Lear Reports Third-Quarter 2008 Financial Results
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SOUTHFIELD, Mich., October 30, 2008: Lear Corporation , a leading global supplier of automotive seating systems, electrical distribution systems and electronic products, today reported financial results for the third quarter of 2008.
The production environment in the third quarter was extremely challenging. In North America, industry production was down 17% and Lear's top fifteen platforms were down 33%. In Europe, industry production was down 3% and Lear's top five customers were down 8%.
"We are experiencing recessionary conditions in North America, and there is increasing weakness in Europe," said Bob Rossiter, Lear's chairman, chief executive officer and president. "As a result, industry production in these mature markets is down sharply. In response, the Company has been very aggressive in reducing structural costs."
In response to rapidly evolving industry conditions, Lear has been aggressively reducing costs and restructuring its global operations. These actions have been designed to better align the Company's manufacturing capacity, lower operating costs and streamline the Company's organizational structure. Since mid-2005, the Company has implemented major structural changes, including a reduction of excess capacity, consolidation of administrative functions, establishment of global operating units and a significant improvement in its low-cost footprint. As a result, the Company has lowered ongoing operating costs by more than $250 million and is presently able to operate more efficiently at significantly lower production volumes.
Third-Quarter Financial Results
For the third quarter of 2008, Lear reported net sales of $3.1 billion and a pretax loss of $77.3 million, including restructuring costs of $45.8 million. This compares with net sales of $3.6 billion and pretax income of $60.1 million, including restructuring costs of $37.3 million and other special items of $8.0 million, for the third quarter of 2007.
Net loss was $98.2 million, or $1.27 per share, for the third quarter of 2008 as compared with net income of $41.0 million, or $0.52 per share, for the third quarter of 2007.
Income before interest, other expense, income taxes, restructuring costs and other special items (core operating earnings) was $46.1 million for the third quarter of 2008. This compares with core operating earnings of $170.4 million for the third 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 of our key platforms in North America and Europe, offset partially by favorable foreign exchange.
In the seating segment, net sales were down $403 million. Operating margins declined sharply, reflecting primarily the impact of lower vehicle production. In the electrical and electronic segment, net sales were down $38 million and operating margins were about flat.
In the third quarter of 2008, free cash flow was negative $16.7 million, as compared with free cash flow of $90.8 million in the third quarter of 2007. The decline in free cash flow compared with a year ago primarily reflects lower earnings.