Lear's Second-Quarter Net Sales Top $4 Billion
SOUTHFIELD, Mich., July 17 -- Lear Corporation , the world's largest automotive interior systems supplier, today reported financial results for the second quarter of 2003.
Highlights Include: * Record net sales of $4.1 billion, up 8% from a year ago * Net income of $1.54 per share, up 21% from a year ago * Strong cash flow used to reduce debt * 21 customer awards for excellence in quality and deliveryFor the second quarter of 2003, Lear posted record net sales of $4.1 billion and net income of $104.1 million, or $1.54 per share. These results compare to net sales of $3.8 billion and net income of $85.5 million, or $1.27 per share, for the second quarter of 2002.
"We grew our top line during the quarter, reaching a new sales milestone despite lower overall industry production," said Bob Rossiter, Lear Chairman and Chief Executive Officer. "Our strategy is to grow Lear's business profitably by delivering the best quality, innovation and service in the industry."
The 8% increase in net sales from a year ago reflects the addition of new business globally and a stronger Euro. Lower vehicle production in North America (down 9%) and in Western Europe (down 2%) partially offset this increase.
The 21% improvement in net income per share reflects the profit contribution from new business globally, aggressive cost reduction efforts, favorable product mix in North America, lower interest expense and a lower corporate tax rate.
"Our continuing cost improvements and overall operating efficiencies are allowing us to meet aggressive cost reduction targets from our customers," Rossiter added.
For the quarter, free cash flow was $179.9 million, allowing the company to continue reducing its debt and improve financial flexibility. (Net cash provided by operating activities was $160.7 million; a reconciliation of free cash flow to net cash provided by operating activities is provided in the following supplemental data page.)
During the quarter, Lear received a total of 21 awards from General Motors, Ford, DaimlerChrysler, Toyota, Honda, Nissan, Mazda, Suzuki, Ferrari and Porsche for excellence in quality and delivery. "We are pleased with this recognition because customer satisfaction is a top priority at Lear and our roadmap for success," Rossiter continued.
Third-Quarter and Full-Year 2003 Outlook
For the third quarter of 2003, net sales are expected to be approximately $3.4 billion, up slightly from a year ago. This reflects the addition of new business globally and a stronger Euro, offset by lower vehicle production in North America (down 5%) and in Western Europe (down 7%). Net income per share is expected to be in the range of $0.95 to $1.05 per share. Capital spending is projected to be approximately $100 million, and free cash flow is expected to be about breakeven. For the second half of 2003, the corporate tax rate is anticipated to be 28%, down from 30% in the first half of 2003.
For the full year, net sales are expected to be approximately $15.2 billion, compared with $14.4 billion in 2002. This increase reflects the expected addition of $900 million in new business globally and a stronger Euro, offset in part by lower vehicle production in North America (down from 16.4 million units to a range of 15.7 to 15.9 million units) and in Western Europe (down from 16.4 million units to a range of 15.7 to 15.9 million units). Net income per share is expected to be in the range of $5.20 to $5.50 per share, reflecting improved results in the second quarter and a lower corporate tax rate in the second half of 2003. Full year capital spending is projected to be approximately $300 million, and free cash flow is expected to be approximately $400 million.
Lear Corporation, a Fortune 500 company headquartered in Southfield, Mich., USA, focuses on integrating complete automotive interiors, including seat systems, interior trim and electrical systems. With annual net sales of $14.4 billion in 2002, Lear is the world's largest automotive interior systems supplier. The company's world-class products are designed, engineered and manufactured by more than 115,000 employees at 280 facilities located in 33 countries.
Lear's news releases and other information, including certain financial and statistical information presented during its periodic earnings conference calls, are available on the Company's website at www.lear.com . Lear will webcast live its second quarter earnings conference call through the Investor Relations link at www.lear.com at 2:00 p.m. (Eastern) on July 17, 2003. In addition, one may access the conference call by dialing 1-800-789-4751 (domestic) or 1-706-679-3323 (international) with the access code number of 668477. The audio replay will be available two hours following the call at 1-800-642-1687 (domestic) or 1-706-645-9291 (international) with the access code number of 668477 and will be available until August 1, 2003.
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 news release, the Company has provided information regarding "free cash flow" (a non-GAAP financial measure). Free cash flow represents net cash provided by 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 borrowing activity.
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 free cash flow for planning and forecasting in future periods.
Free cash flow should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other 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 thus does not reflect funds available for investment or other discretionary uses. Also, free cash flow, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies.
For a reconciliation of free cash flow to net cash provided by operating activities, see the following supplemental data page which, together with this press release, has been posted on the Company's website through the Investor Relations link at www.lear.com .
Forward-Looking Statements
Lear Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited; in millions, except per share amounts)
Three Months Ended
June 28, 2003 June 29, 2002
Net sales $4,101.2 $3,792.2
Cost of sales 3,748.0 3,462.9
Selling, general and
administrative expenses 141.5 132.9
Interest expense 49.1 53.4
Other expense, net 13.9 14.5
Income before income taxes 148.7 128.5
Income taxes 44.6 43.0
Net income $104.1 $85.5
Basic net income per share $1.58 $1.31
Diluted net income per share $1.54 $1.27
Weighted average number of shares
outstanding - basic 66.0 65.5
Weighted average number of shares
outstanding - diluted 67.7 67.4
Lear Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited; in millions, except per share amounts)
Six Months Ended
June 28, 2003 June 29, 2002
Net sales $7,999.9 $7,326.8
Cost of sales 7,338.1 6,724.9
Selling, general and
administrative expenses 288.2 264.5
Interest expense 102.2 110.4
Other expense, net 25.7 28.7
Income before income taxes and
cumulative effect of a
change in accounting principle 245.7 198.3
Income taxes 73.7 66.4
Income before cumulative effect
of a change in accounting principle 172.0 131.9
Cumulative effect of a change in
accounting principle, net of tax - 298.5 (a)
Net income (loss) $172.0 $(166.6)
Basic income per share before
cumulative effect of a
change in accounting principle $2.61 $2.03
Basic net income (loss) per share $2.61 $(2.56)
Diluted income per share before
cumulative effect of a
change in accounting principle $2.55 $1.97
Diluted net income (loss) per share $2.55 $(2.49)
Weighted average number of shares
outstanding - basic 65.9 65.0
Weighted average number of shares
outstanding - diluted 67.5 66.9
(a) On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Under this statement, goodwill is no longer amortized but is subject to annual impairment analysis. The Company's initial impairment analysis compared the fair values of each of its reporting units, based on discounted cash flow analyses, to the related net book values. As a result, the Company recorded impairment charges of $310.8 million ($298.5 million after-tax or $4.46 per diluted share) as of January 1, 2002. These charges are reflected as a cumulative effect of a change in accounting principle, net of tax in the consolidated statement of income for the six months ended June 29, 2002.
Lear Corporation and Subsidiaries
Consolidated Balance Sheets
(In millions)
June 28, 2003 December 31,
(Unaudited) (Audited)
ASSETS
Current:
Cash and cash equivalents $103.1 $91.7
Accounts receivable 2,306.3 1,508.0
Inventories 484.8 489.7
Recoverable customer
engineering and tooling 174.9 153.2
Other 230.6 265.1
3,299.7 2,507.7
Long-Term:
PP&E, net 1,735.1 1,710.6
Goodwill, net 2,899.2 2,860.4
Other 431.0 404.3
5,065.3 4,975.3
Total Assets $8,365.0 $7,483.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Short-term borrowings $35.1 $37.3
Accounts payable and drafts 2,466.2 1,966.4
Accrued liabilities 1,218.7 1,037.6
Current portion of
long-term debt 3.9 3.9
3,723.9 3,045.2
Long-Term:
Long-term debt 2,054.4 2,132.8
Other 675.0 642.7
2,729.4 2,775.5
Stockholders' Equity 1,911.7 1,662.3
Total Liabilities and
Stockholders' Equity $8,365.0 $7,483.0
Lear Corporation and Subsidiaries
Supplemental Data
(Unaudited; in millions, except content per vehicle data)
Three Months Ended
June 28, 2003 June 29, 2002
Net Sales
U.S. and Canada $2,230.1 $2,262.6
Europe 1,455.9 1,144.8
Rest of World 415.2 384.8
Total $4,101.2 $3,792.2
Content Per Vehicle *
North America $597 $553
Western Europe 317 249
South America 92 87
Free Cash Flow **
Net cash provided by
operating activities $160.7 $131.4
Net change in sold
accounts receivable 86.2 34.3
Net cash provided by
operating activities before
net change in sold
accounts receivable 246.9 165.7
Capital expenditures (67.0) (56.3)
Free cash flow $179.9 $109.4
Depreciation $77.7 $73.6
Six Months Ended
June 28, 2003 June 29, 2002
Net Sales
U.S. and Canada $4,427.7 $4,371.1
Europe 2,787.2 2,241.1
Rest of World 785.0 714.6
Total $7,999.9 $7,326.8
Content Per Vehicle *
North America $598 $563
Western Europe 308 247
South America 82 89
Free Cash Flow **
Net cash provided by
operating activities $257.3 $300.3
Net change in sold
accounts receivable 139.6 5.8
Net cash provided by
operating activities before
net change in sold
accounts receivable 396.9 306.1
Capital expenditures (137.3) (102.5)
Free cash flow $259.6 $203.6
Depreciation $152.1 $147.7
* Content Per Vehicle for 2002 has been updated to reflect actual
production levels.
** See "Use of Non-GAAP Financial Information" included in this news
release.