Lear Corporation (NYSE: LEA), a global automotive technology leader in Seating and E-Systems, today reported results for the first quarter 2020.
First Quarter 2020 Highlights
- Sales of $4.5 billion, compared to $5.2 billion in the first quarter of 2019
- Net income of $76 million and adjusted net income of $124 million, compared to $229 million and $253 million, respectively, in the prior year
- Core operating earnings of $205 million, compared to $378 million in the first quarter of 2019
- Estimated negative impact of COVID-19 on Lear’s sales and core operating earnings in the first quarter of 2020 was approximately $900 million and $200 million, respectively
- Earnings per share of $1.26 and adjusted earnings per share of $2.05, compared to $3.73 and $4.00, respectively, in the first quarter of 2019
- Net cash provided by operating activities of $222 million and free cash flow of $113 million, compared to $52 million and $(71) million, respectively, in the first quarter of 2019
- Cash and cash equivalents at quarter end of $2.45 billion and total available liquidity of $3.2 billion; cash balance reflects $1 billion draw on revolving credit facility
- Refinanced $650 million aggregate principal amount of 2025 senior notes through the issuance of new senior notes due in 2030 and additional senior notes due in 2049
- Extended maturity of $1.75 billion revolving credit facility to August 2024
- Adjusted capacity at certain plants to produce personal protective equipment for donations to hospitals and first responders, as well as for internal use
“The COVID-19 pandemic has taken a tremendous toll on people around the globe, and Lear’s deepest sympathies go out to all those who have been impacted by this crisis. I am proud that Lear has been at the forefront in supporting pandemic relief efforts through the manufacture and donation of masks and other personal protective equipment to hospital staff and first responders. We will continue to lend our support to communities in need as this humanitarian crisis unfolds.
“Our first quarter financial results were significantly impacted by production disruptions stemming from the COVID-19 pandemic. We experienced plant shutdowns in China beginning in late January that were followed by shutdowns of almost all our global operations outside of China beginning in mid- to late-March. Excluding the impact of COVID-19, Lear’s results reflect solid financial performance in both of our business segments. While significant near-term challenges remain, I am confident in the strength of our underlying business, long-term competitive position and liquidity,” said Ray Scott, Lear’s President and CEO.
First Quarter Financial Results
(in millions, except per share amounts)
Industry disruptions related to the COVID-19 pandemic during the first quarter impacted operations in all our major markets. Global vehicle production declined by 23% compared to a year ago, with China down 47%, Europe down 19% and North America down 10%.
Sales in the first quarter decreased 14% to $4.5 billion. Excluding the impact of foreign exchange and acquisitions, sales were down 12%, reflecting production declines related to the COVID-19 pandemic, partially offset by the addition of new business. Sales growth over market in the first quarter was 11%.
Core operating earnings were $205 million, or 4.6% of sales, compared to $378 million, or 7.3% of sales, in 2019. The decline in margins reflects the decrease in industry production. In the Seating segment, margins and adjusted margins were 5.5% and 6.0% of sales, respectively. In the E-Systems segment, margins and adjusted margins were 3.0% and 4.8% of sales, respectively. Excluding the estimated impact of COVID-19, adjusted margins in each business segment would have exceeded 8%.
Earnings per share were $1.26. Adjusted earnings per share were $2.05, down from $4.00 in 2019, reflecting lower operating earnings.
In the first quarter of 2020, net cash provided by operating activities was $222 million, and free cash flow(1) was $113 million.
(1) For more information regarding our non-GAAP financial measures, see “Non-GAAP Financial Information” below.
COVID-19 Response and Update
Lear’s operations in China were the first to be impacted by COVID-19, and most of our plants in the country were closed for several weeks during the quarter. By the end of the quarter, all of our operations in China were open, and capacity utilization was increasing. Beginning in mid-March, our operations in Europe, North America, South America and Asia (excluding China) were impacted, with virtually all plants closed at the end of the quarter and closures continuing throughout April and, in most cases, into May. While manufacturing has resumed at certain locations in Europe and North America, production levels at these facilities are currently well below capacity. As a result, second quarter sales, earnings and cash flows are expected to be materially impacted.
During the COVID-19 pandemic, Lear’s top priority is ensuring the health and safety of our employees, and we have taken several steps toward this end, including restricting business travel, preventing visitors from entering Company facilities, enhancing disinfection of work areas, promoting social distancing and requiring office employees to work from home.
Lear is taking proactive steps to plan for the safe return to work for our plant and office employees in regions currently subject to shut downs. Building on lessons learned in China, Lear created a Safe Work Playbook to ensure employees feel safe, prepared and informed when they return to work. The Playbook outlines practical guidelines for creating a safe workplace and offers insights into navigating COVID-19-related operational challenges. The Safe Work Playbook was published on Lear’s website at Lear.com to share with all organizations dealing with COVID-19.
Lear is also working closely with our global customers and supply chain to help the industry prepare for the challenges associated with restarting manufacturing facilities. As part of these efforts, the Company has embarked on a comprehensive evaluation of its supply base to identify and address any gaps that could impact the restarting of production. Utilizing its global operational expertise, Lear is also providing support to government agencies and industry trade groups and advising state and local government leaders on best practices related to safely and efficiently resuming production.
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SOURCE: Lear
