Lear's First Quarter EPS up 32% from a Year Ago
SOUTHFIELD, Mich., April 22 Lear Corporation, the world's fifth-largest automotive supplier, today reported its financial results for the first quarter of 2002.
First Quarter Highlights
- Earnings per share of 70 cents, up 32% from prior year's adjusted basis
- Generated free cash flow of $94 million
- Increased financial flexibility by issuing zero-coupon convertible senior notes
- Continued to strengthen our customer relationships
For the first quarter 2002, Lear posted net sales of $3.5 billion, operating income of $141.0 million and net income of $46.4 million, or $0.70 per share. These results compare to net sales of $3.5 billion, operating income of $134.6 million and net income of $14.5 million, or $0.22 per share in 2001. Excluding non-recurring items and goodwill amortization, Lear had adjusted operating income of $138.8 million and net income of $34.3 million, or $0.53 per share in the first quarter 2001.
``We remain focused on working closely with our customers, improving the fundamentals of our business and delivering superior returns to our shareholders,'' stated Bob Rossiter, President and Chief Executive Officer of Lear Corporation.
Rossiter continued, ``We are encouraged to see overall economic conditions and vehicle production improving in North America. With complete automotive interior capability, an inspired team and a reputation for working as a partner with our customers, we are well-positioned to capitalize on improving automotive industry conditions.''
Net sales for the quarter were about even with a year ago, reflecting higher vehicle production in North America and the addition of new business, offset by lower vehicle production in Western Europe and South America and the unfavorable impact of foreign exchange.
Operating income was up slightly in the quarter as higher production in North America and new business were substantially offset by lower production in Western Europe and the unfavorable impact of foreign exchange.
Earnings per share in the current quarter were $0.70 compared with $0.53 in the first quarter of 2001, excluding non-recurring items and goodwill amortization. This improvement reflects substantially lower interest expense and higher operating earnings, as the Company continues to generate cash and reduce debt.
In February 2002, we issued zero-coupon convertible senior notes, yielding gross proceeds of $250 million. These proceeds were used to reduce borrowings under our revolving credit facilities. This financing had the impact of providing cost effective medium-term financing and increasing the Company's overall financial flexibility.
Second Quarter and Full Year Outlook
For the second quarter, we currently anticipate net sales to be up slightly compared with a year ago, reflecting higher vehicle production in North America, offset by lower production in Western Europe. We expect earnings per share in the range of $1.05 to $1.15. Capital spending will be about $100 million, and free cash flow is expected to be about $25 million.
For the full year, we estimate North American vehicle production volume to be between 15.4 million and 15.8 million units and Western European production volume to between 15.5 million and 16.0 million units. At these production levels, we currently expect earnings per share in the range of $3.80 to $4.20. Full year capital spending is anticipated to be about $300 million. As for free cash flow, we see a range of $200 million to $250 million. These cash flow estimates are net of cash payments of about $70 million needed to implement our previously announced restructuring actions.
Lear Corporation, a Fortune 150 Company headquartered in Southfield, Mich., USA, focuses on integrating automotive interiors, including seat systems, interior trim and electrical systems. With annual net sales of $13.6 billion, Lear ranks as the world's fifth largest automotive supplier. The company's world-class products are designed, engineered and manufactured by over 115,000 employees in more than 300 facilities located in 33 countries. Information about Lear and its products is available on the internet at 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 we operate, including changes in interest rates and fuel prices, fluctuations in the production of vehicles for which we are a supplier, labor disputes involving us or our significant customers, our success in achieving cost reductions that offset or exceed customer-mandated selling price reductions, increases in our warranty costs, risks associated with conducting business in foreign countries, fluctuations in currency exchange rates, adverse changes in economic conditions or political instability in the jurisdictions in which we operate, raw material shortages, unanticipated changes in free cash flow and other risks detailed from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made as of the date hereof, and we do 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
March 30, 2002 March 31, 2001
Reported/Adjusted Reported Adjusted (f)
Net sales $3,534.6 $3,503.6 $3,503.6
Cost of goods sold 3,262.0 3,238.6 (b) 3,236.2
Selling, general and
administrative expenses 131.6 130.4 (b) 128.6
Amortization of goodwill - 22.4 (a) -
Interest expense 57.0 76.5 (c) 73.5
Other expense, net 14.2 5.7 (d) 15.0
Income before income taxes and
extraordinary item 69.8 30.0 50.3
Income taxes 23.4 14.9 (a-d) 16.0
Income before extraordinary item 46.4 15.1 34.3
Extraordinary item, net of tax - 0.6 (e) -
Net income $46.4 $14.5 $34.3
Diluted net income per share $0.70 $0.22 $0.53
Weighted average number of shares
outstanding - diluted 66.3 64.7 64.7
(a) - (f) see Additional Disclosures.
Lear Corporation and Subsidiaries
Additional Disclosures
a) First quarter 2001 Reported results have not been restated to reflect the elimination of amortization of goodwill under SFAS No. 142, ``Goodwill and Other Intangible Assets.'' First quarter 2001 Adjusted results have been presented as if SFAS No. 142 had been adopted as of January 1, 2001. The amortization of goodwill was $22.4 million pre-tax ($17.4 million after-tax or $0.27 per share).
b) During the first quarter 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 $2.4 million and $1.8 million, respectively. The net after-tax impact of these severance actions was $2.5 million or $0.04 per share.
c) During the first quarter 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 $0.03 per share.
d) 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-lived 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 $0.04 per share).
e) 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 $0.01 per share) is presented as an extraordinary item.
f) Excludes the impact from the items included in (a) through (e) above.
Lear Corporation and Subsidiaries
Consolidated Balance Sheets
(In millions)
March 30, 2002 December 31, 2001
(Unaudited) (Audited)
ASSETS
Current:
Cash and cash equivalents $83.8 $87.6
Accounts receivable, net 1,646.4 1,392.8
Inventories 442.3 440.3
Recoverable customer engineering
and tooling 193.5 191.6
Other 300.1 254.5
2,666.1 2,366.8
Long-Term:
PP&E, net 1,664.6 1,715.7
Goodwill, net 3,130.0 3,139.5
Other 357.7 357.2
5,152.3 5,212.4
Total Assets $7,818.4 $7,579.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Short-term borrowings $12.5 $63.2
Accounts payable and drafts 2,203.6 1,982.9
Accrued liabilities 1,143.5 1,007.2
Current portion of long-term debt 79.2 129.5
3,438.8 3,182.8
Long-Term:
Long-term debt 2,203.1 2,293.9
Other 556.6 543.4
2,759.7 2,837.3
Stockholders' Equity 1,619.9 1,559.1
Total Liabilities and Stockholders'
Equity $7,818.4 $7,579.2
Supplemental Data
(Unaudited; in millions, except content per vehicle data)
First Quarter Ended
March 30, 2002 March 31, 2001
Net Sales
U.S. and Canada $2,108.4 $1,990.2
Europe 1,096.3 1,169.8
Rest of World 329.9 343.6
Total $3,534.6 $3,503.6
Reported
Operating income $141.0 $134.6
Goodwill amortization - (22.4)
Operating income after amortization $141.0 $112.2
Adjusted
Operating income $141.0 $138.8
Goodwill amortization - -
Operating income after amortization $141.0 $138.8
Content Per Vehicle*
North America $574 $563
Western Europe $243 $238
South America $87 $107
Depreciation $74.1 $81.2
Capital Expenditures $46.2 $50.8
* Content per Vehicle for 2001 updated for revised production actuals