SOUTHFIELD, Mich., April 24, 2015 /PRNewswire/ -- Lear Corporation
(NYSE: LEA), a leading global supplier of automotive seating and
electrical distribution systems, today reported financial results
for the first quarter. Highlights include:
- Sales of $4.5 billion, up 4% from
a year ago; 12% growth excluding impact of foreign exchange
- Best ever quarterly core operating earnings of $294 million, up 21%
- Adjusted earnings per share of $2.28, up 24%
- Company operating margin of 6.5%, up from 5.6% a year ago
- Improved margins in both business segments
- Completed acquisition of Eagle Ottawa
- Increased quarterly cash dividend by 25%
- Increased share repurchase authorization to $1 billion
- Returned $134 million to
shareholders through share repurchases and dividends
- Lear credit ratings outlook upgraded to positive by Standard
& Poor's
"We continued our positive momentum with strong first quarter
results," said Matt Simoncini,
Lear's president and chief executive officer. "Our balanced
strategy of investing in our business, maintaining a strong
financial position and returning cash to investors is delivering
superior value to both our customers and shareholders. In
both of our business segments, we are continuing to win new
business and improve our margins. The integration of Eagle
Ottawa is progressing as planned. I believe we are in the
strongest competitive position in our history and are well
positioned to take advantage of major industry trends, such as
global platforms, increasing electrical content, improved fuel
efficiency and growing consumer demand for comfort, convenience and
safety features."
Business Conditions
In the first quarter, global vehicle production increased 2%
from a year ago. Production was up 8% in China, 3% in Europe & Africa and 2% in North America.
Production was down 15% in South America.
First Quarter 2015 Financial Results
For the first quarter of 2015, Lear reported sales of
$4.5 billion, core operating earnings
of $294 million, net income of
$147 million and adjusted earnings
per share of $2.28. This
compares with sales of $4.4 billion,
core operating earnings of $243
million, net income of $122
million and adjusted earnings per share of $1.84 for the first quarter of 2014.
In the Seating segment, sales were up 8% to $3.5 billion, reflecting higher production on key
platforms, the acquisition of Eagle Ottawa and the addition of new
business, partially offset by the impact of foreign exchange.
Excluding the impact of foreign exchange, sales increased by
16%. Adjusted segment earnings were $219 million or 6.3% of sales. Adjusted
segment earnings increased 24% from last year, primarily reflecting
the increase in sales, favorable operating performance and the
acquisition of Eagle Ottawa.
In the Electrical segment, sales were down 9% to $1.0 billion. Excluding the impact of
foreign exchange, sales were up 2%, primarily reflecting the
addition of new business. Adjusted segment earnings were
$138 million or 13.3% of sales,
marking our 22nd consecutive quarter of year-over-year
margin improvement. Margins in the Electrical segment
continue to improve, driven by an industry leading cost structure
and strong operating performance.
In the first quarter of 2015, free cash flow was a use of
$120 million, and net cash used in
operating activities was $67
million.
Reconciliations of core operating earnings to pretax income
before equity income, adjusted net income to net income
attributable to Lear, adjusted earnings per share to diluted net
income per share attributable to Lear, adjusted segment earnings to
reported segment earnings and free cash flow to net cash used in
operating activities, in each case as determined in accordance with
accounting principles generally accepted in the United States (GAAP), are provided in the
attached supplemental data pages.
Eagle Ottawa Acquisition
Lear completed the acquisition of Eagle Ottawa, the world's
leading supplier of premium automotive leather, on January 5, 2015 for $843
million. The acquisition of Eagle Ottawa strengthens
our industry leading capabilities in Seating, and provides
additional sales growth and diversification opportunities.
Eagle Ottawa's unique capabilities are a perfect complement to our
world-class Seating business.
Increased Share Repurchase Authorization and Dividend
During the first quarter of 2015, Lear's Board of Directors
authorized an increase in Lear's share repurchase authorization,
bringing the total value of shares that may be repurchased to
$1 billion. In addition, the
Board increased Lear's quarterly cash dividend by 25%, to
$0.25 per share.
During the first quarter of 2015, Lear repurchased over one
million shares of its common stock for a total of $112 million. As of the end of the
first quarter, Lear has a remaining share repurchase authorization
of $888 million, which expires in
December 2017 and reflects
approximately 10% of Lear's total market capitalization at current
market prices.
Since initiating the share repurchase program in early 2011,
Lear has repurchased 31.9 million shares of its common stock for a
total of $2.0 billion at an average
price of $63.49 per share. This
represents a reduction of approximately 30% of our shares
outstanding at the time we began the program.
Full Year 2015 Financial Outlook
Summarized below are highlights of our 2015 full year financial
outlook. Key 2015 assumptions include industry vehicle
production of 17.4 million units in North
America, 20.6 million units in Europe & Africa, and 22.9 million units in China.
Lear's financial guidance is based on an average full year exchange
rate of $1.10/Euro, down 17% from
2014 and down 4% from our January guidance.
Sales in 2015 are expected to be in the range of $18.0 to $18.5 billion, and core operating
earnings are expected to be in the range of $1.175 to $1.225 billion. Free cash flow is
expected to be approximately $575
million.
Pretax income before restructuring costs and other special items
is estimated to be in the range of $1.08 to
$1.13 billion in 2015. Our effective tax rate is
expected to be approximately 30%. Adjusted net income
attributable to Lear is expected to be in the range of $720 to $755 million.
Pretax operational restructuring costs in 2015 are estimated to
be about $80 million. Capital
spending is estimated to be approximately $500 million. Depreciation and amortization
expense is estimated to be about $385
million.
Webcast Information
Lear will webcast a conference call to review the Company's
first quarter 2015 financial results and related matters on
April 24, 2015, at 9:00 a.m. Eastern Time, through the investor
relations link at http://www.lear.com. In addition, the
conference call can be accessed by dialing 1-800-789-4751
(domestic) or 1-973-200-3975 (international). The audio
replay will be available two hours following the call at
1-855-859-2056 (domestic) or 1-404-537-3406 (international) and
will be available until May 8, 2015,
with a Conference I.D. of 95826820.
Non-GAAP Financial Information
In addition to the results reported in accordance with GAAP
included throughout this press release, the Company has provided
information regarding "pretax income before equity income,
interest, other expense, restructuring costs and other special
items" (core operating earnings or adjusted segment earnings),
"pretax income before restructuring costs and other special items,"
"adjusted net income attributable to Lear" (adjusted net income),
"adjusted diluted net income per share attributable to Lear"
(adjusted earnings per share), "tax expense excluding the impact of
restructuring costs and other special items" and "free cash flow"
(each, a non-GAAP financial measure). Other expense includes,
among other things, non-income related taxes, foreign exchange
gains and losses, gains and losses related to certain derivative
instruments and hedging activities, gains and losses on the
extinguishment of debt and gains and losses on the disposal of
fixed assets. Adjusted net income attributable to Lear and
adjusted earnings per share represent net income attributable to
Lear and diluted net income per share attributable to Lear,
respectively, adjusted for restructuring costs and other special
items, including the tax effect thereon. Free cash flow
represents net cash used in operating activities, excluding the
settlement of accounts payable in conjunction with the acquisition
of Eagle Ottawa, less capital expenditures.
Management believes the non-GAAP financial measures used in this
press release 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, pretax income before restructuring costs and
other special items, adjusted net income, adjusted earnings per
share and tax expense excluding the impact of restructuring costs
and other special items are useful measures in assessing the
Company's financial performance by excluding certain items that are
not indicative of the Company's core operating performance or that
may obscure trends useful in evaluating the Company's continuing
operating activities. Management also believes that these
measures are useful to both management and investors in their
analysis of the Company's results of operations and provide
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 future periods.
Core operating earnings, pretax income before restructuring
costs and other special items, adjusted net income, adjusted
earnings per share, tax expense excluding the impact of
restructuring costs and other special items and free cash flow
should not be considered in isolation or as a substitute for pretax
income before equity income, net income attributable to Lear,
diluted net income per share attributable to Lear, cash 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.
For reconciliations of these non-GAAP financial measures to the
most directly comparable financial measures calculated and
presented in accordance with GAAP, see the attached supplemental
data pages which, together with this press release, have been
posted on the Company's website through the investor relations link
at http://www.lear.com.
Given the inherent uncertainty regarding special items and other
expense in any future period, a reconciliation of forward-looking
financial measures to the most directly comparable financial
measures calculated and presented in accordance with GAAP is not
feasible. The magnitude of these items, however, may be
significant.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding anticipated financial results
and liquidity. The words "will," "may," "designed to,"
"outlook," "believes," "should," "anticipates," "plans," "expects,"
"intends," "estimates," "forecasts" and similar expressions
identify certain of these forward-looking statements. The Company
also may provide forward-looking statements in oral statements or
other written materials released to the public. All such
forward-looking statements contained or incorporated in this press
release or in any other public statements which address operating
performance, events or developments that the Company expects or
anticipates may occur in the future, including, without limitation,
statements related to business opportunities, awarded sales
contracts, sales backlog and ongoing commercial arrangements, or
statements expressing views about future operating results, are
forward-looking statements. Actual results may differ materially
from any or all forward-looking statements made by the
Company. Important factors, risks and uncertainties that may
cause actual results to differ materially from anticipated results
include, but are not limited to, general economic conditions in the
markets in which the Company operates, including changes in
interest rates or currency exchange rates; currency controls and
the ability to economically hedge currencies; the financial
condition and restructuring actions of the Company's customers and
suppliers; changes in actual industry vehicle production levels
from the Company's current estimates; fluctuations in the
production of vehicles or the loss of business with respect to, or
the lack of commercial success of, a vehicle model for which
the Company is a significant 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 outcome of customer
negotiations and the impact of customer-imposed price reductions;
the impact and timing of program launch costs and the Company's
management of new program launches; the costs, timing and success
of restructuring actions; increases in the Company's warranty,
product liability or recall costs; risks associated with conducting
business in foreign countries; the impact of regulations on the
Company's foreign operations; the operational and financial success
of the Company's joint ventures; competitive conditions impacting
the Company and its key customers and suppliers; disruptions to the
Company's information technology systems, including those related
to cybersecurity; the cost and availability of raw materials,
energy, commodities and product components and the Company's
ability to mitigate such costs; the outcome of legal or regulatory
proceedings to which the Company is or may become a party; the
impact of pending legislation and regulations or changes in
existing federal, state, local or foreign laws or regulations;
unanticipated changes in cash flow, including the Company's ability
to align its vendor payment terms with those of its customers;
limitations imposed by the Company's existing indebtedness and the
Company's ability to access capital markets on commercially
reasonable terms; impairment charges initiated by adverse industry
or market developments; the Company's ability to execute its
strategic objectives; changes in discount rates and the actual
return on pension assets; costs associated with compliance with
environmental laws and regulations; developments or assertions by
or against the Company relating to intellectual property rights;
the Company's ability to utilize its net operating loss, capital
loss and tax credit carryforwards; global sovereign fiscal matters
and creditworthiness, including potential defaults and the related
impacts on economic activity, including the possible effects on
credit markets, currency values, monetary unions, international
treaties and fiscal policies; and other risks described in the
Company's Annual Report on Form 10-K for the year ended
December 31, 2014, and its other
Securities and Exchange Commission filings. Future operating
results will be based on various factors, including actual industry
production volumes, commodity prices and the Company's success in
implementing its operating strategy.
Information in this press release relies on assumptions in the
Company's sales backlog. The Company's sales backlog reflects
anticipated net sales from formally awarded new programs less lost
and discontinued programs. The calculation of the sales
backlog does not reflect customer price reductions on existing or
newly awarded programs. The sales backlog may be impacted by
various assumptions embedded in the calculation, including vehicle
production levels on new programs, foreign exchange rates and the
timing of major program launches.
The forward-looking statements in this press release 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.
Lear Corporation (NYSE: LEA) is one of the world's leading
suppliers of automotive seating and electrical distribution
systems. Lear serves every major automaker in the world, and Lear
content can be found on more than 300 vehicle nameplates.
Lear's world-class products are designed, engineered and
manufactured by a diverse team of approximately 132,000 employees
located in 34 countries. Lear currently ranks #177 on the
Fortune 500. Lear's headquarters are in Southfield, Michigan. Further
information about Lear is available at http://www.lear.com.
Lear Corporation
and Subsidiaries
|
Condensed
Consolidated Statements of Income
|
|
|
|
|
|
(Unaudited; in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Month
|
|
|
Period
Ended
|
|
|
March
28,
|
|
March
29,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
Net sales
|
|
$ 4,521.4
|
|
$ 4,359.8
|
|
|
|
|
|
Cost of
sales
|
|
4,095.7
|
|
3,999.3
|
Selling, general and
administrative expenses
|
|
151.7
|
|
136.7
|
Amortization of
intangible assets
|
|
13.3
|
|
8.5
|
Interest
expense
|
|
24.4
|
|
16.8
|
Other expense,
net
|
|
30.0
|
|
29.2
|
|
|
|
|
|
Consolidated income
before income taxes and
|
|
|
|
|
equity in net income
of affiliates
|
|
206.3
|
|
169.3
|
Income
taxes
|
|
62.9
|
|
52.7
|
Equity in net income
of affiliates
|
|
(13.3)
|
|
(12.0)
|
|
|
|
|
|
Consolidated net
income
|
|
156.7
|
|
128.6
|
Net income
attributable to noncontrolling interests
|
|
9.4
|
|
6.6
|
|
|
|
|
|
Net income
attributable to Lear
|
|
$ 147.3
|
|
$ 122.0
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share attributable to Lear
|
|
$ 1.86
|
|
$ 1.47
|
|
|
|
|
|
Weighted average
number of diluted shares outstanding
|
|
79.1
|
|
82.8
|
Lear Corporation
and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
28,
|
|
December
31,
|
|
|
2015
|
|
2014
|
|
|
(Unaudited)
|
|
(Audited)
|
ASSETS
|
|
|
|
|
Current:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
748.2
|
|
$
1,094.1
|
Accounts
receivable
|
|
3,170.5
|
|
2,471.7
|
Inventories
|
|
985.8
|
|
853.7
|
Other
|
|
737.9
|
|
960.1
|
|
|
5,642.4
|
|
5,379.6
|
Long-Term:
|
|
|
|
|
PP&E,
net
|
|
1,714.6
|
|
1,624.7
|
Goodwill
|
|
1,057.9
|
|
726.2
|
Other
|
|
1,203.5
|
|
1,419.7
|
|
|
3,976.0
|
|
3,770.6
|
|
|
|
|
|
Total
Assets
|
|
$
9,618.4
|
|
$
9,150.2
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current:
|
|
|
|
|
Accounts payable and
drafts
|
|
$
2,761.3
|
|
$
2,525.3
|
Accrued
liabilities
|
|
1,288.0
|
|
1,188.8
|
Current portion of
long-term debt
|
|
10.6
|
|
243.7
|
|
|
4,059.9
|
|
3,957.8
|
Long-Term:
|
|
|
|
|
Long-term
debt
|
|
1,972.4
|
|
1,475.0
|
Other
|
|
694.3
|
|
688.1
|
|
|
2,666.7
|
|
2,163.1
|
|
|
|
|
|
Equity
|
|
2,891.8
|
|
3,029.3
|
|
|
|
|
|
Total Liabilities
and Equity
|
|
$
9,618.4
|
|
$
9,150.2
|
Lear Corporation
and Subsidiaries
|
Supplemental
Data
|
|
(Unaudited; in
millions, except content per vehicle and per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
March
28,
|
|
March
29,
|
|
|
|
|
2015
|
|
2014
|
|
|
Net
Sales
|
|
|
|
|
|
|
North
America
|
|
$ 1,890.1
|
|
$ 1,596.0
|
|
|
Europe and
Africa
|
|
1,730.7
|
|
1,788.1
|
|
|
Asia
|
|
778.1
|
|
752.8
|
|
|
South
America
|
|
122.5
|
|
222.9
|
|
|
Total
|
|
$ 4,521.4
|
|
$ 4,359.8
|
|
|
|
|
|
|
|
|
|
Content Per
Vehicle1
|
|
|
|
|
|
|
North
America
|
|
$ 456
|
|
$ 386
|
|
|
Europe and
Africa
|
|
$ 326
|
|
$ 341
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow2
|
|
|
|
|
|
|
Net cash used in
operating activities
|
|
$ (66.6)
|
|
$ (54.2)
|
|
|
Settlement of
accounts payable in conjunction with acquisition of
|
|
|
|
|
|
|
Eagle
Ottawa
|
|
45.7
|
|
-
|
|
|
Capital
expenditures
|
|
(98.8)
|
|
(96.4)
|
|
|
Free cash
flow
|
|
$ (119.7)
|
|
$ (150.6)
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
$ 84.5
|
|
$ 74.5
|
|
|
|
|
|
|
|
|
|
Diluted Shares
Outstanding at end of quarter3
|
|
78,115,128
|
|
82,862,956
|
|
|
|
|
|
|
|
|
|
Core Operating
Earnings2
|
|
|
|
|
|
|
Consolidated income
before income taxes and
|
|
|
|
|
|
|
equity in net income
of affiliates
|
|
$ 206.3
|
|
$ 169.3
|
|
|
Interest
expense
|
|
24.4
|
|
16.8
|
|
|
Other expense,
net
|
|
30.0
|
|
29.2
|
|
|
Pretax income before
equity income, interest and
|
|
|
|
|
|
|
other
expense
|
|
260.7
|
|
215.3
|
|
|
Restructuring costs
and other special items -
|
|
|
|
|
|
|
Costs related to
restructuring actions
|
|
8.4
|
|
25.3
|
|
|
Acquisition
costs
|
|
8.4
|
|
-
|
|
|
Acquisition-related
inventory fair value adjustment
|
|
15.8
|
|
-
|
|
|
Other
|
|
0.3
|
|
2.6
|
|
|
Core operating
earnings
|
|
$ 293.6
|
|
$ 243.2
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income Attributable to Lear2
|
|
|
|
|
|
|
Net income
attributable to Lear
|
|
$ 147.3
|
|
$ 122.0
|
|
|
Restructuring costs
and other special items -
|
|
|
|
|
|
|
Costs related to
restructuring actions
|
|
8.4
|
|
25.3
|
|
|
Acquisition
costs
|
|
8.4
|
|
-
|
|
|
Acquisition-related
inventory fair value adjustment
|
|
15.8
|
|
-
|
|
|
Loss on redemption of
bonds
|
|
14.3
|
|
17.5
|
|
|
Other
|
|
0.3
|
|
2.6
|
|
|
Tax impact of special
items and other net tax adjustments 4
|
|
(14.0)
|
|
(15.4)
|
|
|
Adjusted net income
attributable to Lear
|
|
$ 180.5
|
|
$ 152.0
|
|
|
|
|
|
|
|
|
|
Weighted average
number of diluted shares outstanding
|
|
79.1
|
|
82.8
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share attributable to Lear
|
|
$ 1.86
|
|
$ 1.47
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
share
|
|
$ 2.28
|
|
$ 1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Content Per Vehicle
for 2014 has been updated to reflect actual production
levels.
|
|
|
|
|
|
|
|
2
|
See "Non-GAAP
Financial Information" included in this press release.
|
|
|
|
|
|
|
|
3
|
Calculated using
stock price at end of quarter.
|
|
|
|
|
|
|
|
4
|
Represents the tax
effect of restructuring costs and other special items, as well as
several discrete tax items. The identification of these tax
items is judgmental in nature, and their calculation is based on
various assumptions and estimates.
|
Lear Corporation
and Subsidiaries
|
Supplemental
Data
|
|
|
|
|
|
|
(Unaudited; in
millions, except margins)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
March
28,
|
|
March
29,
|
|
|
|
2015
|
|
2014
|
|
Adjusted Segment
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
Seating
|
|
|
|
|
|
Net sales
|
|
$ 3,485.0
|
|
$ 3,225.9
|
|
|
|
|
|
|
|
Segment
earnings
|
|
$ 196.1
|
|
$ 152.2
|
|
Costs related to
restructuring actions
|
|
7.4
|
|
22.3
|
|
Acquisition-related
inventory fair value adjustment
|
|
15.8
|
|
2.1
|
|
Adjusted segment
earnings
|
|
$ 219.3
|
|
$ 176.6
|
|
|
|
|
|
|
|
Adjusted segment
margins
|
|
6.3%
|
|
5.5%
|
|
|
|
|
|
|
|
Electrical
|
|
|
|
|
|
Net sales
|
|
$ 1,036.4
|
|
$ 1,133.9
|
|
|
|
|
|
|
|
Segment
earnings
|
|
$ 137.0
|
|
$ 138.3
|
|
Costs related to
restructuring actions
|
|
0.9
|
|
1.0
|
|
Adjusted segment
earnings
|
|
$ 137.9
|
|
$ 139.3
|
|
|
|
|
|
|
|
Adjusted segment
margins
|
|
13.3%
|
|
12.3%
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/lear-reports-record-quarterly-earnings-300071483.html
SOURCE Lear Corporation