1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ____________.
Commission file number: 1-11311
LEAR SEATING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3386776
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
21557 Telegraph Road, Southfield, MI 48034
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (810) 746-1500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
Yes X No
____ _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Approximate number of shares of Common Stock, $0.01 par value per share,
outstanding at July 30, 1994:
45,861,405
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LEAR SEATING CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JULY 2, 1994
INDEX
Part I - Financial Information: Page No.
------------------------------- --------
Item 1 - Consolidated Financial Statements
Introduction to the Consolidated Financial Statements 3
Consolidated Balance Sheets - December 31, 1993 and
July 2, 1994 4
Consolidated Statements of Income - Three and Six
Month Periods ended June 30, 1993 and July 2, 1994 6
Consolidated Statements of Cash Flows - Six Month
Periods ended June 30, 1993 and July 2, 1994 7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II - Other Information:
----------------------------
Item 4 - Submission of Matters to a Vote of Security Holders 17
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 19
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Exhibit Index 20
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LEAR SEATING CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements of Lear Seating Corporation and
subsidiaries (Note 1) have been prepared by Lear Seating Corporation ("the
Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading when
read in conjunction with the financial statements and the notes thereto
included in the Company's Form 10-K as filed with the Securities and Exchange
Commission for the period ended December 31, 1993.
The financial information presented reflects all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of the results of operations and statements of
financial position for the interim periods presented. These results are not
necessarily indicative of a full year's results of operations. All references
to the number of shares of common stock and income per share in the
accompanying financial statements and notes thereto have been adjusted to give
effect to the 33 for 1 stock split of the Company's common stock (Note 3).
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LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31, July 2,
ASSETS 1993 1994
------ ---------------- --------------
(Unaudited)
-
CURRENT ASSETS:
Cash and cash equivalents $ 55,034 $ 47,133
Accounts receivable 272,421 396,572
Inventories 71,731 66,553
Unbilled customer tooling 19,441 31,197
Other 14,957 15,711
------------ ------------
433,584 557,166
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land 31,289 24,129
Buildings and improvements 114,514 103,650
Machinery and equipment 215,684 236,262
----------- -----------
361,487 364,041
Less-Accumulated depreciation (110,530) (129,647)
----------- -----------
250,957 234,394
----------- -----------
OTHER ASSETS:
Goodwill, net 403,694 404,218
Deferred financing fees and other 26,056 21,436
------------ ------------
429,750 425,654
----------- -----------
$1,114,291 $1,217,214
============ ============
The accompanying notes are an integral part of these balance sheets.
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LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31, July 2,
LIABILITIES AND STOCKHOLDERS EQUITY 1993 1994
----------------------------------- ------------ ----------------
(Unaudited)
CURRENT LIABILITIES:
Short-term borrowings $ 48,155 $ 25,311
Cash overdrafts 19,769 47,650
Accounts payable 298,326 355,320
Accrued liabilities 138,299 163,897
Current portion of long-term debt 1,168 1,217
----------- -----------
505,717 593,395
---------- ----------
LONG-TERM LIABILITIES:
Deferred national income taxes 15,889 15,107
Long-term debt 498,324 383,549
Other 38,716 41,118
----------- -----------
552,929 439,774
----------- -----------
COMMITMENTS AND CONTINGENCIES
COMMON STOCK SUBJECT TO REDEMPTION:
Common stock subject to limited rights of redemption,
$.01 par value, 990,033 shares at December 31, 1993
at an estimated maximum redemption price
of $13.64 per share 13,500 ----
Notes receivable from sale of common stock (1,065) ----
------------ ------------
12,435 ----
----------- ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 49,500,000 and 150,000,000
authorized at December 31, 1993 and July 2, 1994,
respectively; 37,809,981 outstanding at December 31, 1993,
net of shares subject to redemption, and 46,020,514
outstanding at July 2, 1994 12 460
Additional paid-in capital 156,917 273,730
Notes receivable from sale of common stock ---- (1,030)
Warrants to purchase common stock 10,000 802
Less- Common stock held in treasury, 3,300,000 shares
at December 31, 1993 and 274,923 shares at July 2, 1994,
at cost (10,000) (853)
Retained deficit (109,248) (81,596)
Minimum pension liability adjustment (4,164) (4,164)
Cumulative translation adjustment (307) (3,304)
------------- ------------
43,210 184,045
------------ -----------
$1,114,291 $1,217,214
============ ===========
The accompanying notes are an integral part of these balance sheets.
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LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended
---------------------------- ------------------------------
June 30, 1993 July 2, 1994 June 30, 1993 July 2, 1994
------------- ------------ ------------- ------------
(Unaudited) (Unaudited)
Net sales $ 487,048 $ 822,126 $ 945,070 $1,508,862
Cost of sales 429,292 743,509 847,090 1,380,272
Selling, general and
administrative expenses 20,422 21,413 35,051 38,298
Amortization of goodwill 2,987 2,902 5,174 5,704
--------- ---------- ---------- ----------
Operating income 34,347 54,302 57,755 84,588
Interest expense 10,912 11,081 20,889 25,011
Other expense, net 2,635 2,058 2,584 4,568
--------- ---------- ---------- ----------
Income before provision for 20,800 41,163 34,282 55,009
national income taxes
Provision for national income taxes 6,035 20,039 13,397 27,357
--------- ---------- ---------- ----------
Net income $ 14,765 $ 21,124 $ 20,885 $ 27,652
========== ========= ========= ==========
Net income per common share $ .37 $ .43 $ .52 $ .61
========== ========= ========= ==========
The accompanying notes are an integral part of these statements.
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LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months Six Months
Ended Ended
June 30, 1993 July 2, 1994
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,885 $ 27,652
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization of goodwill 20,693 26,945
Amortization of deferred financing fees 1,529 1,182
Deferred national income taxes (12,252) (782)
Other, net (498) 5,716
Net change in working capital items 65,756 (52,494)
-------- ---------
Net cash provided by operating activities 96,113 8,219
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (16,926) (34,998)
Other, net 854 4,520
-------- ---------
Net cash used by investing activities (16,072) (30,478)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in long-term debt, net (54,656) (114,645)
Short-term borrowings, net (4,901) (3,229)
Increase (decrease) in cash overdrafts 869 27,881
Proceeds from sale of common stock, net --- 103,700
Other, net --- 45
---------- ----------
Net cash provided (used) by financing activities (58,688) 13,752
--------- ---------
Effect of foreign currency translation 899 606
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 22,252 (7,901)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 31,535 55,034
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 53,787 $ 47,133
========= =========
CHANGES IN WORKING CAPITAL
Accounts receivable $ (23,156) $ (125,905)
Inventories 7,172 4,923
Accounts payable 37,485 56,449
Accrued liabilities and other 44,255 12,039
---------- ---------
$ 65,756 $ (52,494)
========= =========
SUPPLEMENTARY DISCLOSURE:
Cash paid for interest $ 21,853 $ 16,103
========= =========
Cash paid for income taxes $ 11,430 $ 13,444
========= =========
The accompanying notes are an integral part of these statements.
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LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Lear Seating
Corporation ("the Company"), a Delaware corporation, and its wholly-owned and
majority-owned subsidiaries. Investments in less than majority-owned
businesses are generally accounted for under the equity method.
Prior to December 31, 1993, the Company was a wholly-owned subsidiary
of Lear Holdings Corporation ("Holdings"). On December 31, 1993, Holdings was
merged with and into the Company and the separate corporate existence of
Holdings ceased ("the Merger"). Prior to the Merger, Holdings had several
other wholly-owned subsidiaries, including LS Acquisition No. 14 ("LS No. 14"),
Lear Seating Holdings Corp. No. 50 ("LS No. 50") and Lear Seating Sweden, AB
("LS-Sweden"). In conjunction with the Merger, these companies became
subsidiaries of the Company. The Merger has been accounted for and reflected
in the accompanying financial statements as a merger of companies under common
control. As such, the financial statements of the Company have been restated
as if the current structure (post-Merger) had existed for all periods
presented.
(2) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined principally using the first-in, first out method. Finished goods
and work-in-process inventories include material, labor and manufacturing
overhead costs.
Inventories are comprised of the following (in thousands):
December 31, July 2,
1993 1994
---- ----
Raw materials $42,470 $51,631
Work in process 23,394 6,391
Finished goods 5,867 8,531
-------- --------
$71,731 $66,553
======= =======
(3) INITIAL PUBLIC OFFERING
On April 13, 1994, the Company consummated an initial public offering
of its common stock at a price of $15.50 per share. Of the 10,312,500 shares
offered, 7,187,500 shares were sold by the Company and 3,125,000 shares were
sold by a stockholder of the Company. The net proceeds to the Company of
approximately $104 million were used to repay a portion of the indebtedness
outstanding under the Company's existing credit facility incurred to finance
the NAB Acquisition.
Prior to the initial public offering of the Company's common stock,
the Company effected a 33-for-1 split of its outstanding common stock and
amended its Stockholders and Registration Rights Agreement to, among other
things, relax certain restrictions on transfers of common stock owned by
parties to the agreement and remove the rights of certain management investors
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LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to require the Company to redeem their stock upon certain triggering events.
All references to the numbers of shares of common stock and income per share
for all periods prior to the stock split in the accompanying financial
statements and notes thereto have been adjusted to give effect to the stock
split.
(4) ACQUISITION
On November 1, 1993, the Company purchased certain assets of the Plastics
and Trim Products Division of Ford Motor Company ("Ford") consisting of (i) the
U.S. operations that supply seat trim and trimmed seat assemblies to Ford which
are manufactured by Favesa, S.A. de C.V. ("Favesa"); (ii) all of the shares
of Favesa, a maquiladora company located in Juarez, Mexico; and (iii) certain
inventories and assets employed in the operation of Favesa (collectively
referred to as the "NAB"). In connection with this transaction, the Company
and Ford entered into a long-term supply agreement for certain products
produced by these operations at agreed upon prices. This acquisition was
accounted for as a purchase, and accordingly, the operating results of the NAB
have been included in the accompanying financial statements since the date of
acquisition.
Assuming the acquisition had taken place as of the beginning of the
periods presented and after giving effect to certain adjustments, including
certain operations adjustments consisting principally of management's best
estimates of the effects of product pricing adjustments negotiated in
connection with the acquisition and incremental ongoing NAB engineering,
overhead and administrative expenses, increased interest expense and goodwill
amortization and the related income tax effects, the consolidated pro forma
results of operations of the Company would have been as follows (unaudited, in
thousands, except per share data):
Three Months Ended Six Months Ended
June 30, 1993 June 30, 1993
------------- -------------
Net Sales $620,790 $1,201,940
Net Income 16,338 24,640
Net Income per common share 0.40 0.61
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LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) LONG-TERM DEBT
Long term debt is comprised of the following (in thousands):
December 31, July 2,
1993 1994
---- ----
Senior Debt:
German term loan $ 7,592 $ 7,303
Revolving credit loans:
Domestic 230,700 97,000
Canadian - 10,463
----------- ---------
238,292 114,766
Less - current portion (1,168) (1,217)
--------- ---------
237,124 113,549
-------- --------
Subordinated Debt:
11 1/4% Senior Notes 125,000 125,000
14 % Debentures 135,000 -
8 1/4 % Notes - 145,000
----------- --------
260,000 270,000
Note Payable 1,200 -
--------- -----------
$498,324 $383,549
======== ========
(6) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
On July 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" for its domestic plans. The effect of the adoption of this
standard for the three and six months ended July 2, 1994 was an additional
charge of approximately $1.9 million and $3.7 million, respectively. These
charges include approximately $.3 million and $.6 million, respectively, of
amortization of the net transition obligation at the date of adoption of
approximately $25.6 million for the three and six month periods ended July 2,
1994.
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits." This
statement requires that employers accrue the cost of postemployment benefits
during the employees' active service. The impact of adoption was not material
to the Company's financial position or results of operations.
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LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) NET INCOME PER COMMON SHARE
The weighted average number of shares of common stock after giving effect
to the split of the Company's common stock (Note 3) is as follows for the
periods presented:
Three Months Ended Six Months Ended
-------------------------- ---------------------------
June 30, 1993 July 2, 1994 June 30, 1993 July 2, 1994
------------- ------------ ------------- ------------
Primary 40,381,418 49,058,681 40,381,418 45,479,223
Fully Diluted 40,381,418 49,070,015 40,381,418 45,589,431
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ITEM 2 - MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended July 2, 1994 vs. Three Months Ended June 30, 1993.
Record sales of $822.1 million in the second quarter of calendar year 1994
surpassed the second quarter of calendar 1993 by $335.1 million or 68.8%.
Sales as compared to prior year benefitted from new programs in the United
States, Canada and Europe, higher volumes on mature seating programs in the
United States, and the acquisition of the North American seat and seat cover
business (NAB) from Ford Motor Company on November 1, 1993.
Sales in the United States of $499.5 million increased in the quarter
ended July 2, 1994 as compared to the second quarter of the prior year by
$280.7 million or 128.3%. Sales for the second quarter of calendar year 1994
reflect the contribution of $138.6 million in sales from the NAB acquisition,
improved domestic car and truck production on established seating programs,
incremental volume on new Chrysler truck and Ford passenger car programs and
sales generated by a lead vendor program under which the company assumed
management of components for a seat program with Ford.
Sales in Canada of $132.5 million in the second quarter of calendar 1994
exceeded the comparable period in the prior year by $31.5 million or 31.2% due
to incremental volume on a new Ford truck program introduced in February 1994
while carryover seat programs reflect modest vehicle production increases.
Partially offsetting the sales increase were lower production volumes for a
General Motors replacement mid-size passenger car introduced in the first
quarter of calendar 1994.
Sales in Europe of $137.9 million surpassed prior year by $19.1 million or
16% despite unfavorable exchange rate fluctuations in Germany and Sweden due to
the contribution of new seat programs in Germany and England and to additional
volume on existing seat programs in Germany.
Sales in Mexico of $52.2 million in the second quarter of calendar 1994
exceeded the second quarter of calendar 1993 by 7.9% as increased Chrysler
truck and Ford passenger car seat programs offset reduced General Motors
production requirements.
Gross profit (net sales less cost of sales) and gross margin (gross profit
as a percentage of net sales) were $78.6 million and 9.6% for the quarter ended
July 2, 1994 as compared to $57.8 million or 11.9% in the second quarter of
fiscal 1993. Gross profit in the second quarter of calendar 1994 benefitted
from the overall growth in domestic and foreign sales activity, including the
acquisition of NAB, productivity improvement programs and nonrecurring shutdown
costs in the prior year for a dedicated facility in Finland. Partially
offsetting the increase in gross profit were new program costs in the United
States, Canada, and England, reduced margin contribution associated with a
General Motors replacement seating program in Canada, severance costs
associated with the downsizing of German component operations and an additional
charge relating to SFAS 106 (postretirement health care expenses).
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Selling, general and administrative expenses as a percentage of net sales
declined from 4.2% in the second quarter of calendar 1993 to 2.6% for the
current quarter. Actual expenditures increased approximately $1.0 million
largely as a result of the NAB acquisition.
Operating income and operating margin were $54.3 million and 6.6% for the
second quarter of calendar 1994 as compared to $34.3 million and 7.1% a year
earlier. The increase in operating income was primarily due to higher volumes
caused by increased market demand for new and mature seating programs in North
America and Europe and the NAB acquisition. Partially offsetting the increase
in operating income were preproduction and engineering costs for future seating
programs to be introduced in the next twelve months and SFAS 106 expense.
Non-cash depreciation and amortization charges were $13.8 million and $11.1
million for the second quarter of calendar year 1994 and 1993, respectively.
During the three months ended July 2, 1994, interest expense increased
slightly from the comparable period in the prior year. A net decrease in
subordinated debt interest expense of $1.6 million due to the refinancing of
14% debentures with 8 1/4% notes was offset by interest on debt incurred to
finance the NAB acquisition.
Other expense for the quarter ended July 2, 1994, which includes state and
local taxes, foreign exchange gains and losses, equity in non-consolidated
affiliates, and miscellaneous non-operating expenses, declined slightly from
the prior year. Higher state and local tax expense in the current quarter due
to the inclusion of NAB was offset by write-offs in the prior year quarter of
non-automotive assets, resulting in the slightly favorable variance.
Net income for the second quarter was $21.1 million, or $0.43 per share, a
43.1% increase over net income of $14.8 million, or $0.37 per share, a year
ago. The first quarter subordinated debt refinancing and the Company's initial
public offering favorably affected net income for the second quarter compared
to the corresponding period in 1993. The current quarter net income reflects
an additional $1.9 million charge related to postretirement health care
expenses as well as $14.0 million additional income tax provision as compared
to the prior year quarter. The higher tax provision is a result of
significantly higher second quarter pretax earnings primarily from U.S.
operations.
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Six Months Ended July 2, 1994 vs. Six Months Ended June 30, 1993.
Sales of $1,508.9 million for the first half of calendar 1994 surpassed
the first half of calendar 1993 by $563.8 million or 59.7%. Sales for the six
month period ended July 2, 1994 benefitted from increased production build
schedules on mature domestic and foreign seating programs, new programs in
North America, and the acquisition of NAB.
Gross profit and gross margin were $128.6 million and 8.5% for the six
month period ended July 2, 1994 as compared to $98.0 million and 10.4% for the
prior year. Gross profit surpassed prior year due to incremental domestic and
foreign passenger car and truck production, including the benefit of the NAB
acquisition, which offset new program costs in North America and Europe, lost
margin contribution associated with General Motors model changeover in Canada,
severance costs associated with the downsizing of German component operations,
unfavorable product mix in Mexico and additional postretirement expense due to
SFAS 106.
Selling, general and administrative expenses for the six months ended July
2, 1994 decreased as a percentage of net sales to 2.5% from 3.7% in the
comparable period last year. Actual expenditures increased $3.2 million
principally as the result of administrative support expenses and design and
development costs associated with the expansion of customer business divisions
to support North American original equipment manufacturers.
Operating income and operating margin were $84.6 million and 5.6% for the
first half of calendar year 1994 as compared to $57.8 million and 6.1% for the
first half of calendar 1993. The increase in operating income was largely the
result of higher vehicle production in North America and Europe and the NAB
acquisition, which offset costs associated with recently opened facilities,
plant downtime in Canada and SFAS 106 expense. Non-cash depreciation and
amortization charges were $26.9 million and $20.7 million for the first half of
the current and prior calendar years, respectively.
During the six months ended July 2, 1994, interest expense increased $4.1
million to $25.0 million as compared to the six months ended June 30, 1993.
This increase was primarily due to interest expense incurred on debt used to
finance the NAB purchase. The refinancing of the 14% debentures with 8 1/4
notes during the first quarter of 1994 provided a net interest savings of
approximately $1.2 million, but was offset by higher short-term interest
expense in Europe.
Other expense for the six months ended July 2, 1994 increased by
approximately $2.0 million over the comparable period in 1993. The inclusion
of NAB in the current year contributed an additional $2.0 million in state and
local tax expense which led to the overall increase in other expense.
Net income for the six months ended July 2, 1994 was $27.7 million, or
$0.61 per share, an increase of $6.8 million or 32.4% over net income of $20.9
million, or $0.52 per share, in the comparable period in 1993. Pretax earnings
increased to $55.0 million from $34.3 million as a result of higher earnings
from mature U.S. and European operations, and from the contribution of NAB. The
improved earnings resulted in higher tax provisions in the current year six
month period.
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LIQUIDITY AND CAPITAL RESOURCES
As of July 2, 1994, the Company had a $425.0 million revolving credit
facility under which $97.0 million was borrowed and outstanding and $40.4
million was committed and outstanding under letters of credit, leaving $287.6
million unused and available. On April 13, 1994, the Company received net
proceeds of $103.7 million related to the initial public offering of its common
stock. These proceeds were used to reduce the amount outstanding under the
credit facility thereby increasing the amount unused and available under the
revolving credit facility by $103.7 million. The Company also had term loans
outstanding in Germany of approximately $7.3 million. As of July 2, 1994, the
Company had net cash and cash equivalents of $47.1 million.
Amounts available under the Credit Agreement will be reduced by $40.0
million every six months beginning October 31, 1996, and the Credit Agreement
will expire on October 31, 1998. Excluding amounts outstanding under the
Credit Agreement which will be due upon the expiration of the Credit Agreement,
the Company's scheduled principal payments for the remainder of calendar year
1994 are $.6 million and are $1.1 million in each of the next five calendar
years.
Net cash flows provided by operating activities were $8.2 million during
the six months ended July 2, 1994 compared to $96.1 million during the same
period in fiscal 1993, principally due to the change in working capital which
was partially offset by higher earnings in 1994.
The net change in working capital declined from a source of $65.8 million
for the six months ended June 30, 1993 to a use of $52.5 million for the six
months ended July 2, 1994 primarily as a result of the increase in receivable
levels caused by the 59.7% increase in net sales as well as lower than normal
receivable balances at December 31, 1993 due to plant downtime in Canada and
factored receivables in Europe. The associated increase in accounts payable
was also relatively low compared to the increase in accounts receivable and net
sales due to $27.9 million of payments being released near the end of the
second quarter of 1994 but not charged against the Company's disbursement
accounts as of the end of such period. Also contributing to the decrease in
operating cash flows were higher reimburseable preproduction development and
production tooling costs attributable to new programs. Inventory levels
declined by $5.2 million despite the significant increase in sales over the six
month period in the prior year.
In the six months ended July 2,1994, net cash used by investing activities
increased by $14.4 million to $30.5 million due to a significant number of new
programs scheduled to begin production during calendar 1994. During such
period, the Company's capital expenditures totaled $35.0 million, and the
Company currently anticipates an additional $65.0 million in capital
expenditures during the remainder of fiscal 1994.
In February, 1994, the Company took advantage of the favorable interest
rate environment by refinancing $135.0 million in aggregate principal amount of
its 14% Subordinated Debentures by issuing $145.0 million aggregate principal
amount of 8-1/4% Subordinated Notes due 2002. The additional proceeds were
used to pay a 5.4% call premium and a portion of the accrued interest due upon
the redemption of the 14% Subordinated Debentures.
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The Company believes that cash flows from operations and available credit
facilities will be sufficient to meet its debt service obligations, projected
capital expenditures and working capital requirements.
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LEAR SEATING CORPORATION
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 4, 1994, pursuant to a written consent of the holders of a
majority of the outstanding common stock of the Company, the following
resolutions were approved and adopted by the Company:
(i) Consummation of a public offering of common stock by the Company and a
selling shareholder to a group of underwriters,
(ii) Adoption of the Restated Certificate of Incorporation (filed as
Exhibit 3.3 to the Company's 1993 Transition Report on Form 10-K,
dated March 28, 1994),
(iii) Adoption of the Amended and Restated By-Laws of the Corporation (filed
as Exhibit 3.4 to the Company's Registration Statement on Form S-1
dated March 8, 1994, file No. 33-52565),
(iv) Adoption of the 1994 Stock Option Plan (filed as Exhibit 10.27 to the
Company's 1993 Transition Report on Form 10-K, dated March 28, 1994),
(v) Approval of a 33-for-1 stock split of the Company's outstanding shares
of common stock, and
(vi) Election of the Company's Board of Directors.
The following members were elected to the Company's Board of Directors to hold
office until the years indicated:
Kenneth L. Way 1995
Larry W. McCurdy 1995
Eliot Fried 1995
Robert E. Rossiter 1996
Robert W. Shower 1996
Alan Washkowitz 1996
Gian Andrea Botta 1997
David P. Spalding 1997
Jeffrey P. Hughes 1997
James A. Stern 1997
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The shareholders participating in the written consent, shares of common
stock owned as of April 4, 1994 (prior to the public offering of common stock),
and percentage of common stock owned as of April 4, 1994 are as follows:
Common Shares
Owned %
----------------- -----
Lehman Brothers Merchant Banking
Portfolio Partnership, L.P. 9,293,955 26.1
Lehman Brothers Capital Partners II, L.P. 6,317,124 17.8
Lehman Brothers Offshore Investment
Partnership, L.P. 2,555,157 7.2
Lehman Brothers Offshore Investment
Partnership - Japan, L.P. 7,708,701 21.7
FIMA Finance Management, Inc. 8,635,044 24.3
---------- -----
34,509,981 97.1%
========== =====
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is required to be filed as part of this report:
10.1 Second Amendment to the Amended and Restated Credit Agreement,
dated as of June 29, 1994.
(b) No reports on form 8-K were filed during the quarter ended July 2, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEAR SEATING CORPORATION
Dated: August 15, 1994 By: /s/ James H. Vandenberghe
--------------------------------
James H. Vandenberghe
Executive Vice President
Chief Financial Officer
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LEAR SEATING CORPORATION
FORM 10-Q
EXHIBIT INDEX
FOR THE QUARTER ENDED JULY 2, 1994
Exhibit
Number
10. Material contracts
10.1. Second Amendment to the Amended and Restated Credit Agreement,
dated as of June 29, 1994.
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