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LEAR 2006 asm

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    LEAR 2006 asm LEAR 2006 asm Document Transcript

    • ® Annual Meeting of Stockholders July 16, 2007 Welcome and Introductions 2 1
    • Agenda Strategy Overview and 2006 Highlights Bob Rossiter, Chairman and CEO Product-Line Focus and Operating Priorities Doug DelGrosso, President and COO 2006 Financial Results and 2007 Outlook Jim Vandenberghe, Vice Chairman and CFO 3 Strategy Overview and 2006 Highlights 4 2
    • Since 2005, The Automotive Industry Environment Has Become Even More Challenging Increased foreign competition and other effects of globalization Increased energy prices and environmental concerns Shifts in consumer purchasing patterns, particularly with respect to light trucks and SUVs in North America Increased price of key commodities and raw materials; significant financial distress within supply base Major restructuring initiatives, including significant capacity reductions implemented by the Big Three Lear’s Operating And Financial Performance Since 2005 Has Been Adversely Impacted By These Industry Conditions 5 Long-Range Plan A Strategic Partner for OEMs* Evolution of Lear 1994 – 1999 2000 – 2006 2007 – Forward Systems Strategic Supplier Integrator Partner Product-Line Focus; Seat Total Interior Collaborative Partnership Manufacturer Capability With Customers Major Initiatives Over Time Strategic Acquisitions Operational Excellence Global Restructuring * Please see slides titled “Forward Looking Statements” at the end of this presentation for further information. 6 3
    • Major 2006 Accomplishments Repositioned our product portfolio for future success Continued major global restructuring initiative Improved overall financial results and liquidity position Expanded infrastructure in Asia; grew total Asian sales Maintained strong market positions and superior quality in core products Significantly Strengthened The Company’s Company’ Financial Flexibility And Competitive Position 7 2006 Highlights Repositioned Product Portfolio* Strategic Investment Core Products Electronic Seating Interior and Electrical Lear’s Product Portfolio 2006 Initiatives Maintained superior quality levels Contributed a significant • • Implemented new product-focused portion of Lear’s operations to • organization IAC joint ventures Increased technology focus Retained minority interest • • Further diversified sales mix • Implemented restructuring actions • Increased low-cost sourcing • Achieved cost and efficiency • improvements 8 4
    • 2006 Highlights Asia and Asian OEM Sales*** 2006 Highlights 2006 Highlights Net Sales** 75% seating / /25% electronic and 75% seating 25% electronic and electrical (in millions) electrical 53% in Asia / /44% in North America / / 53% in Asia 44% in North America 3% in Europe 3% in Europe 3,000 ≈$2,700 2007 Projection 2007 Projection $2,200 Leading automotive supplier in China Leading automotive supplier in China seating market: $1,850 seating market: 2,000 Sales >>$500 million* Sales $500 million* $1,450 Supply nearly 20 OEMs on Supply nearly 20 OEMs on >>100 vehicle programs 100 vehicle programs $950 18 facilities with approximately 1,000 18 facilities with approximately 6,000 employees $500 6,000 employees Our fastest growing market Our fastest growing market 99new facilities in India and China new facilities in India and China 0 supporting Ford, Mazda, Chery, supporting Ford, Mazda, Chery, 2002 2003 2004 2005 2006 2007 Proj. TATA, M&M, BMW and Hyundai TATA, M&M, BMW and Hyundai Consolidated Non-consolidated * Includes consolidated and unconsolidated sales Targeting Asian Growth Of 25% Annually ** Excludes Interior business *** Please see slides titled “Forward Looking Statements” at the end of this presentation for further information. 9 2006 Highlights Strong Market Positions and Superior Quality Lear is a true partner to all of the world’s major automakers, with strong market positions and superior quality in our core businesses: Seating Systems #2 Position globally, in a market estimated to be about $45 to $50 billion in size: #2 Positions in North America and Europe #3 Position in Asia, including #2 Position in China Lear is recognized as the highest quality major seat manufacturer for the past 6 years, according to the J.D. Power Seat Survey Electrical Distribution Systems #3 Position in North America, #4 Position in Europe and #3 Position in China Strong Global Market Positions And Superior Quality In Our Core Businesses Source: Lear Market Share Study / CSM Worldwide Survey Data 10 5
    • Product-Line Focus and Operating Priorities 11 Product-Line Focus and Operating Priorities Product-Line Focus Divest Interior business -- now complete Focus on strengthening core businesses -- ongoing Leverage leadership position in Seating Systems Strengthen capabilities in Electronics and Electrical Distribution Systems and Expand capabilities in value-added components Operating Priorities World-class quality and customer satisfaction Global restructuring and footprint actions Priority emphasis on Asia / Asian OEM growth Product innovation with focus on safety and technology 12 6
    • Operating Priorities Customer Awards and Industry Recognition Customer Awards “Supplier of the Year” for global Seating Systems 3 World Excellence Awards-- quot;Gold Award” for Genk, Belgium seating plant quot;Silver Award” for St. Thomas, Ontario Canada seating plant quot;Recognition of Achievement” for consumer-driven Six-Sigma at St. Thomas, Ontario Canada seating plant “Outstanding Performance – Quality and Delivery” at East London, South Africa “Superior Supplier Diversity” and “Excellence in Quality” at Edinburgh, Indiana “Outstanding Supplier Performance Award” at Boeblingen, Germany “Value Analysis / Value Engineering Performance Award” and “Value Analysis Award” for most cost saving ideas generated “Supplier Award for Successful Partnership” in Brazil “Supplier of the Year” at Liuzhou, China Industry Recognition “…Most Impressive Stereo Sound in the World” (from March 2007 review of Lear’s premium sound system in the BMW M5) 13 Operating Priorities Implementing Global Restructuring Initiative* Initiated closure of 15+ manufacturing facilities; consolidating administrative centers, reducing census by 5-7% and increasing sourcing and engineering in low-cost countries: Move manufacture of seat components (metals and headrests) to low-cost countries (Northern Mexico, Eastern Europe and Asia) Transfer European wire harness operations to low-cost countries (Eastern Europe, North Africa and Asia) Align production capacity to match customer actions Restructuring Investments Estimated Annual Savings ($ in millions) ($ in millions) $150 $ 125 ~$125 $104 $100 ~$100 100 ~$100 100 75 ~$70 50 50 25 0 0 2005 2006 2007 Outlook 2006 2007 Outlook Ongoing Annual * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 14 7
    • Operating Priorities Maintaining a Competitive Global Footprint* England Slovakia Turkey TACLE JV - China Seat Trim Seating Components Nissan Seating Guangzhou TACLE JV – Nissan Seating U.S. (Tennessee) Nanjing TACLE JV- Ford / Mazda – Seating Nissan Seating Shanghai Cadillac – Seating CTO Center Mexico Engineering Center Piedras Negras Seating Components Seating Components (2) Wuhu Monclova Chery – Seating Seating Components India Chennai Honduras BMW/Ford – Seating Wire Harnesses Hyundai – Seating Pune TATA – Seating Seating Components Nashik South Africa M&M/Renault – Seating Seat Trim Halol GM – Seating New Lear Facilities in 2006 and 2007 * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 15 Operating Priorities Expanding Our Presence in Asia* Well positioned for growth in fast growing Asian markets** China India • 18 facilities (+6 new in 2007) • 7 facilities (+3 new in 2007) • 2 engineering/R&D centers in Shanghai • 1 engineering center in Mumbai (+1 new CTO center in 2007) • 3 program launches in 2006 • 18 program launches in 2006 • 4 program launches in 2007 • 20 program launches in 2007 • 7 customers • 25 customers • Seats • Seats, Electrical Distribution, Electronics Other facilities in Asia Korea Japan • 4 facilities • 5 facilities • 1 engineering center in Seoul • 1 engineering center in Atsugi (Tokyo) • Seats • 1 engineering center in Hiroshima Philippines Thailand • 4 facilities • 3 facilities • 1 engineering/CTO center in Cebu • Seats, Seat Trim • Electrical Distribution, Electronics * Includes facilities held through joint ventures. ** Please see slides titled “Forward Looking Statements” at the end of this presentation for further information. 16 8
    • Operating Priorities Seating -- Product Innovation 17 Operating Priorities Electronic and Electrical -- Product Innovation 18 9
    • 2006 Results and 2007 Outlook 19 2006 Results Industry Environment Full Year Full Year 2006 2006 vs. 2005 North American Production Industry 15.3 mil Down 3% Big Three 10.2 mil Down 6% European Production Industry 19.2 mil Up 1% Lear's Top 5 Customers 9.7 mil Up 2% Euro $1.25 / Euro Up 1% 20 10
    • 2006 Results Net Sales For Core Businesses* Total Lear (in billions) (in billions) $17.8 $17.1 $14.6 $14.0 2005 2006 2005 2006 * Core businesses include Seating, Electronic and Electrical. Excludes Interior business: - 2005 $3.1 billion - 2006 $3.2 billion 21 2006 Results Geographic and Customer Mix of Sales 2006 Net Sales for Core Businesses* Worldwide Sales Mix Customer Mix in North America Europe Big Three 85% 40% North America Rest Of World All Other 15% 50% 10% * Core businesses include Seating, Electronic and Electrical. 22 11
    • 2006 Results Core Operating Earnings** For Core Businesses* Total Lear (in millions) (in millions) $558 $397 $401 $325 2005 2006 2005 2006 * Excludes Interior Business: - 2005 $(76) million - 2006 $(161) million ** Core operating earnings represent income before interest, other expense, income taxes, restructuring costs and other special items. Loss before income taxes was $655.5 million and $1,187.2 million for the years ended December 31, 2006 and 2005, respectively. Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information. 23 2006 Results Cash Flow and Liquidity* 2007 – 2009 Debt Maturities Free Cash Flow (in millions) (in billions) $500 $1.8 $116 $0 $0.2 ($419) ($500) 2005 as of 12/31/05 as of 12/31/06 2006 * Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. Net cash provided by operating activities was $285.3 million and $560.8 million for the years ended December 31, 2006 and 2005, respectively. Please see slides titled “Non-GAAP Financial Information” at the end of this presentation for further information. 24 12
    • 2007 Outlook Full-Year Production Assumptions* Full-Year Change from 2007 Outlook Prior Year North American Production Total Industry ≈ 15.2 mil flat Big Three ≈ 9.8 mil down 4% European Production Total Industry ≈ 19.4 mil up 1% Lear's Top 5 Customers ≈ 9.8 mil up 1% Euro $1.35 / Euro up 8% * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 25 2007 Outlook Net Sales and Core Operating Earnings for Core Businesses*** Core Operating Earnings** Net Sales* (in millions) $600 - $640 (in billions) ≈$14.8 $558 $14.6 $14.0 $401 2005 2006 2007 2005 2006 2007 Outlook Outlook * Excludes Interior business: ** Excludes Interior Business: - 2005 $(76) million - 2005 $3.1 billion - 2006 $(161) million - 2006 $3.2 billion - Q1 2007 $11 million - Q1 2007 $0.6 billion *** Please see slides titled “Non-GAAP Financial Information” and “Forward Looking Statements” at the end of this presentation for further information. 26 13
    • Summary and Outlook* Lear is Financially Sound Successfully refinanced debt maturities through 2010 Operating results improving; cash flow now solidly positive Making Progress on Strategic Priorities Completed divestiture of Interior business Expanding our presence in Asia and growing Asian sales globally Implementing global restructuring actions Automotive industry conditions, particularly in North America, remain challenging Longer-term outlook for Lear continues to be positive * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 27 Questions 28 14
    • 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 “income before interest, other expense, income taxes, restructuring costs and other special items” (core operating earnings) and “free cash flow” (each a non-GAAP financial measure). Other expense includes, among other things, state and local non-income taxes, foreign exchange gains and losses, fees associated with the Company’s asset-backed securitization and factoring facilities, minority interests in consolidated subsidiaries, equity in net income of affiliates and gains and losses on the sale of assets. 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 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 core operating earnings is a useful measure in assessing the Company’s financial performance by excluding certain items (including those items that are included in other expense) that are not indicative of the Company's core operating earnings or that may obscure trends useful in evaluating the Company’s continuing operating activities. Management also believes that this measure is useful to both management and investors in their analysis of the Company's results of operations and provides improved comparability between fiscal periods. 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 these non-GAAP financial measures for planning and forecasting in future periods. Core operating earnings and free cash flow should not be considered in isolation or as substitutes for pretax income, net income, cash provided by (used in) operating activities or other income statement or 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, 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 slide are reconciliations of certain non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Given the inherent uncertainty regarding special items and the net change in sold accounts receivable in any future period, a reconciliation of forward-looking financial measures is not feasible. The magnitude of these items, however, may be significant. 29 Non-GAAP Financial Information Free Cash Flow (in millions) Full Year Full Year 2006 2005 Net cash provided by operating activities $ 285.3 $ 560.8 Net change in sold accounts receivable 178.0 (411.1) Net cash provided by operating activities before net change in sold accounts receivable 463.3 149.7 (cash from operations) Capital expenditures (347.6) (568.4) $ 115.7 $ (418.7) Free cash flow 30 15
    • Non-GAAP Financial Information Core Operating Earnings (in millions) 2006 2005 Pretax loss * $ (655.5) $ (1,187.2) Interest expense 209.8 183.2 Other expense, net ** 87.8 96.6 Loss on divestiture of Interior business 636.0 - Goodwill impairment charges 2.9 1,012.8 Costs related to restructuring actions 105.6 106.3 Fixed asset impairment charges 10.0 82.3 Litigation charges - 30.5 Income before interest, other expense, income taxes, restructuring costs and other special items (core operating earnings) $ 396.6 $ 324.5 * Before cumulative effect of a change in accounting principle ** Includes minority interests in consolidated subsidiaries and equity in net (income) loss of affiliates 31 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 and liquidity. 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 or currency exchange rates, the financial condition of the Company’s customers or suppliers, fluctuations in the production of vehicles for which the Company is a supplier, disruptions in the relationships with the Company’s suppliers, 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 outcome of customer productivity negotiations, the impact and timing of program launch costs, the costs and timing of facility closures, business realignment or similar actions, increases in the Company's warranty or product liability costs, risks associated with conducting business in foreign countries, competitive conditions impacting the Company's key customers and suppliers, raw material costs and availability, the Company's ability to mitigate the significant impact of increases in raw material, energy and commodity costs, the outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in cash flow, including the Company’s ability to align its vendor payment terms with those of its customers, the finalization of the Company's restructuring strategy and other risks described from time to time in the Company's Securities and Exchange Commission filings. In particular, the Company’s financial outlook is based on several factors, including the Company’s current vehicle production and raw material pricing assumptions. The Company’s actual financial results could differ materially as a result of significant changes in these factors. The Company's proposed merger with AREP Car Acquisition Corp. is subject to various conditions including the receipt of the requisite stockholder approval from the Company's stockholders and other conditions to closing customary for transactions of this type. No assurances can be given that the proposed transaction will be consummated or, if not consummated, that the Company will enter into a comparable or superior transaction with another party. The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof. Important Additional Information has been and will be filed with the SEC In connection with the proposed Merger, Lear filed a definitive proxy statement, and supplements thereto, with the Securities and Exchange Commission (“SEC”) on May 23, 2007, June 18, 2007, and July 9, 2007, respectively, for its shareholders' meeting Lear has also filed with the SEC additional materials regarding the meeting. Before making any voting decision, Lear’s shareholders are urged to read the proxy statement, as supplemented, regarding the Merger carefully in its entirety because it contains important information about the proposed transaction. Lear’s shareholders and other interested parties may also obtain, without charge, a copy of the proxy statement and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. Lear’s shareholders and other interested parties may also obtain, without charge, a copy of the proxy statement and other relevant documents by directing such request to Lear Corporation, 21557 Telegraph Road, P.O. Box 5008, Southfield, Michigan 48086-5008, Attention: Investor Relations, or through Lear’s website at www.lear.com. Lear and its directors and officers may be deemed to be participants in the solicitation of proxies from Lear’s shareholders with respect to the Merger. Information about Lear’s directors and executive officers and their ownership of Lear’s Common Stock is set forth in the proxy statement. Shareholders and investors may obtain additional information regarding the interests of Lear and its directors and executive officers in the Merger, which may be different than those of Lear’s shareholders generally, by reading the proxy statement and other relevant documents regarding the Merger, which have been, and which may in the future be, filed with the SEC. 32 16