SOUTHFIELD, Mich., April 27, 2016 /PRNewswire/ -- Lear
Corporation (NYSE: LEA), a leading global supplier of automotive
seating and electrical systems, today reported record financial
results for the first quarter of 2016. Highlights
include:
- Sales of $4.7 billion, up 8% from
prior year excluding the impact of foreign exchange and lower
commodity prices
- Record core operating earnings of $387
million, up 32% from prior year
- Record core operating margin of 8.3%, up from 6.5% a year
ago
- Adjusted earnings per share of $3.40, up 49% from prior year
- Generated $201 million of free
cash flow
- Increased quarterly cash dividend by 20% and increased share
repurchase authorization to $1
billion
- Returned $180 million to
shareholders through share repurchases and dividends
- Increasing full year outlook for earnings and free cash
flow
"Our strong results reflect the investments we have made to
expand our product capabilities and improve our cost structure.
These investments have positioned Lear extremely well to take
advantage of major industry trends," said Matt Simoncini, Lear's president and chief
executive officer.
First Quarter 2016 Financial Results
For the first quarter of 2016, Lear reported sales of
$4.7 billion, core operating earnings
of $387 million, net income of
$248 million and adjusted earnings
per share of $3.40. This
compares with sales of $4.5 billion,
core operating earnings of $294
million, net income of $147
million and adjusted earnings per share of $2.28 for the first quarter of 2015.
In the Seating segment, sales were up 3% to $3.6 billion, reflecting improved production
volumes on key platforms and the addition of new business partially
offset by the impact of foreign exchange. Excluding the
impact of foreign exchange and commodity prices, sales increased
8%. Adjusted segment earnings were $299 million or 8.3% of sales. Margins
improved 200 basis points from a year ago, reflecting the increase
in sales and strong operating performance.
In the Electrical segment, sales were up 2% to $1.1 billion, reflecting the addition of new
business and improved production volumes on key platforms partially
offset by the impact of foreign exchange. Excluding the
impact of foreign exchange and commodity prices, sales increased
8%. Adjusted segment earnings were $154 million or 14.5% of sales. Margins
improved 120 basis points from a year ago, reflecting the increase
in sales and favorable operating performance. This
marks our 26th consecutive quarter of year-over-year margin
improvement.
In the first quarter of 2016, free cash flow was $201 million, and net cash provided by operating
activities was $289 million.
For more information regarding our non-GAAP financial measures,
see "Non-GAAP Financial Information" below.
Increased Share Repurchase Authorization and Dividend
During the first quarter of 2016, 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 20%, to
$0.30 per share.
During the first quarter of 2016, Lear repurchased approximately
1.4 million shares of its common stock for a total of $155 million. As of the end of the first quarter,
Lear had a remaining share repurchase authorization of $845 million, which expires on December 31, 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 36.7 million shares of its common stock for a
total of $2.6 billion at an average
price of $69.67 per share. This
represents a reduction of approximately 35% of our shares
outstanding at the time we began the program.
Full Year 2016 Financial Outlook
Lear is increasing its full year 2016 financial guidance for
earnings and free cash flow based on our strong first quarter
performance and outlook for the full year.
Our 2016 financial outlook is based on industry vehicle
production assumptions of 18.2 million units in North America, up 4% from the prior year, 22.2
million units in Europe &
Africa, up 3% from the prior year,
and 23.8 million units in China,
up 6% from the prior year. Lear's financial outlook is based
on an average full year exchange rate of $1.10/Euro.
Sales in 2016 are expected to be in the range of $18.5 billion to $19.0 billion, consistent with
our prior outlook. Core operating earnings are expected to be
in the range of $1.40 billion to $1.45
billion, up $50 million from
the prior range of $1.35 billion to $1.40
billion. Free cash flow is expected to be
approximately $850 million, up
$50 million from the prior
outlook.
Our effective tax rate is expected to be approximately 28%,
unchanged from the prior outlook. Adjusted net income is
expected to be in the range of $900 million
to $940 million, up from the prior range of $855 million to $895 million.
Pretax operational restructuring costs are estimated to be about
$70 million. Capital spending
is estimated to be approximately $525
million. Depreciation and amortization expense is
estimated to be about $375
million.
Webcast Information
Lear will webcast a conference call to review the Company's
first quarter 2016 financial results and related matters on
April 27, 2016, at 9:00 a.m. Eastern Time, through the investor
relations link at http://ir.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 11, 2016,
with a Conference I.D. of 61724144.
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 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), "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 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 provided by (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, 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, 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 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.
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, 2015, 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 350 vehicle nameplates.
Lear's world-class products are designed, engineered and
manufactured by a diverse team of approximately 136,000 employees
located in 36 countries. Lear currently ranks #174 on the
Fortune 500. Lear's headquarters are in Southfield, Michigan. Further
information about Lear is available at http://www.lear.com or
follow us on Twitter @LearCorporation.
Lear Corporation
and Subsidiaries
|
Condensed
Consolidated Statements of Income
|
|
|
|
|
|
(Unaudited; in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Month
|
|
|
Period
Ended
|
|
|
April
2,
|
|
March
28,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Net sales
|
|
$
|
4,662.9
|
|
$
|
4,521.4
|
|
|
|
|
|
Cost of
sales
|
|
4,127.2
|
|
4,095.7
|
Selling, general and
administrative expenses
|
|
149.0
|
|
151.7
|
Amortization of
intangible assets
|
|
13.2
|
|
13.3
|
Interest
expense
|
|
21.1
|
|
24.4
|
Other expense,
net
|
|
8.5
|
|
30.0
|
|
|
|
|
|
Consolidated income
before income taxes and
|
|
|
|
|
equity in net income
of affiliates
|
|
343.9
|
|
206.3
|
Income
taxes
|
|
98.2
|
|
62.9
|
Equity in net income
of affiliates
|
|
(16.8)
|
|
(13.3)
|
|
|
|
|
|
Consolidated net
income
|
|
262.5
|
|
156.7
|
Net income
attributable to noncontrolling interests
|
|
14.1
|
|
9.4
|
|
|
|
|
|
Net income
attributable to Lear
|
|
$
|
248.4
|
|
$
|
147.3
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share attributable to Lear
|
|
$
|
3.29
|
|
$
|
1.86
|
|
|
|
|
|
Weighted average
number of diluted shares outstanding
|
|
75.5
|
|
79.1
|
|
|
|
|
|
Lear Corporation
and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
2,
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
(Audited)
|
ASSETS
|
|
|
|
|
Current:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,174.1
|
|
$
|
1,196.6
|
Accounts
receivable
|
|
3,048.8
|
|
2,590.0
|
Inventories
|
|
1,009.7
|
|
947.6
|
Other
|
|
543.1
|
|
552.4
|
|
|
5,775.7
|
|
5,286.6
|
Long-Term:
|
|
|
|
|
PP&E,
net
|
|
1,874.0
|
|
1,826.5
|
Goodwill
|
|
1,065.3
|
|
1,053.8
|
Other
|
|
1,244.5
|
|
1,238.9
|
|
|
4,183.8
|
|
4,119.2
|
|
|
|
|
|
Total
Assets
|
|
$
|
9,959.5
|
|
$
|
9,405.8
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current:
|
|
|
|
|
Short-term
borrowings
|
|
$
|
2.6
|
|
$
|
-
|
Accounts payable and
drafts
|
|
2,790.0
|
|
2,504.4
|
Accrued
liabilities
|
|
1,450.5
|
|
1,312.1
|
Current portion of
long-term debt
|
|
26.4
|
|
23.1
|
|
|
4,269.5
|
|
3,839.6
|
Long-Term:
|
|
|
|
|
Long-term
debt
|
|
1,928.5
|
|
1,931.7
|
Other
|
|
617.1
|
|
616.8
|
|
|
2,545.6
|
|
2,548.5
|
|
|
|
|
|
Equity
|
|
3,144.4
|
|
3,017.7
|
|
|
|
|
|
Total Liabilities
and Equity
|
|
$
|
9,959.5
|
|
$
|
9,405.8
|
|
|
|
|
|
Lear Corporation
and Subsidiaries
|
Supplemental
Data
|
|
|
|
|
|
|
|
(Unaudited; in
millions, except content per vehicle and per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
April
2,
|
|
March
28,
|
|
|
|
|
2016
|
|
2015
|
|
|
Net
Sales
|
|
|
|
|
|
|
North
America
|
|
$
|
1,926.1
|
|
$
|
1,890.1
|
|
|
Europe and
Africa
|
|
1,827.7
|
|
1,730.7
|
|
|
Asia
|
|
817.4
|
|
778.1
|
|
|
South
America
|
|
91.7
|
|
122.5
|
|
|
Total
|
|
$
|
4,662.9
|
|
$
|
4,521.4
|
|
|
|
|
|
|
|
|
|
Content per
Vehicle1
|
|
|
|
|
|
|
North
America
|
|
$
|
422
|
|
$
|
459
|
|
|
Europe and
Africa
|
|
$
|
314
|
|
$
|
320
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow2
|
|
|
|
|
|
|
Net cash provided by
(used in) operating activities
|
|
$
|
288.6
|
|
$
|
(66.6)
|
|
|
Settlement of
accounts payable in conjunction with acquisition of
|
|
|
|
|
|
|
Eagle
Ottawa
|
|
-
|
|
45.7
|
|
|
Capital
expenditures
|
|
(88.1)
|
|
(98.8)
|
|
|
Free cash
flow
|
|
$
|
200.5
|
|
$
|
(119.7)
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
$
|
90.2
|
|
$
|
84.5
|
|
|
|
|
|
|
|
|
|
Diluted Shares
Outstanding at end of Quarter3
|
|
74,227,995
|
|
78,115,128
|
|
|
|
|
|
|
|
|
|
Core Operating
Earnings2
|
|
|
|
|
|
|
Consolidated income
before income taxes and
|
|
|
|
|
|
|
equity in net income
of affiliates
|
|
$
|
343.9
|
|
$
|
206.3
|
|
|
Interest
expense
|
|
21.1
|
|
24.4
|
|
|
Other expense,
net
|
|
8.5
|
|
30.0
|
|
|
Pretax income before
equity income, interest and
|
|
|
|
|
|
|
other
expense
|
|
373.5
|
|
260.7
|
|
|
Restructuring costs
and other special items -
|
|
|
|
|
|
|
Costs related to
restructuring actions
|
|
11.7
|
|
8.4
|
|
|
Acquisition
costs
|
|
-
|
|
8.4
|
|
|
Acquisition-related
inventory fair value adjustment
|
|
-
|
|
15.8
|
|
|
Other
|
|
1.6
|
|
0.3
|
|
|
Core operating
earnings
|
|
$
|
386.8
|
|
$
|
293.6
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income Attributable to Lear2
|
|
|
|
|
|
|
Net income
attributable to Lear
|
|
$
|
248.4
|
|
$
|
147.3
|
|
|
Restructuring costs
and other special items -
|
|
|
|
|
|
|
Costs related to
restructuring actions
|
|
11.7
|
|
8.4
|
|
|
Acquisition
costs
|
|
-
|
|
8.4
|
|
|
Acquisition-related
inventory fair value adjustment
|
|
-
|
|
15.8
|
|
|
Loss on redemption of
bonds
|
|
-
|
|
14.3
|
|
|
Other
|
|
1.3
|
|
0.3
|
|
|
Tax impact of special
items and other net tax adjustments 4
|
|
(5.0)
|
|
(14.0)
|
|
|
Adjusted net income
attributable to Lear
|
|
$
|
256.4
|
|
$
|
180.5
|
|
|
|
|
|
|
|
|
|
Weighted average
number of diluted shares outstanding
|
|
75.5
|
|
79.1
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share attributable to Lear
|
|
$
|
3.29
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
share
|
|
$
|
3.40
|
|
$
|
2.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Content per Vehicle
for 2015 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
|
|
|
April
2,
|
|
March
28,
|
|
|
2016
|
|
2015
|
Adjusted Segment
Earnings
|
|
|
|
|
|
|
|
|
|
Seating
|
|
|
|
|
Net sales
|
|
$
|
3,602.0
|
|
$
|
3,485.0
|
|
|
|
|
|
Segment
earnings
|
|
$
|
291.6
|
|
$
|
196.1
|
Costs related to
restructuring actions
|
|
7.2
|
|
7.4
|
Acquisition-related
inventory fair value adjustment
|
|
-
|
|
15.8
|
Adjusted segment
earnings
|
|
$
|
298.8
|
|
$
|
219.3
|
|
|
|
|
|
Adjusted segment
margins
|
|
8.3%
|
|
6.3%
|
|
|
|
|
|
Electrical
|
|
|
|
|
Net sales
|
|
$
|
1,060.9
|
|
$
|
1,036.4
|
|
|
|
|
|
Segment
earnings
|
|
$
|
149.8
|
|
$
|
137.0
|
Costs related to
restructuring actions
|
|
2.9
|
|
0.9
|
Other
|
|
1.2
|
|
-
|
Adjusted segment
earnings
|
|
$
|
153.9
|
|
$
|
137.9
|
|
|
|
|
|
Adjusted segment
margins
|
|
14.5%
|
|
13.3%
|
|
|
|
|
|
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SOURCE Lear Corporation