SOUTHFIELD, Mich., Jan. 29 /PRNewswire-FirstCall/ -- Lear Corporation (NYSE: LEA), a leading global supplier of automotive seating systems, electrical distribution systems and electronic products, today reported preliminary financial results for the fourth quarter and full year of 2008, as follows:

    -- Net sales of $2.6 billion in Q4 and $13.6 billion for full year
    -- Core operating earnings positive in Q4 and strong for full year
    -- Year end cash and cash equivalents balance of $1.6 billion
    -- Accelerated and expanded global restructuring and cost reduction
       efforts
    -- Continued to diversify sales, with 64% of 2008 revenue generated
       outside of N.A.
    -- Awarded electrical and electronic content on Chevy Volt and other new
       hybrids

    (Logo: http://www.newscom.com/cgi-bin/prnh/20080520/LEARCORPLOGO )

Business Conditions

The production environment in the fourth quarter was extremely challenging due to significantly lower production volumes globally. In North America, industry production compared with a year ago was down 26%, the Domestic Three were down 30%, and our top fifteen platforms were down 26%. In Europe, industry production was down 29%, and our top five customers were down 31%. Globally, automotive production was down 21%.

'These sharp declines in automotive production in North America and globally dramatically impacted our financial results in the fourth quarter,' said Bob Rossiter, Lear's chairman, chief executive officer and president. 'We have been aggressively restructuring our global operations in response to changing business conditions. Lear's strategy to manage through the downturn is to accelerate and expand global restructuring and cost reduction efforts, to narrow our investment focus to minimize cash burn and to continue to provide our customers with superior value.'

Fourth-Quarter 2008 Financial Results

For the fourth quarter of 2008, Lear reported net sales of $2.6 billion and a pretax loss of $692.1 million, driven largely by a non-cash goodwill impairment charge of $530.0 million and restructuring costs of $66.2 million. Income before interest, other (income) expense, income taxes, restructuring costs and other special items (core operating earnings) was $22.0 million in the fourth quarter of 2008. This compares with net sales of $3.9 billion, pretax income of $45.1 million and core operating earnings of $178.6 million in the fourth quarter of 2007. A reconciliation of core operating earnings to pretax income (loss) as determined by generally accepted accounting principles ('GAAP') is provided in the attached supplemental data pages.

The decline in net sales for the quarter primarily reflects a significant reduction in production in North America and Europe.

In the seating segment, net sales were down 32% to $2.1 billion. Operating margins declined sharply, reflecting primarily the impact of lower vehicle production offset partially by favorable cost performance. In the electrical and electronic segment, net sales were down 33% to $529 million. Operating margins declined significantly, driven by lower vehicle production offset partially by favorable cost performance.

Net loss was $688.2 million, or $8.91 per share, including the non-cash goodwill impairment charge and restructuring costs, for the fourth quarter of 2008. This compares with net income of $27.0 million, or $0.34 per share, in the year earlier quarter.

In the fourth quarter of 2008, free cash flow was negative $38.3 million, as compared with free cash flow of $170.9 million in the fourth quarter of 2007. The decline in free cash flow compared with a year ago primarily reflects lower earnings. Net cash provided by (used in) operating activities was ($90.9) million and $157.4 million in the fourth quarters of 2008 and 2007, respectively. A reconciliation of free cash flow to net cash provided by (used in) operating activities as determined by GAAP is provided in the attached supplemental data pages.

Full-Year 2008 Financial Results

For the full year 2008, Lear reported net sales of $13.6 billion and a pretax loss of $604.1 million, driven largely by a non-cash goodwill impairment charge of $530.0 million and restructuring costs of $193.9 million. Core operating earnings were $418.4 million for the full year 2008. This compares with net sales of $16.0 billion, pretax income of $331.4 million and core operating earnings of $748.5 million in 2007. A reconciliation of core operating earnings to pretax income (loss) as determined by GAAP is provided in the attached supplemental data pages.

The decline in net sales for the full year primarily reflects a significant reduction in production in North America and Europe and the divestiture of the interior business, partially offset by favorable foreign exchange. The decline in core operating earnings reflects the decline in net sales offset in part by favorable cost performance, including the benefit of restructuring actions.

Lear reported a net loss of $689.9 million, or $8.93 per share, including the non-cash goodwill impairment charge and restructuring costs, for the full-year 2008. This compares with net income of $241.5 million, or $3.09 per share, for the full-year 2007.

Free cash flow in 2008 was negative $70.7 million as compared with free cash flow of $433.6 million in 2007. The decline primarily reflects lower earnings and higher cash costs for restructuring. Net cash provided by operating activities was $144.2 million and $466.9 million in 2008 and 2007, respectively. A reconciliation of free cash flow to net cash provided by operating activities as determined by GAAP is provided in the attached supplemental data pages.

For the year, Lear continued to make progress on its strategic priorities, including further diversification of its global sales, business development in emerging markets and the implementation of an operating improvement plan for the electrical and electronic segment. Approximately two-thirds of Lear's 2008 net sales were generated outside of North America. In addition, Lear continues to improve quality and win new business globally. Our business backlog for the 2009 to 2011 period currently stands at $1.1 billion, with 60% in the seating segment and 40% in the electrical and electronic segment, including recent awards on the Chevy Volt and several other new hybrid models.

In terms of liquidity, the Company had approximately $1.6 billion in cash and cash equivalents as of December 31, 2008, providing more than adequate resources to satisfy ordinary course business obligations. During the fourth quarter of 2008, Lear chose to borrow $1.2 billion under its primary credit facility in order to protect against disruptions in the capital markets and to further bolster its liquidity position. The Company elected not to repay the amounts borrowed at year end in light of continued market and industry uncertainty. As a result of this decision, the Company is no longer in compliance with the leverage ratio contained in its primary credit facility. The Company has initiated discussions with the co-agents under its primary credit facility to seek a long-term amendment. The discussions have been constructive and are continuing. Because the amendment will require support from lenders holding a majority of outstanding commitments and borrowings under the primary credit facility, the Company intends to pursue discussions with a broader lender group before finalizing the amendment proposal and launching the formal amendment process.