Lear Reports Third-Quarter Financial Results

    SOUTHFIELD, Mich., Oct. 26 /PRNewswire-FirstCall/ -- Lear Corporation
 (NYSE:   LEA), one of the world's largest automotive interior systems and
 components suppliers, today reported financial results for the third
 quarter of 2006, guidance for the full year of 2006 and a preliminary
 outlook for 2007.
     Recent Highlights:
     *  Completed contribution of its European Interior business to joint
        venture
     *  Continued to win new business in Asia and with Asian automakers
        globally
     *  Agreement to issue $200 million of common stock
     *  Introduced industry's first solid-state Smart Junction Box technology
     For the third quarter of 2006, Lear posted net sales of $4.1 billion
 and a pretax loss of $65.9 million, including $46.1 million related to
 restructuring costs and a loss on the divestiture of the Company's European
 Interior business. These results compare with year-earlier net sales of
 $4.0 billion and a pretax loss of $787.8 million, including $777.7 million
 related to impairments and restructuring costs. Net loss for the third
 quarter of 2006 was $74.0 million, or $1.10 per share. This compares with a
 net loss of $750.1 million, or $11.17 per share, for the third quarter of
 2005.
     "In response to very challenging industry conditions, we are continuing
 to aggressively implement cost reduction and restructuring actions to
 improve future profitability. Margins in our Seating business are showing
 solid improvement, and the actions we are taking to improve our
 manufacturing footprint will benefit our Electronic and Electrical margins
 in the future. We are also moving forward with our strategy to put in place
 a new, more sustainable business model for our Interior segment," said Bob
 Rossiter, Lear Chairman and Chief Executive Officer.
     Net sales were up from the prior year, primarily reflecting the
 addition of new business globally, offset in large part by lower production
 in North America and Europe. Operating performance was slightly below the
 year-earlier results, reflecting the adverse impact of lower production and
 higher raw material costs, largely offset by the benefit of new business
 and cost reductions in our core businesses.
     Free cash flow was negative $48.2 million for the third quarter of
 2006. (Net cash provided by operating activities was negative $8.1 million.
 A reconciliation of free cash flow to net cash provided by operating
 activities is provided in the attached supplemental data page.)
     Lear continued to make progress on important strategic initiatives,
 including the completion of a transaction to contribute substantially all
 of its European Interior business to International Automotive Components
 Group, LLC (IAC) in return for a one-third equity interest. With respect to
 the Company's North American Interior business, we are continuing to make
 progress toward a similar strategic solution with IAC. Lear is also
 aggressively expanding its business in Asia and with Asian automakers
 globally, and was awarded several new Asian programs during the third
 quarter. The Company's recent agreement to issue $200 million of common
 stock provides additional operating and financial flexibility, allowing the
 Company to invest in and further strengthen its core businesses.
 Additionally, the Company continued to develop new products and
 technologies, including the industry's first solid-state Smart Junction
 Box.
     Full-Year 2006 Guidance
     On October 16, 2006, the Company completed the contribution of
 substantially all of its European Interior business to International
 Automotive Components Group, LLC. Accordingly, Lear's full-year financial
 results will reflect Lear's minority interest in the joint venture on an
 equity basis for the fourth quarter.
     For the full year of 2006, Lear expects worldwide net sales of about
 $17.7 billion, reflecting recently announced production cuts in North
 America and the divestiture of the Company's European Interior business.
     Lear anticipates full-year income before interest, other expense,
 income taxes, impairments, restructuring costs and other special items
 (core operating earnings) to be in the range of $345 to $375 million.
 Restructuring costs for the full year are estimated to be in the range of
 $105 to $115 million.
     Full-year interest expense is estimated to be in the range of $210 to
 $215 million. Pretax income before impairments, restructuring costs and
 other special items is estimated to be in the range of $65 to $95 million.
 Income tax expense is estimated to be approximately $40 million in the
 fourth quarter, subject to the actual mix of financial results by country.
     Full-year capital spending is estimated to be in the range of $380 to
 $390 million. Free cash flow for the full year is expected to be about
 breakeven.
     Fourth quarter industry production assumptions underlying Lear's
 financial outlook include 3.7 million units in North America, down 5% from
 a year ago, and 4.7 million units in Europe, down 1% from a year ago.
 Lear's major platforms in North America are expected to be down
 significantly more than the industry average.
     Preliminary 2007 Outlook
     With respect to our core Seating, Electronic and Electrical businesses,
 we estimate that we will add new business of about $800 million. Seating
 margins are expected to continue to improve to the mid-5% level. In the
 Electronic and Electrical segment, we are continuing to implement
 aggressive restructuring actions, and we expect margins to improve during
 the course of the year to the 5.5% to 6% range. These margins assume an
 industry production environment roughly in line with 2006 and reflect
 underlying operating margins, excluding restructuring costs and other
 special items. Capital spending for 2007 in our core businesses is expected
 to be in the range of $250 to $280 million. Free cash flow is expected to
 return to a solid positive level.
     Lear Corporation is one of the world's largest suppliers of automotive
 interior systems and components. Lear provides complete seat systems,
 electronic products and electrical distribution systems and other interior
 products. With annual net sales of $17.1 billion in 2005, Lear ranks #127
 among the Fortune 500. Lear's world-class products are designed, engineered
 and manufactured by a diverse team of 115,000 employees at 282 locations in
 34 countries. Lear's headquarters are in Southfield, Michigan, and Lear is
 traded on the New York Stock Exchange under the symbol [LEA]. Further
 information about Lear is available on the Internet at http://www.lear.com.
     Lear will hold a conference call to review the Company's third-quarter
 2006 financial results and related matters on Thursday, October 26, 2006,
 at 9:00 a.m. EDT. To participate in the conference call, dial
 1-800-789-4751 (domestic) or 1-706-679-3323 (international). You may also
 listen to the live audio webcast of the call, in listen-only mode, on the
 corporate website at http://www.lear.com . An audio replay will be
 available two hours following the call at 1-800-642-1687 (domestic) and
 1-706-645-9291 (international). The audio replay will be available until
 November 9, 2006 (Conference I.D. 4340633).
     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 certain non-GAAP financial measures. These measures include
 "income before interest, other expense, income taxes, impairments,
 restructuring costs and other special items" (core operating earnings),
 "pretax income (loss) before impairments, restructuring costs and other
 special items" and "free cash flow." 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 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 core operating earnings and pretax income (loss) before
 impairments, 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
 earnings or that may obscure trends useful in evaluating the Company's
 continuing operating activities. Management also believes 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 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, pretax income (loss) before impairments,
 restructuring costs and other special items and free cash flow should not
 be considered in isolation or as substitutes for net income (loss), pretax
 income (loss), cash provided by operating activities or other 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 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 a reconciliation of third-quarter 2006 free cash flow to net cash
 provided by operating activities, see the 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 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.
     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. 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, fluctuations in the
 production of vehicles for which the Company is a supplier, 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, the outcome of
 various strategic alternatives being evaluated with respect to its North
 American Interior business and other risks described from time to time in
 the Company's Securities and Exchange Commission filings. In particular,
 the Company's financial outlook for 2006 and 2007 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 previously announced private placement of common stock to
 affiliates of and funds managed by Carl C. Icahn is subject to certain
 conditions. No assurances can be given that the offering will be
 consummated on the terms contemplated or at all.
     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 and Subsidiaries
                       Consolidated Statements of Operations
 
                (Unaudited; in millions, except per share amounts)
 
 
                                                       Three Months Ended
                                                September 30,       October 1,
                                                     2006              2005
 
     Net sales                                     $4,069.7          $3,986.6
 
     Cost of sales                                  3,882.9           3,900.2
     Selling, general and administrative
      expenses                                        158.0             142.7
     Goodwill impairment charge                          -              670.0
     Interest expense                                  56.6              45.1
     Other expense, net                                38.1              16.4
 
     Loss before income taxes                         (65.9)           (787.8)
     Income taxes                                       8.1             (37.7)
 
     Net loss                                        $(74.0)          $(750.1)
 
 
     Basic net loss per share                        $(1.10)          $(11.17)
 
     Diluted net loss per share                      $(1.10)          $(11.17)
 
 
     Weighted average number of shares
      outstanding - basic                              67.4              67.1
 
     Weighted average number of shares
      outstanding - diluted                            67.4              67.1
 
 
 
                         Lear Corporation and Subsidiaries
                       Consolidated Statements of Operations
 
                (Unaudited; in millions, except per share amounts)
 
 
                                                        Nine Months Ended
                                                September 30,       October 1,
                                                    2006              2005
 
     Net sales                                    $13,558.4         $12,691.9
 
     Cost of sales                                 12,868.3          12,184.8
     Selling, general and administrative
      expenses                                        493.9             484.6
     Goodwill impairment charge                         2.9             670.0
     Interest expense                                 157.5             138.1
     Other expense, net                                55.4              55.5
 
     Loss before income taxes and
     cumulative effect of a change in
      accounting principle                            (19.6)           (841.1)
     Income taxes                                      45.8             (62.2)
 
     Loss before cumulative effect of a
      change in accounting principle                  (65.4)           (778.9)
     Cumulative effect of a change in
      accounting principle                              2.9                -
 
     Net loss                                        $(62.5)          $(778.9)
 
 
     Basic net loss per share
     Loss before cumulative effect of a
      change in
     accounting principle                            $(0.97)          $(11.60)
     Cumulative effect of a change in
      accounting principle                             0.04               -
     Basic net loss per share                        $(0.93)          $(11.60)
 
     Diluted net loss per share
     Loss before cumulative effect of a
      change in
     accounting principle                            $(0.97)          $(11.60)
     Cumulative effect of a change in
      accounting principle                             0.04               -
     Diluted net loss per share                      $(0.93)          $(11.60)
 
 
     Weighted average number of shares
      outstanding - basic                              67.3              67.2
 
     Weighted average number of shares
      outstanding - diluted                            67.3              67.2
 
 
 
                         Lear Corporation and Subsidiaries
                            Consolidated Balance Sheets
 
                                   (In millions)
 
 
 
 
                                                September 30,      December 31,
                                                     2006              2005
     ASSETS                                       (Unaudited)        (Audited)
     Current:
     Cash and cash equivalents                       $153.0            $207.6
     Accounts receivable                            2,571.8           2,337.6
     Inventories                                      748.4             688.2
     Recoverable customer engineering and
      tooling                                         228.2             317.7
     Other                                            310.7             295.3
                                                    4,012.1           3,846.4
     Long-Term:
     PP&E, net                                      1,982.0           2,019.3
     Goodwill, net                                  1,984.7           1,939.8
     Other                                            472.6             482.9
                                                    4,439.3           4,442.0
 
     Total Assets                                  $8,451.4          $8,288.4
 
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current:
     Short-term borrowings                             $8.6             $23.4
     Accounts payable and drafts                    2,888.9           2,993.5
     Accrued liabilities                            1,214.6           1,080.4
     Current portion of long-term debt                 27.5               9.4
                                                    4,139.6           4,106.7
     Long-Term:
     Long-term debt                                 2,349.7           2,243.1
     Other                                            838.9             827.6
                                                    3,188.6           3,070.7
 
     Stockholders' Equity                           1,123.2           1,111.0
 
     Total Liabilities and Stockholders'
      Equity                                       $8,451.4          $8,288.4
 
 
 
                         Lear Corporation and Subsidiaries
                                 Supplemental Data
 
        (Unaudited; in millions, except content per vehicle and share data)
 
 
 
 
                                                       Three Months Ended
                                                September 30,       October 1,
                                                     2006              2005
        Net Sales
        North America                              $2,244.5          $2,222.8
        Europe                                      1,444.1           1,405.7
        Rest of World                                 381.1             358.1
        Total                                      $4,069.7          $3,986.6
 
        Content Per Vehicle *
        North America                                  $660              $606
        Total Europe                                   $347              $339
 
        Free Cash Flow **
        Net cash used in operating
         activities                                   $(8.1)          $(297.3)
        Net change in sold accounts
         receivable                                    43.7             (11.9)
        Net cash provided by (used in)
         operating activities before
        net change in sold accounts
         receivable                                    35.6            (309.2)
        Capital expenditures                          (83.8)           (135.2)
        Free cash flow                               $(48.2)          $(444.4)
 
        Depreciation                                  $96.7             $98.3
 
 
 
                                                         Nine Months Ended
                                                 September 30,       October 1,
                                                      2006              2005
        Net Sales
        North America                               $7,600.8          $6,757.4
        Europe                                       4,834.4           4,978.6
        Rest of World                                1,123.2             955.9
        Total                                      $13,558.4         $12,691.9
 
        Content Per Vehicle *
        North America                                   $653              $571
        Total Europe                                    $338              $351
 
        Free Cash Flow **
        Net cash provided by operating
         activities                                   $106.1            $228.8
        Net change in sold accounts
         receivable                                     23.7            (279.2)
        Net cash provided by (used in)
         operating activities before
        net change in sold accounts
         receivable                                    129.8             (50.4)
        Capital expenditures                          (268.5)           (414.3)
        Free cash flow                               $(138.7)          $(464.7)
 
        Depreciation                                  $295.6            $287.4
 
 
        Basic Shares Outstanding at end of
         quarter                                  67,373,554        67,168,087
 
        Diluted Shares Outstanding at end
         of quarter ***                           67,373,554        67,168,087
 
 
     *  Content Per Vehicle for 2005 has been updated to reflect actual
        production levels.
 
     ** See "Non-GAAP Financial Information" included in this news release.
 
     ***Calculated using stock price at end of quarter.  Diluted shares
        outstanding exclude shares related to
        outstanding convertible debt, as well as options, restricted stock
        units, performance units and stock
        appreciation rights, all of which were antidilutive.
 
 

SOURCE Lear Corporation

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