Lear Reports Fourth Quarter and Full Year 2010 Financial Results

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SOUTHFIELD, Mich., Feb. 1, 2011 /PRNewswire/ — Lear Corporation (NYSE: LEA), a leading global supplier of automotive seating and electrical power management systems, today reported financial results for the fourth quarter and full year of 2010.  Highlights include:

Fourth Quarter 2010

  • Net sales of $3.2 billion, up 15% from a year ago
  • Core operating earnings of $150 million, up 30% from a year ago and the sixth consecutive quarter of year-over-year improvement
  • Adjusted earnings per share of $2.38
  • Free cash flow of $160 million

 

Full Year 2010

  • Net sales of $12.0 billion, up 23% from a year ago
  • Core operating earnings of $627 million
  • Adjusted earnings per share of $8.83
  • Free cash flow of $429 million
  • Reduced total debt by $273 million
  • Year-end cash balance of $1.7 billion; total debt of $699 million

 

Business Conditions

In the fourth quarter, global industry production improved 9% from a year ago, reflecting primarily growth in the emerging markets and industry recovery in North America.  For the full year, global industry production increased by 25% from a year ago to a record 71.5 million vehicles, reflecting industry recovery in North America and Europe and continued rapid growth in the emerging markets.

“2010 marked a year of recovery in our mature markets; however, industry production in North America and Europe remains below historical levels.  We were able to achieve strong financial results and generate significant cash flow due to structural cost reductions and improvements in our manufacturing footprint implemented over the past several years.  In addition, we completed a refinancing of our capital structure, and our balance sheet is in the best shape in our history.  We continue to win new business globally and expect continued improvements in our operating performance in 2011,” said Bob Rossiter, Lear’s chief executive officer and president.

Fourth Quarter 2010 Financial Results

For the fourth quarter of 2010, Lear reported net sales of $3.2 billion, pretax income of $119.3 million, including restructuring costs and other special items of $27.7 million, and diluted net income per share of $2.16.  Income before interest, other (income) expense, income taxes, restructuring costs and other special items (core operating earnings) was $149.9 million, and adjusted diluted net income per share (adjusted earnings per share) was $2.38.  This compares with net sales of $2.7 billion and core operating earnings of $115.5 million in the fourth quarter of 2009.  Pretax income in the fourth quarter of 2009 is not comparable as a result of certain special items related to our financial restructuring.  A reconciliation of core operating earnings to pretax income and adjusted earnings per share to diluted net income per share, as determined in accordance with accounting principles generally accepted in the United States (GAAP), is provided in the attached supplemental data pages.

In the Seating segment, net sales were up 13% to $2.5 billion, and in the Electrical Power Management Systems segment, net sales were up 21% to $690.9 million.  The increase in net sales in both segments was primarily driven by the improvement in global vehicle production and the addition of new business.  Operating margins in both segments improved on a year-over-year basis, primarily reflecting the increase in sales.

In the fourth quarter of 2010, free cash flow was $159.8 million, as compared with free cash flow of $11.3 million in the fourth quarter of 2009.  Net cash provided by operating activities was $237.8 million and $67.4 million in the fourth quarters of 2010 and 2009, respectively.  A reconciliation of free cash flow to net cash provided by operating activities, as determined in accordance with GAAP, is provided in the attached supplemental data pages.

Full Year 2010 Financial Results

For the full year 2010, Lear reported net sales of $12.0 billion and pretax income of $486.0 million, including restructuring costs and other special items of $90.7 million, and diluted net income per share of $8.11.  Core operating earnings were $627.3 million, and adjusted earnings per share were $8.83.  This compares with net sales of $9.7 billion and core operating earnings of $106.8 million in 2009.  Pretax income in 2009 is not comparable as a result of certain special items related to our financial restructuring.  A reconciliation of core operating earnings to pretax income and adjusted earnings per share to diluted net income per share, as determined in accordance with GAAP, is provided in the attached supplemental data pages.

In the Seating segment, net sales were up 20% to $9.4 billion, primarily driven by the improvement in global vehicle production.  In the Electrical Power Management Systems segment, net sales were up 33% to $2.6 billion, primarily driven by the improvement in global vehicle production and the addition of new business.  Operating margins in both segments improved on a year-over-year basis, reflecting the increase in sales and the benefit of cost savings from operational restructuring actions.

Free cash flow in 2010 was $428.6 million, as compared with a use of cash of $155.5 million in 2009.  In addition, the Company used a portion of its cash to reduce its total debt by $273 million in 2010.  Net cash provided by (used in) operating activities was $621.9 million and $(175.2) million in 2010 and 2009, respectively.  A reconciliation of free cash flow to net cash provided by (used in) operating activities, as determined in accordance with GAAP, is provided in the attached supplemental data pages.

In 2010, the Company continued its comprehensive efforts to restructure its global operations for improved long-term competitiveness.  Since mid-2005, Lear has been implementing a global operational restructuring initiative to (i) eliminate excess capacity and lower our operating costs, (ii) streamline our organizational structure and reposition our business for improved long-term profitability and (iii) better align our manufacturing footprint with the changing needs of our customers.  Through the end of 2010, we have invested $809 million in connection with these activities, which have included the closure of 44 manufacturing and 11 administrative facilities and the location of more than half of our total facilities and approximately 80% of our employment in 20 low-cost countries.  We anticipate that 2011 will be the last year of accelerated restructuring spending.

Full Year 2011 Financial Outlook

Summarized below are highlights from our full year 2011 financial outlook, which was announced on January 10, 2011.  Key 2011 assumptions include industry vehicle production of approximately 12.5 million units in North America, up 5% from 2010, 17.4 million units in Europe, flat with 2010, and 15.7 million units in China, up 8% from 2010.  Our financial outlook is based on an average full year exchange rate of $1.33/Euro, flat with 2010.  

Lear expects 2011 net sales in the range of $12.6 to $13.0 billion and core operating earnings of $700 to $740 million.  Free cash flow is expected to be approximately $400 million for the year.  Interest expense for 2011 is estimated to be approximately $55 million.  Pretax income before restructuring costs and other special items is estimated to be in the range of $645 to $685 million.  Tax expense excluding restructuring costs and other special items is expected to be in the range of $120 to $125 million.  Adjusted net income attributable to Lear is expected to be in the range of $500 to $535 million, and adjusted earnings per share are expected to be in the range of $9.20 to $9.85 per share.  

Pretax operational restructuring costs in 2011 are estimated to be about $125 million.   Capital spending in 2011 is estimated to be approximately $250 million.  Depreciation and amortization expense is estimated to be about $250 million in 2011. 

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