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February 5, 2008 |
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LEAR CORP: Earns US$27 Million in Fourth Quarter 2007 Lear Corporation has reported improved financial results for the fourth quarter and full year 2007 compared with year-ago levels and updated its financial outlook for 2008. Fourth-Quarter and Full-Year 2007 Highlights: -- Net sales in core businesses up 6% in Q4 and 5% for FY vs. year ago -- Core operating earnings up 11% in Q4 and 34% for Fiscal Year vs. year ago -- Free cash flow of US$434 million for full year -- best since 2003 -- Continued to diversify sales - about 60% of revenue outside of N.A. in Fourth Quarter -- Aggressive actions taken to improve cost structure since 2005 -- ProTec(TM) PluS named finalist in 2008 Automotive News PACE Awards For the fourth quarter of 2007, Lear reported net sales of US$3.9 billion and pretax income of US$45.1 million, including restructuring costs and other special items of US$94.9 million. This compares with net sales of US$4.3 billion and a pretax loss of US$635.9 million for the fourth quarter of 2006, including a loss of US$607.3 million related to the divestiture of the Interior business and restructuring costs and other special items of US$91.8 million. Income before interest, other income expense, income taxes, restructuring costs and other special items was US$178.6 million in the fourth quarter of 2007. This compares with core operating earnings of US$161.1 million in the fourth quarter of 2006, excluding the divested Interior business. A reconciliation of core operating earnings to pretax income (loss) as determined by generally accepted accounting principles is provided in the supplemental data pages. "We have been successful in restructuring our operations to achieve improved financial results at lower production levels," said Lear Chairman, Chief Executive Officer and President, Bob Rossiter. "We remain committed to continuously improving the fundamentals of our business -- quality, customer satisfaction, innovation and cost structure. Going forward, the Lear team is focused on profitably growing and further improving the long- term competitiveness of our seating and electrical and electronic businesses." For the fourth quarter of 2007, net sales in the company's core businesses were up over US$200 million from the prior year, primarily reflecting favorable foreign exchange and the addition of new business outside of North America, offset in part by unfavorable platform mix in North America. Operating performance improved from the year-earlier results, reflecting the company's cost improvement actions and restructuring initiative, as well as benefits from new business outside of North America. In the seating segment, operating margins were unchanged from a year ago, reflecting favorable cost performance from restructuring and ongoing efficiency actions, selective vertical integration and the benefit of new business globally, offset by unfavorable platform mix in North America. In the electrical and electronic segment, operating margins improved slightly reflecting the favorable impact of net commodity costs. Lear reported fourth-quarter 2007 net income of US$27.0 million, or US$0.34 per share, including restructuring costs and other special items. This compares with a net loss of US$645.0 million, or US$8.90 per share, including restructuring costs and other special items, for the fourth quarter of 2006. Free cash flow in the fourth quarter of 2007 was US$170.9 million, compared with US$254.4 million in the fourth quarter of 2006. The lower cash flow reflects primarily the timing of engineering and tooling recoveries. Net cash provided by operating activities was US$157.4 million and US$179.2 million in the fourth quarters of 2007 and 2006, respectively. Also during the fourth quarter, Lear's ProTec(TM) PluS self- aligning active head restraint system was selected as a finalist and Lear's SoyFoam(TM) received honorable mention in the 14th annual Premier Automotive Suppliers' Contribution to Excellence Award competition, which is jointly presented by Automotive News, Microsoft, SAP and Transportation Research Center Inc. 2007 Full-Year Results For the full year 2007, Lear reported net sales of US$16.0 billion and pretax income of US$331.4 million, including restructuring costs and other special items of US$204.9 million. This compares with net sales of US$17.8 billion and a pretax loss of US$655.5 million, including restructuring costs and other special items of US$770.2 million, for the full year 2006. Full-year 2007 net sales in core businesses were US$15.3 billion, up about US$700 million from 2006, reflecting the addition of new business primarily outside of North America and favorable foreign exchange, offset by lower industry production and unfavorable platform mix in North America. Excluding the divested Interior business, income before interest, other expense, income taxes, restructuring costs and other special items was US$748.5 million in 2007, compared with US$557.8 million in 2006. The improvement reflects favorable cost performance from restructuring and ongoing efficiency actions, selective vertical integration and the benefit of new business, partially offset by lower industry production and unfavorable platform mix in North America. A reconciliation of core operating earnings to pretax income (loss) as determined by generally accepted accounting principles is provided in the supplemental data pages. "We have seen promising results from our strategy to restructure our global operations, deliver superior quality products and service, encourage innovation and continue to diversify our sales on a customer, regional and vehicle segment basis," Mr. Rossiter continued. Lear reported net income of US$241.5 million, or US$3.09 per share, including restructuring costs and other special items, for the full-year 2007. This compares with a net loss of US$707.5 million, or US$10.31 per share, including special items, for the full-year 2006. The company's 2007 net income excluding restructuring costs and other special items was US$409.6 million, or US$5.24 per share. A reconciliation of adjusted net income to net income as determined by generally accepted accounting principles is provided in the supplemental data pages. Free cash flow in 2007 was US$433.6 million. This compares with free cash flow of US$115.7 million in 2006. The improvement reflects higher earnings and the divestiture of the Interior business. Net cash provided by operating activities was US$466.9 million and US$285.3 million in 2007 and 2006, respectively. The company continued to diversify its sales, with about 60% of revenue in the fourth quarter and 55% of revenue in the full year generated outside of North America. Lear also continued to improve its business structure by implementing US$386 million in global restructuring actions since 2005. 2008 Full-Year Outlook Lear expects 2008 worldwide net sales of approximately US$15 billion, reflecting primarily the addition of new business globally and the positive impact of foreign exchange, more than offset by lower vehicle production and unfavorable platform mix in North America. The company anticipates 2008 income before interest, other expense, income taxes, restructuring costs and other special items of US$660 to US$700 million. Restructuring costs in 2008 are estimated to be about US$100 million. Interest expense for 2008 is estimated to be between US$185 and US$195 million. Pretax income before restructuring costs and other special items is estimated to be in the range of US$430 to US$470 million. Tax expense is expected to be approximately US$135 million, depending on the mix of earnings by country. Capital spending in 2008 is estimated in the range of US$255 to US$275 million. Depreciation and amortization expense is estimated at about US$300 million. Free cash flow is expected to be solidly positive, at US$250 million or more, for the year. Key assumptions underlying Lear's financial outlook include expectations for industry vehicle production of approximately 14.4 million units in North America and 20.1 million units in Europe. The company expects production for the Domestic Three to be down about 9% in North America. In addition, The company is assuming an exchange rate of US$1.45/Euro. About Lear Corporation Based in Southfield, Michigan, Lear Corporation (NYSE:LEA) -- http://www.lear.com/ -- supplies automotive interior systems and components. Lear provides complete seat systems, electronic products and electrical distribution systems and other interior products. The company has more than 90,000 employees at 236 facilities in 33 countries. Lear also operates in Latin American countries including Argentina, Mexico, and Venezuela. Its European operations are located in Czech Republic, United Kingdom, France, Germany, Honduras, Hungary, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, South Africa, Morocco, Netherlands, Tunisia and Turkey. Its Asian facilities are in Singapore, China, India, Japan, Philippines, South Korea, and Thailand. * * * As reported in the Troubled Company Reporter-Europe on Sept. 4, 2007, Moody's Investors Service affirmed Lear Corporation's Corporate Family Rating of B2 with a stable outlook. Ratings on the company's term loan of B2 and on its unsecured notes of B3 were similarly affirmed but with slight revisions to their respective LGD point estimates. The company's liquidity rating of SGL-2, designating good liquidity was also affirmed. Ratings affirmed with revised LGD point estimates: -- Corporate Family Rating, B2 -- Probability of Default, B2 -- Senior Secured Term Loan, B2 (LGD-3, 47%) from B2 (LGD-4, 50%) -- Senior Unsecured Notes to B3 (LGD-4, 58%) from B3 (LGD-4, 61%) -- Shelf ratings for senior unsecured, subordinated and preferred, (P)B3 (LGD-4, 58%), (P)Caa1(LGD-6, 97%), and (P)Caa1 (LGD-6, 97%) respectively from (P)B3 (LGD-4, 61%), (P)Caa1 (LGD-6, 97%), and (P)Caa1 (LGD-6, 97%) respectively. -- Speculative Grade Liquidity Rating, SGL-2 |
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