Lear Corp. (LEA, Financial) filed Quarterly Report for the period ended 2009-07-04.
Lear Corporation one of the largest independent automotive suppliers in the world. It is also one of the leading suppliers of automotive interior systems in automotive interior market and suppliers in the automotive electrical distribution systems market. It has established in-house capabilities in all five principal segments of the automotive interior market: seat systems; flooring and acoustic systems; door panels; headliners; and instrument panels. Lear Corp. has a market cap of $30.23 million; its shares were traded at around $0.48 .
In the three and six months ended July 4, 2009, we incurred fees and expenses related to our capital restructuring of $15 million and $21 million, respectively. In addition, in the three and six months ended July 4, 2009, we recognized tax benefits of $8 million and $18 million, respectively, related to reductions in recorded tax reserves, as well as tax expense of $4 million and $10 million, respectively, related to the establishment of valuation allowances in certain foreign subsidiaries in the first half of 2009.
Net sales in the second quarter of 2009 were $2.3 billion as compared to $4.0 billion in the second quarter of 2008, a decrease of $1.7 billion or 42.7%. Lower industry production volumes in North America and Europe, as well as the impact of net foreign exchange rate fluctuations, negatively impacted net sales by $1.4 billion and $248 million, respectively.
Gross profit and gross margin were $35 million and 1.5% in the quarter ended July 4, 2009, as compared to $261 million and 6.6% in the quarter ended June 28, 2008. Lower industry production volumes reduced gross profit by $298 million. The benefit of our productivity and restructuring actions was partially offset by the impact of net selling price reductions.
The provision for income taxes was $14 million for the second quarter of 2009, representing an effective tax rate of negative 9.1% on a pretax loss of $154 million, as compared to $38 million for the second quarter of 2008, representing an effective tax rate of 60.2% on pretax income of $62 million. The provision for income taxes in the second quarter of 2009 primarily relates to profitable foreign operations, as well as withholding taxes on royalties and dividends paid by our foreign subsidiaries. In addition, we incurred losses in several countries that provided no tax benefits due to valuation allowances on our deferred tax assets in those countries. The provision was also impacted by a portion of our restructuring charges, for which no tax benefit was provided as the charges were incurred in certain countries for which no tax benefit is likely to be realized due to a history of operating losses in those countries. Additionally, the provision was impacted by tax benefits of $8 million, including interest, related to reductions in recorded tax reserves and tax expense of $4 million related to the establishment of valuation allowances in certain foreign subsidiaries. The provision for income taxes in the second quarter of 2008 was impacted by a portion of our restructuring charges, for which no tax benefit was provided as the charges were incurred in certain countries for which no tax benefit is likely to be realized due to a history of operating losses in those countries. Excluding these items, the effective tax rate in the second quarter of 2009 and 2008 approximated the U.S. federal statutory income tax rate of 35% adjusted for income taxes on foreign earnings, losses and remittances, foreign and U.S. valuation allowances, tax credits, income tax incentives and other permanent items.
Net income (loss) attributable to Lear in the second quarter of 2009 was ($174) million, or ($2.24) per diluted share, as compared to $18 million, or $0.23 per diluted share, in the second quarter of 2008, for the reasons described above.
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Lear Corporation one of the largest independent automotive suppliers in the world. It is also one of the leading suppliers of automotive interior systems in automotive interior market and suppliers in the automotive electrical distribution systems market. It has established in-house capabilities in all five principal segments of the automotive interior market: seat systems; flooring and acoustic systems; door panels; headliners; and instrument panels. Lear Corp. has a market cap of $30.23 million; its shares were traded at around $0.48 .
Highlight of Business Operations:
On July 6, 2009, the Debtors entered into a credit and guarantee agreement by and among Lear, as borrower, and the other guarantors named therein, JPMorgan Chase Bank, N.A., as administrative agent, and each of the lenders party thereto (the DIP Agreement). The DIP Agreement provides for new money debtor-in-possession financing comprised of a term loan in the aggregate principal amount of $500 million (the DIP Facility). On August 4, 2009, the Bankruptcy Court entered an order approving the DIP Agreement. The closing of the DIP Facility occurred on August 4, 2009, and as of August 5, 2009, the Debtors have access to $500 million in debtor-in-possession financing. Upon the Debtors emergence from bankruptcy proceedings, subject to certain conditions, the DIP Facility is convertible, at our option, into an exit facility of up to $500 million (the Exit Facility), comprised of a term loan in an aggregate principal amount equal to the principal amount of the term loans outstanding under the DIP Agreement at the time of conversion. For further information regarding the DIP Agreement and the Exit Facility, see Liquidity and Capital Resources Capitalization DIP Agreement and Exit Facility.In the three and six months ended July 4, 2009, we incurred fees and expenses related to our capital restructuring of $15 million and $21 million, respectively. In addition, in the three and six months ended July 4, 2009, we recognized tax benefits of $8 million and $18 million, respectively, related to reductions in recorded tax reserves, as well as tax expense of $4 million and $10 million, respectively, related to the establishment of valuation allowances in certain foreign subsidiaries in the first half of 2009.
Net sales in the second quarter of 2009 were $2.3 billion as compared to $4.0 billion in the second quarter of 2008, a decrease of $1.7 billion or 42.7%. Lower industry production volumes in North America and Europe, as well as the impact of net foreign exchange rate fluctuations, negatively impacted net sales by $1.4 billion and $248 million, respectively.
Gross profit and gross margin were $35 million and 1.5% in the quarter ended July 4, 2009, as compared to $261 million and 6.6% in the quarter ended June 28, 2008. Lower industry production volumes reduced gross profit by $298 million. The benefit of our productivity and restructuring actions was partially offset by the impact of net selling price reductions.
The provision for income taxes was $14 million for the second quarter of 2009, representing an effective tax rate of negative 9.1% on a pretax loss of $154 million, as compared to $38 million for the second quarter of 2008, representing an effective tax rate of 60.2% on pretax income of $62 million. The provision for income taxes in the second quarter of 2009 primarily relates to profitable foreign operations, as well as withholding taxes on royalties and dividends paid by our foreign subsidiaries. In addition, we incurred losses in several countries that provided no tax benefits due to valuation allowances on our deferred tax assets in those countries. The provision was also impacted by a portion of our restructuring charges, for which no tax benefit was provided as the charges were incurred in certain countries for which no tax benefit is likely to be realized due to a history of operating losses in those countries. Additionally, the provision was impacted by tax benefits of $8 million, including interest, related to reductions in recorded tax reserves and tax expense of $4 million related to the establishment of valuation allowances in certain foreign subsidiaries. The provision for income taxes in the second quarter of 2008 was impacted by a portion of our restructuring charges, for which no tax benefit was provided as the charges were incurred in certain countries for which no tax benefit is likely to be realized due to a history of operating losses in those countries. Excluding these items, the effective tax rate in the second quarter of 2009 and 2008 approximated the U.S. federal statutory income tax rate of 35% adjusted for income taxes on foreign earnings, losses and remittances, foreign and U.S. valuation allowances, tax credits, income tax incentives and other permanent items.
Net income (loss) attributable to Lear in the second quarter of 2009 was ($174) million, or ($2.24) per diluted share, as compared to $18 million, or $0.23 per diluted share, in the second quarter of 2008, for the reasons described above.
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