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Lear Corp. (LEA)
Q4 2009 Earnings Call
February 5, 2010 9:00 am ET
Mel Stephens – Investor Relations & Corporate Communications
Robert Rossiter – Chairman, President, Chief Executive Officer
Mathew Simoncini – Chief Executive Officer
Ray Scott – President – President Global Electrical and Electronic Systems
Robert McLaughlin – Vice President Tax
Colin Langan – UBS
John Murphy – Bank of America
Rod Lache – Deutsche Bank
Himanshu Patel – J.P. Morgan
Itay Michaeli – Citi
Brian Johnson – Barclays Capital
Christopher Ceraso – Credit Suisse
Derick Winger – Jefferies & Company
Previous Statements by LEA
» Lear Corporation Q3 2009 Earnings Call Transcript
» Lear Corporation Q1 2009 Earnings Call Transcript
» Lear Corporation Q4 2008 Earnings Call Transcript
Thank you everyone for joining us for our call this morning. The review materials for our call were filed with the Securities and Exchange Commission and they’ve also been posted on our website lear.com underneath the investor relations link.
Today our presenters are Bob Rossiter, Chairman, CEO and President and Matt Simoncini our Chief Financial Officer. Also participating on the call are two division Presidents, Lou Salvatore, President of Global Seating and Ray Scott, President of Global Electrical Power Management. Terry Larkin is with us, our General Council, Wendy Foss, our Controller, Terry Burgess, our Treasurer and John [Treithal], Vice President Business Planning and Analysis, and there are a number of other folks from our finance staff that will help us with questions.
Before we begin I remind you that during this call we will be making forward-looking statements that are subject to certain risks and uncertainties. Some of the factors that could impact our future results are described in the last slide of the slide deck and they’re also included in our SEC filings.
In addition, we will be referring to non-GAAP financial measures. Additional information regarding these measures can be found in the slides titled Non-GAAP Financial Information. They’re also at the end of the deck.
If you’ll now turn to the next page, on Slide 2 we outline our agenda for today. Bob Rossiter will open with an overview of 2009, then Matt Simoncini will review our fourth quarter and 2009 results and also provide our financial outlook for 2010. Bob Rossiter will come back with some wrap up comments and then following the formal presentation, we’ll be happy to take your questions.
So now if you’ll turn to Slide 3, I’ll hand the presentation over to Mr. Rossiter.
Good morning everybody. Obviously things were pretty tough in 2009 but in the environment we reduced our structural costs, realigned our global footprint and completed a major financial restructuring.
We needed to do it to restore the company to financial health and position our business for long term success. We made progress on our strategic priorities which include diversification of our sales globally, continued business development in the markets. For 2009 approximately 70% of Lear’s net sales came from outside of North America.
Our global Seating business continues to perform very well. In the second half of 2009 we operated the business close to our long term target margin despite industry production levels that were depressed and we continue to see significant growth opportunities in Asia and other emerging markets.
In the Electrical Power and Management business, we put in place a comprehensive sales growth and margin improvement plan set by Ray and his team. Our sales backlog includes about $800 million in new electrical business and we see a significant opportunity for growth in emerging high power and high grid electrical vehicles.
This segment was profitable in the second half of 2009. We expect to make stead progress toward our margin targets over the next few years.
If you please go to Slide 4, Slide 4 summarizes our major restructuring initiatives. Since mid 2005, we’ve invested $740 million in operational restructuring actions resulting in significant reduction in structural costs, major repositioning of our production footprint. During that time, we closed 35 manufacturing facilities and 10 administrative offices, had a reduction in head count of 35,000 employees and today 50% of our total facilities and 75% of our employment is in 21 low cost countries.
In 2009 we completed a comprehensive evaluation of our strategic and financial options and concluded that filing for Chapter 11 was necessary in order to realign our capital structure and position Lear for long term success. On July 7, 2009 the company filed Chapter 11 and just four months later we emerged with substantially lower total debt and improved credit profile.
Following the problems of 2009 the company returned to profitability in the third quarter. We achieved positive cash flow in the second half and we ended 2009 with a cash balance of $1.6 billion and less than $1 billion in debt.
Go to Slide 5, in addition to restructuring our business for the future, we also continue to make progress further diversifying our sales mix. Last year 70% of our sales as I mentioned, were outside North America.
In addition, we continue to diversify our customer mix with increasing sales coming from Europe and our Asian manufacturers.
Please go to Slide 6. We continue to grow in Asia. The Asia Pacific region now accounts for $1.3 billion or 13% of our consolidated worldwide sales. Including non consolidated sales, our total revenue in Asia is about $1.9 billion. Within Asia, China is our largest and fastest growing market. Last year we had consolidated sales of $900 million in China and total sales including our joint ventures of $1.3 billion.