Lear Posts Record Third Quarter Net Sales of $3.9 Billion
Southfield, Mich., October 21, 2004 -- Lear Corporation [NYSE: LEA],
one of the world's largest automotive interior systems suppliers, today
reported financial results for the third quarter of 2004 and provided
fourth quarter 2004 guidance as well as a directional outlook for 2005.
Third Quarter Highlights:
- Record net sales of $3.9 billion, up 12% from a year ago
- Reported net income of $1.32 per share, including a $0.22 benefit from a favorable prior years' tax settlement
- Solid financial results in Europe; on-track for continued improvement
- Integration of terminals and connectors acquisition proceeding well
For the third quarter of 2004, Lear posted record net sales of $3.9
billion and net income of $91.7 million, or $1.32 per share, including a
$0.22 benefit from a prior years' tax settlement. These results
compare to net sales of $3.5 billion and net income of $76.1 million, or
$1.10 per share, for the third quarter of 2003.
“Despite escalating raw material and energy prices, the Lear team
remained focused on meeting the requirements of our customers and
delivering value to our shareholders," said Bob Rossiter, Lear Chairman
and Chief Executive Officer. “We continue to invest in the business on
a global basis, and I am pleased that the aggressive actions we have
taken to improve our operations in Europe are paying off."
Net sales rose $406 million, or 12%, from the comparable period last
year. The sales increase reflects primarily the addition of new
business globally and the impact of foreign currency, offset in part by
unfavorable vehicle production mix.
Net income per share was $1.32 in the quarter compared with $1.10 a
year earlier. The improvement reflects primarily a $0.22 benefit from a
prior years' tax settlement. Favorable operating performance and a
stronger level of new business were offset by unfavorable vehicle
production mix and increasing commodity costs.
Free cash flow was $40.8 million for the third quarter of 2004. (Net
cash provided by operating activities was $131.9 million. A
reconciliation of free cash flow to net cash provided by operating
activities is provided in the supplemental data page.)
Fourth Quarter and Full Year 2004 Guidance
For the fourth quarter of 2004, net sales are expected to be
approximately $4.1 billion, down about 3% from a year ago, reflecting
lower Big Three production volumes in North America and unfavorable
vehicle production mix in Europe. Net income per share is expected to
be in the range of $1.70 to $1.80, reflecting the lower net sales, the
impact of higher commodity costs and the investment in structural cost
reductions. Full year net income per share is expected to be in the
range of $5.97 to $6.07. The fourth quarter and full year effective tax
rate is expected to be in the 24% range.
Lear's 2004 industry production planning assumptions are now 15.8
million units for North America and 18.5 million units for Europe (16.1
million for Western Europe). Full year capital spending is forecasted
to be approximately $400 million, with depreciation of about $365
million. Free cash flow is expected to be approximately $300 million,
with interest expense of about $165 million.
Directional 2005 Outlook
For 2005, net sales are anticipated to be a record, increasing in the
range of 5% to 7%, supported by Lear's largest-ever annual backlog.
Operating earnings are expected to increase in the range of 5% to 10%,
compared with 2004. Additional financial details for 2005 will be
released in January 2005.
Lear will webcast its third quarter earnings conference call through
the Investor Relations link at www.lear.com at 9:00 a.m. EDT on October
21, 2004. In addition, the conference call can be accessed by dialing
1-800-789-4751 (domestic) or 1-706-679-3323 (international). The audio
replay will be available two hours following the call at 1-800-642-1687
(domestic) or 1-706-645-9291 (international) and will be available until
November 5, 2004, with a Conference I.D. of 41513.
Lear Corporation, a FORTUNE 500 company headquartered in Southfield,
Michigan, USA, focuses on integrating complete automotive interiors,
including seat systems, interior trim and electrical systems. With
annual net sales of $15.75 billion in 2003, Lear is one of the world's
largest automotive interior systems suppliers. The Company's
world-class products are designed, engineered and manufactured by more
than 110,000 employees. At December 31, 2003, Lear had 289 facilities
located in 34 countries. Further information about Lear and its
products is available on the internet at www.lear.com.
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 substitute for 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 therefore,
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 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.
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,
including changes in interest rates and fuel prices, fluctuations in the
production of vehicles for which the Company is a supplier, labor
disputes involving the Company or its significant customers or suppliers
or that otherwise affect the Company, the Company's ability to achieve
cost reductions that offset or exceed customer-mandated selling price
reductions, the impact and timing of program launch costs, the costs and
timing of facility closures or similar actions, increases in the
Company's warranty or product liability costs, risks associated with
conducting business in foreign countries, fluctuations in foreign
exchange rates, adverse changes in economic conditions or political
instability in the jurisdictions in which the Company operates,
competitive conditions impacting the Company's key customers, raw
material cost and availability, the Company's ability to successfully
integrate the recently acquired terminals and connectors operations, the
outcome of legal or regulatory proceedings to which the Company is or
may become a party, unanticipated changes in free cash flow and other
risks described from time to time in the Company's Securities and
Exchange Commission filings.
In addition, the fourth quarter and full year 2004 per share earnings
guidance is based on an assumed 69.8 million and 70.0 million shares
outstanding, respectively, and does not reflect the adoption of Emerging
Issues Task Force (“EITF") 04-08, “The Effect of Contingently
Convertible Debt on Diluted Earnings per Share. The Company will
adopt EITF 04-08 in the fourth quarter of 2004. As a result, the impact
of the assumed conversion of the outstanding convertible senior notes
is expected to reduce fourth quarter and full year 2004 per share
earnings by approximately $0.08 and $0.26 - $0.27, respectively.
The forward-looking statements in this news release are made as of
the date hereof, and the Company does not assume any obligation to
Posted on 10/21/2004