Lear Corporation (LEA)
Q3 2009 Earnings Call
December 18, 2009 11:00 am ET
Mel Stephens – Investor Relations & Corporate Communications
Robert E. Rossiter – Chairman, Chief Executive Officer & President
Matthew J. Simoncini – Chief Financial Officer
Lou Salvatore – Senior Vice President & President Global Seating Systems
Ray Scott – Senior Vice President & President Global Electrical and Electronic Systems
Terry Larkin – Senior Vice President, General Counsel & Corporate Secretary
Shari Burgess – Treasurer
John Trithal – Vice President Business Planning and Analysis
John Murphy – Bank of America Merrill Lynch
Himanshu Patel – J. P. Morgan
Brian Johnson – Barclays Capital
Christopher Ceraso – Credit Suisse
Analyst for [Etay MaKaley] – Citigroup
Rod Lache – Deutsche Bank Securities
Sarah Thompson – Barclays Capital
Michael Rosenthal – QVT Financial
Previous Statements by LEA
» Lear Corporation Q1 2009 Earnings Call Transcript
» Lear Corporation Q4 2008 Earnings Call Transcript
» Lear Corporation, Q3 2008 Earnings Call Transcript
The review materials for these earnings have been posted on our website earlier today and they will be filed with the Securities & Exchange Commission tomorrow. For today our presenters are Bob Rossiter, our Chairman, CEO and President and Matt Simoncini, our Chief Financial Officer. Also with us here today are Lou Salvatore, the President of our Global Seating Business and Ray Scott, the President of our Global Electrical Distribution Business. Terry Larkin, our General Counsel is here; Shari Burgess, Treasurer; and John Trithal, Vice President of Business Planning and Analysis.
Before we begin, I'd like to remind you that during the call we will be making forward-looking statements that are subject to risks and uncertainties. Some of the factors that could impact our future results are described in the last slide of our deck and they will also be included in our SEC filings. In addition, we will be referring to certain non-GAAP financial measures and additional information regarding these measures can be found in the slides labeled non-GAAP financial reconciliations also at the end of the slide presentation.
If you'll turn to slide two please, here we show the agenda for today's review. Bob will begin with a few brief comments on our plan of reorganization. Next, Matt will cover our third Quarter and year-to-date 2009 financial results. He'll also comment on our full year 2009 financial forecast and he'll provide an update to our consolidated sales backlog that covers the 2010/2012 period. Then Bob will provide some summary and outlook comments and following the formal presentation we will all be happy to take your questions. So if you'll please now turn to slide number three, I'll hand it over to Bob Rossiter.
Robert E. Rossiter
As most of you know, we entered Chapter 11 voluntarily on July 7th. While bankruptcy is never our first choice we needed to reorganize with the minimum disruption, preserve maximum value, and best position our company for long term success. Operationally, we did not miss a beat in terms of serving our customers. Our quality metrics continue to improve. Our suppliers were paid in full and we were able to preserve employee pay and benefits and leave pension obligations intact.
In addition, we were able to continue to win new business in every region of the world and we grew our three year backlog sales significantly to I think our highest level ever. Financially we were able also to reduce Lear's debt obligation by approximately $2.8 billion. We have no significant near term maturities. In addition, we have a cash balance of over a billion dollars so we have the financial resources to invest in new products and technologies as well as grow in emerging markets.
New Lear common shares have been listed on the New York Stock Exchange under the historical symbol LEA. Matt will provide more details on our capital structure and our share account in a few minutes. Also, importantly, this management team remains in place.
I'd ask you to go to slide four. Before I turn it over to Matt, I'd like to remind you of some important Lear strengths that have not changed. We continue to be the leading Tier I automotive supplier with strong market position and two critical product lines; seating and electrical systems. We have a long history of leadership and quality, customer satisfaction, and innovation that continues to represent the core of our value proposition going forward. I also believe we have the best customer relationships in the industry and that was very evident during this past year as our backlog has continued to grow.
We've made significant progress in restructuring our business over the past few years, including a significant expansion of our low cost footprint. The result is lower structural cost and improved operating efficiencies. At the same time we are continuing to diversify our sales in all regions and within our product lines. Lastly, I believe the strength and commitment of the Lear team is a clear competitive advantage to us. So now I'd like to turn it over to Matt and give you a financial update and I'll be back at the end.
Matthew J. Simoncini
Please turn to slide number five; this slide provides a group perspective behind this year’s industry environment and our financial results broken down into three periods, the first half, the third quarter, and the outlook for the fourth quarter. In the first half, industry production levels were severely depressed in our major market. As a result, our net sales were down 43% and despite significant cost reductions our core operating earnings were down and our free cash flow was negative.