Lear Reports Q3 Sale $3.5 Billion: Full Report Here
SOUTHFIELD, Mich., Oct. 23 -- Lear Corporation ,
the world's fifth-largest automotive supplier, today reported its financial
results for the third quarter of 2001.
Highlights:
* Earnings from operations of $0.35 per share
* Free cash flow of $64 million
* Redeemed 9.50% subordinated notes, lowering future interest costs
For the quarter, Lear posted net sales of $3.1 billion, operating income
of $137.5 million and net income of $15.7 million, or $0.24 per share.
Excluding non-recurring items, Lear had net income of $23.0 million, or $0.35
per share.
"We had expected a difficult quarter due to weakening economic conditions,
particularly in North America. However, the extraordinary events made it a
more difficult quarter than anyone could have anticipated," stated Bob
Rossiter, President and Chief Executive Officer of Lear Corporation.
Rossiter continued, "More than ever, it is critical for us to work with
our customers to support their key initiatives. We continue to be committed
to generating free cash flow and retiring debt, which we feel is the best
strategy to drive shareholder value."
Earnings per share, excluding non-recurring items, were $0.35 versus $0.59
in the third quarter of 2000, due to the negative impact of lower production
levels, unscheduled customer downtime and an overall deterioration of general
economic conditions.
The Company generated $63.9 million in free cash flow during the quarter,
driven primarily by lower capital spending and improved working capital
performance.
During the quarter, the Company redeemed its 9.50% subordinated notes due
2006. In connection with this transaction, the Company recorded an
extraordinary charge, net of tax, of $7.3 million, or $0.11 per share. The
redemption will lower future interest costs.
Net sales for the quarter were essentially flat at $3.1 billion as
compared to last year's third quarter. The impact of lower North American
production volumes was offset by new business and higher content-per-vehicle.
Net sales in the U.S. and Canada decreased from $1.9 billion in the third
quarter of 2000 to $1.8 billion in the third quarter of 2001, due primarily to
the 8 percent lower industry production. In Europe, net sales were $.9
billion on flat production volume, and Rest of World net sales were $.4
billion.
For the fourth quarter of 2001, the Company currently anticipates net
sales to be approximately 3 to 5 percent lower than the fourth quarter of a
year ago and earnings, on an operating basis, to be between $0.95 and $1.15
per share. The upper end of the range reflects current production schedules,
however, the Company believes additional reductions in customer build
schedules may occur in both North America and Western Europe.
For the full year, net sales are currently anticipated to be down 3 to 6
percent versus 2000 and earnings, on an operating basis, are currently
anticipated to be between $2.30 and $2.50 per share.
The Company is reviewing consolidation actions in light of the current
economic and industry environment and expects to take a pre-tax charge of up
to $150.0 million in this year's fourth quarter. This is expected to improve
the Company's competitive position going forward.
For 2002, the Company estimates North American production volume to be
between 14.5 million and 15.5 million units and Western Europe production
volume to be between 15.5 million and 16.0 million units. At these production
levels, the Company would anticipate earnings per share, excluding the impact
of FAS 142, "Goodwill and Other Intangible Assets," in the low $2.00 to the
low $3.00 range.
Lear Corporation, a Fortune 150 Company headquartered in Southfield,
Mich., USA, focuses on automotive interior systems and is the world's fifth-
largest automotive supplier. Net sales in 2000 were $14.1 billion. The
Company's world-class products are designed, engineered and manufactured by
over 100,000 employees in more than 300 facilities located in 33 countries.
Information about Lear and its products is available on the internet at
http://www.lear.com .
This news release 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,
including but not limited to general economic conditions in the markets in
which the Company operates, fluctuations in the production of vehicles for
which the Company is a supplier, the Company's success in achieving cost
reductions that offset or exceed customer selling price reductions, labor
disputes involving the Company or its significant customers, risks associated
with conducting business in foreign countries, increases in product warranty
costs, raw material shortages and other risks detailed from time to time in
the Company's Securities and Exchange Commission filings. These forward-
looking statements are made as of the date hereof, and Lear does not assume
any obligation to update them.
Lear Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited; in millions, except per share amounts)
Three Months Ended
September 29, 2001 September 30, 2000
Reported Adjusted (g) Reported Adjusted
Net sales $3,106.7 $3,106.7 $3,144.1 $3,144.1
Cost of goods sold 2,846.9 2,846.9 2,844.3 2,844.3
Selling, general and
administrative expenses 122.3 122.3 119.3 119.3
Amortization of goodwill 22.5 22.5 22.7 22.7
Interest expense 63.8 63.8 80.0 80.0
Other expense, net 12.5 12.5 12.5 12.5
Income before income taxes
and extraordinary item $38.7 $38.7 $65.3 $65.3
Income taxes 15.7 15.7 26.7 26.7
Income before extraordinary
item $23.0 $23.0 $38.6 $38.6
Extraordinary item, net
of tax 7.3 (a) - - -
Net income $15.7 $23.0 $38.6 $38.6
Diluted net income per
share $0.24 $0.35 $0.59 $0.59
Weighted average number
of shares outstanding
- diluted 65.6 65.6 65.1 65.1
Nine Months Ended
September 29, 2001 September 30, 2000
Reported Adjusted (g) Reported Adjusted (h)
Net sales $10,219.7 $10,219.7 $10,710.6 $10,710.6
Cost of goods sold 9,383.2 (c) 9,378.2 9,646.8 9,646.8
Selling, general and
administrative expenses 384.5 (c) 379.4 399.3 399.3
Amortization of goodwill 67.2 67.2 67.5 67.5
Interest expense 209.6 (d) 206.6 239.5 239.5
Other expense, net 32.9 (e) 42.2 13.8 (f) 36.8
Income before income taxes
and extraordinary items $142.3 $146.1 $343.7 $320.7
Income taxes 59.3 (c,d,e) 57.7 141.4 (f) 131.4
Income before extraordinary
items $83.0 $88.4 $202.3 $189.3
Extraordinary items,
net of tax 7.9 (a,b) - - -
Net income $75.1 $88.4 $202.3 $189.3
Diluted net income per
share $1.15 $1.36 $3.05 $2.85
Weighted average number of shares
outstanding - diluted 65.2 65.2 66.3 66.3
(a), (b), (c), (d), (e), (f), (g) and (h) See additional disclosures
ADDITIONAL DISCLOSURES
(a) In August 2001, the Company redeemed its 9.50% subordinated notes due
2006. The redemption was made at 104.75% of the aggregate principal amount of
the notes. The write-off of deferred financing fees of $2.5 million pre-tax
and the premium of $9.5 million pre-tax (collectively, $12.0 million pretax
and $7.3 million after-tax or $.11 per share) is presented as an extraordinary
item.
(b) In March 2001, the Company amended and restated its $2.1 billion
credit agreement. The write-off of deferred financing fees of $1.0 million
pre-tax ($0.6 million after-tax or $.01 per share) is presented as an
extraordinary item.
(c) During the first nine months of 2001, the Company completed actions
to reduce its cost base. The non-recurring costs, comprised of severance
costs less the associated savings, were recorded in cost of goods sold and
selling, general and administrative expenses in the amounts of $5.0 million
and $5.1 million, respectively. The net after-tax impact of these severance
actions was $6.1 million or $.09 per share.
(d) During the first nine months of 2001, the Company made the initial
draws under an asset-backed securitization. Approximately $3.0 million in
non-recurring expenses were incurred as a result of the transaction. The
after-tax impact of these expenses was $1.8 million or $.03 per share.
(e) In March 2001, the Company completed the sale of its Spanish wire
business for $35.5 million, resulting in a gain of $12.4 million pre-tax ($5.6
million after-tax). This gain was offset by a $3.1 million pre-tax charge
recorded to write-down certain long-term assets to net realizable value. The
net result of these transactions was a $9.3 million pre-tax gain ($2.5 million
after-tax or $.04 per share).
(f) In June 2000, the Company completed the sale of its sealants and foam
rubber business for $92.5 million, resulting in a gain of $36.6 million pre-
tax. The Company also recorded other transactions, including charges related
to the disposal of idle plant equipment. The net result of these transactions
was a $23.0 million pre-tax gain ($13.0 million after-tax or $.20 per share).
(g) Excludes the impact from the items included in (a), (b), (c), (d) and
(e) above.
(h) Excludes the impact from the items included in (f) above.
Lear Corporation and Subsidiaries
Consolidated Balance Sheets
(In millions)
September 29, December 31,
2001 2000
(Unaudited) (Audited)
ASSETS
Current:
Cash and cash equivalents $101.2 $98.8
Accounts receivable, net 1,507.6 1,639.0
Inventories 473.8 538.8
Recoverable customer engineering
and tooling 209.8 273.2
Other 211.8 278.2
2,504.2 2,828.0
Long-Term:
PP&E, net 1,791.2 1,891.3
Goodwill, net 3,182.3 3,266.6
Other 334.7 389.6
5,308.2 5,547.5
Total Assets $7,812.4 $8,375.5
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Short-term borrowings $21.8 $72.4
Accounts payable and drafts 2,141.0 2,174.0
Accrued liabilities 904.8 969.6
Current portion of long-term debt 105.0 155.6
3,172.6 3,371.6
Long-Term:
Long-term debt 2,430.0 2,852.1
Other 612.9 551.0
3,042.9 3,403.1
Stockholders' Equity: 1,596.9 1,600.8
Total Liabilities and Stockholders'
Equity $7,812.4 $8,375.5
Lear Corporation and Subsidiaries
Supplemental Data
(Unaudited; in millions, except content per vehicle data)
Three Months Ended
September 29, September 30,
2001 2000
Net Sales
U.S. and Canada $1,802.3 $1,928.7
Europe 936.8 870.3
Rest of World 367.6 345.1
Total $3,106.7 $3,144.1
Reported/Adjusted
Operating income $137.5 $180.5
Goodwill amortization (22.5) (22.7)
Operating income after amortization $115.0 $157.8
Content per vehicle*
North America $582 $557
Western Europe $254 $233
South America $96 $100
Nine Months Ended
September 29, September 30,
2001 2000
Net Sales
U.S. and Canada $5,974.2 $6,616.6
Europe 3,167.0 3,108.6
Rest of World 1,078.5 985.4
Total $10,219.7 $10,710.6
Reported
Operating income $452.0 $664.5
Goodwill amortization (67.2) (67.5)
Operating income after amortization $384.8 $597.0
Adjusted
Operating income $462.1 $664.5
Goodwill amortization (67.2) (67.5)
Operating income after amortization $394.9 $597.0
* Prior year CPV's updated to reflect actual production
