Lear Reports Record Fourth-Quarter and Full-Year Net Sales
SOUTHFIELD, Michigan, January 26 -- Lear Corporation , the world's largest automotive interior systems supplier, today reported financial results for the fourth quarter and full year of 2003 and updated earnings guidance for 2004.
Fourth-Quarter Highlights:
- Net sales of USUS$4.26 billion, up 13% from a year ago
- Net income per share of USUS$1.90, up 8% from a year ago
- Strong cash flow generation
- 11% improvement in 2003 J.D. Power Seat Quality Report
- Declared first-ever quarterly cash dividend of USUS$0.20 per share
For the fourth quarter of 2003, Lear posted net sales of USUS$4.26 billion and net income of USUS$132.4 million, or USUS$1.90 per share. For the fourth quarter of 2002, Lear reported net sales of USUS$3.76 billion and net income of USUS$118.0 million, or USUS$1.76 per share.
"We continued our momentum in the fourth quarter with record sales, strong cash flow and further quality improvements," said Bob Rossiter, Lear Chairman and Chief Executive Officer.
The 13% increase in fourth-quarter net sales from the prior year period reflects the benefit of currency exchange and the addition of new business globally. The 8% improvement in fourth-quarter net income per share compared to the prior year period was driven by higher sales and lower income tax and interest expense. Operating efficiencies were more than offset by costs incurred for manufacturing capacity reduction/consolidation actions.
For the quarter, free cash flow was US$172.5 million, reflecting the solid conversion of earnings and efficient working capital management, offset in part by higher capital spending. (Net cash provided by operating activities was US$226.7 million. A reconciliation of free cash flow to net cash provided by operating activities is provided in the attached supplemental data page.)
2003 Full-Year Results
For the full year, Lear posted record net sales of US$15.75 billion and net income of US$380.5 million, or US$5.55 per share. For the full year of 2002, Lear reported net sales of US$14.42 billion and income before the cumulative effect of a change in accounting for goodwill of US$311.5 million, or US$4.65 per share. Including the cumulative effect of the change in accounting for goodwill, Lear reported net income of US$13.0 million, or US$0.19 per share, for the full year of 2002.
The 9% increase in net sales compared to 2002 reflects the benefit of currency exchange and the addition of new business globally, partially offset by lower industry production in North America and unfavorable platform mix in Western Europe. The US$0.90, or 19%, improvement in net income per share compared to 2002, excluding the change in accounting for goodwill, reflects the impact of higher sales, operating efficiencies and lower income tax and interest expense, offset in part by costs related to plant consolidations. For 2003, free cash flow was US$508.8 million. (Net cash provided by operating activities was US$586.3 million. A reconciliation of free cash flow to net cash provided by operating activities is provided in the attached supplemental data page.)
"Looking back over last year, the Lear team achieved a number of milestones by focusing on execution," Rossiter continued. "In addition to record sales and solid earnings growth, we achieved investment grade ratings with S&P and Fitch, utilised strong cash flow to further strengthen our balance sheet and declared our first-ever quarterly dividend. Importantly, we also continued to improve our quality and customer satisfaction levels."
Earlier this month, Lear updated its five-year sales backlog to US$4.4 billion, reflecting the addition of new business in the areas of cockpit and interior programs, seating systems with Korean automakers and electrical distribution and electronics systems. Higher content on replacement business and a stronger Euro also contributed to the increase of the backlog. (Information on the calculation of sales backlog is provided in the Forward- Looking Statements section of this news release.)
2004 Outlook
For the first quarter of 2004, net sales are expected to be up 10% to 12% from the comparable period of 2003, primarily reflecting the addition of new business globally and favorable currency exchange. Net income is expected to be in the range of US$1.10 to US$1.20 per share and includes the anticipated impact of additional expenses associated with facility consolidation activities. These added costs are expected to continue as the company implements further plant capacity and efficiency actions.
For the full year, net sales are expected to be approximately US$16.20 billion, compared with US$15.75 billion in 2003. This increase primarily reflects the addition of new business globally. The industry production planning assumptions for both North America and Western Europe are approximately 16.0 million units. Given this industry outlook and a forecasted tax rate of approximately 28%, net income is expected to be in the range of US$5.85 to US$6.25 per share. Full-year capital spending is forecasted to be approximately US$300 million, and free cash flow is estimated to be in the range of US$300 to US$350 million.
"While we are proud of our 2003 accomplishments, we are committed to maintaining our momentum in the face of the industry challenges," continued Rossiter. "Our fundamentals are very strong, and we are confident we have the right strategy in place to make 2004 another successful year for our customers and shareholders."
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 US$15.75 billion in 2003, Lear is the world's largest automotive interior systems supplier. The Company's world-class products are designed , engineered and manufactured by more than 110,000 employees at 280 facilities located in 33 countries.
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 attached 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 .