Lear Reports Third Quarter Results and Increases 2023 Financial Outlook
- Lear Corporation reports strong Q3 2023 results with a 10% increase in sales and a 14% increase in core operating earnings. The company also increases its full year 2023 financial outlook.
- None.
Third Quarter 2023 Highlights
- Sales increased
10% to$5.8 billion $5.2 billion - Net income of
$133 million $170 million $92 million $140 million - Core operating earnings increased
14% to$267 million $235 million - Earnings per share of
$2.25 $2.87 $1.54 $2.33 - Net cash provided by operating activities of
$404 million $251 million $252 million $112 million - Fifth consecutive quarter of year-over-year margin improvement in E-Systems
- Received more than twice as many J.D. Power 2023 U.S. Seat Quality and Satisfaction StudySM awards as any other seat supplier, with four best in segment and nine total awards
- Awarded first General Motors seat ventilation program, leveraging our strong customer relationships to accelerate growth in thermal comfort systems
- Launched complete seats for Stellantis conquest business for the Wagoneer and Grand Wagoneer premium SUVs
- Named a 2023 PACE award finalist for ReNewKnit™, Lear's premium and fully recyclable sueded seating surface material
- Cash and cash equivalents at quarter end of
$980 million $3.0 billion - Accelerated share repurchases, returning
$120 million
"Lear's positive momentum continued in the third quarter with our fifth consecutive quarter of improved year-over-year results," said Ray Scott, Lear's President and Chief Executive Officer. "Our strategy to streamline our product portfolio and improve our financial performance in E-Systems is on track, as the division reported its highest operating margins in more than two years. In Seating, we were again recognized as a leader in quality by J.D. Power, third-party validation of Lear's strength in operational excellence. We also received our first General Motors seat ventilation award, continuing the momentum of new business wins in thermal comfort systems. I am confident that the actions we are taking to provide innovative solutions for our customers and improve operational efficiency in both business segments will support continued above market growth, increased profitability and cash flow, and significant returns for our shareholders."
Third Quarter Financial Results (in millions, except per share amounts) | |||
2023 | 2022 | ||
Reported | |||
Sales | |||
Net income | |||
Earnings per share | |||
Adjusted(1) | |||
Core operating earnings | |||
Adjusted net income | |||
Adjusted earnings per share | |||
In the third quarter, global vehicle production increased by
Sales in the third quarter increased
Core operating earnings were
Earnings per share were
In the third quarter of 2023, net cash provided by operating activities was
(1) For more information regarding our non-GAAP financial measures, see "Non-GAAP Financial Information" below.
(2) The production change on a Lear sales-weighted basis is calculated using Lear's prior year regional sales mix and third quarter fiscal calendar. Management believes this provides a more meaningful comparison of the Company's global revenue growth relative to global vehicle production.
Share Repurchase Program
During the third quarter of 2023, we repurchased 521,552 shares of our common stock for a total of
Since initiating the share repurchase program in 2011, we have repurchased 54.2 million shares of our common stock for a total of
Increased 2023 Financial Outlook
Below is our updated financial outlook, which has increased from the midpoint of our prior outlook. Our full year financial outlook assumes a
Full Year 2023 Financial Outlook | |||
Net Sales | |||
Core Operating Earnings | |||
Adjusted EBITDA | |||
Restructuring Costs | ≈ | ||
Operating Cash Flow | |||
Capital Spending | ≈ | ||
Free Cash Flow |
The industry volume assumptions underlying Lear's 2023 financial outlook are derived from several sources, including internal estimates, customer production schedules and the most recent S&P Global Mobility production estimates for Lear's vehicle platforms.
The financial outlook is based on a full year average exchange rate of
Certain of the forward-looking financial measures above are provided on a non-GAAP basis. The Company does not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event-driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant.
Third Quarter 2023 Conference Call and Webcast Information
A conference call and webcast will be held to discuss Lear's third quarter 2023 financial results and related matters on October 26, 2023, at 8:30 a.m. EDT. The webcast link for the conference call will be available through Lear's investor relations webpage at ir.lear.com. In addition, the conference call can be accessed by dialing 1-877-883-0383 (domestic) or 1-412-902-6506 (international) with Conference I.D. 7035224. The webcast replay will be available two hours following the call.
Non-GAAP Financial Information
In addition to the results reported in accordance with accounting principles generally accepted in
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 EBITDA, adjusted depreciation and amortization, adjusted net income and adjusted earnings per share 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 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 EBITDA, adjusted depreciation and amortization, adjusted net income, adjusted earnings per share and free cash flow should not be considered in isolation or as a substitute for net income attributable to Lear, diluted net income per share attributable to Lear, cash provided by 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.
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 statements contained or incorporated in this press release or in any other public statements that address operating performance, events or developments that the Company expects or anticipates may occur in the future are forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and its other Securities and Exchange Commission filings. Future operating results will be based on various factors, including actual industry production volumes, supply chain disruptions, labor disruptions, commodity prices, changes in foreign exchange rates, the impact of restructuring actions 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 Company enters into contracts with its customers to provide production parts generally at the beginning of a vehicle's life cycle. Typically, these contracts do not provide for a specified quantity of production, and many of these contracts may be terminated by the Company's customers at any time. Therefore, these contracts do not represent firm orders. Further, 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.
About Lear Corporation
Lear, a global automotive technology leader in Seating and E-Systems, enables superior in-vehicle experiences for consumers around the world. Lear's diverse team of talented employees in 37 countries is driven by a commitment to innovation, operational excellence, and sustainability. Lear is Making every drive better™ by providing the technology for safer, smarter, and more comfortable journeys. Lear, headquartered in
Lear Corporation and Subsidiaries Condensed Consolidated Statements of Income
(Unaudited; in millions, except per share amounts) | ||||
Three Months Ended | ||||
September 30, | October 1, | |||
Net sales | $ 5,781.0 | $ 5,241.2 | ||
Cost of sales | 5,362.8 | 4,864.3 | ||
Selling, general and administrative expenses | 182.5 | 163.9 | ||
Amortization of intangible assets | 15.5 | 15.2 | ||
Interest expense | 25.7 | 24.8 | ||
Other expense, net | 5.8 | 18.1 | ||
Consolidated income before income taxes and equity in net income of affiliates | 188.7 | 154.9 | ||
Income taxes | 47.0 | 41.7 | ||
Equity in net income of affiliates | (10.4) | (6.0) | ||
Consolidated net income | 152.1 | 119.2 | ||
Net income attributable to noncontrolling interests | 19.2 | 26.9 | ||
Net income attributable to Lear | $ 132.9 | $ 92.3 | ||
Diluted net income per share attributable to Lear | $ 2.25 | $ 1.54 | ||
Weighted average number of diluted shares outstanding | 59.1 | 59.8 | ||
Lear Corporation and Subsidiaries Condensed Consolidated Statements of Income
(Unaudited; in millions, except per share amounts) | ||||
Nine Months Ended | ||||
September 30, | October 1, | |||
Net sales | $ 17,625.7 | $ 15,520.6 | ||
Cost of sales | 16,320.5 | 14,482.3 | ||
Selling, general and administrative expenses | 542.1 | 512.4 | ||
Amortization of intangible assets | 47.4 | 55.5 | ||
Interest expense | 76.1 | 74.6 | ||
Other expense, net | 39.0 | 59.8 | ||
Consolidated income before income taxes and equity in net income of affiliates | 600.6 | 336.0 | ||
Income taxes | 134.1 | 85.6 | ||
Equity in net income of affiliates | (36.2) | (21.0) | ||
Consolidated net income | 502.7 | 271.4 | ||
Net income attributable to noncontrolling interests | 57.5 | 61.2 | ||
Net income attributable to Lear | $ 445.2 | $ 210.2 | ||
Diluted net income per share available to Lear common stockholders | $ 7.50 | $ 3.50 | ||
Weighted average number of diluted shares outstanding | 59.3 | 60.0 | ||
Lear Corporation and Subsidiaries Condensed Consolidated Balance Sheets
(In millions) | ||||
September 30, | December 31, | |||
(Unaudited) | (Audited) | |||
ASSETS | ||||
Current: | ||||
Cash and cash equivalents | $ 979.7 | $ 1,114.9 | ||
Accounts receivable | 4,041.2 | 3,451.9 | ||
Inventories | 1,788.3 | 1,573.6 | ||
Other | 928.5 | 853.7 | ||
7,737.7 | 6,994.1 | |||
Long-Term: | ||||
PP&E, net | 2,886.0 | 2,854.0 | ||
Goodwill | 1,714.1 | 1,660.6 | ||
Other | 2,275.9 | 2,254.3 | ||
6,876.0 | 6,768.9 | |||
Total Assets | $ 14,613.7 | $ 13,763.0 | ||
LIABILITIES AND EQUITY | ||||
Current: | ||||
Short-term borrowings | $ 26.7 | $ 9.9 | ||
Accounts payable and drafts | 3,556.5 | 3,206.1 | ||
Accrued liabilities | 2,117.9 | 1,961.5 | ||
Current portion of long-term debt | 0.3 | 10.8 | ||
5,701.4 | 5,188.3 | |||
Long-Term: | ||||
Long-term debt | 2,742.1 | 2,591.2 | ||
Other | 1,186.9 | 1,153.2 | ||
3,929.0 | 3,744.4 | |||
Equity | 4,983.3 | 4,830.3 | ||
Total Liabilities and Equity | $ 14,613.7 | $ 13,763.0 | ||
Lear Corporation and Subsidiaries Consolidated Supplemental Data
(Unaudited; in millions, except content per vehicle and per share amounts) | ||||
Three Months Ended | ||||
September 30, | October 1, | |||
Net Sales | ||||
$ 2,381.4 | $ 2,284.2 | |||
2,015.4 | 1,588.8 | |||
1,142.5 | 1,142.9 | |||
241.7 | 225.3 | |||
Total | $ 5,781.0 | $ 5,241.2 | ||
Content per Vehicle 1 | ||||
$ 598 | $ 636 | |||
$ 508 | $ 432 | |||
Free Cash Flow 2 | ||||
Net cash provided by operating activities | $ 403.8 | $ 252.1 | ||
Capital expenditures | (153.2) | (140.4) | ||
Free cash flow | $ 250.6 | $ 111.7 | ||
Core Operating Earnings 2 | ||||
Net income attributable to Lear | $ 132.9 | $ 92.3 | ||
Interest expense | 25.7 | 24.8 | ||
Other expense, net | 5.8 | 18.1 | ||
Income taxes | 47.0 | 41.7 | ||
Equity in net income of affiliates | (10.4) | (6.0) | ||
Net income attributable to noncontrolling interests | 19.2 | 26.9 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 48.0 | 18.6 | ||
Acquisition costs | 0.4 | 0.3 | ||
Impairments related to Russian operations | 0.4 | 19.9 | ||
Insurance recoveries related to typhoon in | (3.5) | (0.6) | ||
Other | 1.6 | (1.4) | ||
Core operating earnings | $ 267.1 | $ 234.6 | ||
Lear Corporation and Subsidiaries Consolidated Supplemental Data (continued)
(Unaudited; in millions, except content per vehicle and per share amounts) | ||||
Three Months Ended | ||||
September 30, | October 1, | |||
Adjusted Net Income and Adjusted Earnings Per Share 2 | ||||
Net income attributable to Lear | $ 132.9 | $ 92.3 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 48.0 | 18.6 | ||
Acquisition costs | 0.4 | 0.3 | ||
Other acquisition-related costs | — | 10.6 | ||
Impairments related to Russian operations | 0.4 | 19.9 | ||
Insurance recoveries related to typhoon in | (7.5) | (0.6) | ||
Foreign exchange (gains) losses due to foreign exchange rate volatility related to | (0.7) | 0.8 | ||
Other | 3.5 | 0.6 | ||
Tax impact of special items and other net tax adjustments 3 | (7.4) | (3.0) | ||
Adjusted net income | $ 169.6 | $ 139.5 | ||
Weighted average number of diluted shares outstanding | 59.1 | 59.8 | ||
Diluted net income per share available to Lear | $ 2.25 | $ 1.54 | ||
Adjusted earnings per share | $ 2.87 | $ 2.33 | ||
Adjusted Depreciation and Amortization 2 | ||||
Depreciation and amortization | $ 151.9 | $ 139.3 | ||
Less - Intangible asset impairment | — | — | ||
Adjusted depreciation and amortization | $ 151.9 | $ 139.3 | ||
Lear Corporation and Subsidiaries Consolidated Supplemental Data (continued)
(Unaudited; in millions, except content per vehicle and per share amounts) | ||||
Nine Months Ended | ||||
September 30, | October 1, | |||
Net Sales | ||||
$ 7,231.2 | $ 6,675.5 | |||
6,438.9 | 5,124.7 | |||
3,271.1 | 3,089.0 | |||
684.5 | 631.4 | |||
Total | $ 17,625.7 | $ 15,520.6 | ||
Content per Vehicle 1 | ||||
$ 605 | $ 621 | |||
$ 478 | $ 434 | |||
Free Cash Flow 2 | ||||
Net cash provided by operating activities | $ 679.6 | $ 484.2 | ||
Settlement of accounts payable in conjunction with acquisition of IGB | 15.4 | — | ||
Capital expenditures | (433.3) | (442.9) | ||
Free cash flow | $ 261.7 | $ 41.3 | ||
Core Operating Earnings 2 | ||||
Net income attributable to Lear | $ 445.2 | $ 210.2 | ||
Interest expense | 76.1 | 74.6 | ||
Other expense, net | 39.0 | 59.8 | ||
Income taxes | 134.1 | 85.6 | ||
Equity in net income of affiliates | (36.2) | (21.0) | ||
Net income attributable to noncontrolling interests | 57.5 | 61.2 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 96.9 | 93.5 | ||
Acquisition costs | 0.9 | 9.6 | ||
Acquisition-related inventory fair value adjustment | 1.8 | 1.1 | ||
Impairments related to Russian operations | 1.5 | 19.9 | ||
Intangible asset impairment | 1.9 | 8.9 | ||
(Insurance recoveries) costs related to typhoon in | (3.3) | 3.9 | ||
Other | 16.9 | (1.6) | ||
Core operating earnings | $ 832.3 | $ 605.7 | ||
Lear Corporation and Subsidiaries Consolidated Supplemental Data (continued)
(Unaudited; in millions, except content per vehicle and per share amounts) | ||||
Nine Months Ended | ||||
September 30, | October 1, | |||
Adjusted Net Income Attributable to Lear 2 | ||||
Net income attributable to Lear | $ 445.2 | $ 210.2 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 96.9 | 93.5 | ||
Acquisition costs | 0.9 | 9.6 | ||
Acquisition-related inventory fair value adjustment | 1.8 | 1.1 | ||
Other acquisition-related costs | — | 10.6 | ||
Impairments related to Russian operations | 1.5 | 19.9 | ||
Intangible asset impairment | 1.9 | 8.9 | ||
(Insurance recoveries) costs related to typhoon in | (7.3) | 3.9 | ||
Foreign exchange (gains) losses due to foreign exchange rate volatility related to | (2.7) | 14.5 | ||
Loss related to affiliate | 5.0 | — | ||
Other | 14.6 | 11.2 | ||
Tax impact of special items and other net tax adjustments 3 | (24.5) | (28.4) | ||
Adjusted net income attributable to Lear | $ 533.3 | $ 355.0 | ||
Weighted average number of diluted shares outstanding | 59.3 | 60.0 | ||
Diluted net income per share available to Lear common stockholders | $ 7.50 | $ 3.50 | ||
Adjusted earnings per share | $ 8.99 | $ 5.91 | ||
Adjusted Depreciation and Amortization 2 | ||||
Depreciation and amortization | $ 450.3 | $ 434.3 | ||
Less - Intangible asset impairment | 1.9 | 8.9 | ||
Adjusted depreciation and amortization | $ 448.4 | $ 425.4 | ||
Diluted Shares Outstanding at End of Period 4 | 58,746,353 | 59,653,949 | ||
1 Content per Vehicle for 2022 has been updated to reflect actual production levels. | ||||
2 See "Non-GAAP Financial Information" included in this press release. | ||||
3 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. | ||||
4 Calculated using stock price at end of quarter. | ||||
Lear Corporation and Subsidiaries Segment Supplemental Data
(Unaudited; in millions, except margins) | ||||
Three Months Ended | ||||
September 30, | October 1, | |||
Adjusted Segment Earnings | ||||
Seating | ||||
Net sales | $ 4,284.9 | $ 3,887.8 | ||
Segment earnings | $ 244.7 | $ 222.6 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 28.5 | 12.0 | ||
Impairments related to Russian operations | 0.4 | 19.9 | ||
Other | 1.3 | 0.3 | ||
Adjusted segment earnings | $ 274.9 | $ 254.8 | ||
Segment margins | 5.7 % | 5.7 % | ||
Adjusted segment margins | 6.4 % | 6.6 % | ||
E-Systems | ||||
Net sales | $ 1,496.1 | $ 1,353.4 | ||
Segment earnings | $ 60.4 | $ 46.8 | ||
Restructuring and other special items - | ||||
Costs related to restructuring actions | 19.5 | 6.5 | ||
Insurance recoveries related to typhoon in | (3.5) | (0.7) | ||
Other | 2.5 | 0.8 | ||
Adjusted segment earnings | $ 78.9 | $ 53.4 | ||
Segment margins | 4.0 % | 3.5 % | ||
Adjusted segment margins | 5.3 % | 3.9 % | ||
Lear Corporation and Subsidiaries Segment Supplemental Data (continued)
(Unaudited; in millions, except margins) | ||||
Nine Months Ended | ||||
September 30, | October 1, | |||
Adjusted Segment Earnings | ||||
Seating | ||||
Net sales | $ 13,206.0 | $ 11,674.4 | ||
Segment earnings | $ 823.4 | $ 636.6 | ||
Costs related to restructuring actions | 65.8 | 47.5 | ||
Acquisition costs | — | 0.1 | ||
Acquisition-related inventory fair value adjustment | 1.8 | 1.1 | ||
Impairments related to Russian operations | 1.5 | 19.9 | ||
Costs related to typhoon in | — | 0.1 | ||
Other | 4.9 | 0.6 | ||
Adjusted segment earnings | $ 897.4 | $ 705.9 | ||
Segment margins | 6.2 % | 5.5 % | ||
Adjusted segment margins | 6.8 % | 6.0 % | ||
E-Systems | ||||
Net sales | $ 4,419.7 | $ 3,846.2 | ||
Segment earnings | $ 155.6 | $ 64.7 | ||
Costs related to restructuring actions | 29.9 | 40.9 | ||
Intangible asset impairment | 1.9 | 8.9 | ||
(Insurance recoveries) costs related to typhoon in | (3.6) | 3.3 | ||
Other | 7.3 | 1.8 | ||
Adjusted segment earnings | $ 191.1 | $ 119.6 | ||
Segment margins | 3.5 % | 1.7 % | ||
Adjusted segment margins | 4.3 % | 3.1 % | ||
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SOURCE Lear Corporation
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