth-quarter
2008 financial results and related matters on
http://www.lear.com. In addition, the conference call can be accessed by
dialing 1-800-789-4751 (domestic) or 1-973-200-3975 (international). The
audio replay will be available two hours following the call at 1-800-642-1687
(domestic) or 1-706-645-9291 (international) and will be available until
Non-GAAP Financial Information
In addition to the results reported in accordance with GAAP included
throughout this press release, the Company has provided information regarding
“income before interest, other expense, income taxes, restructuring costs and
other special items” (core operating earnings) and “free cash flow” (each, a
non-GAAP financial measure). Other expense includes, among other things, non-
income related taxes, foreign exchange gains and losses, discounts and
expenses associated with the Company’s asset-backed securitization and
factoring facilities, minority interests in consolidated subsidiaries, equity
in net income of affiliates and gains and losses on the sale of assets. Free
cash flow represents net cash provided by (used in) operating activities
before the net change in sold accounts receivable, less capital expenditures.
The Company believes it is appropriate to exclude the net change in sold
accounts receivable in the calculation of free cash flow since the sale of
receivables may be viewed as a substitute for borrowing activity.
Management believes the non-GAAP financial measures used in this press
release are useful to both management and investors in their analysis of the
Company’s financial position and results of operations. In particular,
management believes that core operating earnings is a useful measure in
assessing the Company’s financial performance by excluding certain items
(including those items that are included in other expense) that are not
indicative of the Company’s core operating earnings or that may obscure trends
useful in evaluating the Company’s continuing operating activities.
Management also believes that this measure is useful to both management and
investors in their analysis of the Company’s results of operations and
provides improved comparability between fiscal periods. Management believes
that free cash flow is useful to both management and investors in their
analysis of the Company’s ability to service and repay its debt. Further,
management uses these non-GAAP financial measures for planning and forecasting
in future periods.
Core operating earnings and free cash flow should not be considered in
isolation or as a substitute for pretax income (loss), net income (loss), cash
provided by (used in) operating activities or other statement of operations or
cash flow statement data prepared in accordance with GAAP or as a measure of
profitability or liquidity. In addition, the calculation of free cash flow
does not reflect cash used to service debt and therefore, does not reflect
funds available for investment or other discretionary uses. Also, these non-
GAAP financial measures, as determined and presented by the Company, may not
be comparable to related or similarly titled measures reported by other
companies.
For reconciliations of non-GAAP financial measures to the most directly
comparable financial measures calculated and presented in accordance with
GAAP, see the attached supplemental data pages which, together with this press
release, have been posted on the Company’s website through the Investor
Relations link at http://www.lear.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including statements
regarding anticipated financial results and liquidity. Actual results may
differ materially from anticipated results as a result of certain risks and
uncertainties, including but not limited to, general economic conditions in
the markets in which the Company operates, including changes in interest rates
or currency exchange rates, the financial condition of the Company’s customers
or suppliers, changes in actual industry vehicle production levels from the
Company’s current estimates, fluctuations in the production of vehicles for
which the Company is a supplier, the loss of business with respect to, or the
lack of commercial success of, a vehicle model for which the Company is a
significant supplier, including further declines in sales of full-size pickup
trucks and large sport utility vehicles, disruptions in the relationships with
the Company’s suppliers, labor disputes involving the Company or its
significant customers or suppliers or that otherwise affect the Company, the
Company’s ability to achieve cost reductions that offset or exceed customer-
mandated selling price reductions, the outcome of customer negotiations, the
impact and timing of program launch costs, the costs, timing and success of
restructuring actions, increases in the Company’s warranty or product
liability costs, risks associated with conducting business in foreign
countries, competitive conditions impacting the Company’s key customers and
suppliers, the cost and availability of raw materials and energy, the
Company’s ability to mitigate increases in raw material, energy and commodity
costs, the outcome of legal or regulatory proceedings to which the Company is
or may become a party, unanticipated changes in cash flow, including the
Company’s ability to align its vendor payment terms with those of its
customers, the Company’s ability to access capital markets on commercially
reasonable terms, further impairment charges initiated by adverse industry or
market developments, the Company’s ability to obtain a waiver or amendment
under its primary credit facility and other risks described from time to time
in the Company’s Securities and Exchange Commission filings. Future operating
results will be based on various factors, including actual industry production
volumes, commodity prices and the Company’s success in implementing its
operating strategy.
This press release also contains information on the Company’s sales
backlog. The Company’s incremental sales backlog reflects anticipated net
sales from formally awarded new programs and open replacement programs, less
phased-out and cancelled programs. The calculation of backlog does not
reflect customer price reductions on existing or newly awarded programs. The
backlog may be impacted by various assumptions embedded in the calculation,
including vehicle production levels on new and replacement programs, foreign
exchange rates and the timing of major program launches. Lear’s 2009 – 2011
sales backlog is based on an exchange rate of
15, 2008
The forward-looking statements in this press release are made as of the
date hereof, and the Company does not assume any obligation to update, amend
or clarify them to reflect events, new information or circumstances occurring
after the date hereof.
Lear Corporation is one of the world’s leading suppliers of automotive
seating systems, electrical distribution systems and electronic products. The
Company’s world-class products are designed, engineered and manufactured by a
diverse team of 80,000 employees at 215 facilities in 35 countries. Lear’s
headquarters are in
Stock Exchange under the symbol [LEA]. Further information about Lear is
available on the Internet at http://www.lear.com.
Lear Corporation and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
Three Months Ended
December 31, December 31,
2008 2007
Net sales $2,600.4 $3,859.0
Cost of sales 2,542.3 3,626.3
Selling, general and administrative expenses 96.6 146.1
Goodwill impairment charges 530.0 -
Divestiture of Interior business - 2.9
Interest expense 50.8 48.9
Other (income) expense, net 72.8 (10.3)
Income (loss) before income taxes (692.1) 45.1
Income taxes (3.9) 18.1
Net income (loss) $(688.2) $27.0
Basic net income (loss) per share $(8.91) $0.35
Diluted net income (loss) per share $(8.91) $0.34
Weighted average number of shares outstanding
Basic 77.3 77.2
Diluted 77.3 78.3
Lear Corporation and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
Twelve Months Ended
December 31, December 31,
2008 2007
Net sales $13,570.5 $15,995.0
Cost of sales 12,826.5 14,846.5
Selling, general and administrative expenses 513.2 574.7
Goodwill impairment charges 530.0 -
Divestiture of Interior business - 10.7
Interest expense 190.3 199.2
Other expense, net 114.6 32.5
Income (loss) before income taxes (604.1) 331.4
Income taxes 85.8 89.9
Net income (loss) $(689.9) $241.5
Basic net income (loss) per share $(8.93) $3.14
Diluted net income (loss) per share $(8.93) $3.09
Weighted average number of shares outstanding
Basic 77.2 76.8
Diluted 77.2 78.2
Lear Corporation and Subsidiaries
Selected Balance Sheet Data
(In millions)
December 31, December 31,
2008 2007
Cash and cash equivalents * $1,592.1 $601.3
PP&E, net 1,213.5 1,392.7
Total assets 6,872.9 7,800.4
Reported debt * 3,526.8 2,454.6
Stockholders' equity 198.9 1,090.7
* Increase in cash and cash equivalents and in reported debt is primarily
due to borrowings of
Lear Corporation and Subsidiaries
Supplemental Data
(Unaudited; in millions, except content per vehicle and share data)
Three Months Ended
December 31, December 31,
2008 2007
Net Sales
North America $1,036.5 $1,566.4
Europe 1,121.2 1,781.0
Rest of World 442.7 511.6
Total $2,600.4 $3,859.0
Content Per Vehicle *
North America $368 $430
Europe $293 $344
Free Cash Flow **
Net cash provided by (used in)
operating activities $(90.9) $157.4
Net change in sold accounts receivable 86.5 101.6
Net cash provided by (used in) operating
activities before net change in sold
accounts receivable (4.4) 259.0
Capital expenditures (33.9) (88.1)
Free cash flow $(38.3) $170.9
Depreciation and Amortization $71.8 $76.0
Core Operating Earnings **
Pretax income (loss) $(692.1) $45.1
Interest expense 50.8 48.9
Other (income) expense, net 67.1 *** (10.3)
Restructuring costs and other special
items -
Goodwill impairment charges 530.0 -
Divestiture of Interior business - 2.9
Costs related to restructuring actions 66.2 93.9
Costs related to merger transaction - (1.9)
Core Operating Earnings $22.0 $178.6
* Content Per Vehicle for 2007 has been updated to reflect actual
production levels.
** See “Non-GAAP Financial Information” included in this press release.
*** Reported 2008 other expense, net of
related to restructuring actions of
Lear Corporation and Subsidiaries
Supplemental Data
(Unaudited; in millions, except content per vehicle and share data)
Twelve Months Ended
December 31, December 31,
2008 2007
Net Sales
North America $4,924.6 $7,260.4
Europe 6,593.2 6,895.1
Rest of World 2,052.7 1,839.5
Total $13,570.5 $15,995.0
Net Sales - Core Businesses
North America $4,924.6 $6,648.4
Europe 6,593.2 6,827.1
Rest of World 2,052.7 1,830.6
Total $13,570.5 $15,306.1
Content Per Vehicle *
North America $391 $483
North America - core businesses $391 $443
Europe $348 $342
Europe - core businesses $348 $338
Free Cash Flow **
Net cash provided by operating activities $144.2 $466.9
Net change in sold accounts receivable (47.2) 168.9
Net cash provided by operating activities
before net change in sold accounts receivable 97.0 635.8
Capital expenditures (167.7) (202.2)
Free cash flow $(70.7) $433.6
Depreciation and Amortization $299.3 $296.9
Basic Shares Outstanding at end of
quarter 77,403,859 77,189,965
Diluted Shares Outstanding at end of
quarter *** 77,403,859 78,159,822
Core Operating Earnings **
Pretax income (loss) $(604.1) $331.4
Interest expense 190.3 199.2
Other expense, net 108.3 **** 28.6 ****
Restructuring costs and other special
items -
Goodwill impairment charges 530.0 -
Costs related to divestiture of
Interior business - 20.7
Costs related to restructuring
actions 193.9 181.8
U.S. salaried pension plan
curtailment gain - (36.4)
Costs related to merger transaction - 34.9
Loss on joint venture transaction - 3.9
Less: Interior business - (15.6)
Core Operating Earnings $418.4 $748.5
* Content Per Vehicle for 2007 has been updated to reflect actual
production levels.
** See “Non-GAAP Financial Information” included in this press release.
*** Calculated using stock price at end of quarter. Excludes certain
shares related to outstanding convertible debt, as well as certain options,
restricted stock units, performance units and stock appreciation rights, all
of which were antidilutive.
**** Reported other expense, net of
million
million
2007 listed below.
SOURCE Lear Corporation