2004 Annual Meeting of Shareholders

Transcription

1 R 2004 Annual Meeting of Shareholders May 13, 2004 world s leading automotive interior supplier advance relentlessly fast forward

2 Agenda I. I. Introduction Bob Rossiter, Chairman & CEO II. II. III. III. IV. IV. Americas Review Don Stebbins, President & COO --Americas International Review Doug DelGrosso, President & COO --International Financial Review Dave Wajsgras, SVP & CFO 2

3 Americas Review 3

4 Americas Business Summary 2003 Revenue $9.6 billion Operations in in 7 countries 68K employees 169 facilities Top 5 Customers General Motors Ford DaimlerChrysler BMW Toyota 4

5 Americas North America Market Share Rankings Product Rank Share Seat Systems # 1 47 % Door Panels # 1 26 % Floor & Acoustic Systems # 2 37 % Headliners # 2 20 % Electrical Distribution Systems # 3 14 % Instrument Panels # 5 4 % Total Interior # 1 37% Source: Internal Market Share Study 5

6 Americas Sales by Segment Americas Total Sales of $9.6 Billion Truck 69% Car 31% Truck SUV 56 % Pickup 36 Van 7 Medium/Heavy 1 Total 100 % Car Mid Size 49 % Compact 21 Full Size 15 Luxury 11 Sports 4 Total 100 % 6

7 Americas Product On Top Selling Vehicles in North America 1 Ford - Total F-Series Pickup 11 DCX - Caravan 21 Ford - Econoline 2 GM - Total Silverado Pickup 12 GM - Cavalier 22 GM - Malibu 3 DCX - Ram Pickup 13 GM - TrailBlazer 23 Honda - Odyssey 4 Toyota - Camry 14 Ford - Focus 24 Ford - Escape 5 Honda - Accord 15 Ford Ranger 25 Ford - Mustang 6 Ford - Explorer 16 Nissan Altima 26 DCX - Jeep Liberty 7 Ford - Taurus 17 GM Total GMC Sierra Pickup 27 Toyota - Tacoma 8 Honda - Civic 18 DCX Jeep Grand Cherokee 28 GM - S-10 9 Toyota - Corolla/Matrix 19 GM Tahoe 29 Honda - CRV 10 GM - Impala 20 Ford Expedition 30 DCX - Chrysler Town & Country Source: Based on available industry data On 28 of 30 Top-Selling Vehicles in North America 7

8 Americas PPM s Parts Per Million (PPM) Defective* 65% Improvement YTD * Based on internal and customer data 8

9 Americas J.D. Power Seat Survey - 4 th Consecutive Year of Improvement Things Gone Wrong (TGW) per 100 vehicles 10.3 Continuous Improvement Lear s 2003 J.D. Power Results 11% improvement in th consecutive year of improvement in TGW Highest quality seat manufacturer that supplies multiple OEMs Source: 2003 J.D. Power Seat Survey Independent J.D. Power Survey Shows Continuous Improvement in Lear s TGW 9

10 Americas Recent Industry Awards & Recognition Supplier of the Year Four World Excellence Awards Interior Excellence Award Fortune Magazine Ranked Lear as America s Most Admired Automotive Supplier for Second Consecutive Year 10

11 Americas Sales Backlog Sales Backlog (billions) $2.6 $ * Please see slide titled Forward-Looking Statements at the end of this presentation for further information. 11

12 Americas GM Total Interior Integrator Program On Track Total Total Interior prototypes have have been been completed and and shipped to to GM GM Refining engineering designs with with GM GM to to harmonize total total interior with with overall overall vehicle aesthetics Interiors feature several Lear Lear innovations integrated as as a vehicle system for for the the first first time time Spray Spray PUR PUR TM TM seamless polyurethane coating on on instrument panel panel R Sonotec lightweight acoustical products Flexible seating architecture Ongoing studies confirm that that consumer appeal appeal remains on on target target throughout the the development process Lear Working in Close Partnership with GM to Deliver World Class Interiors for Next Generation Large and Luxury Vehicles 12

13 Americas Global Lear Program Management Process (LPMP) = One LEAR Customers Facilities Programs Acquisitions Countries Current Functionality: Timing Plans Supplier Status Open Issues Financial Status Real Time Access on the Performance of Complete Portfolio of Business 13

14 Americas 2004 Plan Customer Service Operational Excellence Product Innovation & Growth Commercial Responsibility Teamwork Leverage Leadership Position in Total Interiors 14

15 International Review 15

16 International Europe & Asia Business Summary Represents approximately one-third of global sales Operations in 27 countries Europe * : 35K employees 94 facilities Asia: 7K employees 26 facilities PPM: 36% improvement Top 5 Customers Ford Group GM Group BMW PSA Fiat * Includes African operations 16

17 International Western Europe Market Share Rankings Product Rank Share Seat Systems #1 #1 27% Electrical Distribution Systems #3 #3 14% Headliners #3 #3 13% Instrument Panels // Cockpits #4 #4 8% 8% Door Panels #5 #5 7% 7% Source: Internal Market Share Study and 2004 estimates of outsourced IP/cockpit market. 17

18 International Product On Top Selling Vehicles in Western Europe 1 Peugeot Mercedes C-class 21 Opel - Zafira 2 VW - Golf 12 Audi - A4 22 Citroen - C3 3 Ford - Focus 13 Ford - Fiesta 23 VW - Seat Ibiza 4 Peugeot Renault - Scenic 24 Opel - Vectra 5 BMW - 3 Series 15 Renault - Laguna 25 Citroen - Xsara 6 Opel - Astra 16 Ford - Mondeo 26 Fiat - Stilo 7 Opel - Corsa 17 VW - Polo 27 BMW - 5 Series 8 Renault - Clio 18 Mercedes E-class 28 BMW - Mini 9 VW - Passat 19 Citroen - Xsara Picasso 29 Audi - A6 10 Fiat - Punto 20 Renault - Megane 30 Mercedes A-class Source: Based on available company and industry data On 23 of 30 Top-Selling Vehicles in Western Europe 18

19 International PPM s Parts Per Million (PPM) Defective* 68% Improvement Target * Based on internal and customer data 19

20 International J.D. Power Seat Survey Shows Improvement for European Seats Things Gone Wrong (TGW) per 100 vehicles 21% Improvement Lear s 2003 J.D. Power Results for Lear Europe U.S. data for seats supplied by Lear s European plants 21% improvement from Source: 2003 J.D. Power Seat Survey Independent J.D. Power Survey Shows Solid Improvement in Lear s European TGW 20

21 International Recent Industry Awards & Recognition Global Value Achievement Award Supplier of the Year 2003 Presidents Award Green Partner Award Quality Master Awards Fortune Magazine Ranked Lear as World s Most Admired Automotive Supplier for Second Consecutive Year 21

22 International Sales Backlog Sales Backlog (billions) $1.8 $ * Please see slide titled Forward-Looking Statements at the end of this presentation for further information. 22

23 International Electrical/Electronics Market Electrical/Electronics Global Market Opportunity* $18 (in billions) $25 $28 $44 Grote & Hartmann ** High quality producer with technical expertise Improves overall competitiveness in electrical/electronics market Wire Harness/ Terminals & Connectors Add Body Electronics & Mechatronics Add Safety Electronics Add Audio, Infotainment & Other Provides avenue for growth and customer diversification Acquisition Consistent with our Electrical/Electronics Strategy * Based on internal Lear estimates ** Please see slide titled Forward-Looking Statements at the end of this presentation for further information. 23

24 International Lear China Overview Wuhan (2) (2) - Citroen - - Renault/Nissan - ChangChun - Audi Products - Seats - Door Panels - Wiring - Carpet/Acoustics - Shiyan / Xiangfan --Nissan Chongqing - - ChangAn, Suzuki Suzuki, -FordFord Nanjing -Fiat Shenyang -BMW Shanghai (3) - SGM, SVW Customers - Jiangling (Ford) - ChangAn (Ford) - SAIC (GM) - FAW (VW) -Nanjing-Iveco(Fiat) -DFM(Nissan, PSA) - China Brilliance (BMW) - Others Nanchang - Isuzu, Ford, Suzuki, Isuzu Ford Eleven joint ventures 4,000 employees Key Strategic Points - Follow customers footprint - Potential manufacturing for export - Leverage partners resources for technology Lower technology risk - Controlled growth and investment 24

25 International Europe & Asia 2004 Plan Exceed Customer Requirements Continue to to Improve Quality and Customer Satisfaction Leverage Existing Infrastructure Grow Market Share & Improve Business Structure Aggressively Grow Business with Asian OEMs Provide World Class Value to Customers and Shareholders 25

26 Financial Review 26

27 Financial Review Financial Highlights - Full Year 2003 Record net sales of of $15.75 billion, up up 9% from 2002 Net income of of $5.55 per share, up up 19% from 2002 ** Return on on invested capital ** ** increased to to 10.6% Strong free cash flow ** ** of of $509 million Net debt ** ** to to capital ratio improved to to 45.8%, lowest level in in years Leveraging our Total Interior Capabilities to Deliver Value to our Customers and Shareholders * Excluding the cumulative effect of a change in accounting for goodwill of $4.46 per share in ** Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. For further information on these measures, as well as return on invested capital, please see slides titled Use of Non-GAAP Financial Information at the end of this presentation. 27

28 Financial Review Financial Priorities We are focused on: Profitable growth Improving ROIC Generating cash Financial discipline Meeting Our Commitments and Delivering Shareholder Value 28

29 Financial Review Focused Strategy has Supported Rapid Growth Net Sales (in billions) $16.0 $14.0 $12.0 $10.0 $8.0 $6.2 Net Income CAGR 23% $7.3 $9.1 $12.4 $14.1 $13.6 $14.4 $15.7 SALES CAGR 20% $6.0 $4.7 $4.0 $3.1 $2.0 $ Net sales have steadily increased since IPO to about $15.7 billion today 17 major acquisitions during the 1990 s 60% acquisition growth No strategic hole in Lear s product line up Lear ranks 129 among the Fortune 500 and is the 23 rd fastest growing company in the U.S. over the last ten years 40% organic growth 29

30 Financial Review Growth Strategy Deliver record sales backlog Pursue strategic acquisitions Accelerate new product innovations Win new total interior integrator programs Continue to to form alliances and joint ventures Comprehensive Approach to Profitably Growing Our Business 30

31 Financial Review Record Backlog Supports Continued Growth Sales Backlog * (in billions) Three-Year $3.0 Five-Year $4.4 Major New Business New cockpit and interior programs Growth in in seating systems with Korean automakers Electrical distribution and electronics systems, including TPMS Added content on replacement programs Record Backlog Supports Continued Growth and Diversification of Sales * Please see slide titled Forward-Looking Statements at the end of this presentation for further information. 31

32 Financial Review Grote & Hartmann Acquisition Total transaction value: $220 million Headquarters: Wuppertal, Germany; 1,900 employees Major products: terminals & connectors and and junction boxes $275 million in in revenue, with with about 75% 75% in in Europe Major customers: VW, VW, BMW, Ford, Opel, DCX, Renault, MAN and and PSA PSA group Acquisition Expected to be Slightly Accretive in

33 Financial Review Strategic Joint Ventures Position Lear for Growth Europe 3 Asia 15 North America 11 Asian JVs China 11 * India 1 * Thailand 1 * Japan 2 ** Total Global Strategic Joint Ventures 12 Consolidated / 17 Non-consolidated ---- * Manufacturing JVs ** Sales and Engineering JVs 33

34 Financial Review Return on Invested Capital Improving 11.0% Trailing Twelve Month ROIC * 10.5% 10.6% 10.0% 9.8% 9.5% 9.0% 8.5% 8.5% 8.0% 1Q Q Q Q Q Q Q Q Q Q Q Q 2003 * Return on Invested Capital (ROIC) represents income before restructuring charges, amortization, interest, other expense and income taxes times (1 - effective tax rate) divided by average invested capital. Average invested capital is the sum of total assets, sold accounts receivable and the present value of operating leases (assuming a discount rate of 10%) less the sum of accounts payable and drafts and accrued liabilities, based on the account values on the last day of the prior four quarters. Please see slides titled Use of Non-GAAP Financial Information at the end of this presentation for further information. 34

35 Financial Review Continuing to Reduce Our Net Debt (in billions) $4.0 70% $3.5 $3.4 65% 63% Net Debt *** /Capital Net Debt $3.0 $2.5 $3.0 $2.7 $2.3 58% 46% $2.0 $1.9 $ * ** 2002** 2003 Free Cash Flow*** $179M $410M $318M $395M $509M * UTA acquisition 5/99 ** Includes ABS debt of $261 million in 2001 and $189 million in 2002 (implemented in 2001). *** Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. Please see slides titled Use of Non-GAAP Financial Information at the end of this presentation for further information. 35

36 Financial Review How Investors View Our Performance GROWTH Eight consecutive quarters of higher year-over-year sales RETURNS Margins flat year over year, due to tough production/mix environment ROIC steadily improved from 2001 to 2003 RISK Deleveraging balance sheet lowest leverage in 10 years Consistent results and No Surprises over past eight quarters Initiated dividend program INTANGIBLES Company is delivering on strategy Improving quality, validated by J.D. Power Survey Proactive manufacturing capacity/efficiency actions Company rated Most Admired auto supplier in Fortune survey 36

37 Financial Review 2004 Guidance - Net Income Per Share ** Full Year $4.65 * $5.55 $6.25 $5.85 Second Quarter $1.27 $1.54 $1.65 to $1.55 First Quarter $0.70 * $1.01 $ Guidance Net Sales $14.4B $15.7B $16.6B Full Year EPS Guidance Remains Unchanged * Represents income per share before cumulative effect of a change in accounting principle, which excludes the impact of goodwill impairment of $298.5 million after-tax, or $4.50 per share in the first quarter of 2002 and $4.46 per share in the full year of ** Please see slide titled Forward-Looking Statements at the end of this presentation for further information. 37

38 R ADVANCE RELENTLESSLY LEA Listed NYSE

39 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 presentation, the Company has provided information regarding certain non-gaap financial measures. These measures include free cash flow, ROIC and net debt. 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. ROIC represents income before restructuring charges, amortization, interest, other expense and income taxes times (1 - effective tax rate) divided by average invested capital. Average invested capital is the sum of total assets, sold accounts receivable and the present value of operating leases (assuming a discount rate of 10%) less the sum of accounts payable and drafts and accrued liabilities, based on the account values on the last day of the prior four quarters. Net debt represents total debt plus utilization under the Company s ABS facility, less cash and cash equivalents. Management believes that the non-gaap financial measures used in this presentation are useful to both management and investors in their analysis of the Company s financial position and results of operations. In particular, management believes that free cash flow is useful in analyzing the Company s ability to service and repay its debt. Management believes that ROIC is a commonly used measure that provides useful information regarding the efficiency with which the Company s assets are deployed. Management believes that net debt provides useful information regarding a company s financial condition. Further, management uses these non-gaap measures for planning and forecasting in future periods. Neither free cash flow, ROIC nor net debt should be considered in isolation or as substitutes for net cash provided by operating activities, total debt or other balance sheet, income statement or cash flow statement data prepared in accordance with GAAP or as measures 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, these non-gaap financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies. Set forth on the following slides are reconciliations of these non-gaap financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. 39

40 Use of Non-GAAP Financial Information Free Cash Flow (in millions) Free cash flow Twelve Months Net cash provided by operating activities $ $ Net change in sold accounts receivable Net cash provided by operating activities before net change in sold accounts receivable Capital expenditures ( ) ( ) Free cash flow $ $

41 Use of Non-GAAP Financial Information Free Cash Flow (in millions) Free cash flow Twelve Months Net cash provided by operating activities $ $ $ Net change in sold accounts receivable ( ) ( 21.2 ) 10.4 Net cash provided by operating activities before net change in sold accounts receivable Capital expenditures ( ) ( ) ( ) Free cash flow $ $ $

42 Use of Non-GAAP Financial Information Return on Invested Capital (in millions) Income before restructuring charges, amortization, interest, other expense and income taxes Twelve Months Q Q Q Income before income taxes $ $ 89.9 $ Restructuring charges Amortization Interest expense Other expense, net Income before restructuring charges, amortization, interest, other expense and income taxes $ $ $ (return on invested capital earnings) Note: Income before restructuring charges, amortization, interest, other expense and income taxes is used to calculate return on invested capital. 42

43 Use of Non-GAAP Financial Information Net Debt (in millions) Net debt December 31, Short-term borrowings $ 17.1 $ 37.3 $ 63.2 $ 72.4 $ Current portion of long-term debt Long-term debt 2, , , , ,324.8 Total debt 2, , , , ,492.0 Cash and cash equivalents ( ) ( 91.7 ) ( 87.6 ) ( 98.8 ) (106.9 ) Asset backed securitization Net debt $ 1,909.0 $ 2,271.3 $ 2,659.7 $ 2,981.3 $ 3,385.1 Note: Net debt to capital is defined as net debt divided by net debt plus stockholders equity. 43

44 Forward-Looking Statements This presentation 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 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, costs and timing of facility closures or similar actions, increases in 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 outcome of legal or regulatory proceedings, unanticipated changes in cash flow and other risks detailed from time to time in the Company s Securities and Exchange Commission filings. This presentation also contains information on the Company s sales backlog. The Company s incremental sales backlog reflects: (i) formally awarded new programs; (ii) targeted programs for which the Company believes there is a substantial likelihood of award; (iii) phased-out and cancelled programs; (iv) estimates regarding customer-mandated changes in selling prices; and (v) estimates of expected changes in vehicle content. Changes in any of these components may significantly impact the Company s backlog. In addition, backlog may be impacted by various assumptions imbedded in the calculation, including vehicle production levels on new, replacement or targeted programs, foreign exchange rates and the timing of major program launches. For purposes of the backlog data included in this presentation, the Company has made the following assumptions: (1) North American vehicle production of 16.0 million units; (2) Western European vehicle production of 16.0 million units; (3) South American vehicle production of 1.9 million units; and (4) a Euro exchange rate of $1.20/Euro. Please refer to the Company s Annual Report on Form 10-K for its fiscal year ended December 31, 2003 for further information on the Company s calculation of backlog. Statements regarding the anticipated timing and impact of the Grote & Hartmann acquisition are also included. Actual events or results may differ materially from anticipated events or results as a result of certain risks and uncertainties, including, but not limited to, whether or not the conditions to the completion of the transaction are satisfied, the possibility that the transaction will not close, the timing of the closing of the transaction and Lear s ability to successfully integrate Grote & Hartmann s operations. In addition, the full year net income per share guidance is based on assumed 71.0 million shares outstanding and does not reflect the potential dilutive impact of the convertible senior notes. The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume any obligation to update them. 44