<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 1995
REGISTRATION NO. 33-61583
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
LEAR SEATING CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3386776
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
21557 TELEGRAPH ROAD
SOUTHFIELD, MICHIGAN 48034
(810) 746-1500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
JAMES H. VANDENBERGHE
21557 TELEGRAPH ROAD
SOUTHFIELD, MICHIGAN 48034
(810) 746-1500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copies to:
<TABLE>
<S> <C>
Robert W. Ericson David Mercado
John L. MacCarthy Cravath, Swaine & Moore
Winston & Strawn 825 Eighth Avenue
35 W. Wacker Drive New York, New York 10019
Chicago, Illinois 60601 (212) 474-1000
(312) 558-5600
</TABLE>
---------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF NUMBER OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE SHARES TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1)(2) PER SHARE(1)(3) PRICE(1)(3) FEE(1)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value........... 5,750,000 $29.69 $170,717,500 $58,869
--------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) The total number of shares of Common Stock to be registered is 23,000,000,
consisting of 5,750,000 for which the Registration Fee is being paid at the
time of filing this Amendment No. 2 and 17,250,000 shares for which the
Registration Fee of $159,860 was previously paid at the time the
Registration Statement was filed on August 4, 1995.
(2) Includes 750,000 shares to cover the Underwriters' over-allotment options.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) on the basis of the average of the high and low prices
reported on the New York Stock Exchange Composite Tape on September 18,
1995.
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--------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTES
This Registration Statement covers the registration of 23,000,000 shares of
Common Stock, $.01 par value per share, of Lear for sale in underwritten public
offerings (the "Offerings") in the United States and Canada (the "U.S.
Offering") and outside the United States and Canada (the "International
Offering"). The complete Prospectus relating to the U.S. Offering (the "U.S.
Offering Prospectus") follows immediately after these Explanatory Notes.
Following the U.S. Offering Prospectus is an alternate cover page and alternate
back cover page for the Prospectus to be used in the International Offering (the
"International Prospectus"). Otherwise, the International Prospectus will be
identical to the U.S. Offering Prospectus.
<PAGE> 3
PROSPECTUS
20,000,000 Shares
[LEAR LOGO]
COMMON STOCK
---------------------------
Of the 20,000,000 shares of Common Stock ("Common Stock") of Lear Seating
Corporation ("Lear" or the "Company") being offered hereby, 10,000,000 shares
are being offered by the Company and 10,000,000 shares are being offered by
certain stockholders of the Company (the "Selling Stockholders"). See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders. Of the 20,000,000 shares of Common
Stock being offered hereby, 16,000,000 shares are being offered initially in the
United States and Canada by the U.S. Underwriters (the "U.S. Offering") and
4,000,000 shares are being offered initially outside the United States and
Canada by the International Managers (the "International Offering" and, together
with the U.S. Offering, the "Offerings"). The public offering price and
underwriting discounts and commissions per share are identical for both
Offerings. See "Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "LEA." On September 19, 1995, the reported last sale price of the
Common Stock on the New York Stock Exchange Composite Tape was $29 3/8 per
share.
SEE "RISK FACTORS" ON PAGE 9 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
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Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
-------------------------------------------------------------------------------------------------------
Per Share.............................. $29.25 $0.95 $28.30 $28.30
-------------------------------------------------------------------------------------------------------
Total(3)............................... $585,000,000 $19,000,000 $283,000,000 $283,000,000
-------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Lear and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters, the International Managers and certain other persons against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by Lear estimated at $2,000,000.
(3) The Selling Stockholders have granted the U.S. Underwriters and the
International Managers a 30-day option to purchase up to an aggregate of
3,000,000 additional shares of Common Stock on the same terms and conditions
as set forth above solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $672,750,000,
$21,850,000 and $367,900,000, respectively. See "Underwriting."
---------------------------
The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of certificates for shares will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about September 25, 1995.
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SCHRODER WERTHEIM & CO.
September 20, 1995
<PAGE> 4
[LEAR SEATING CORPORATION LOGO]
[Photo of Chevrolet Cavalier]
[Photo of Surebond(TM) SEAT]
[Photos of Interior Trim Components]
[Photos of Ford Windstar Interior]
<PAGE> 5
[Photo of Fiat Punto Interior]
[Photo of Fiat Punto]
[Photo of Interior Components]
[Photo of Shaker Table]
[HIGH-IMPACT, CUSTOMER-FOCUSED TECHNOLOGY.
Lear Seating Corporation is dedicated to
providing its customers with world-class
products and services. From its Technical
Centers in Southfield and Rochester Hills,
Michigan, and Turin, Italy, reseach, advanced
engineering and testing focus on future
products for the world market. These centers
demonstrate Lear's ongoing commitment as a
technology leader and as a Tier 1 interior
systems supplier.]
[Photo of Crash Sled] [Photo of Side Entry Durability Test]
<PAGE> 6
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DURING THE OFFERINGS, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK OF THE COMPANY PURSUANT TO EXEMPTIONS
FROM RULES 10b-6, 10b-7, AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
-------------------------
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement ("Registration Statement") (which term encompasses any amendments
thereto) and the exhibits thereto filed by the Company with the Commission, as
well as the reports and other information filed by the Company with the
Commission, may be inspected at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and are also available for inspection and copying at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and at the New York Stock Exchange located
at 20 Broad Street, New York, New York 10005. Copies of such material may also
be obtained from the Public Reference Section of the Commission at 450 First
Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement or
to a document incorporated by reference herein, reference is hereby made to the
exhibit for a more complete description of the matter involved and each such
statement shall be deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference and made a part hereof:
(a) the Company's Annual Report on Form 10-K for the year ended December 31,
1994;
(b) the Company's Quarterly Report on Form 10-Q for the period ended April 1,
1995;
(c) the Company's Quarterly Report on Form 10-Q for the period ended July 1,
1995;
(d) the Company's Current Report on Form 8-K dated December 15, 1994, as amended
by its Form 8-K/A filed on February 28, 1995 and its Form 8-K/A filed on
August 11, 1995;
(e) the Company's Current Report on Form 8-K filed on August 28, 1995; and
(f) the Company's Registration Statement on Form 8-A filed on April 1, 1994, as
amended by Amendment No. 1 on Form 8-A/A filed on April 5, 1994.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the Offerings shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in any subsequently filed document which is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to the Company's principal
office: Lear Seating Corporation, 21557 Telegraph Road, Southfield, Michigan
48034, Attention: Secretary (telephone: (810) 746-1500).
2
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere or
incorporated by reference in this Prospectus. As used in this Prospectus, unless
the context otherwise requires, the "Company" or "Lear" refers to Lear Seating
Corporation and its consolidated subsidiaries. Unless otherwise indicated, all
information contained in this Prospectus is based on the assumption that the
Underwriters' over-allotment option is not exercised. Unless the context
otherwise requires, the description of the Company's business included in this
Prospectus does not include AIH.
THE COMPANY
GENERAL
Lear Seating Corporation is the largest supplier of automotive seat systems
in the world. The Company's principal products include finished automobile and
light truck seat systems, seat frames, seat covers and other seat components.
The Company's seat systems, which are designed, manufactured and assembled at
the Company's manufacturing facilities, are shipped to customer assembly plants
on a sequential just-in-time basis. As of July 1, 1995, the Company employed
approximately 26,000 people in 18 countries and operated 82 manufacturing,
research, design, engineering, testing and administration facilities. The
Company's sales have grown rapidly, both internally and through acquisitions,
from approximately $159.8 million in the fiscal year ended June 30, 1983 to
approximately $3.1 billion in the year ended December 31, 1994, a compound
annual growth rate of approximately 30%.
With the acquisition of Automotive Industries Holding, Inc. ("AIH") in
August 1995, the Company has become the largest independent Tier I supplier of
automotive seat and interior systems to the North American and European vehicle
markets. AIH is a leading designer and manufacturer of high quality interior
trim systems and blow molded products principally for North American and
European car and light truck manufacturers.
STRATEGY
The Company's strategy is to capitalize on two significant trends in the
automotive industry: (i) the outsourcing of automotive components and systems by
original equipment manufacturers ("OEMs"); and (ii) the consolidation and
globalization of the OEMs' supply base. Outsourcing of interior components and
systems has increased in response to competitive pressures on OEMs to improve
quality and reduce capital needs, costs of labor, overhead and inventory.
Consolidation among automotive industry suppliers has occurred as OEMs have more
frequently awarded long-term sole source contracts to the most capable global
suppliers. Increasingly, the criteria for selection include not only cost,
quality and responsiveness, but also certain full-service capabilities including
design, engineering and project management support.
Elements of the Company's strategy include:
- Strong Relationships with the OEMs. The Company's management has
developed strong relationships with its 17 OEM customers which allow Lear
to identify business opportunities and customer needs in the early stages
of vehicle design. Management believes that working closely with OEMs in
the early stages of designing and engineering seat systems gives it a
competitive advantage in securing new business. Lear maintains an excellent
reputation with the OEMs for timely delivery and customer service and for
providing world class quality at competitive prices.
- Product Technology and Product Design Capability. Lear has made
substantial investments in product technology and product design capability
to support its products. The Company maintains two advanced technical
centers (in Southfield, Michigan and Turin, Italy) where it develops and
tests current and future products to determine compliance with safety
standards, quality and durability, response to environmental conditions and
user wear and tear. At its 12 customer-dedicated engineering centers,
specific program applications are developed and tested. The Company has
also made substantial investments in advanced computer aided design,
engineering and manufacturing systems.
- Lean Manufacturing Philosophy. Lear's "lean manufacturing"
philosophy seeks to eliminate waste and inefficiency in its own operations
and in those of its customers and suppliers. The Company, whose facilities
are linked by computer directly to those of its suppliers and customers,
receives
3
<PAGE> 8
components from its suppliers on a just-in-time basis, and delivers seat
systems and components to its customers on a sequential just-in-time basis,
which provides products to an OEM's manufacturing facility in the color and
order in which the products are used. This process minimizes inventories
and fixed costs for both the Company and its customers and enables the
Company to deliver products on as little as 90 minutes' notice.
- Global Presence. Due to significant cost savings and improved
product quality and consistency, OEMs have increasingly required their
suppliers to manufacture seat systems and other components in multiple
geographic markets. By expanding its operations outside the United States,
Lear provides its products on a global basis to its OEM customers. For the
six months ended July 1, 1995 approximately 54% of the Company's sales were
outside the United States.
- Growth Through Strategic Acquisitions. Strategic acquisitions have
been, and management believes will continue to be, an important element in
the Company's growth worldwide and in its efforts to capitalize on
automotive industry trends. These acquisitions complement Lear's existing
capabilities and provide new growth opportunities. The Company's recent
acquisitions have expanded its OEM customer base and worldwide presence and
enhanced its relationships with existing customers. The acquisition of AIH
(the "AIH Acquisition") has also given the Company a significant presence
in the non-seating segment of the automobile and light truck interior
market.
Implementation of the Company's strategy has resulted in rapid growth of
the Company's net sales from approximately $159.8 million in the fiscal year
ended June 30, 1983 to approximately $3.1 billion in the year ended December 31,
1994, a compound annual growth rate of approximately 30%. This increase in sales
has been achieved through internal growth as well as through acquisitions. In
1994, the Company held a leading 38% share of the estimated $4.8 billion North
American outsourced seat systems market and a 27% share of the estimated $6.8
billion total seat systems market. After giving pro forma effect to the
acquisition of the primary automotive seat systems supplier to Fiat S.p.A. (the
"FSB Acquisition"), the Company's share in 1994 of the estimated $2.4 billion
European outsourced seat systems market would have been a leading 33% and its
share of the estimated $4.5 billion total seat systems market would have been
18%. The Company's North American content per vehicle has increased from $12 in
1983 to $169 in 1994. In Europe, the Company's content per vehicle has grown
from $3 in 1983 to $80 in 1994 after giving pro forma effect to the FSB
Acquisition.
RECENT ACQUISITIONS
In August 1995, the Company purchased AIH for an aggregate purchase price
of $926.4 million (including the assumption of $282.3 million of AIH's existing
indebtedness and the payment of fees and expenses in connection with the
acquisition). The acquisition of AIH, a leading designer and manufacturer of
high quality interior trim systems and blow molded products principally for
North American and European car and light truck manufacturers, positions the
Company as the largest, independent Tier I supplier of automotive seat and
interior systems to the estimated $22 billion North American and European total
light vehicle interior market. AIH's sales have grown rapidly, both internally
and through acquisitions, from approximately $209.5 million in 1991 to
approximately $512.8 million in 1994, a compound annual growth rate of
approximately 35%. As a result of the AIH Acquisition, Lear is able to provide
OEMs with a complete portfolio of interior systems and components and the
ability to manage the design, manufacture and supply of the total car and light
truck interior. In the near-term, the Company intends to operate AIH as a
separate division, using Lear's existing relationships with the OEMs to expand
AIH's business. Management believes that as the outsourcing and supplier
consolidation trends continue, the OEMs will increasingly seek global suppliers
to provide total interiors, including seat systems, resulting in greater
integration of Lear's and AIH's businesses and long-term growth opportunities
for the Company.
Since 1990, Lear has completed five additional strategic acquisitions. In
December 1994, the Company completed the FSB Acquisition, establishing Lear as
the market leader in automotive seat systems in Europe. In 1993, the Company
significantly expanded its operations in North America by purchasing certain
portions of the North American seat cover and seat systems business (the "NAB")
of Ford (the "NAB Acquisition"). In 1991 and 1992, the Company acquired the seat
systems businesses of Saab in Sweden and Finland and of Volvo in Sweden.
The Company's principal executive offices are located at 21557 Telegraph
Road, Southfield, Michigan 48034. Its telephone number at that location is (810)
746-1500.
4
<PAGE> 9
THE OFFERINGS
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<S> <C>
Common Stock offered by:
The Company........................... 10,000,000 shares
The Selling Stockholders.............. 10,000,000 shares
----------
Total Common Stock offered......... 20,000,000 shares
==========
Common Stock offered for sale in:
U.S. Offering......................... 16,000,000 shares
International Offering................ 4,000,000 shares
Common Stock to be outstanding after the
Offerings............................. 56,223,011 shares(1)
NYSE Symbol ............................ LEA
Use of Proceeds......................... The net proceeds to the Company from the Offerings
will be used to repay a portion of the indebtedness
outstanding under the New Credit Agreement (as
defined herein) incurred to finance the AIH
Acquisition. The Company will not receive any
proceeds from the sale of Common Stock by the
Selling Stockholders.
</TABLE>
-------------------------
(1) Excludes 4,280,805 shares of Common Stock issuable upon exercise of options
outstanding as of September 19, 1995 and granted pursuant to (i) stock
option agreements between the Company and certain management investors, (ii)
the Company's 1992 Stock Option Plan and (iii) the Company's 1994 Stock
Option Plan. Also excludes 229,405 shares of Common Stock issuable upon
exercise of options (collectively with the options referred to in the
preceding sentence, the "Options") originally granted under the Automotive
Industries Holding, Inc. 1992 Key Employee Stock Option Plan which were
converted into options to purchase Common Stock in connection with the AIH
Acquisition.
RISK FACTORS
Investment in the Company's Common Stock involves certain risks discussed
under "Risk Factors" that should be considered by prospective investors.
5
<PAGE> 10
SUMMARY FINANCIAL DATA OF THE COMPANY
The following summary consolidated financial information and other data
were derived from the consolidated financial statements of the Company. The
consolidated financial statements of the Company for each of the fiscal years
ended December 31, 1994 and 1993 and June 30, 1993 and 1992 have been audited by
Arthur Andersen LLP. The consolidated financial statements of the Company for
the six months ended July 1, 1995 and July 2, 1994 are unaudited; however, in
the Company's opinion, they reflect all adjustments, consisting only of normal
recurring items, necessary for a fair presentation of the financial position and
results of operations of such periods. The results for the six months ended July
1, 1995 are not necessarily indicative of the results to be expected for the
full fiscal year. The summary financial data below should be read in conjunction
with the other financial data of the Company included in this Prospectus, the
consolidated financial statements of the Company and the notes thereto
incorporated by reference in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company."
LEAR SEATING CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED
-------------------- ----------------------------------------------------
JULY 1, JULY 2, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1994 1994 1993 1993 1992
-------- -------- ------------ ------------ -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales....................... $2,186.1 $1,508.9 $3,147.5 $1,950.3 $1,756.5 $1,422.7
Operating income................ 114.9 84.6 169.6 79.6 81.1 56.8
Net income (loss)(1)............ 45.9 27.7 59.8 (13.8) 10.1 (22.2)
Net income (loss) per
share(1)...................... .92 .61 1.26 (.39) .25 (.80)
BALANCE SHEET DATA:
Total assets.................... $1,855.1 $1,217.2 $1,715.1 $1,114.3 $ 820.2 $ 799.9
Long-term debt.................. 460.1 383.5 418.7 498.3 321.1 348.3
Stockholders' equity............ 246.5 184.0 213.6 43.2 75.1 49.4
OTHER DATA:
EBITDA(2)....................... $ 152.0 $ 111.5 $ 225.7 $ 122.2 $ 121.8 $ 91.8
Capital expenditures............ 42.6 35.0 103.1 45.9 31.6 27.9
North American content per
vehicle(3).................... 193 159 169 112 98 94
European content per
vehicle(4).................... 90 38 48 38 37 21
</TABLE>
-------------------------
(1) After extraordinary charges of $11.7 million and $5.1 million ($.33 and $.18
per share) for the fiscal years ended December 31, 1993 and June 30, 1992,
respectively, relating to the early extinguishment of debt.
(2) "EBITDA" is operating income plus amortization and depreciation. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles.
(3) "North American content per vehicle" is the Company's net sales in North
America divided by total North American vehicle production. "North American
vehicle production" comprises car and light truck production in the United
States, Canada and Mexico estimated by the Company from industry sources.
(4) "European content per vehicle" is the Company's net sales in Western Europe
divided by total Western European vehicle production. "Western European
vehicle production" comprises car and light truck production in Western
Europe estimated by the Company from industry sources.
6
<PAGE> 11
SUMMARY FINANCIAL DATA OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
The following summary consolidated financial information and other data
were derived from the consolidated financial statements of AIH. The consolidated
financial statements of AIH for each fiscal year presented have been audited by
Arthur Andersen LLP. The consolidated financial statements of AIH for the six
months ended July 1, 1995 and July 2, 1994 are unaudited; however, in the
opinion of AIH's management, they reflect all adjustments, consisting only of
normal recurring items, necessary for a fair presentation of the financial
position and results of operations of such periods. The results for the six
months ended July 1, 1995 are not necessarily indicative of the results to be
expected for the full fiscal year. The summary financial data below should be
read in conjunction with the other financial data of AIH included in this
Prospectus, the consolidated financial statements of AIH and the notes thereto
incorporated by reference in this Prospectus and "Management's Discussion and
Analysis of Results of Operations of Automotive Industries Holding, Inc."
AUTOMOTIVE INDUSTRIES HOLDING, INC.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED
--------------------- ----------------------------------------
JULY 1, JULY 2, DECEMBER 31, JANUARY 1, DECEMBER 26,
1995 1994 1994 1994 1992
-------- -------- ------------ ---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................... $ 377.1 $ 236.8 $512.8 $348.7 $272.4
Operating income............................ 45.5 31.8 63.9 47.1 36.5
Net income(1)............................... 21.9 16.8 32.7 24.0 6.9
BALANCE SHEET DATA:
Total assets................................ $ 611.3 $ 461.0 $567.4 $338.5 $233.7
Long-term debt.............................. 221.1 154.0 216.9 93.8 75.8
Stockholders' equity........................ 241.3 207.2 219.9 189.7 109.8
OTHER DATA:
EBITDA...................................... $ 60.4 $ 41.9 $ 85.8 $ 63.0 $ 48.6
Capital expenditures........................ 30.8 18.6 40.5 22.4 8.9
</TABLE>
-------------------------
(1) Net of a preferred stock dividend of $1.0 million and an extraordinary item
relating to the early extinguishment of debt of $8.3 million in the fiscal
year ended December 26, 1992.
7
<PAGE> 12
SUMMARY PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL DATA
The following summary pro forma unaudited consolidated financial and other
data were derived from and should be read in conjunction with the pro forma
unaudited consolidated financial data included elsewhere in this Prospectus. The
following summary pro forma unaudited consolidated operating data of the Company
were prepared to illustrate the estimated effects of (i) the AIH Acquisition
(including the refinancing of certain debt of AIH with borrowings under a $1.5
billion secured revolving credit agreement with Chemical Bank and a syndicate of
financial institutions (the "New Credit Agreement")), (ii) the FSB Acquisition,
(iii) certain acquisitions completed by AIH prior to the acquisition of AIH by
the Company, (iv) the initial public offering of Common Stock by the Company
(the "IPO") and the application of the net proceeds therefrom in April 1994, (v)
the refinancing of the Company's 14% Subordinated Debentures due 2000 (the
"Subordinated Debentures") with its 8 1/4% Subordinated Notes due 2002, (vi) the
refinancing of the Company's prior $500 million credit facility (the "Prior
Credit Facility") with borrowings under the New Credit Agreement and (vii) the
Offerings contemplated hereby and the application of the net proceeds to the
Company therefrom to repay indebtedness incurred pursuant to the New Credit
Agreement to finance the AIH Acquisition (collectively, the "Pro Forma
Transactions"), as if the Pro Forma Transactions had occurred on January 1,
1994. The following summary pro forma unaudited consolidated balance sheet data
were prepared as if the AIH Acquisition, the acquisition of Plastifol GmbH & Co.
KG ("Plastifol") by AIH and the Offerings contemplated hereby and the
application of the net proceeds therefrom to repay indebtedness incurred
pursuant to the New Credit Agreement to finance the AIH Acquisition had occurred
as of July 1, 1995. The following summary pro forma unaudited consolidated
financial data do not purport to represent (i) the actual results of operations
or financial condition of the Company had the Pro Forma Transactions occurred on
the dates assumed or (ii) the results to be expected in the future.
<TABLE>
<CAPTION>
AS OF OR AS OF OR
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE AND CONTENT PER VEHICLE
DATA)
<S> <C> <C>
OPERATING DATA:
Net sales.................................................... $2,612.3 $ 4,355.6
Operating income............................................. 164.1 227.1
Net income................................................... 56.8 59.6
Net income per share......................................... .95 1.00
BALANCE SHEET DATA:
Total assets................................................. $2,954.2
Long-term debt............................................... 1,109.2
Stockholders' equity......................................... 526.7
OTHER DATA:
EBITDA....................................................... $ 222.6 $ 334.5
Capital expenditures......................................... 73.4 151.0
North American content per vehicle(1)........................ 231 205
</TABLE>
-------------------------
(1) "North American content per vehicle" is the Company's pro forma net sales in
North America divided by total North American vehicle production. "North
American vehicle production" comprises car and light truck production in the
United States, Canada and Mexico estimated by the Company from industry
sources.
8
<PAGE> 13
RISK FACTORS
A potential investor should consider carefully all of the information
contained in this Prospectus before deciding whether to purchase the Common
Stock offered hereby and, in particular, should consider the following:
LEVERAGE
Substantially all the funds needed to finance the Company's recent
acquisitions, including the FSB Acquisition and the AIH Acquisition, were raised
through borrowings. As a result, the Company has debt that is substantial in
relation to its stockholders' equity and a significant portion of the Company's
cash flow from operations will be used to service its debt obligations. As of
July 1, 1995, after giving effect to the Pro Forma Transactions, the Company had
total debt of $1,134.0 million and stockholders' equity of $526.7 million,
producing a total capitalization of $1,660.7 million, so that total debt as a
percentage of total capitalization was 68.3%.
The Company's high leverage may have consequences, including the following:
(i) the ability of the Company to obtain additional financing for working
capital, capital expenditures and debt service requirements or other purposes
may be impaired; (ii) the Company may be more highly leveraged than companies
with which it competes, which may place it at a competitive disadvantage; and
(iii) the Company may be more vulnerable in the event of a downturn in its
business or in the economy generally. If the Company is unable to generate
sufficient cash flow to service its debt obligations, it will have to adopt one
or more alternatives, such as reducing or delaying planned expansion and capital
expenditures, selling assets, restructuring debt or obtaining additional equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms.
In addition, because certain of the Company's obligations under the New
Credit Agreement bear interest at floating rates, an increase in interest rates
could adversely affect the Company's ability to service its debt obligations. As
of July 1, 1995, the Company was not a party to any interest rate swaps or
similar arrangements; however, in the future the Company may determine to enter
into such arrangements with respect to all or a portion of its floating rate
debt. Although any interest rate swaps or similar arrangements entered into by
the Company would effectively cap or fix associated interest rates, such
arrangements could have the effect of increasing total interest expense.
CYCLICAL NATURE OF AUTOMOTIVE INDUSTRY
The Company's principal operations are directly related to domestic and
foreign automotive vehicle production. Automobile sales and production are
cyclical and can be affected by the strength of a country's general economy and
by other factors. A decline in automotive sales and production could result in a
decline in the Company's sales.
RELIANCE ON MAJOR CUSTOMERS AND SELECTED CAR MODELS
Two of the Company's customers, Ford and General Motors, accounted for
approximately 39% and 36%, respectively, of the Company's net sales during
fiscal 1994. After giving effect to the AIH Acquisition and the FSB Acquisition,
sales to Ford and General Motors will continue to represent a similar
substantial portion of the Company's total sales. Although the Company has
purchase orders from many of its customers, such purchase orders generally
provide for supplying the customers' annual requirements for a particular model
or assembly plant, renewable on a year-to-year basis, rather than for
manufacturing a specific quantity of products. In addition, certain of the
Company's manufacturing and assembly plants are dedicated to a single customer's
automobile assembly plant. The customer's decision to close any such plant would
require the Company to obtain alternate supply agreements, relocate existing
business to such facility or close such facility. To date, neither model
discontinuances nor plant closings have had a material adverse effect on the
Company because of the breadth of the Company's product lines and the ability of
the Company to relocate its facilities with minimal capital expenditures. There
can be no assurances that the Company's loss of business
9
<PAGE> 14
with respect to either a particular automobile model or a particular assembly
plant would not have a material adverse effect on the Company's results of
operations or financial condition in the future.
There is substantial and continuing pressure from the major OEMs to reduce
costs, including costs associated with outside suppliers such as the Company.
Management believes that the Company's ability to develop new products and to
control its own costs, many of which are variable, will allow the Company to
remain competitive. However, there can be no assurance that the Company will be
able to improve or maintain its gross margins.
CONTROL BY LEHMAN BROTHERS HOLDINGS INC.
Certain merchant banking partnerships (the "Lehman Funds") affiliated with
Lehman Brothers Holdings Inc. own an aggregate of approximately 56% of the
outstanding Common Stock. Upon the closing of the Offerings, in which they will
participate as Selling Stockholders, the Lehman Funds will own an aggregate of
approximately 32% of the outstanding Common Stock (in each case, assuming no
Options are exercised and the Underwriters' over-allotment option is not
exercised). Pursuant to an agreement with Lehman Brothers Holdings Inc., The
Cypress Group L.L.C. provides consulting services to Lehman Brothers Holdings
Inc. with respect to the management of the equity investments of the Lehman
Funds, including the Lehman Funds' investment in Lear. After the Offerings,
employees of Lehman Brothers Holdings Inc. and The Cypress Group L.L.C. will
continue to occupy five of the ten seats on the Company's Board of Directors. As
a result of their stock ownership and representation on the Company's Board of
Directors, the Lehman Funds have the ability to control the affairs and policies
of the Company.
RESTRICTIONS ON DIVIDENDS
The Company's ability to pay dividends to holders of Common Stock is
limited under the terms of the New Credit Agreement and of the indentures (the
"Indentures") governing its 11 1/4% Senior Subordinated Notes due 2000 (the
"Senior Subordinated Notes") and its 8 1/4% Subordinated Notes due 2002 (the
"Subordinated Notes"). The Company does not intend to pay any cash dividends in
the foreseeable future. See "Common Stock Price Range and Dividends."
FOREIGN EXCHANGE RISK
As a result of recent acquisitions, including the acquisitions of the
primary automotive seat systems supplier to Fiat S.p.A. ("FSB"), John Cotton
Limited and Plastifol, and the Company's business strategy, which includes plans
for the global expansion of its operations, a significant portion of the
Company's revenues and expenses are denominated in currencies other than U.S.
dollars. Changes in exchange rates therefore may have a significant effect on
the Company's results of operations and financial condition.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and by-laws, as well as provisions of the Delaware General Corporation Law, may
have the effect of delaying, deterring or preventing transactions involving a
change of control of the Company, including transactions in which stockholders
might otherwise receive a substantial premium for their shares over then current
market prices, and may limit the ability of stockholders to approve transactions
that they may deem to be in their best interests. For example, under the
Restated Certificate of Incorporation, the Board of Directors is authorized to
issue one or more classes of preferred stock having such designations, rights
and preferences as may be determined by the Board of Directors. In addition, the
Board of Directors is divided into three classes, each having a term of three
years, with the term of one class expiring each year. A director may be removed
from office only for cause. These provisions could delay the replacement of a
majority of the Board of Directors and have the effect of making changes in the
Board of Directors more difficult than if such provisions were not in place.
Further, Section 203 of the Delaware General Corporation Law restricts certain
business combinations with any "interested stockholder" as defined in such law.
The current stockholders of the Company are not, by virtue of their current
holdings, deemed to be "interested stockholders" under this statute. This
statute also may delay, deter or prevent a change of control of the Company. See
"Description of Capital Stock" for additional information regarding these and
certain other anti-takeover provisions adopted by the Company.
10
<PAGE> 15
USE OF PROCEEDS
All the net proceeds to the Company from the Offerings will be used to
repay a portion of the indebtedness outstanding under the New Credit Agreement
which was incurred to finance the AIH Acquisition, bearing a rate of interest as
of September 19, 1995 of approximately 6.9%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company --
Liquidity and Capital Resources." The Company will not receive any proceeds from
the sale of Common Stock by the Selling Stockholders.
COMMON STOCK PRICE RANGE AND DIVIDENDS
The Common Stock is listed for trading on the New York Stock Exchange under
the symbol "LEA." The following table sets forth the high and low sale prices of
the Common Stock as reported on the New York Stock Exchange for the fiscal
periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1994:
Second Quarter............................................... $20 1/4 $16 1/4
Third Quarter................................................ 19 5/8 16
Fourth Quarter............................................... 22 1/8 17
1995:
First Quarter................................................ 20 7/8 16 5/8
Second Quarter............................................... 24 1/4 17 7/8
Third Quarter (through September 19, 1995)................... 31 1/8 23
</TABLE>
The reported last sale price of the Common Stock on the New York Stock
Exchange Composite Tape as of a recent date is set forth on the cover page of
this Prospectus.
As of September 19, 1995, there were 235 holders of record of the
outstanding Common Stock and the Company estimates that, at such date, there
were approximately 4,500 beneficial holders.
The Company has never paid dividends on its Common Stock. Any future
payment of dividends is subject to the discretion of the Company's Board of
Directors, which may consider the Company's earnings and financial condition and
such other factors as it deems relevant. In addition, the New Credit Agreement
and the Indentures contain certain restrictions on the Company's payment of
dividends. The Company does not intend to pay any cash dividends in the
foreseeable future.
11
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company at July 1,
1995, after giving effect on a pro forma basis to the AIH Acquisition and the
incurrence of indebtedness under the New Credit Agreement to finance such
acquisition, and as adjusted to reflect the Offerings contemplated hereby and
the application of the net proceeds to the Company therefrom. See "Use of
Proceeds" and "Pro Forma Financial Data."
<TABLE>
<CAPTION>
AS OF JULY 1, 1995
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Short-term debt:
Short-term borrowings................................... $ 19.2 $ 19.2 $ 19.2
Current maturities of long-term debt.................... 1.7 5.6 (1) 5.6
------ -------- ---------
Total short-term debt................................ 20.9 24.8 24.8
------ -------- ---------
Long-term debt, less current portion:
Term loans.............................................. 5.8 5.8 5.8
Revolving credit loans.................................. 160.0 1,073.8 (2) 792.8 (5)
Loans from governmental agencies........................ 24.3 27.2 (1) 27.2
Other, including long-term notes payable and capital
lease obligations.................................... -- 13.4 (1) 13.4
11 1/4% Senior Subordinated Notes due 2000.............. 125.0 125.0 125.0
8 1/4% Subordinated Notes due 2002...................... 145.0 145.0 145.0
------ -------- ---------
Total long-term debt, less current portion........... 460.1 1,390.2 1,109.2
------ -------- ---------
Stockholders' equity:
Common stock, par value $.01 per share; 150,000,000
shares authorized, 46,142,594 shares issued
(56,142,594 after adjustment for the Offerings)...... .5 .5 .6 (6)
Additional paid-in capital.............................. 274.4 276.3 (3) 557.2 (6)
Notes receivable from sale of Common Stock.............. (1.0) (1.0) (1.0)
Treasury stock, 10,230 shares of Common Stock........... (.1) (.1) (.1)
Retained deficit........................................ (3.6) (6.3) (4) (6.3)
Cumulative translation adjustment....................... (17.9) (17.9) (17.9)
Minimum pension liability adjustment.................... (5.8) (5.8) (5.8)
------ -------- ---------
Total stockholders' equity........................... 246.5 245.7 526.7
------ -------- ---------
Total capitalization............................... $727.5 $1,660.7 $ 1,660.7
====== ======== =========
</TABLE>
-------------------------
(1) Reflects debt assumed in connection with the AIH Acquisition.
(2) Reflects borrowings under the New Credit Agreement of: (i) $623.8 million to
purchase all the common stock of AIH, (ii) $262.1 million to retire certain
debt assumed in connection with the AIH Acquisition, and (iii) $27.9 million
to pay estimated fees and expenses related to the AIH Acquisition and the
refinancing of the Prior Credit Facility.
(3) Reflects the issuance of options originally granted under the Automotive
Industries Holding, Inc. 1992 Key Employee Stock Option Plan which were
converted into options to purchase Common Stock in connection with the AIH
Acquisition (the "AIH Option Conversion").
(4) Reflects the write-off of deferred finance fees of $4.2 million related to
the refinancing of the Prior Credit Facility, net of the tax benefit of
these expenses of $1.5 million.
(5) Reflects the application of the net proceeds of the Offerings to the Company
to repay indebtedness under the New Credit Agreement.
(6) Reflects issuance of 10 million shares in the Offerings at $29 1/4 per
share, net of $11.5 million in estimated fees and expenses.
12
<PAGE> 17
PRO FORMA FINANCIAL DATA
The following pro forma unaudited consolidated statements of operations of
the Company were prepared to illustrate the estimated effects of (i) the AIH
Acquisition (including the refinancing of certain debt of AIH pursuant to the
New Credit Agreement), (ii) the FSB Acquisition, (iii) certain acquisitions
completed by AIH prior to the acquisition of AIH by the Company, (iv) the
initial public offering of Common Stock by the Company (the "IPO") and the
application of the net proceeds therefrom in April 1994, (v) the refinancing of
the Subordinated Debentures with the net proceeds from the issuance of the
Subordinated Notes, (vi) the refinancing of the Prior Credit Facility with
borrowings under the New Credit Agreement and (vii) the Offerings contemplated
hereby and the application of the net proceeds to the Company therefrom to repay
indebtedness incurred pursuant to the New Credit Agreement to finance the AIH
Acquisition (collectively, the "Pro Forma Transactions"), as if the Pro Forma
Transactions had occurred on January 1, 1994.
The following pro forma unaudited consolidated balance sheet (collectively
with the pro forma unaudited consolidated statements of operations, the "Pro
Forma Statements") was prepared as if the AIH Acquisition, the acquisition of
Plastifol by AIH and the Offerings contemplated hereby and the application of
the net proceeds therefrom to repay indebtedness incurred pursuant to the New
Credit Agreement to finance the AIH Acquisition had occurred as of July 1, 1995.
The Pro Forma Statements do not purport to represent (i) the actual results
of operations or financial position of the Company had the Pro Forma
Transactions occurred on the dates assumed or (ii) the results to be expected in
the future.
The pro forma adjustments are based upon available information and upon
certain assumptions that management believes are reasonable. The Pro Forma
Statements and accompanying notes should be read in conjunction with the
historical financial statements of the Company, AIH, FSB and Plastifol,
including the notes thereto, and the other financial information pertaining to
the Company, AIH, FSB and Plastifol, including the information set forth in
"Capitalization" and related notes thereto, included elsewhere or incorporated
by reference in this Prospectus.
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JULY 1, 1995
<TABLE>
<CAPTION>
AIH OPERATING AND
LEAR AIH ACQUISITIONS AIH AIH FINANCING
HISTORICAL HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA ADJUSTMENTS PRO FORMA
---------- ------------- -------------- -------------- --------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 2,186.1 $ 377.1 $ 49.1 $ -- $ 426.2 $ -- $2,612.3
Cost of sales............ 2,014.7 304.1 36.4 -- 340.5 -- 2,355.2
--------- ------- ------ ------ ------- ------- --------
Gross profit............. 171.4 73.0 12.7 -- 85.7 -- 257.1
Selling, general and
administrative
expenses............... 50.1 24.9 4.2 -- 29.1 (0.4)(4) 78.8
Amortization............. 6.4 2.6 -- .5 3.1 4.7 (5) 14.2
--------- ------- ------ ------ ------- ------- --------
Operating income......... 114.9 45.5 8.5 (.5) 53.5 (4.3) 164.1
Interest expense......... 28.5 9.0 -- 2.1 11.1 13.6 (6) 53.2
Other expense, net....... 5.8 -- -- -- -- -- 5.8
--------- ------- ------ ------ ------- ------- --------
Income before income
taxes.................. 80.6 36.5 8.5 (2.6) 42.4 (17.9) 105.1
Income taxes............. 34.7 14.6 4.3 (.7) 18.2 (4.6)(7) 48.3
--------- ------- ------ ------ ------- ------- --------
Net income............... $ 45.9 $ 21.9 $ 4.2 $ (1.9) $ 24.2 $ (13.3) $ 56.8
========= ======= ====== ====== ======= ======= ========
Net income per share..... $ .92 $ .95
Weighted average shares
outstanding (in
millions).............. 49.6 10.1 (8) 59.7
</TABLE>
13
<PAGE> 18
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
AIH
LEAR FSB FSB LEAR/FSB AIH ACQUISITIONS AIH AIH
HISTORICAL HISTORICAL(9) ADJUSTMENTS(10) PRO FORMA HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA
---------- ------------- --------------- --------- ------------- --------------- -------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....... $ 3,147.5 $ 451.1 $ 4.8 $3,603.4 $ 512.8 $ 239.4 $ -- $ 752.2
Cost of sales... 2,883.9 443.9 (1.0) 3,326.8 408.9 210.7 (1.8) 617.8
--------- ------- ----- -------- ------- ------- ------ -------
Gross profit.... 263.6 7.2 5.8 276.6 103.9 28.7 1.8 134.4
Selling, general
and
administrative
expenses...... 82.6 31.5 (5.5) 108.6 35.3 14.4 (2.9) 46.8
Amortization.... 11.4 -- 2.0 13.4 4.7 -- 1.5 6.2
--------- ------- ----- -------- ------- ------- ------ -------
Operating income
(loss)........ 169.6 (24.3) 9.3 154.6 63.9 14.3 3.2 81.4
Interest
expense....... 46.7 5.3 4.4 56.4 9.3 (.3) 8.7 17.7
Other expense
(income),
net........... 8.1 .8 -- 8.9 -- (.2) .3 .1
--------- ------- ----- -------- ------- ------- ------ -------
Income (loss)
before income
taxes......... 114.8 (30.4) 4.9 89.3 54.6 14.8 (5.8) 63.6
Income taxes.... 55.0 .2 (1.5) 53.7 21.9 3.5 (1.7) 23.7
--------- ------- ----- -------- ------- ------- ------ -------
Net income
(loss)........ $ 59.8 $ (30.6) $ 6.4 $ 35.6 $ 32.7 $ 11.3 $ (4.1) $ 39.9
========= ======= ===== ======== ======= ======= ====== =======
Net income per
share......... $ 1.26
Weighted average
shares
outstanding
(in
millions)..... 47.4
</TABLE>
<TABLE>
<CAPTION>
OPERATING AND
LEAR/FSB AIH FINANCING
PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
--------- --------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................................... $3,603.4 $ 752.2 $ -- $4,355.6
Cost of sales....................................... 3,326.8 617.8 -- 3,944.6
--------- --------- ------------- ---------
Gross profit........................................ 276.6 134.4 -- 411.0
Selling, general and administrative expenses........ 108.6 46.8 (.6)(4) 154.8
Amortization........................................ 13.4 6.2 9.5 (5) 29.1
--------- --------- ------------- ---------
Operating income.................................... 154.6 81.4 (8.9) 227.1
Interest expense.................................... 56.4 17.7 10.4 (6) 84.5
Other expense, net.................................. 8.9 .1 -- 9.0
--------- --------- ------------- ---------
Income before income taxes.......................... 89.3 63.6 (19.3) 133.6
Income taxes........................................ 53.7 23.7 (3.4)(7) 74.0
--------- --------- ------------- ---------
Net income.......................................... $ 35.6 $ 39.9 $ (15.9) $ 59.6
======== ======== =========== ========
Net income per share................................ $ 1.00
Weighted average shares outstanding (in millions)... 12.2 (8) 59.6
</TABLE>
-------------------------
(1) The AIH Historical information represents the audited results of operations
for the year ended December 31, 1994 and the unaudited results of
operations for the six months ended July 1, 1995.
(2) The AIH Acquisitions Historical information reflects the combined results
of operations for three companies acquired by AIH prior to their respective
acquisitions by AIH. The AIH Acquisitions Historical information for the
year ended December 31, 1994 reflects the results of operations of (i) John
Cotton Limited ("Cotton") headquartered in Manchester, England and acquired
in May 1994, (ii) the Gulfstream Division of O'Sullivan Corporation
("Gulfstream") located in Ohio and Virginia and acquired in December 1994,
and (iii) Plastifol headquartered in Ebersberg, Germany and acquired in
July 1995. The AIH Acquisitions Historical information for the six months
ended July 1, 1995 reflects the results of operations of Plastifol.
(3) The AIH Adjustments information with respect to the Cotton, Gulfstream and
Plastifol acquisitions represents (i) adjustments to depreciation expense
due to the revaluation of assets; (ii) reclassifications needed to present
information on a basis that is consistent with the AIH Historical
information; (iii) the elimination of management fees charged by a previous
owner of Gulfstream; (iv) interest on borrowings by AIH to finance the
acquisitions; and (v) the related income tax effects.
(4) Represents the elimination of certain management fees charged to AIH by an
affiliate of AIH which ceased to be payable upon the completion of the AIH
Acquisition.
14
<PAGE> 19
(5) The adjustment to goodwill for the AIH Acquisition represents the
following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Amortization of goodwill from the AIH Acquisition................. $ 7.3 $14.7
Elimination of the historical goodwill amortization of AIH........ (2.6) (5.2)
------ -----
$ 4.7 $ 9.5
====== =====
</TABLE>
(6) Reflects interest expense changes as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Reduction of interest due to application of the proceeds from the
Offerings........................................................ $(10.1) $ (14.4)
Estimated interest on borrowings to finance the AIH Acquisition at
interest rates of 7.2% in the first six months of 1995 and 5.1%
for the year ended December 31, 1994............................. 32.6 46.2
Elimination of interest on AIH debt being refinanced............... (10.1) (18.6)
Reduction in interest due to application of proceeds from the
IPO.............................................................. -- (1.2)
Elimination of interest on the Subordinated Debentures............. -- (3.3)
Interest on the Subordinated Notes................................. -- 1.1
Interest on borrowings to finance fees and expenses related to the
New Credit Agreement............................................. .3 .5
Change in commitment fees due to increased availability under the
New Credit Agreement............................................. .4 .9
Change in interest expense due to rate differences between the
Prior Credit Facility and the New Credit Agreement............... .2 (1.6)
Change in deferred finance fees due to the refinancing of the Prior
Credit Facility and the issuance of the Subordinated Notes....... .3 .8
------- -------
$ 13.6 $ 10.4
======= =======
</TABLE>
(7) Reflects the income tax effects of the operating and financing adjustments.
(8) Reflects the issuance of 10 million shares of Common Stock pursuant to the
Offerings, the effect on weighted average shares outstanding of the AIH
Option Conversion and the effect on weighted average shares outstanding had
the IPO occurred on January 1, 1994.
(9) The FSB Historical information for the year ended December 31, 1994
represents the results of operations of FSB translated from lira to U.S.
dollars at an average exchange rate of 1,611 lira to one U.S. dollar.
(10) The FSB Adjustments information represents (i) management's estimates of
the effects of product pricing adjustments negotiated in connection with
the FSB Acquisition of $4.8 million; (ii) the elimination of certain costs
being assumed by the seller of $1.5 million; (iii) an increase in
depreciation expense due to the revaluation of the assets of $.5 million;
(iv) on-going savings of $3.5 million as a result of consolidating
technical centers; (v) the elimination of management fees charged by the
parent of the seller of $2.0 million; (vi) amortization of goodwill as a
result of the FSB Acquisition of $2.0 million; (vii) an increase in
interest expense to finance the FSB Acquisition of $4.4 million; and (viii)
the related income tax effects of $1.5 million. The results from operations
of FSB for the six months ended July 1, 1995 are included in the historical
results of the Company.
15
<PAGE> 20
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF JULY 1, 1995
<TABLE>
<CAPTION>
OPERATING
ACQUISITION AND AND
LEAR AIH AIH AIH VALUATION OF FINANCING
HISTORICAL HISTORICAL ACQUISITIONS(1) ADJUSTED AIH(2) ADJUSTMENTS PRO FORMA
---------- ---------- -------------- -------- ---------------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash....................... $ 53.0 $ -- $ -- $ -- $ (904.3) $ 904.3(3) $ 53.0
Accounts receivable, net... 700.2 123.2 9.8 133.0 -- -- 833.2
Inventories................ 111.0 42.0 4.8 46.8 -- -- 157.8
Other current assets....... 94.9 40.6 0.4 41.0 -- -- 135.9
-------- ------ ------ ------ -------- ------- --------
959.1 205.8 15.0 220.8 (904.3) 904.3 1,179.9
-------- ------ ------ ------ -------- ------- --------
Property, Plant and
Equipment, net............. 363.9 233.4 21.3 254.7 -- -- 618.6
Other Assets:
Goodwill and other
intangibles, net......... 494.4 146.4 39.1 185.5 404.0 -- 1,083.9
Deferred finance fees and
other.................... 37.7 25.7 3.1 28.8 -- 5.3(4) 71.8
-------- ------ ------ ------ -------- ------- --------
532.1 172.1 42.2 214.3 404.0 5.3 1,155.7
-------- ------ ------ ------ -------- ------- --------
$1,855.1 $611.3 $ 78.5 $689.8 $ (500.3) $ 909.6 $2,954.2
======== ====== ======= ====== ======== ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Short-term borrowings...... $ 19.2 $ -- $ -- $ -- $ -- $ -- $ 19.2
Cash overdrafts............ 55.2 -- -- -- -- -- 55.2
Accounts payable........... 766.0 75.4 5.2 80.6 -- -- 846.6
Accrued liabilities........ 199.5 38.3 5.4 43.7 -- (1.5)(4) 241.7
Current portion of
long-term debt........... 1.7 3.9 -- 3.9 -- -- 5.6
-------- ------ ------ ------ -------- ------- --------
1,041.6 117.6 10.6 128.2 -- (1.5) 1,168.3
-------- ------ ------ ------ -------- ------- --------
Long-Term Liabilities:
Long-term debt............. 460.1 221.1 60.0 281.1 (264.8) 632.8(5) 1,109.2
Deferred national income
taxes.................... 24.3 4.4 7.9 12.3 -- -- 36.6
Other...................... 82.6 26.9 -- 26.9 3.9 -- 113.4
-------- ------ ------ ------ -------- ------- --------
567.0 252.4 67.9 320.3 (260.9) 632.8 1,259.2
-------- ------ ------ ------ -------- ------- --------
Stockholders' Equity......... 246.5 241.3 -- 241.3 (239.4) 278.3(6) 526.7
-------- ------ ------ ------ -------- ------- --------
$1,855.1 $611.3 $ 78.5 $689.8 $ (500.3) $ 909.6 $2,954.2
======== ====== ======= ====== ======== ======= ========
</TABLE>
-------------------------
(1) Represents the allocation of the purchase price to net assets of Plastifol
which was acquired by AIH in July 1995.
(2) Assumes a purchase price of $926.4 million which consists of: (i) $625.7
million to purchase all of the common stock of AIH ($623.8 million in cash
and $1.9 million in stock options granted pursuant to the AIH Option
Conversion), (ii) $282.3 million of debt assumed in connection with the AIH
Acquisition, and (iii) $18.4 million to pay estimated fees and expenses
related to the AIH Acquisition. The AIH Acquisition was accounted for using
the purchase method of accounting and the total purchase cost was allocated
first to assets and liabilities based on their respective fair values, with
the remainder allocated to goodwill. The allocation of the purchase price
above is based on historical costs and management's estimates which may
differ from the final allocation.
(3) Reflects proceeds of borrowings under the New Credit Agreement of $904.3
million.
(4) Reflects the capitalization of fees incurred in establishing the New Credit
Agreement of $9.5 million, net of the unamortized portion of fees from the
Prior Credit Facility of $4.2 million being written-off. Also reflects the
related income tax benefit of $1.5 million from the write-off.
(5) Reflects borrowings under the New Credit Agreement of $913.8 million to
finance the AIH purchase price and fees and expenses incurred to establish
the New Credit Agreement, reduced by the net proceeds of the Offerings of
$281.0 million.
(6) Reflects issuance of the 10 million shares pursuant to the Offerings at
$29 1/4 per share, net of $11.5 million in fees and expenses and the
write-off of deferred finance fees, net of income taxes, of $2.7 million
related to the refinancing of the Prior Credit Facility.
16
<PAGE> 21
SELECTED FINANCIAL DATA OF THE COMPANY
The following income statement and balance sheet data were derived from the
consolidated financial statements of the Company. The consolidated financial
statements of the Company for each of the fiscal years ended December 31, 1994
and 1993 and June 30, 1993, 1992, 1991 and 1990 have been audited by Arthur
Andersen LLP. The consolidated financial statements of the Company for the six
months ended July 1, 1995 and July 2, 1994 are unaudited; however, in the
Company's opinion, they reflect all adjustments, consisting only of normal
recurring items, necessary for a fair presentation of the financial position and
results of operations of such periods. The results for the six months ended July
1, 1995 are not necessarily indicative of the results to be expected for the
full fiscal year. The selected financial data below should be read in
conjunction with the consolidated financial statements of the Company and the
notes thereto incorporated by reference in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Company."
LEAR SEATING CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED
------------------- ------------------------------------------------------------------------
JULY 1, JULY 2, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1994 1993 1993 1992 1991 1990
-------- -------- ------------ ------------ -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales......................... $2,186.1 $1,508.9 $3,147.5 $1,950.3 $1,756.5 $1,422.7 $1,085.3 $1,067.9
Gross profit...................... 171.4 128.6 263.6 170.2 152.5 115.6 101.4 104.7
Selling, general and
administrative expenses......... 50.1 38.3 82.6 62.7 61.9 50.1 41.6 28.2
Incentive stock and other
compensation expense............ -- -- -- 18.0 -- -- 1.3 1.4
Amortization...................... 6.4 5.7 11.4 9.9 9.5 8.7 13.8 13.8
-------- -------- ------------ ------------ -------- -------- -------- --------
Operating income.................. 114.9 84.6 169.6 79.6 81.1 56.8 44.7 61.3
Interest expense(1)............... 28.5 25.0 46.7 45.6 47.8 55.2 61.7 61.2
Other expense, net(2)............. 5.8 4.6 8.1 9.2 5.4 5.8 2.2 4.1
-------- -------- ------------ ------------ -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary items......... 80.6 55.0 114.8 24.8 27.9 (4.2) (19.2) (4.0)
Income taxes...................... 34.7 27.3 55.0 26.9 17.8 12.9 14.0 16.6
-------- -------- ------------ ------------ -------- -------- -------- --------
Net income (loss) before
extraordinary items............. 45.9 27.7 59.8 (2.1) 10.1 (17.1) (33.2) (20.6)
Extraordinary items............... -- -- -- (11.7) -- (5.1) -- --
-------- -------- ------------ ------------ -------- -------- -------- --------
Net income (loss)................. $ 45.9 $ 27.7 $ 59.8 $ (13.8) $ 10.1 $ (22.2) $ (33.2) $ (20.6)
======= ======= ========= ========= ======= ======= ======= =======
Net income (loss) per share before
extraordinary items............. $ .92 $ .61 $ 1.26 $ (.06) $ .25 $ (.62) $ (2.01) $ (1.25)
Net income (loss) per share....... $ .92 $ .61 $ 1.26 $ (.39) $ .25 $ (.80) $ (2.01) $ (1.25)
Weighted average shares
outstanding (in millions)....... 49.6 45.6 47.4 35.5 40.0 27.8 16.5 16.5
BALANCE SHEET DATA:
Current assets.................... $ 959.1 $ 557.2 $ 818.3 $ 433.6 $ 325.2 $ 282.9 $ 213.8 $ 223.2
Total assets...................... 1,855.1 1,217.2 1,715.1 1,114.3 820.2 799.9 729.7 747.6
Current liabilities............... 1,041.6 593.4 981.2 505.8 375.0 344.2 287.1 254.5
Long-term debt.................... 460.1 383.5 418.7 498.3 321.1 348.3 386.7 402.8
Stockholders' equity.............. 246.5 184.0 213.6 43.2 75.1 49.4 4.4 35.3
OTHER DATA:
EBITDA(3)......................... $ 152.0 $ 111.5 $ 225.7 $ 122.2 $ 121.8 $ 91.8 $ 81.4 $ 94.3
Capital expenditures.............. $ 42.6 $ 35.0 $ 103.1 $ 45.9 $ 31.6 $ 27.9 $ 20.9 $ 14.9
North American content per
vehicle(4)...................... $ 193 $ 159 $ 169 $ 112 $ 98 $ 94 $ 84 $ 77
European content per vehicle(5)... $ 90 $ 38 $ 48 $ 38 $ 37 $ 21 $ 11 $ 8
Inventory turnover ratio(6)....... 36.0 36.0 36.7 30.3 25.6 27.4
</TABLE>
-------------------------
(1) Includes non-cash charges for amortization of deferred financing fees of
approximately $1.2 million, $1.2 million, $2.4 million, $2.6 million, $3.0
million, $3.2 million, $4.1 million and $4.5 million for the six months
ended July 1, 1995 and July 2, 1994 and for each of the years ended December
31, 1994 and 1993 and June 30, 1993 through June 30, 1990, respectively.
(2) Consists of foreign currency exchange gain or loss, minority interest in net
income of subsidiaries, equity in (income) loss of affiliates, state and
local taxes and other expense.
(3) "EBITDA" is operating income plus amortization and depreciation. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles.
(4) "North American content per vehicle" is the Company's net sales in North
America divided by total North American vehicle production. "North American
vehicle production" comprises car and light truck production in the United
States, Canada and Mexico estimated by the Company from industry sources.
(5) "European content per vehicle" is the Company's net sales in Western Europe
divided by total Western European vehicle production. "Western European
vehicle production" comprises car and light truck production in Western
Europe estimated by the Company from industry sources.
(6) "Inventory turnover ratio" is cost of goods sold divided by average
inventory. The inventory turnover ratios for the years ended December 31,
1994 and December 31, 1993 exclude the effects of the FSB Acquisition and
the NAB Acquisition, respectively.
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
RESULTS OF OPERATIONS
Lear's sales have grown rapidly, both internally and through acquisitions,
from approximately $159.8 million in the fiscal year ended June 30, 1983 to
approximately $3.1 billion in the year ended December 31, 1994, a compound
annual growth rate of approximately 30%. As a result of this growth, the Company
has experienced substantial upfront costs for new programs and new facilities.
Such expenses consist of administrative expenses and engineering and design
expenses for new seating programs, including pre-production expenses and
inefficiencies incurred until the customer reaches normal operating levels. The
Company expenses such non-recurring pre-production expenses as they are
incurred.
The Company's performance is dependent on automotive vehicle production,
which is seasonal in nature. The third calendar quarter is historically the
weakest vehicle production quarter due to the impact of plant shutdowns for
vacation and model changeovers which affect automotive production in both North
America and Europe. See Note 19 to the consolidated financial statements of the
Company incorporated by reference in this Prospectus.
In February 1994, the Company changed its fiscal year end from June 30 to
December 31, effective December 31, 1993.
The following chart shows operating results of the Company by principal
geographic area.
GEOGRAPHIC OPERATING RESULTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
---------------------- ----------------------------------------------------
JULY 1, JULY 2, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1994 1994 1993 1993 1992
-------- --------- ------------ ------------ -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
United States................ $1,001.4 $ 968.0 $1,805.3 $ 981.2 $ 765.7 $ 597.1
Canada....................... 445.7 198.9 573.4 375.8 372.0 403.3
Europe....................... 625.0 241.2 572.5 403.8 432.5 268.2
Mexico and other............. 114.0 100.8 196.3 189.5 186.3 154.1
-------- --------- ------------ ------------ -------- --------
Net sales.................. $2,186.1 $ 1,508.9 $3,147.5 $1,950.3 $1,756.5 $1,422.7
======= ======= ========== ========== ======= =======
OPERATING INCOME (LOSS):
United States................ $ 53.9 $ 70.0 $ 109.3 $ 61.3 $ 51.8 $ 32.0
Canada....................... 49.8 5.4 46.3 25.6 15.3 14.7
Europe....................... 2.0 2.7 4.4 (9.6) (3.9) 3.0
Mexico and other............. 9.2 6.5 9.6 20.3 17.9 7.1
Unallocated corporate
expense(1)................. -- -- -- (18.0) -- --
-------- --------- ------------ ------------ -------- --------
Operating income........... $ 114.9 $ 84.6 $ 169.6 $ 79.6 $ 81.1 $ 56.8
======= ======= ========== ========== ======= =======
</TABLE>
-------------------------
(1) Unallocated corporate expense consists of incentive stock option expense and
other one-time compensation expense.
Six Months Ended July 1, 1995 Compared With Six Months Ended July 2, 1994
Net sales increased by 44.9% to $2,186.1 million in the first six months of
1995 as compared to $1,508.9 million in the first six months of 1994. Sales for
the six month period ended July 1, 1995 benefited from incremental volume on
mature seating programs in North America and Europe, new business in the United
States and Europe and the FSB Acquisition in December 1994. For the first six
months of 1995, FSB accounted for 9.9% of the Company's net sales.
18
<PAGE> 23
Gross profit (net sales less cost of sales) and gross margin (gross profit
as a percentage of net sales) were $171.4 million and 7.8%, respectively, for
the six month period ended July 1, 1995 as compared to $128.6 and 8.5%,
respectively, for the comparable period in the prior year. Gross profit in the
first six months of 1995 surpassed gross profit for the first six months of 1994
due to increased production volumes on passenger car and truck seat programs by
domestic and foreign automotive manufacturers. The increase in gross profit was
offset by, and the lower gross margin resulted from, new program start-up
expenses in North America, low profitability at FSB, increased engineering costs
and pre-production and facility expenses associated with new foreign ventures.
Selling, general and administrative expenses for the six months ended July
1, 1995 decreased as a percentage of net sales to 2.3% from 2.5% in the
comparable period in the prior year. The increase in actual expenditures from
$38.3 million to $50.1 million was largely the result of the FSB Acquisition,
administrative support expenses and design and development costs associated with
the expansion of business and expenses related to new business opportunities.
Operating income and operating margin (operating income as a percentage of
sales) were $114.9 million and 5.3%, respectively, for the first six months of
1995 as compared to $84.6 million and 5.6%, respectively, for the first six
months of 1994. The growth in operating income was primarily due to incremental
volume on new and mature seat programs in the United States, Canada and Europe
and improved performance in Mexico. Partially offsetting the increase in
operating income were increased engineering and support expenses, costs
associated with recently opened facilities in North America and losses related
to FSB's operations. Non-cash depreciation and amortization charges were $37.1
million and $26.9 million for the first half of the current and prior years,
respectively. During the six month period ended July 1, 1995, interest expense
increased to $28.5 million as compared to $25.0 million in the six month period
ended July 2, 1994. The increase is primarily due to the additional debt
incurred to finance the FSB Acquisition in addition to slightly higher interest
rates under the Prior Credit Facility.
Primarily as a result of foreign currency exchange fluctuations, other
expense, including state and local taxes, foreign exchange, minority interests
and equity in income of affiliates, increased in comparison to the prior period.
During the six months ended July 1, 1995, the provision for income taxes
was $34.7 million or 43.1% of pre-tax income as compared to $27.3 million or
49.6% of pre-tax income in the six month period ended July 2, 1994. The decrease
in the rate compared to the previous period is due primarily to changes in
operating performance and related income levels among the various tax
jurisdictions.
Year Ended December 31, 1994 Compared With Year Ended December 31, 1993
Net sales of $3,147.5 million in the year ended December 31, 1994
represents the thirteenth consecutive year of record sales and surpassed sales
of $1,950.3 million in the year ended December 31, 1993 by $1,197.2 million or
61.4%. Sales in 1994 benefited from internal growth from new programs and
increased seat content per vehicle, higher automotive production in the United
States and Europe and the NAB Acquisition, which accounted for $421.0 million of
the increase.
Gross profit and gross margin were $263.6 million and 8.4%, respectively,
in the year ended December 31, 1994 as compared to $170.2 million and 8.7%,
respectively, in the year ended December 31, 1993. Gross profit in 1994
surpassed gross profit in 1993 due to the benefit of higher sales volume,
including the effect of the NAB Acquisition and the Company's cost reduction
programs.
Partially offsetting the increase in gross profit were $23.1 million of
expense for engineering and pre-production costs for new facilities in the
United States, Canada and Europe, lower margin contribution in Mexico and the
$3.9 million increase in postretirement health care expenses (SFAS 106).
Selling, general and administrative expenses as a percentage of net sales
declined to 2.6% for the year ended December 31, 1994 as compared to 3.2% in the
prior year. The increase in actual expenditures was largely the result of
administrative support expenses and research and development costs associated
with the expansion of domestic and foreign business and expenses related to new
business opportunities.
19
<PAGE> 24
Operating income and operating margin were $169.6 million and 5.4%,
respectively, in the year ended December 31, 1994 and $79.6 million and 4.1%,
respectively, in the year ended December 31, 1993. The 113.1% increase in
operating income was attributable to the benefits of higher sales volume,
including the effect of the NAB Acquisition, non-recurring incentive stock and
other compensation expense of $18.0 million in 1993 and the Company's cost
reduction programs.
Partially offsetting the increase in operating income were new facility and
engineering costs for future seat programs, reduced margins in Mexico and the
effect of the adoption of SFAS 106. Non-cash depreciation and amortization
charges were $56.1 million and $42.6 million, respectively, for the years ended
December 31, 1994 and 1993. Other expense for the year ended December 31, 1994,
including state and local taxes, foreign exchange gains and losses, minority
interests and equity in income of affiliates, decreased in comparison to the
prior year as the non-recurring write-off of equipment associated with a
discontinued program in Germany and non-seating related assets in the United
States, along with a foreign exchange gain, offset state and local tax expense
associated with the NAB Acquisition. Interest expense in 1994 increased in
relation to 1993 as additional debt incurred to finance the NAB Acquisition and
higher short-term interest expense in Europe offset the benefits derived from
the refinancing of subordinated debt at a lower interest rate and the Company's
IPO in April 1994.
Net income for the year ended December 31, 1994 was $59.8 million, or $1.26
per share, as compared to a net loss of $13.8 million, or $.39 per share,
realized in the year ended December 31, 1993. The net income of $59.8 million in
1994 reflects a $55.0 million provision for national income taxes of which $26.0
million relates to foreign operations. Further contributing to the improvement
in 1994 net income was the extraordinary expense in 1993 of $11.7 million for
the early extinguishment of debt.
United States Operations
Net sales in the United States increased by 84.0% from $981.2 million in
the year ended December 31, 1993 to $1,805.3 million for the year ended December
31, 1994. Sales for the year ended December 31, 1994 benefited from the full
year contribution of the NAB Acquisition, vehicle production increases on mature
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.
Operating income and operating margin were $109.3 million and 6.1%,
respectively, in the year ended December 31, 1994 and $61.3 million and 6.2%,
respectively, in the year ended December 31, 1993. Operating income in 1994 as
compared to the prior year benefited from the NAB Acquisition, the overall
increase in vehicle production and cost reduction programs which offset new
program costs for new facilities, administrative expenses associated with the
expansion of business and increased research and development expenses.
Canadian Operations
Net sales in Canada increased by 52.6% to $573.4 million in the year ended
December 31, 1994 compared to $375.8 million in the year ended December 31,
1993. Sales in 1994 reflect the benefit of a new Ford truck program introduced
in February 1994, the relocation of an NAB passenger car program from Mexico and
slightly higher volumes on mature seat programs which offset downtime associated
with a General Motors plant conversion for a replacement mid-size passenger car.
Initial production of the replacement program began in February 1994 with
attainment of targeted production levels in the second quarter of 1994.
Operating income and operating margin in Canada were $46.3 million and
8.1%, respectively, in the year ended December 31, 1994 and $25.6 million and
6.8%, respectively, in the year ended December 31, 1993. The growth in operating
income and operating margin was due to the benefits derived from higher sales
volume on mature seating programs, cost reduction programs and improved
operating performance at start-up seat facilities.
20
<PAGE> 25
European Operations
Net sales in Europe increased by 41.8% to $572.5 million for the year ended
December 31, 1994 compared to $403.8 million for the year ended December 31,
1993. The sales increase was due primarily to the addition of new seat programs
in Germany and England and vehicle production increases on established programs
in Germany, Sweden and Austria.
Operating income in Europe was $4.4 million in the fiscal year ended
December 31, 1994 compared to an operating loss of $9.6 million sustained in the
year ended December 31, 1993. Operating income in 1994 as compared to the prior
year benefited from the higher sales levels and cost reduction programs at
existing seat and seat component facilities. Partially offsetting the increase
in operating income were incremental costs associated with the start-up of a new
seat facility in England and the introduction of a replacement component program
within an established facility in Germany.
Mexican Operations
Net sales in Mexico were $196.3 million in the year ended December 31, 1994
and $189.5 million in the year ended December 31, 1993. Sales for the year ended
December 31, 1994 surpassed the prior year due to new Chrysler truck and Ford
passenger car seat programs and incremental volume on mature Ford programs.
Partially offsetting the increase in net sales was the product phase out of a
mature truck program and participation in customer cost reduction programs.
Operating income and operating margin in Mexico were $10.2 million and
5.2%, respectively, in the year ended December 31, 1994 and $20.3 million and
10.7%, respectively, in the prior year. Operating income and operating margin in
1994 declined in relation to the prior year as a result of the Company's
participation in customer cost reduction programs and costs associated with the
introduction of replacement products at new and established facilities.
Year Ended June 30, 1993 Compared With Year Ended June 30, 1992
Net sales of $1,756.5 million in the fiscal year ended June 30, 1993
increased $333.8 million or 23.5% over the fiscal year ended June 30, 1992. The
increase was due to new business in the United States and Europe, full year
production of a second facility in Sweden for Volvo, of which the Company
assumed control in January 1992, and incremental volume on domestic and Mexican
programs.
Gross profit and gross margin were $152.5 million and 8.7%, respectively,
in the fiscal year ended June 30, 1993 and $115.6 million and 8.1%,
respectively, in the fiscal year ended June 30, 1992. Gross profit increased due
to the benefit of incremental volume, including production of new business
programs, productivity improvement programs and improved operating performance
at new facilities in North America, Europe and Mexico. Partially offsetting the
increase in gross profit were participation in customer cost reduction programs,
plant shutdown costs at a dedicated facility in Finland, nonrecurring favorable
foreign exchange effects on sales and a retroactive price increase recognized in
the first and second quarters of the fiscal year ended June 30, 1992.
Selling, general and administrative expenses as a percentage of net sales
remained unchanged at 3.5% in the fiscal year ended June 30, 1993 as compared to
the prior fiscal year. The increase in actual expenses was largely the result of
increased research and development costs for future seating programs in the
United States, Canada and Europe. Further contributing to the increase in
expenses were administrative support expenses for Mexican operations and costs
associated with the establishment of customer business units in North America.
Operating income and operating margin were $81.1 million and 4.6%,
respectively, in the fiscal year ended June 30, 1993, compared to $56.8 million
and 4.0%, respectively, in the fiscal year ended June 30, 1992. The growth in
operating income was due to incremental volume on established seating programs
and improved performance at new seat and seat cover facilities. Partially
offsetting the increase in operating income were pre-production and facility
costs for programs introduced after June 30, 1993, plant shutdown costs and
21
<PAGE> 26
non-recurring prior fiscal year adjustments noted above. Non-cash depreciation
and amortization charges were $40.7 million in the fiscal year ended June 30,
1993 and $35.0 million in the fiscal year ended June 30, 1992.
Interest expense in the fiscal year ended June 30, 1993 declined in
relation to the fiscal year ended June 30, 1992 due to lower interest rates on
bank debt, refinancing of certain subordinated debt at a lower interest rate and
the application of funds received from capital infusions made on September 27,
1991 and July 30, 1992.
Other expense, including state and local taxes, foreign exchange gains or
losses, minority interests and equity in income of affiliates, decreased in the
fiscal year ended June 30, 1993 in comparison to the fiscal year ended June 30,
1992 as reduced income derived from joint ventures accounted for under the
equity method coupled with the Company's write-off of its $1.7 million
investment in Probel S.A., a Brazilian company, were more than offset by the
expense portion of non-recurring capitalization and related costs of $3.2
million associated with a capital raising transaction completed on September 27,
1991.
Net income of $10.1 million was realized in the fiscal year ended June 30,
1993 as compared to a net loss of $22.2 million in the fiscal year ended June
30, 1992. The net income of $10.1 million in the fiscal year ended June 30, 1993
reflects an $11.9 million provision for foreign national income taxes as
compared to an $8.2 million provision in the fiscal year ended June 30, 1992.
United States Operations
Net sales in the United States were $765.7 million and $597.1 million in
the fiscal years ended June 30, 1993 and 1992, respectively. Net sales in fiscal
1993 surpassed the prior year due to improved domestic car and truck production
on established seating programs in the second half of the fiscal year ended June
30, 1993 coupled with a new Ford passenger car program and the attainment of
targeted production levels for a General Motors truck program introduced in the
fall of 1991.
Operating income and operating margin were $51.8 million and 6.8%,
respectively, in the fiscal year ended June 30, 1993 and $32.0 million and 5.4%,
respectively, in the fiscal year ended June 30, 1992. The growth in operating
income and operating margin was due to the benefits derived from incremental
volume on established and new seating programs, productivity improvements and
improved operating performance at new seat cover facilities. Partially
offsetting the increase in operating income were participation in customer cost
reduction programs and preproduction costs associated with a new seating
program.
Canadian Operations
Net sales from Canadian operations were $372.0 million in the fiscal year
ended June 30, 1993 and $403.3 million in the fiscal year ended June 30, 1992.
Net sales in the fiscal year ended June 30, 1993 were adversely impacted by
market demand and vehicle inventories as General Motors announced temporary
plant shutdowns and production adjustments on existing passenger car and light
truck programs.
Operating income and operating margin were $15.3 million and 4.1%,
respectively, in the fiscal year ended June 30, 1993 and $14.7 million and 3.6%,
respectively, in the fiscal year ended June 30, 1992. Operating income in the
fiscal year ended June 30, 1993 benefited from productivity improvement
programs, favorable exchange rate fluctuations and improved operating
performance at a new seat facility. Partially offsetting the increase in
operating income were reduced vehicle production schedules on existing programs
and engineering costs associated with a new Ford seating program.
European Operations
Net sales in Europe were $432.5 million in the fiscal year ended June 30,
1993 and $268.2 million in the fiscal year ended June 30, 1992. Net sales in
fiscal 1993 exceeded net sales in the prior year due to the addition of new
operations in Germany and Austria, the full year impact resulting from the
acquisition of facilities in Sweden and Finland and incremental volume on
carryover programs in Germany. Partially offsetting the
22
<PAGE> 27
increase in net sales were reduced vehicle production schedules for established
seating programs in Sweden and unfavorable exchange rate fluctuations.
The Company's European operations sustained an operating loss of $3.9
million in the fiscal year ended June 30, 1993 as compared to operating income
of $3.0 million in the fiscal year ended June 30, 1992. The $6.9 million
unfavorable variance in the fiscal year ended June 30, 1993 was the result of
lower margin products introduced at an established facility in Germany,
technical and administration costs required to support European manufacturing
facilities, a retroactive price increase recognized in the first half of the
fiscal year ended June 30, 1992 and the devaluation of the Swedish krona, which
were partially offset by the favorable impact of foreign exchange rates. Also
contributing to the decrease in operating income were reserves established by
the Company for anticipated plant shutdown costs at a dedicated facility in
Finland due to the customer transfer of production to alternative locations in
Europe. Partially offsetting the decrease in operating income was the overall
growth in sales activity, including production from new programs in Germany and
Austria and the full year contribution of facilities in Sweden and Finland of
which the Company assumed control in the fiscal year ended June 30, 1992.
Mexican Operations
Net sales in Mexico were $186.3 million in the fiscal year ended June 30,
1993 and $154.1 million in the fiscal year ended June 30, 1992. Net sales
increased due to increased production activity on established General Motors,
Ford, Volkswagen and Chrysler programs.
Operating income and operating margin in Mexico were $17.9 million and
9.6%, respectively, in the fiscal year ended June 30, 1993 and $7.1 million and
4.6%, respectively, in the fiscal year ended June 30, 1992. The increase in
operating income and operating margin in the fiscal year ended June 30, 1993 as
compared to the prior fiscal year was due to the benefit of additional sales,
productivity improvement programs and improved manufacturing performance at a
seat cover facility.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the AIH Acquisition, the Company entered into a $1.5
billion secured revolving credit agreement with Chemical Bank and a syndicate of
financial institutions (the "New Credit Agreement"), the purpose of which was to
finance the AIH Acquisition, to refinance a portion of the existing indebtedness
of AIH, to refinance the Company's prior $500 million credit facility (the
"Prior Credit Facility"), and for general corporate purposes, including
acquisitions. Borrowings under the New Credit Agreement bear interest, at the
election of the Company, at a floating rate of interest equal to (i) the higher
of Chemical Bank's prime rate and the federal funds rate plus .5% or (ii) the
Eurodollar Rate (as defined in the New Credit Agreement) plus a borrowing margin
of .5% to 1.0%. The applicable borrowing margin is determined based on the
satisfaction of a specified financial ratio of the Company. Amounts available to
be drawn under the New Credit Agreement will be reduced by an aggregate amount
of $650 million during the term of the New Credit Agreement, which matures on
September 30, 2001.
Borrowings under the New Credit Agreement will bear interest at floating
rates, although the Company is permitted to convert variable rate interest
obligations on up to an aggregate of $500 million in principal amount of
indebtedness into fixed rate interest obligations. The Company also has
scheduled principal payments on long-term debt, including debt assumed in the
AIH Acquisition, of $3.0, $12.3, $4.3, $7.3 and $2.1 million in 1995, 1996,
1997, 1998, and 1999, respectively.
In addition to its debt service obligations, the Company will require
liquidity for capital expenditures and working capital needs. During the fiscal
year ended December 31, 1994, the Company's capital expenditures aggregated
approximately $103.1 million. The Company anticipates spending approximately
$135.0 million for capital expenditures in 1995.
As of July 1, 1995, and after giving effect to the AIH Acquisition, the
Offerings and the application of the net proceeds therefrom, the Company would
have had $847.9 million outstanding under the New Credit
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<PAGE> 28
Agreement ($55.1 million of which would have been outstanding under letters of
credit), resulting in approximately $652.1 million of available commitments. As
of July 1, 1995, the Company had net cash and cash equivalents of $53.0 million.
The Company's actual cash availability at the date hereof will be less than at
July 1 because of greater working capital needs during the Company's
traditionally weak third quarter. Nevertheless, the Company believes that cash
flows from operations, together with amounts available under the New Credit
Agreement and its current cash balances, will be sufficient to meet its debt
service obligations, projected capital expenditures and working capital
requirements, as well as to provide the flexibility to fund future acquisitions.
The New Credit Agreement, together with the Senior Subordinated Notes and
the Subordinated Notes, impose various restrictions and covenants on the
Company, including, among other things, financial covenants relating to the
maintenance of minimum operating profit and net worth levels and interest
coverage ratios as well as restrictions on indebtedness, guarantees,
acquisitions, capital expenditures, investments, loans and advances, liens,
dividends and other restricted payments, asset sales and issuances of stock.
Such restrictions, together with the leveraged nature of the Company, could
limit the Company's ability to respond to market conditions, to provide for
unanticipated capital investments or to take advantage of business
opportunities.
INFLATION
Lear's contracts with its major customers generally provide for an annual
productivity price reduction and, in some cases, provide for the recovery of
increases in material and labor costs. Cost reduction through design changes,
increased productivity and similar programs with the Company's suppliers
generally have offset changes in selling prices. The Company's cost structure is
comprised of a high percentage of variable costs. The Company believes that this
structure provides it with additional flexibility during economic cycles.
During the six months ended July 1, 1995, the Company recorded a reduction
in stockholders' equity of $14.1 million due to the devaluation of the Mexican
peso by approximately 44%. The effect on the results of the Company's operations
has not been material.
BUSINESS OF THE COMPANY
GENERAL
Lear is the largest independent supplier of automobile and light truck seat
systems in the world. The Company's principal products include finished
automobile and light truck seat systems, seat frames, seat covers and other seat
components. The Company's seat systems, which are designed, manufactured and
assembled at the Company's manufacturing facilities, are shipped to customer
assembly plants on a sequential parts delivery ("SPD") basis for installation in
vehicles near the end of the assembly process. The SPD process not only enables
the Company to deliver seat systems to customers on a just-in-time ("JIT") basis
but also permits delivery in the color and order in which the products are used
in the OEMs' assembly lines. The Company's present customers include 17 OEMs,
the most significant of which are Ford, General Motors, Fiat, Chrysler, Volvo,
Volkswagen, BMW, Saab and Mazda. As of July 1, 1995, the Company employed
approximately 26,000 people in 18 countries and operated 82 manufacturing,
research, design, engineering, testing and administration facilities.
Lear's sales have grown rapidly from approximately $159.8 million in the
fiscal year ended June 30, 1983 to approximately $3.1 billion in the fiscal year
ended December 31, 1994, a compound annual growth rate of approximately 30%.
This increase in sales, which has been achieved through internal growth as well
as through acquisitions, is attributable primarily to the Company's strategy of
capitalizing on two significant trends in the automotive industry: (i) the
outsourcing of automotive components and systems by OEMs; and (ii) the
consolidation and globalization of the OEM's supply base. Outsourcing of
interior components and systems has increased in response to competitive
pressures on OEMs to improve quality and reduce capital needs, costs of labor,
overhead and inventory. Consolidation among automotive industry suppliers has
occurred as OEMs have more frequently awarded long-term sole source contracts to
the most capable global suppliers.
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Increasingly, the criteria for selection include not only cost, quality and
responsiveness, but also certain full-service capabilities, including design,
engineering and project management support. OEMs now have rigorous programs for
evaluating and rating suppliers, which encompass quality, cost control,
reliability of delivery, new technology implementation and overall management.
Under these programs, each facility operated by a supplier is evaluated
independently. The suppliers who obtain superior ratings from an OEM are
considered for new business; those who do not may continue their existing
contracts, but are unlikely to be considered for additional business. As a
result, the OEMs' new supplier policies have sharply reduced the number of
component and systems suppliers. The Company believes that OEMs in North America
and Europe will continue to pursue outsourcing and supplier consolidation as a
means of cost reduction.
The principal beneficiaries of the trend to outsourcing have been
independent suppliers, such as the Company, with proven design, engineering,
program management and SPD manufacturing capabilities. The Company has
demonstrated its ability to substantially reduce the cost and increase the
quality of seat systems through the coordination of design, development and
manufacturing as a Tier I supplier. As a result of this continuing trend toward
outsourcing, the Company has been awarded the following new business which has
recently begun production or is scheduled to begin production shortly:
<TABLE>
<CAPTION>
ACTUAL/
LOCATION OF SCHEDULED
PROGRAM LEAR FACILITY START DATE
-------------------------------------------------- --------------------- ----------------
<S> <C> <C>
Ford Explorer -- Plant II......................... St. Louis, MO January 1995
Dodge Ram Pick-up Truck........................... Saltillo, Mexico March 1995
Ford Taurus/Sable................................. Atlanta, GA June 1995
Ford Taurus/Sable................................. Chicago, IL June 1995
Dodge Ram Pick-up Truck........................... St. Louis, MO July 1995
BMW -- 3 Series................................... Brits, South Africa July 1995
GMT 600 Van....................................... Wentzville, MO September 1995
BMW -- Roadster................................... Duncan, SC September 1995
VW -- Gol......................................... Sao Paulo, Brazil October 1995
GM Blazer......................................... Jakarta, Indonesia October 1995
BMW -- 3 Series................................... Wackersdorf, Germany November 1995
Holden -- VS...................................... Adelaide, Australia November 1995
</TABLE>
The outsourced market for automobile and light truck seat systems in North
America is approximately 70% of the estimated total North American seat systems
market of $6.8 billion. In 1994, the Company held a leading 38% share of the
estimated $4.8 billion outsourced seat systems market and a 27% share of the
estimated $6.8 billion total seat systems market. After giving pro forma effect
to the FSB Acquisition, the Company's share of the estimated $2.4 billion
European outsourced seat systems market would have been a leading 33% and its
share of the estimated $4.5 billion total seat systems market would have been
18%. The Company is also the largest supplier of seat systems and seat
components in Mexico.
The Company's North American content per vehicle has increased from $12 in
1983 to $169 in 1994. In Western Europe, the content per vehicle has grown from
$3 in 1983 to $80 in 1994 after giving pro forma effect to the FSB Acquisition.
This increase has resulted from the Company's ability to capitalize on a number
of industry trends including outsourcing, greater design responsibility by
suppliers and the increased sophistication of seat systems as OEMs add more
advanced features and luxury items into vehicle models.
STRATEGY
The Company has become a significant Tier I supplier by implementing a
strategy based upon the following elements:
- Strong Relationships with the OEMs. The Company's management has
developed strong relationships with its 17 OEM customers which allow Lear
to identify business opportunities and customer needs in the early stages
of vehicle design. Management believes that working closely with OEMs in
the early stages of designing and engineering seat systems gives it a
competitive advantage in securing new
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business. Lear maintains an excellent reputation with the OEMs for timely
delivery and customer service and for providing world class quality at
competitive prices. As a result of the Company's service and performance
record, it has received high quality ratings from virtually every OEM with
which it does business.
- Product Technology and Product Design Capability. Lear has made
substantial investments in product technology and product design capability
to support its products. The Company maintains two advanced technical
centers (in Southfield, Michigan and Turin, Italy) where it develops and
tests current and future products to determine compliance with safety
standards, quality and durability, response to environmental conditions and
user wear and tear. At its 12 customer-dedicated engineering centers,
specific program applications are developed and tested. Benchmarking
studies are also conducted to aid in developing innovative seat design
features. The Company has recently made substantial investments to upgrade
its advanced computer-aided engineering ("CAE") and computer-aided
design/computer-aided manufacturing ("CAD/CAM") systems. Such tools as
advanced design modeling software, dynamic crash simulation, linear and
non-linear finite element analysis and solids modeling are among several
tools recently added to electronically create a seat and evaluate its
performance.
- Lean Manufacturing Philosophy. Lear's "lean manufacturing"
philosophy seeks to eliminate waste and inefficiency in its own operations
and in those of its customers and suppliers. The Company believes that it
provides superior quality seating products at lower costs than the OEMs.
The Company, whose facilities are linked by computer directly to those of
its suppliers and customers, receives components from its suppliers on a
JIT basis, and delivers seat systems and components to its customers on a
sequential JIT basis, which provides products to an OEM's manufacturing
facility in the color and order in which the products are used. This
process minimizes inventories and fixed costs for both the Company and its
customers and enables the Company to deliver products on as little as 90
minutes' notice. For the year ended December 31, 1994, the Company's
overall annual inventory turnover rate was 36 times and up to 150 times in
the case of certain of the Company's JIT plants. The Company also minimizes
fixed costs by using existing suppliers to the OEMs and the OEMs themselves
for certain components. In cases where one of the Company's manufacturing
facilities is underutilized, the Company is able to redistribute products
to increase facility utilization.
- Global Presence. By expanding its operations outside the United
States, Lear has sought to provide its products on a global basis to its
OEM customers. Due to significant cost savings and improved product quality
and consistency, OEMs have increasingly required their suppliers to
manufacture seat systems and other components in multiple geographic
markets. By expanding its operations outside the United States, Lear
provides its products on a global basis to its OEM customers. A global
market presence also affords Lear some protection against cyclical
downturns in any single market. For the six months ended July 1, 1995,
approximately 54% of the Company's sales were outside the United States. In
furtherance of its global expansion strategy, on June 28, 1995 the Company
entered into a joint venture agreement with an affiliate of Industria
Espanola del Polieter, S.A. ("INESPO"), a Spanish corporation, to supply
seat systems to Volkswagen in Brazil.
- Growth Through Strategic Acquisitions. Strategic acquisitions have
been, and management believes will continue to be, an important element in
the Company's growth worldwide and in its efforts to capitalize on the
automotive industry trends described above. These acquisitions complement
Lear's existing capabilities and provide new growth opportunities. The
Company's recent acquisitions have expanded its OEM customer base and
worldwide presence and enhanced its relationships with existing customers.
The AIH Acquisition has also given the Company a significant presence in
the non-seating segment of the automobile and light truck interior market.
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<PAGE> 31
RECENT ACQUISITIONS
To supplement its internal growth and implement its business strategy, the
Company has made six strategic acquisitions since 1990. The following is a
summary of these acquisitions:
AIH Acquisition
In August 1995, AIHI Acquisition Corp., a wholly-owned subsidiary of Lear,
acquired all the outstanding common stock of AIH and subsequently merged with
and into AIH. The aggregate purchase price for the AIH Acquisition was $926.4
million (including the assumption of $282.3 million of AIH's existing
indebtedness and fees and expenses of $18.4 million). These funds were provided
by borrowings under the New Credit Agreement.
AIH is a leading designer and manufacturer of high quality interior trim
systems and blow molded products principally for North American and European
automobile and light truck manufacturers. AIH's interior trim products include
complete door panel assemblies, seatbacks and inserts, armrests, consoles and
headliners. Blow molded products include windshield washer reservoirs, fuel tank
shields and radiator coolant overflow reservoirs. AIH sales increased, both
internally and through acquisitions, from $209.5 million in 1991 to $512.8
million in 1994, resulting in a compound annual growth rate of approximately
35%.
The Company believes that the AIH Acquisition will provide Lear with
several strategic benefits, including the following:
- Market Share. The AIH Acquisition has made Lear the largest
independent Tier I supplier of seat and automotive interior
systems in the estimated $22 billion North American and European
total light vehicle interior market. Although the Company has
manufactured certain interior components for several years, the
AIH Acquisition affords Lear a significant presence in the
non-seating and non-instrument panel segments of the interior
market, which account for approximately 47% of the total interior
market. A substantial portion of this market is still provided
in-house by OEMs and the outsourced market is much more fragmented
than the seat systems market, thereby providing the Company with
significant growth opportunities as outsourcing continues and
supplier consolidations increase as OEMs seek global supplier
relationships.
- OEM Relationships. Management believes that the ability to offer
integrated interior systems provides Lear with a competitive
advantage as OEMs continue to reduce their supplier base while
demanding improved quality and additional Tier I services. In this
regard, management believes that OEMs will increasingly ask their
lead interior suppliers to fill the role of "Systems Integrator" to
manage the design, purchasing and supply of the total automobile
interior. As a result of the AIH Acquisition, Lear is
well-positioned to fill this role.
- Growth Opportunities. Lear's market leadership, expertise and
established relationships with European OEMs (Fiat, Opel, Volvo and
Saab) should provide AIH with additional access to the European
market. In addition, Lear's entry into automotive growth areas
worldwide, particularly in South America and the Asia-Pacific
region, provides further growth opportunities for AIH.
- AIH Management. The AIH Acquisition will provide the Company
with the experience and expertise of AIH's strong management team.
AIH is a stand-alone entity and initially will be operated as
such. The AIH Acquisition also gives the Company access to AIH's
comprehensive program management system that tracks each program's
status, predicting lead time and cost variances for each product
change requested.
FSB Acquisition
On December 15, 1994, the Company, through its wholly-owned subsidiary,
Lear Seating Italia S.r.L., purchased from Gilardini S.p.A. ("Gilardini"), a
subsidiary of Fiat, all the shares of SEPI S.p.A. ("SEPI"), the primary
automotive seat systems supplier to Fiat. SEPI and its wholly-owned subsidiary,
SEPI Sud S.p.A. ("SEPI Sud"), operate eight facilities in Italy producing
automotive seat systems for 85% of Fiat's Italian
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<PAGE> 32
vehicle production under the Fiat, Lancia, Alfa Romeo and Ferrari nameplates as
well as seat frames for certain Fiat models for which SEPI and SEPI Sud do not
supply the seat systems. In connection with this acquisition, Lear also acquired
from Gilardini interests in seat systems and seat covers businesses in Poland,
Spain and Turkey. Lear also anticipates acquiring interests in proposed South
American joint ventures which plan to supply automotive seat systems to Fiat or
its affiliates in Brazil and Argentina. Lear and Fiat also entered into a
long-term supply agreement for the production of substantially all outsourced
automotive seat systems for Fiat and affiliated companies worldwide.
The FSB Acquisition not only established Lear as the market leader in
automotive seat systems in Europe, but combined with its leading position in
North America, made Lear the largest automotive seat systems manufacturer in the
world. In addition, it gave the Company additional access to rapidly expanding
markets in South America and Eastern Europe.
NAB Acquisition
On November 1, 1993, Lear significantly strengthened its position in the
North American automotive seating market by purchasing the North American seat
cover and seat system business of Ford. The NAB consists of an integrated United
States and Mexican operation which produces seat covers for approximately 80% of
Ford's North American vehicle production (as well as for several independent
suppliers) and manufactures seat systems for certain Ford models. The NAB
Acquisition included the machinery, equipment, real property and other assets
used in the operations of the NAB as well as all of the issued and outstanding
capital stock of Favesa S.A. de C.V., a maquiladora operation located in Juarez,
Mexico.
Prior to the NAB Acquisition, the Company outsourced a significant portion
of its seat cover requirements. The expansion of the Company's seat cover
business has provided Lear with better control over the costs and quality of one
of the critical components of a seat system. In addition, by virtue of the NAB
Acquisition, the Company was able to enhance its relationship with its largest
OEM customer, entering into a five year supply agreement with Ford covering
models for which the NAB had produced seat covers and seat systems at the time
of the acquisition. The Company also assumed during the term of the supply
agreement primary engineering responsibility for a substantial portion of Ford's
car models, providing Lear with greater involvement in the planning and design
of seat systems and related products for future light vehicle models.
Scandinavian Acquisitions
In 1991 and 1992, the Company acquired the seat systems businesses of Saab
in Sweden and Finland and of Volvo in Sweden. In connection with each of these
acquisitions, the Company entered into long-term relationships with the
respective OEMs.
PRODUCTS
Lear's products have evolved from the Company's many years of experience in
the seat frame market where it has been a major supplier to General Motors and
Ford since its inception in 1917. The seat frame has structural and safety
requirements which make it the basis for overall seat design and was the logical
first step in the Company's emergence as a dominant supplier of entire seat
systems.
The market for seat systems developed as a result of North American
automobile manufacturers' need to restructure assembly plant methods in response
to vigorous foreign competition in the early 1980s. The Company was positioned
to take advantage of this growing market through its long standing relationships
with customers. These relationships have been fostered through the Company's
performance in seat frame manufacturing over the years and its demonstrated
ability to supply and manage total seat systems. The Company believes that its
position in the seat systems market will improve as seats with advanced features
become an increasingly important criterion for distinguishing between competing
vehicle models.
The following is the approximate composition by product category of the
Company's net sales in the year ended December 31, 1994: seat systems, 78%; seat
covers, 12%; seat frames, 8%; and seat components, 2%.
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<PAGE> 33
- Seat Systems. The seat systems business consists of the design,
engineering, manufacture, assembly and supply of entire seating requirements for
a vehicle or assembly plant. The Company produces seat systems for automobiles
and light trucks that are fully finished and ready to be installed in a vehicle.
As OEMs continue to view seat systems as a distinguishing marketing feature, the
advanced features incorporated initially in high performance seats are more
frequently becoming standard features in a wider variety of later production
vehicles.
As a result of its product technology and product design strengths, the
Company can provide ergonomic designs which offer styling flexibility at low
cost. In addition, the Company is able to incorporate many convenience features
and safety improvements into its seat designs, such as storage armrests, rear
seat fold down panels, integrated restraint systems and child restraint seats.
Lear's position as a market leader in seat systems is largely attributable
to seating programs on new vehicle models launched in the past five years. The
Company believes that supplying seating for these new vehicle models will
provide it with a long-term revenue stream throughout the lives of these models.
The Company is currently working with customers in the development of a number
of seat systems products to be introduced by automobile manufacturers in the
late 1990s, which it expects will lead to an increase in outsourcing
opportunities in the future. Such business includes the Ford Taurus/Mercury
Sable, the Ford Explorer, the Ford Contour/Mercury Mystique, the Dodge Ram
Pick-up Truck, the Chevrolet Cavalier/Pontiac Sunfire, the Ford Windstar
Minivan, all Jaguar models and the GM Opel Omega.
- Seat Covers. Lear produces seat covers at its Fairhaven, Michigan and
Saltillo, Mexico facilities, which deliver seat covers primarily to other
Company plants. In addition, pursuant to the NAB Acquisition, the Company
acquired a portion of Ford's North America seat cover business and is producing
approximately 80% of the seat covers for Ford's North American vehicles. The
Company's major external customers for seat covers are Ford and other
independent seat system suppliers. The expansion of the Company's seat cover
business allows the Company better control over the costs and quality of one of
the critical components of a seat system. Typically, seat covers comprise
approximately 30% of the aggregate cost of a seat system.
- Seat Frames. Lear produces steel and aluminum seat frames for passenger
cars and light and medium trucks. Seat frames are primarily manufactured using
precision stamped, tubular steel and aluminum components joined together by
highly automated, state-of-the-art welding and assembly techniques. The
manufacture of seat frames must meet strict customer specified safety standards.
The Company's seat frames are delivered to its own plants where they become part
of a completed seat that is sold to the OEM customer, to customer-operated
assembly plants or to other independent seating suppliers where they are used in
the manufacture of assembled seating systems.
- Seat Components. The Company designs and manufactures plastic storage
armrests for inclusion in seat systems at its plant in Mendon, Michigan.
Vehicles in which these components are found are the Dodge Ram Pick-up Truck,
the Ford F-Series Pick-up Truck, the Buick LeSabre and the Oldsmobile Delta 88.
The Company also manufactures decorative, painted and assembled injection molded
components at the Mendon facility that are used in automotive vehicle interiors.
MANUFACTURING
All the Company's plants use JIT manufacturing techniques, and most of the
Company's products, including all seat systems, are delivered to the OEMs on a
JIT basis. The JIT concept, first broadly utilized by Japanese automobile
manufacturers, is the cornerstone of the Company's manufacturing and supply
strategy. This strategy involves many of the principles of the Japanese system,
but was redeveloped for compatibility with the greater volume requirements and
geographic distances of the North American market. The Company first developed
JIT operations in the early 1980s at its seat frame manufacturing plants in
Morristown, Tennessee and Kitchener, Ontario, Canada. These plants previously
operated under traditional manufacturing practices, resulting in relatively low
inventory turnover rates, significant scrap and rework, a high level of indirect
labor costs and long production set-up times. As a result of JIT manufacturing
techniques, the
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<PAGE> 34
Company has been able to consolidate plants, increase capacity and significantly
increase inventory turnover, quality and productivity.
The JIT principles first developed at Lear's seat frame plants in 1983 were
next applied to the Company's growing seat systems business and have now evolved
to SPD principles. The Company's seating plants are typically no more than 30
minutes or 20 miles from its customers' assembly plants and manufacture seats
for delivery to the customers' facilities in as little as 90 minutes. Orders for
the Company's seats are received on a weekly basis, pursuant to blanket purchase
orders for annual requirements. These orders detail the customers' needs for the
ensuing week. In addition, on each work day, constant computer and other
communication is maintained between personnel at the Company's plants and
personnel at the customers' plants to keep production current with the
customers' demand.
Seat and component assembly techniques fall into two major categories,
traditional assembly methods (in which fabric is affixed to a frame using
Velcro, wire or other material) and more advanced bonding processes. There are
two bonding techniques employed by the Company, the Company's patented SureBond
process, a technique in which fabric is affixed to the underlying foam padding
using adhesives, and the Company's licensed foam-in-place process, in which foam
is injected into a fabric cover. The SureBond process has several major
advantages when compared to traditional methods, including design flexibility,
increased quality and lower cost. The SureBond process, unlike alternative
bonding processes, results in a more comfortable seat in which air can circulate
freely. The SureBond process, moreover, is reversible, so that seat covers that
are improperly installed can be removed and repositioned properly with minimal
materials cost. In addition, the SureBond process is not capital intensive when
compared to competing technologies. Approximately one-third of the Company's
seats are manufactured using the SureBond process. See "-- Litigation."
The seat assembly process begins with pulling the requisite components from
inventory. Inventory at each plant is kept at a minimum, with each component's
requirement monitored on a daily basis. This allows the plant to devote the
maximum space to production, but also requires precise forecasts of the day's
output. Seats are assembled in modules, then tested and packaged for shipment.
The Company operates a specially designed trailer fleet that accommodates the
off-loading of vehicle seats at the assembly plant.
The Company obtains steel, aluminum and foam chemicals used in its seat
frames from various producers under various supply arrangements. Leather, fabric
and purchased components generally are acquired from suppliers. The principal
raw materials used in the production of polyurethane foam are polyol (poly
oxyalkylene) and TDI (toluene discyanate). These materials are supplied under
various arrangements with major chemical companies and are readily available.
Leather, fabric and purchased components are generally purchased from various
suppliers under contractual arrangements generally lasting no longer than one
year. Some of the purchased components are obtained through the Company's own
customers.
CUSTOMERS
The Company currently serves the worldwide automobile and light truck
market, which produces over 50 million vehicles annually. The outsourced market
for automobile and light truck seat systems in North America currently
represents approximately 70% of the total North American market for these
products which is estimated to have annual revenues of approximately $6.8
billion. The outsourced market for seat systems in Europe is approximately 53%
of the total European seat systems market, which in 1994 was estimated to have
annual revenues of approximately $4.5 billion. The Company believes that the
same competitive pressures that contributed to the rapid expansion of its
business in North America since 1983 will continue to require OEMs in the North
American and the European markets to outsource more of their seating
requirements. The Company's OEM customers currently include Ford, General
Motors, Fiat, Chrysler, Volvo, Volkswagen, BMW, Saab, Mazda, Jaguar, Audi,
Subaru, Isuzu, Suzuki, Daimler-Benz, Renault and Peugeot.
In the past six years, in the course of retooling and reconfiguring plants
for new models and model changeovers, OEMs have eliminated production of seat
systems and components from certain of their facilities, thereby committing
themselves to purchasing these products from outside suppliers. During this
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period, the Company became a supplier of these products for a significant number
of new models, many on a JIT basis.
The purchase of seat systems on a JIT basis has allowed the Company's
customers to realize a competitive advantage as a result of (i) a reduction in
labor costs since suppliers like the Company generally enjoy lower direct labor
rates, (ii) the elimination of working capital and personnel costs associated
with the production of seating systems by the OEM, (iii) a reduction in net
overhead expenses and capital investment due to the availability of plant space
previously associated with seat production at the OEM's facilities for expansion
of other manufacturing operations and (iv) a reduction in transaction costs
because of the customer's ability to deal with a limited number of sophisticated
system suppliers as opposed to numerous individual component suppliers. In
addition, the Company offers improved quality and on-going cost reduction to its
customers through design improvements and its "Champion Programs," whereby
individual members of management are responsible for working with a specific
vendor to aggressively reduce costs.
The Company receives blanket purchase orders from its customers that
normally cover annual requirements for seats to be supplied for a particular car
model. Such purchase orders typically extend over the life of the model, which
is generally four to seven years, and do not require the purchase by the
customer of any minimum number of seats. Although such purchase orders may be
terminated at any time, the Company does not believe that any of its customers
have terminated a material purchase order prior to the end of the life of a
model. The primary risk to the Company is that an OEM will produce fewer units
of a model than anticipated. In order to reduce its reliance on any one model,
the Company produces complete seat systems and components for a broad
cross-section of both new and established models. The Company's seat systems
sales for the year ended December 31, 1994 broke down into the following vehicle
categories: 42% light truck and sport utility, 18% mid-size, 13% luxury, 11%
full-size, 9% sport vehicles and 7% compact vehicles. The following table
indicates the vehicles for which the Company or its affiliates produce seat
systems and the locations of such production:
31
<PAGE> 36
<TABLE>
<S> <C> <C>
UNITED STATES AND CANADA
FORD: GENERAL MOTORS: BMW:
Ford Crown Victoria Buick LeSabre 3 Series
Ford Explorer Buick Park Avenue
Ford F-Series Pick-up Truck Buick Regal CAMI - GENERAL MOTORS/SUZUKI:
Ford Mustang GT & LX Chevrolet Cavalier Geo Metro
Ford Probe Chevrolet Corvette Geo Tracker
Ford Ranger Supercab/STX Chevrolet Lumina Suzuki Sidekick
Ford Taurus Chevrolet Monte Carlo Suzuki Swift
Ford Taurus SHO Chevrolet Tahoe/GMC Yukon
Ford Thunderbird SC Chevrolet C/K Pick-up Truck CHRYSLER:
Ford Windstar Minivan Chevrolet Kodiak Dodge Dakota Pick-up Truck
Mercury Sable Chevrolet/GMC G-Van Dodge Ram Pick-up Truck
Mercury Cougar XR7 GMC Pick-up Truck Dodge Viper
Mercury Grand Marquis Chevrolet/GMC Suburban
Mazda Navajo GMC Top Kick FUJI/ISUZU:
Pontiac Bonneville Isuzu Rodeo
Pontiac Sunfire Subaru Legacy
HONDA:
Passport
EUROPE
FIAT: ALFA ROMEO: JAGUAR:
Barchetta Alfa 145/146 XJS
Coupe 500 Alfa 155 X300
Croma Alfa 164
X230 Coupe LANCIA:
Punto Spider Dedra
Tempra Delta
Tipo CHRYSLER: Thema
Uno Eurostar Minivan Y11
Kappa
GENERAL MOTORS - OPEL: VOLVO:
Astra 800 Series VOLKSWAGEN:
Corsa 900 Series Transporter T4
Omega
Vectra SAAB:
Saab 900
Saab 9000
MEXICO
BMW: CHRYSLER: VOLKSWAGEN:
3 Series Dodge Ram Pick-up Truck Golf
5 Series Jetta
7 Series GENERAL MOTORS: Derby
Chevrolet Cavalier GPA Minivan
FORD: Chevrolet C/K Pick-up Truck
Ford Contour Opel Corsa
Ford Escort Pontiac Sunfire
Ford F-Series Pick-up Truck
Mercury Mystique
Mercury Tracer
OTHER
GENERAL MOTORS - HOLDEN (AUSTRALIA): VOLVO (THAILAND): GENERAL MOTORS - OPEL
VS 800 Series (INDONESIA):
900 Series 330 Blazer
BMW (SOUTH AFRICA): Optima
3 Series Vectra
</TABLE>
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<PAGE> 37
As a result of the economic benefits inherent in the JIT manufacturing
process and the costs associated with reversing a decision to purchase seat
systems from an outside supplier, the Company believes that automobile
manufacturers' level of commitment to purchasing seating from outside suppliers,
particularly on a JIT basis, will increase. However, under the contracts
currently in effect in the United States between each of General Motors, Ford
and Chrysler with the United Automobile, Aerospace and Agricultural Implement
Workers of America (the "UAW"), in order for any of such manufacturers to obtain
components that it currently produces itself from external sources, it must
first notify the UAW of such intention. If the UAW objects to the proposed
outsourcing, some agreement will have to be reached between the UAW and the OEM.
Factors that will normally be taken into account by the UAW and the OEM include
whether the proposed new supplier is technologically more advanced than the OEM,
cost and whether the OEM will be able to reassign union members whose jobs are
being displaced to other jobs within the same factories. As part of its
long-term agreement with General Motors, the Company operates its Grand Rapids,
Michigan, Rochester Hills, Michigan and Lordstown, Ohio facilities with General
Motors employees and reimburses General Motors for the wages of such employees
on the basis of the Company's employee wage structure. The Company enters into
these arrangements to cooperate and enhance its relationship with its customers.
The Company's contracts with its major customers generally provide for an
annual productivity price reduction and, in some cases, provide for the recovery
of increases in material and labor costs. Cost reduction through design changes,
increased productivity and similar programs with the Company's suppliers
generally have offset changes in selling prices. The Company's cost structure is
comprised of a high percentage of variable costs. The Company believes that this
structure provides it with additional flexibility during economic cycles.
Ford and General Motors, the two largest automobile and light truck
manufacturers in the world, are also the Company's two largest customers,
accounting for 39% and 36%, respectively, of the Company's net sales during
1994. After giving effect to the AIH Acquisition and the FSB Acquisition, sales
to Ford and General Motors will continue to represent a similar substantial
portion of the Company's total sales.
MARKETING AND SALES
The Company markets its products by maintaining strong relationships with
its customers. Throughout its 78-year history, customers have benefitted from
the Company's strong technical and product development capabilities, reliable
delivery of high quality products, strong customer service, innovative new
products and a competitive cost structure. Close personal communication with
automobile manufacturers on both corporate and plant levels is an integral part
of the Company's marketing strategy. Recognizing this, the Company was
reorganized into six independent divisions, each with the ability to focus on
its own customers and programs and each having complete responsibility for the
product, from design to installation. By moving the decision process closer to
the customer, and instilling a philosophy of "cooperative autonomy," the Company
is more responsive to, and has strengthened its relationship with, its
customers. Automobile manufacturers have increasingly reduced their number of
suppliers as part of their move to purchase systems rather than discrete
components. This trend favors suppliers, like the Company, with established ties
to automobile manufacturers and the demonstrated ability to adapt to the new
competitive environment in the automotive industry.
The Company's sales are originated almost entirely by its sales staff. This
marketing effort is augmented by design and manufacturing engineers who work
closely with automobile manufacturers from the preliminary design to the
manufacture and supply of a seating system. Manufacturers have increasingly
looked to suppliers like the Company to assume responsibility for product
innovations, to shorten the development cycle of new models, decrease tooling
investment and labor costs, reduce the number of costly design changes in the
early phases of production and improve seat comfort and functionality. Once the
Company is engaged to develop the design for the seating of a specific car
model, it is also generally engaged to supply the automobile with seating when
the car goes into production. The Company has responded to this trend by
improving its engineering and technical capabilities and investing in technical
centers in the United States and in Europe. The Company has also developed
full-scope engineering capabilities, including all aspects of safety and
functional testing and comfort assessment. In addition, the Company has
established various remote
33
<PAGE> 38
engineering sites in close proximity to several of its OEM customers to enhance
customer relationships and design activity.
TECHNOLOGY
The Company conducts advanced product design and development at its
technical centers in Southfield, Michigan and Turin, Italy. After the FSB
Acquisition, Lear transferred its European technical facility from Rietberg,
Germany to Turin, Italy. At the technical centers, the Company tests its
products to determine compliance with applicable safety standards, the products'
quality and durability, response to environmental conditions and user wear and
tear. In the past, the Company has developed a number of designs for innovative
seat features which it has patented, including ergonomic features such as
adjustable lumbar supports and bolster systems and adjustable thigh supports. In
addition, the Company incorporates many convenience, comfort and safety features
into its seat designs, including storage armrests, rear seat fold down panels,
integrated restraint systems and child restraint seats. The Company has invested
to further upgrade its CAE and CAD/CAM systems, including investments in
three-dimensional color graphics, customer telecommunications and direct
interface with customer CAD systems. Research and development costs incurred in
connection with the development of new products and manufacturing methods (not
including additional research and development costs paid for by the customer)
amounted to approximately $16.2 million, $21.9 million and $16.2 million for the
six months ended July 1, 1995 and for the years ended December 31, 1994 and
1993, respectively.
The Company uses its patented SureBond process (the patent for which has
approximately 8 years remaining) in bonding seat cover materials to the foam
pads used in certain of its seats. The SureBond process is used to bond a
pre-shaped cover to the underlying foam to minimize the need for sewing and
achieve new seating shapes, such as concave shapes, which were previously
difficult to manufacture. See "-- Litigation".
The Company holds a number of mechanical and design patents covering its
automotive seating products and has numerous applications for patents currently
pending. In addition, the Company holds several trademarks relating to various
of its manufacturing processes. The Company also licenses its technology to a
number of seating manufacturers.
The Company has and will continue to dedicate resources to research and
development to maintain its position as a leading developer of technology in the
automotive seating industry.
JOINT VENTURES
The Company conducts a portion of its business through joint ventures in
order to facilitate the exchange of technical information and the establishment
of business relationships with foreign automakers. In connection with the FSB
Acquisition, the Company obtained a 49% interest in Industrias Cousin Freres,
S.L., a Spanish joint venture with Bertrand Faure S.A. which produces seat
components, and a 35% interest in Markol Otomotiv Yan Sanayi Ve Ticart, a
Turkish joint venture which proposes to produce seat systems for Tofas, a Fiat
affiliate, and seat covers for certain of the Company's Italian subsidiaries. As
part of the Company's effort to procure business in the Asia-Pacific market, the
Company holds a 49% interest in Lear Seating Thailand Corporation. The Company
also participates in joint ventures with NHK Spring Co., Ltd. of Japan and
certain other foreign automotive component suppliers.
EMPLOYEES
As of July 1, 1995, the Company employed approximately 6,700 persons in the
United States, 11,000 in Mexico, 2,700 in Canada, 1,400 in Germany, 2,100 in
Italy, 1,300 in Sweden, 300 in the United Kingdom, 300 in Poland, 100 in Austria
and 100 in France. Of these, approximately 3,650 were salaried employees and the
balance were paid on an hourly basis. Approximately 20,000 of the Company's
employees are members of unions. The Company has experienced some labor disputes
at its plants, none of which have significantly disrupted production or had a
materially adverse effect on its operations. The Company has been able to
resolve all such labor disputes and believes its relations with its employees
are good.
34
<PAGE> 39
FACILITIES
As of July 1, 1995, the Company's operations were conducted through 82
facilities, including six facilities operated by the Company's less than
majority-owned affiliates, in 18 countries employing 26,000 people worldwide.
Substantially all owned facilities secure borrowings under the Company's various
debt agreements.
The Company's facilities are located in appropriately designed buildings
which are kept in good repair with sufficient capacity to handle present
volumes. The Company has designed its facilities to provide for efficient SPD
manufacturing of its products. No facility is materially underutilized.
Management believes substantially all of the Company's property and equipment is
in good condition and that it has sufficient capacity to meet its current and
expected manufacturing and distribution needs.
LITIGATION
On August 17, 1995, Astechnologies, Inc. ("Astech") filed a complaint
against the Company in the United States District Court for the Northern
District of Georgia, Atlanta Division. Astech asserts that the Company's
SureBond process, which bonds seat covers to foam pads, and the Company's
manufacture and use of certain machines to carry out such process, infringe an
Astech patent. See "-- Manufacturing." Astech also asserts that the Company
breached an agreement between the Company and Astech relating to the use in
connection with the SureBond process of machines purchased by the Company from
Astech. Astech seeks unspecified treble damages and an injunction against
further patent infringement.
The Company does not believe that Astech's patent is valid nor does the
Company believe that, if Astech's patent were to be upheld, the Company has
infringed Astech's patent. The Company intends to vigorously contest Astech's
claims and does not believe that Astech's claims will have a material adverse
effect on the Company's consolidated financial position or future results of
operations.
The Company is also involved in certain other legal actions and claims
arising in the ordinary course of business. Management of the Company does not
believe that any of the litigation in which the Company is currently engaged,
either individually or in the aggregate, will have a material adverse effect on
the Company's consolidated financial position or future results of operations.
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<PAGE> 40
SELECTED FINANCIAL DATA OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
The following summary consolidated financial information and other data
were derived from the consolidated financial statements of AIH. The consolidated
financial statements of AIH for each of fiscal years 1994, 1993, 1992 and 1991
and the nine months ended December 29, 1990 have been audited by Arthur Andersen
LLP. The consolidated financial statements of AIH for the six months ended July
1, 1995 and July 2, 1994 are unaudited; however, in the opinion of AIH's
management, they reflect all adjustments, consisting only of normal recurring
items, necessary for a fair presentation of the financial position and results
of operations of such periods. The results for the six months ended July 1, 1995
are not necessarily indicative of the results to be expected for the full fiscal
year. The selected financial data below should be read in conjunction with the
consolidated financial statements of AIH and the notes thereto incorporated by
reference in this Prospectus and "Management's Discussion and Analysis of
Results of Operations of Automotive Industries Holding, Inc."
AUTOMOTIVE INDUSTRIES HOLDING, INC.
<TABLE>
<CAPTION>
AS OF
AS OF OR FOR THE OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED NINE MONTHS
----------------- ------------------------------------------------------- ENDED
JULY 1, JULY 2, DECEMBER 31, JANUARY 1, DECEMBER 26, DECEMBER 28, DECEMBER 29,
1995 1994 1994 1994 1992 1991 1990
------- ------- ------------ ---------- ------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.......................... $ 377.1 $ 236.8 $512.8 $348.7 $272.4 $209.5 $135.5
Gross profit....................... 73.0 50.6 103.9 74.9 55.5 40.7 26.8
Selling, general and administrative
expenses......................... 24.9 16.6 35.3 24.4 16.7 11.1 7.1
Amortization....................... 2.6 2.2 4.7 3.4 2.3 2.2 1.6
------- ------- ------------ ---------- ------------ ------------ ------------
Operating income................... 45.5 31.8 63.9 47.1 36.5 27.4 18.1
Interest expense, net.............. 9.0 3.6 9.3 7.1 9.4 15.0 11.8
Other expense, net................. -- -- -- -- -- .1 .1
------- ------- ------------ ---------- ------------ ------------ ------------
Income before income taxes and
extraordinary items.............. 36.5 28.2 54.6 40.0 27.1 12.3 6.2
Income taxes....................... 14.6 11.4 21.9 16.0 11.0 5.4 3.1
------- ------- ------------ ---------- ------------ ------------ ------------
Net income before extraordinary
items............................ 21.9 16.8 32.7 24.0 16.1 6.9 3.1
Extraordinary items................ -- -- -- -- 8.3 -- --
------- ------- ------------ ---------- ------------ ------------ ------------
Net income before preferred
dividend......................... 21.9 16.8 32.7 24.0 7.8 6.9 3.1
Preferred dividend................. -- -- -- -- .9 2.5 1.7
------- ------- ------------ ---------- ------------ ------------ ------------
Net income......................... $ 21.9 $ 16.8 $ 32.7 $ 24.0 $ 6.9 $ 4.4 $ 1.4
====== ====== ========== ======== ========== ========== ==========
BALANCE SHEET DATA:
Current assets..................... $ 205.8 $ 156.4 $187.6 $ 93.0 $ 63.4 $ 47.8 $ 45.3
Total assets....................... 611.3 461.0 567.4 338.5 233.7 216.6 212.6
Current liabilities................ 117.6 79.7 96.2 36.0 32.7 33.4 27.6
Long-term debt..................... 221.1 154.0 216.9 93.8 75.8 105.3 115.8
Stockholders' equity............... 241.3 207.2 219.9 189.7 109.8 34.3 55.1
OTHER DATA:
EBITDA............................. $ 60.4 $ 41.9 $ 85.8 $ 63.0 $ 48.6 $ 38.8 $ 25.6
Capital expenditures............... 30.8 18.6 40.5 22.4 8.9 7.8 4.3
</TABLE>
36
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
Six Months Ended July 1, 1995 Compared with Six Months Ended July 2, 1994
Revenues
Revenues for the six months ended July 1, 1995 totaled $377.1 million
compared to $236.8 million for the six months ended July 2, 1994, an increase of
$140.3 million or 59.2%. The increase was the result of newly awarded business
and increased production of models served by AIH, particularly in the light
truck segment, combined with AIH's acquisitions of Cotton and Gulfstream.
Cost of Sales
Cost of sales as a percentage of revenues increased to 80.6% for the first
six months of 1995 compared to 78.6% for the same period in 1994. The decrease
in gross margin is the result of lower margins at the acquired companies (which
were anticipated at the time of such acquisitions) and costs associated with
program launches.
Selling, General and Administrative
Selling, general and administrative costs increased to $24.9 million or
6.6% of revenues for the six months ended July 1, 1995 compared to $16.6 million
or 7.0% of revenues for the six months ended July 2, 1994. Approximately $5.6
million of the increase was the result of incremental costs associated with
AIH's acquisitions. The remaining increase was due to incremental engineering
and administrative costs to support the revenue growth.
Interest Expense
Interest expense for the six months ended July 1, 1995 was approximately
$9.0 million or 2.4% of revenues, an increase of $5.4 million compared to the
same period in 1994. Approximately $2.9 million of the increase is due to
increased borrowings to finance AIH's acquisitions. The remaining increase was
due to higher rates on floating rate indebtedness and increased borrowings to
finance capital expenditures.
Income Taxes
The effective income tax rates for the first six months of 1995 and 1994
were 39.9% and 40.2%, respectively. The effective income tax rates differed from
the federal statutory rate due primarily to the effects of state income taxes
and non-deductible expenses.
Year Ended December 31, 1994 Compared with Year Ended January 1, 1994
Revenues
Revenues for the year ended December 31, 1994 increased 47.0% to $512.8
million from $348.7 million in 1993. Approximately $55.0 million of the revenue
increase was due to the incremental effects of the May 1994 acquisition of
Cotton and the December 1994 acquisition of Gulfstream. The remaining increase
was from ongoing operations resulting from new business on several redesigned or
new platforms including the GM C/K Pickup and J Car (Cavalier, Sunfire) and
Ford's Windstar mini-van and Contour/Mystique. AIH also benefited from increased
production by North American OEMs, particularly in the light truck segment.
AIH's content per vehicle produced in North America increased 22.7% to $31.40 in
1994 from $25.60 in 1993. AIH's European sales increased to $44.6 million as a
result of the Cotton acquisition.
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<PAGE> 42
Cost of Sales
Cost of sales, as a percentage of revenues, increased to 79.7% in 1994 from
78.5% in 1993. AIH's margins were lower than 1993 levels due to anticipated
lower margins associated with the acquired businesses and start-up costs on new
programs.
Selling, General and Administrative
Selling, general and administrative expenses increased by $11.0 million,
but decreased to 6.9% of revenues in 1994 compared to 7.0% of revenues in 1993.
The increased costs were incurred principally to support the continued growth
and design, engineering and program development activities associated with
future growth in new business and AIH's 1994 acquisitions.
Other
Amortization expense increased from $3.4 million in 1993 to $4.7 million in
1994 due to incremental goodwill amortization related to AIH's 1994
acquisitions. Interest expense increased from $7.1 million in 1993 to $9.3
million in 1994. The increase was the result of additional borrowings to fund
AIH's 1994 acquisitions and higher interest rates on AIH's floating rate
indebtedness. The effective income tax rates were 40.1% and 40.0%, respectively,
for 1994 and 1993. The effective rates were higher than federal statutory rates
as a result of non-deductible goodwill amortization and state income taxes.
Year Ended January 1, 1994 Compared with Year Ended December 26, 1992
Revenues
Revenues for the year ended January 1, 1994 increased 28.0% to $348.7
million from $272.4 million in 1992. The increase reflects incremental business
awarded to AIH on new and redesigned vehicles, increased automotive production
and revenues from acquired businesses. AIH's revenue content per vehicle
produced in North America increased 9.4% from $23.40 in 1992 to $25.60 in 1993.
Approximately one-half of the revenue increase resulted from the acquisition of
ASAA International, Inc. in May 1993 and Fibercraft//DESCon Engineering, Inc. in
July 1993. AIH also benefited from the continuing recovery in the North American
automotive market.
Cost of Sales
Cost of sales, as a percentage of revenues, decreased to 78.5% in 1993 from
79.6% in 1992. The improvement was the result of AIH's continuing efforts to
improve productivity and reduce costs and the effect of the increased sales on
fixed costs. AIH's margins increased despite the costs associated with launch of
several new programs.
Selling, General and Administrative
Selling, general and administrative expenses increased to 7.0% of revenues
in 1993 compared to 6.1% of revenues in 1992. The increase was due principally
to the incremental costs related to AIH's 1993 acquisitions. Costs to support
the growth in revenues and new program development also led to an increase in
selling, general and administrative expenses.
Other
Amortization expense increased from $2.3 million in 1992 to $3.4 million in
1993 due to additional amortization related to AIH's 1993 acquisitions. Interest
expense decreased to $7.1 million in 1993 compared with $9.5 million in 1992.
The decrease was due principally to the retirement of certain indebtedness with
the proceeds of the public offering of AIH's Class A Common Stock in August
1993. The effective income tax rates for 1993 and 1992 were 40.0% and 40.5%,
respectively. The effective tax rates were higher than federal statutory rates
as a result of non-deductible goodwill amortization and state income taxes.
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<PAGE> 43
BUSINESS OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
GENERAL
AIH is a designer and manufacturer of high-quality interior trim systems
and blow molded products principally for North American and European car and
light truck manufacturers. AIH's interior trim products include complete door
panel assemblies, seatbacks and inserts, armrests, consoles, and headliners.
Blow molded products include windshield washer reservoirs, fuel tank shields and
radiator coolant overflow reservoirs. AIH's products are sold to almost every
major automotive OEM including Ford, General Motors, Chrysler, Honda, Diamond
Star (Mitsubishi), Mazda, Subaru, Isuzu, Nissan and Toyota and, with the
Plastifol acquisition, Mercedes, Volkswagen, BMW and Jaguar.
Since 1987, AIH has achieved substantial internal growth. This growth has
been augmented by selected strategic acquisitions, including Plasta Fiber
Industries, Inc. ("PFI") in February 1992, Cellasto Plastics Corporation
("Cellasto") in July 1992, ASAA International, Inc. ("ASAA") in May 1993,
Fibercraft//DESCon Engineering, Inc., ("Fibercraft") in July 1993, Cotton in May
1994, Gulfstream in December 1994 and Plastifol in July 1995. In addition, in
January 1994 AIH completed its acquisition of an initial 40% interest in
Interiores Automotrices Summa, S.A. de C.V. ("IASSA"). These acquisitions have
allowed AIH to expand its interior trim systems and blow molded products
capabilities and have substantially increased AIH's ability to provide advanced
design, engineering and program management services to customers. At the same
time, they have increased AIH's global presence and have provided AIH access to
new customers and new technologies.
AIH STRATEGY
AIH's business objective is to expand its position as a leading supplier of
interior trim systems and blow molded products to North American and European
OEMs. To achieve this objective, AIH has pursued, and as a subsidiary of Lear
will continue to pursue, a strategy based upon the following elements:
High Quality Products. AIH emphasizes the importance of product quality to
all of its employees, utilizes technologically advanced machinery and production
techniques, incorporates raw materials that conform to AIH's stringent quality
standards, and uses advanced testing equipment and methods.
Low Delivered Cost. AIH strives to achieve low delivered costs to its
customers through its emphasis on quality, as evidenced by its near-zero
customer rejection rate, and its responsiveness to customer needs, including its
reliable and timely delivery. AIH's in-house scrap rejection rate of less than
one-half of one percent and the resulting savings from reduced scrap and rework
exemplifies AIH's ability to control its costs. In addition, AIH has located its
plants in areas with high-quality and relatively low-cost labor, and has
equipped its facilities with technologically advanced, cost-effective machinery.
Long-Term Customer Relationships. Because of the long lead times required
to obtain contracts and the reduction of in-house technical staff by OEMs, AIH
has sought to develop long-term relationships with customers by working closely
with them throughout all phases of new product development and subsequent
production. In particular, AIH seeks to continue to develop its relationship and
reputation with customers by continually exceeding their expectations in every
phase of AIH's operations.
Focus on Complex, Value-Added Products. AIH focuses its efforts on a
"systems" approach to developing its products. These integrated systems, rather
than individual components, produce greater value for the customer since certain
services such as design and engineering and subassembly are provided more cost
efficiently by AIH.
Provide Complete Services from Initial Design to Manufacturing. AIH has
responded to OEMs' needs for full service from their suppliers. With the
acquisition of Fibercraft, AIH has enhanced its capabilities to provide
cost-effective integrated development services from the initial styling of
components through the manufacturing process.
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<PAGE> 44
Strategic Acquisitions. AIH is continually seeking to acquire businesses to
complement and expand its interior trim systems and blow molded products systems
capabilities. Such opportunities should continue to present themselves as OEMs
continue to rationalize their supplier base toward larger more global suppliers.
AIH PRODUCTS
AIH produces interior trim systems and components as well as blow molded
plastic parts principally for North American and European car and light truck
manufacturers. AIH's primary interior trim systems and blow molded products are
described below:
<TABLE>
<S> <C>
Interior Trim Systems Blow Molded Products
- Complete door panel assemblies - Seatbacks
- Armrests and consoles - Windshield washer resevoir
- Custom injection molded interior - Fuel tank shields
trim including "A," "B" and "C" - Coolant reservoirs
pillars, cowl panels, scuff plates, - Front grille assemblies
trunk liners and quarter panels - HVAC ducts
- Sun visors - Interior insulators
- Headliners and package trays - Hood insulators
- Appliques and bolsters - Engine shrouds
- Load floors - Air intake ducts
- Spare tire covers - Exterior air dams
- Vapor canisters
</TABLE>
Interior Trim Systems. The core technologies used in AIH's interior trim
systems include injection molding, low-pressure injection molding, rotational
molding and urethane foaming, compression molding of Wood-Stock(TM) (a
proprietary process that combines polypropylene and wood flour), glass
reinforced urethane and a proprietary headliner process. One element of AIH's
strategy is to focus on more complex, value-added products such as door panel
systems and armrests. AIH delivers these integrated systems at attractive prices
to the customer because certain services such as design and engineering and
sub-assembly are provided more cost efficiently by AIH.
Door panel systems and armrests represent AIH's most complex products. A
door panel consists of several component parts that are attached to a base
molded substrate by various methods. Specific components include vinyl- or
cloth-covered appliques, armrests, radio speaker grilles, map pocket
compartments or carpet and sound reducing insulation. Upon assembly, each
component must fit precisely, with a minimum of misalignment or gap, and must
match the color of the base substrate. Armrests are produced by either
rotational molding or injection molding of a vinyl covering and are then
combined with an insert and filled with a resilient polyurethane foam to produce
the finished product.
There has been a rapid evolution in AIH's product mix over the last four
years, particularly considering AIH's rapid revenue growth over the same period.
In fiscal 1987, approximately 36% of AIH's revenues were derived from component
value-added assemblies such as door panel systems and armrests. For the year
ended December 31, 1994, approximately 50% of AIH's revenues are derived from
value-added assemblies.
Blow Molded Products. AIH produces a variety of blow molded products. In
contrast to AIH's interior systems products, blow molded products require little
assembly. However, the manufacturing process for such parts demands considerable
expertise in order to consistently produce high-quality products. Blow molded
parts are produced by extruding a shaped parison or tube of plastic material and
then clamping a mold around the parison. High pressure air is introduced into
the tube causing the hot plastic to take the shape of the surrounding mold. The
part is removed from the mold after cooling and finished by trimming, drilling
and other operations.
The combined pressures of cost reduction and fuel economy enhancement have
caused automotive manufacturers to concentrate their efforts on developing and
employing lower cost, lighter materials. As a result, plastic content in cars
and light trucks has grown significantly. Plastics are now commonly used in such
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<PAGE> 45
nonstructural components as interior and exterior trim, door panels, instrument
panels, grilles, bumpers, duct
systems, taillights and fluid reservoirs. Increasingly, automobile content
requires large plastic injection molded assemblies for both the interior and
exterior. For interior trim applications, substitution of plastics for other
materials is largely complete, and little growth through substitution is
expected. However, further advances in injection molding technologies are
improving the performance and appearance of parts molded in reinforced
thermoplastics.
Product Requirements. AIH's products must conform to the increasingly
exacting standards set by the North American and European OEMs. Product color,
weatherability and durability are critical to AIH's success in developing the
plastic automotive parts business; AIH's plants have been favorably rated by
Ford, Chrysler, GM, Diamond Star, Isuzu, Mazda, Honda, Nissan, Rover and Jaguar
with respect to their near-zero defect level in these areas. As a result of
AIH's service and quality record, near-zero customer rejection rate, and its
production rejection rate of less than one-half of one percent, the OEMs have
awarded high quality ratings to AIH.
AIH CUSTOMERS
AIH supplies its products primarily to Ford, General Motors and Chrysler,
but has increased its business with Diamond Star (Mitsubishi), Honda, Isuzu,
Rover, Mazda, Nissan, Mercedes, BMW, Volkswagen, and Jaguar. For the year ended
December 31, 1994, Ford, General Motors and Chrysler accounted for approximately
45%, 17% and 12%, respectively, of AIH's net sales.
AIH's sales of value-added assemblies and component systems have increased
as a result of the OEMs' decision to reduce their internal engineering and
design resources. In recent years, AIH has significantly increased its capacity
to provide complete engineering and design services to support its product line.
Because assembled parts such as door panels, armrests and consoles need to be
designed at an early stage in the development of new automobiles or model
revisions, AIH is increasingly given the opportunity to participate earlier in
the product planning process. This has resulted in opportunities to add value by
furnishing engineering and design services and managing the sub-assembly process
for the manufacturer, as well as providing the broader range of parts that are
required for the assembly.
AIH's customers typically award blanket purchase orders that normally cover
parts to be supplied for a particular car model. Such purchase orders typically
extend over the life of the model, which is generally four to seven years. Even
though such purchase orders generally may be terminated at any time, AIH does
not believe that any of its customers have terminated a material purchase order
prior to the end of the life of a model. The primary risk to AIH is that an OEM
will produce fewer units of a model than anticipated. In addition, AIH competes
for new business to supply parts for successor models and therefore runs the
risk that the OEM will not select AIH to produce parts on a successor model. In
order to reduce its reliance on any one model, AIH produces parts for a broad
cross-section of both new and more mature models. AIH has been
41
<PAGE> 46
chosen as a supplier on a variety of generally successful car and light truck
models. The following table presents an overview of the major models for which
AIH produces interior trim and blow molded products:
UNITED STATES AND CANADA
<TABLE>
<S> <C> <C>
FORD: GENERAL MOTORS: CHRYSLER:
Ford F-Series Pick-up Truck Buick LeSabre Dodge Caravan
Ford Escort Buick Park Avenue Dodge Dakota Pick-up Truck
Ford Explorer Buick Regal Plymouth Voyager
Ford Ranger Cadillac DeVille
Ford Taurus Chevrolet Corsica DIAMOND STAR:
Ford Contour Chevrolet Beretta Eagle Talon
Ford Econoline Chevrolet Cavalier Mitsubishi Eclipse
Ford Windstar Chevrolet Lumina Plymouth Laser
Ford Bronco Chevrolet C/K Pick-up Truck
Ford Thunderbird Oldsmobile Cutlass HONDA:
Ford Fiesta Oldsmobile Delta 88 Accord
Ford Scorpio Oldsmobile 98 Civic
Ford Mondeo Pontiac Bonneville
Mercury Cougar Pontiac Grand Prix MAZDA:
Mercury Mondeo Pontiac Sunfire G26
Mercury Mystique MX6
Mercury Sable Probe
Mercury Tracer Protege
NISSAN:
King Cab Pick-up Truck
TOYOTA:
Camry
</TABLE>
EUROPE
<TABLE>
<S> <C> <C>
BMW: ROVER: MERCEDES:
3 Series Discovery 200 Series
RX3
JAGUAR: RX8 Theta
J40 Range Rover
XJS
VOLKSWAGEN:
Passat
Golf
</TABLE>
42
<PAGE> 47
Based on its ability to service its OEM customers' needs effectively, AIH
believes it will be able to maintain or expand its position on most existing
models, while also expanding into new models, as further consolidation in the
OEM supplier base occurs. For example, AIH has been selected as a major supplier
for the 1995 model changeovers of the Ford Explorer, Ford Ranger, Ford
Taurus/Mercury Sable, Ford F-Series Pick-up Truck, Oldsmobile N-Car and Chrysler
Minivan.
AIH believes that the expanding presence of foreign manufacturers in North
America represents an attractive growth opportunity over the next decade. AIH is
currently supplying products for Diamond Star, Honda, Isuzu, Mazda and Nissan.
AIH believes that it is favorably positioned to increase its business with the
foreign manufacturers in the United States because of AIH's superior reputation
for quality, reliability and lower delivered cost.
AIH MARKETING AND SALES
Sales of AIH's products to OEMs are made directly by AIH's sales and
engineering force, headquartered in Rochester Hills, Michigan. Through the sales
and engineering office, AIH services its OEM customers and manages its
continuing programs of product design improvement and development. AIH's sales
and engineering force consists of approximately 250 individuals, including
several who are located periodically at various OEMs' offices in order to
facilitate the development of new programs.
AIH operates in a highly competitive, fragmented environment, with only a
few injection and blow molders generating sales in excess of $100 million. The
number of AIH's competitors is expected to decrease due to the supplier
consolidation resulting from changing OEM policies. AIH's major competitors
include Davidson Interior Trim (a division of Textron), UT Automotive (a
subsidiary of United Technologies), Prince Corporation, The Becker Group, and GM
and Ford internal operations, plus a large number of smaller operations.
AIH principally competes for new business both at the beginning of the
development of new models and upon the redesign of existing models by its major
customers. New model development generally begins two to four years prior to the
marketing of such models to the public. Once a producer has been designated to
supply parts to a new program, an OEM will generally continue to purchase those
parts from the designated producer for the life of the program. Competitive
factors in the market for AIH's products include product quality, customer
service, product mix, new product innovation, cost and timely delivery. AIH
believes that the implementation of its business strategy allows it to compete
effectively in the market for its products.
AIH is well positioned to succeed in this highly competitive supplier
environment. AIH's size (equal to or larger than many of its competitors),
quality and customer service orientation, manufacturing expertise and
technological leadership all contribute to AIH's success in the automotive
supply industry.
AIH EMPLOYEES
As of July 1, 1995, AIH had approximately 7,400 employees. AIH believes
that its future success will depend in part on its ability to continue to
recruit, retain and motivate qualified personnel at all levels of AIH. AIH has
instituted a large number of employee programs to increase employee morale and
expand the employees' participation in AIH's business. While most of AIH's
employees are not unionized, AIH has approximately 625 hourly employees
represented by labor unions. AIH has not experienced any work stoppages and
considers its relations with its employees to be good.
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<PAGE> 48
MANAGEMENT
Set forth below is certain information concerning the executive officers of
the Company.
<TABLE>
<CAPTION>
YEARS WITH
THE COMPANY
NAME AGE POSITION OR PREDECESSOR
------------------------- --- ------------------------------------------------ --------------
<S> <C> <C> <C>
Kenneth L. Way........... 56 Chairman of the Board and Chief Executive 29
Officer
Robert E. Rossiter....... 49 President, Chief Operating Officer and Director 24
of the Company
James H. Vandenberghe.... 45 Executive Vice President and Chief Financial 22
Officer of the Company
James A. Hollars......... 50 Senior Vice President and President -- 22
International Division of the Company
Barthold H. Hoemann...... 56 Senior Vice President and President -- Ford 14
Division of the Company
Frederick F. Sommer...... 52 Senior Vice President and President -- --
Automotive Industries Division of the Company
Donald J. Stebbins....... 37 Vice President, Treasurer and Assistant 3
Secretary of the Company
Joseph F. McCarthy....... 51 Vice President, Secretary and General Counsel of 1
the Company
Gerald G. Harris......... 61 Vice President and President -- GM Division of 33
the Company
Terrence E. O'Rourke..... 48 Vice President and President -- Chrysler 1
Division of the Company
Randal T. Murphy......... 60 Vice President and President -- BMW Division of 15
the Company
Richard N. Hodgson....... 47 Vice President and President -- Components 13
Division of the Company
</TABLE>
Set forth below is a description of the business experience of each
executive officer of the Company.
Kenneth L. Way. Mr. Way was elected to and has held the position of
Chairman of the Board and Chief Executive Officer of the Company since 1988.
Prior to this he served as Corporate Vice President, Automotive Group of Lear
Siegler, Inc. ("LSI") since October 1984. During the previous six years, Mr. Way
was President of LSI's General Seating Division. Prior to this, he was President
of LSI's Metal Products Division in Detroit for three years. Other positions
held by Mr. Way during his 29 years at Lear include Manufacturing Manager of the
Metal Products Division and Manager of Production Control for the Automotive
Division in Detroit. Mr. Way also serves as a director of Hayes Wheels
International, Inc.
Robert E. Rossiter. Mr. Rossiter became President of the Company in 1984
and a Director and the Chief Operating Officer of the Company in 1988. He joined
LSI in 1971 in the Material Control Department at the Automotive Division, then
joined the Metal Products Division of LSI as Production Control Manager, and
subsequently moved into sales and sales management. In 1979, he joined the
General Seating Division as Vice President of Sales and worked in that position,
as well as Vice President of Operations, until 1984.
James H. Vandenberghe. Mr. Vandenberghe is currently Executive Vice
President and Chief Financial Officer of the Company. Mr. Vandenberghe
previously served as Senior Vice President -- Finance, Secretary and Chief
Financial Officer of the Company since 1988. He was appointed Executive Vice
President of the Company in 1993. He joined LSI's Automotive Division in 1973 as
a financial analyst and was promoted to positions at the Metal Products Division
and the Automotive Group office, and in 1978 was named the Vice President --
Finance for the Plastics Division. In 1983, Mr. Vandenberghe was appointed Vice
President -- Finance for General Seating Division. Prior to 1988, Mr.
Vandenberghe had been responsible for project management, United States
operations, and international operations of the Company.
James A. Hollars. Mr. Hollars is currently Senior Vice President and
President -- International Division of the Company. He was promoted to this
position in 1995. Prior to serving in this position, he was President --
International Operations of the Company since 1994. Previously he served as
Senior Vice President -- International Operations of the Company since 1993 and
Vice President -- International upon the sale of
44
<PAGE> 49
LSI's Power Equipment Division to Lucas Industries in 1988. Mr. Hollars joined
LSI's Metal Products Division in 1973 as the Manufacturing Manager and later
served as Vice President -- Manufacturing for No-Sag Spring Division. In 1979,
he was named President of the Foam Products Division and was subsequently
promoted to President at the Anchorlok Division in 1985 and the Power Equipment
Division in 1986.
Barthold H. Hoemann. Mr. Hoemann was elected Senior Vice President and
President -- Ford Division of the Company in May 1995. Prior to serving in this
position he was President -- Ford Division of the Company since November 1994.
Mr. Hoemann previously served as Senior Vice President -- North American JIT
Operations of the Company since 1993, as Vice President-Component Operations for
the Company in 1992 and 1993 and as Vice President and General Manager of the
Company's subsidiary, Lear Plastics Corporation, in 1991 and 1992. Mr. Hoemann
has over 30 years experience as a senior manager and officer in manufacturing
companies such as the AC Spark Plug Division of General Motors and the Plastics
and Peerless Divisions of LSI.
Frederick F. Sommer. Mr. Sommer was elected Senior Vice President and
President -- Automotive Industries Division of the Company upon consummation of
the AIH Acquisition. Prior to the AIH Acquisition, he served as President of AIH
since November 1991 and Chief Executive Officer of AIH since May 1994. From
March 1992 to May 1994, Mr. Sommer served as Chief Operating Officer of AIH. Mr.
Sommer also served as Executive Vice President of AIH from October 1990 until
November 1991. Prior thereto, he served as Vice President -- Manufacturing and
Purchasing of the U.S. subsidiary of Nissan from January 1987 until October
1990.
Donald J. Stebbins. Mr. Stebbins is currently Vice President, Treasurer and
Assistant Secretary of the Company. He joined the Company in June 1992 from
Bankers Trust Company, New York where he was Vice President for four years.
Prior to his tenure at Bankers Trust Company, he held positions at Citibank,
N.A. and The First National Bank of Chicago.
Joseph F. McCarthy. Mr. McCarthy was elected Vice President, Secretary and
General Counsel of the Company in April 1994. Prior to joining the Company, Mr.
McCarthy served as Vice President -- Legal and Secretary for both Hayes Wheels
International, Inc. and Kelsey-Hayes Company. Prior to joining Hayes Wheels
International, Inc. and Kelsey-Hayes Company, Mr. McCarthy was a partner in the
law firm of Kreckman & McCarthy from 1973 to 1983.
Gerald G. Harris. Mr. Harris was elected Vice President and President -- GM
Division of the Company in May 1995. Prior to serving in this position, he was
President -- GM Division of the Company since November 1994. Mr. Harris
previously served as Vice President and General Manager -- GM Operations since
March 1994. Previously Mr. Harris served as Director -- Ford Business Unit from
March 1992 to March 1994, Director of Sales from August 1990 to March 1992 and
Sales Manager from January 1989 to August 1990.
Terrence E. O'Rourke. Mr. O'Rourke was elected Vice President and President
-- Chrysler Division of the Company in May 1995. Prior to serving in this
position, he was President -- Chrysler Division of the Company since November
1994. Previously, Mr. O'Rourke served as Director -- Strategic Planning since
October 1994. Prior to joining Lear, Mr. O'Rourke was employed by Ford Motor
Company as Supply Manager -- Climate Control Department from 1992 and
Procurement Operations Manager from 1988.
Randal T. Murphy. Mr. Murphy was elected Vice President and President --
BMW Division of the Company in May 1995, after having served as President -- BMW
Division of the Company since November 1994. Prior to serving in these
positions, he was Vice President and General Manager -- Chrysler/BMW Operations
since March 1994. Previously he served as Director -- JIT Operations from 1993
and Vice President -- Product Engineering from 1980.
Richard N. Hodgson. Mr. Hodgson was elected Vice President and President --
Components Division of the Company in May 1995, after having served as President
-- Components Division of the Company since November 1994. Prior to serving in
these positions, he was Vice President -- Components Operations since April
1993. Previously he served as Plant Manager for Lear's subsidiary, Lear Seating
Canada Ltd., from 1982.
45
<PAGE> 50
SELLING STOCKHOLDERS
The following table and accompanying footnotes set forth certain
information regarding beneficial ownership of the Company's Common Stock by the
Selling Stockholders as of September 19, 1995 prior to the Offerings and as
adjusted to reflect the sale of 10,000,000 shares of Common Stock by the Company
and 10,000,000 shares of Common Stock by the Selling Stockholders in the
Offerings:
<TABLE>
<CAPTION>
PRIOR TO OFFERINGS AFTER OFFERINGS
-------------------------------- -----------------------------------
NUMBER OF NUMBER OF
SHARES SHARES OF SHARES
OF COMMON STOCK COMMON STOCK OF COMMON STOCK
OWNED PERCENTAGE OF BEING OWNED PERCENTAGE OF
BENEFICIALLY COMMON STOCK(3) OFFERED(4) BENEFICIALLY(4) COMMON STOCK(3)(4)
--------------- --------------- ------------ --------------- ------------------
<S> <C> <C> <C> <C> <C>
Lehman Funds(1)........... 25,958,724 56.2% 8,250,000 17,708,724 31.5%
FIMA Finance Management
Inc.(2)................. 5,510,044 11.9 1,750,000 3,760,044 6.7
</TABLE>
-------------------------
(1) The number of shares beneficially owned by the Lehman Funds comprises
9,324,051 shares of Common Stock owned by Lehman Brothers Merchant Banking
Portfolio Partnership L.P. and 6,337,584 shares of Common Stock owned by
Lehman Brothers Capital Partners II, L.P. (each located at Three World
Financial Center, New York, New York 10285); 2,563,440 shares of Common
Stock owned by Lehman Brothers Offshore Investment Partnership L.P. and
7,733,649 shares of Common Stock owned by Lehman Brothers Offshore
Investment Partnership-Japan L.P. (each located at Clarendon House, Church
Street, Hamilton HMCX, Bermuda). LB I Group Inc. and Lehman Brothers
Holdings Inc. are the general partners of Lehman Brothers Merchant Banking
Portfolio Partnership L.P. and Lehman Brothers Capital Partners II, L.P.,
respectively, and Lehman Brothers Offshore Partners Ltd. is the general
partner of Lehman Brothers Offshore Investment Partnership-Japan L.P. and
Lehman Brothers Offshore Investment Partnership L.P. Each such general
partner may be deemed to own beneficially the shares directly owned by the
entity of which it is the general partner. LB I Group Inc. and Lehman
Brothers Offshore Partners Ltd. are wholly-owned subsidiaries of Lehman
Brothers Holdings Inc. Each of the partnerships may be deemed to share with
Lehman Brothers Holdings Inc. the power to vote and the power to dispose of
the shares owned by such partnership. The address of Lehman Brothers
Holdings Inc. is Three World Financial Center, New York, New York 10285.
(2) FIMA Finance Management Inc. ("FIMA") is a wholly-owned subsidiary of EXOR
Group S.A. ("EXOR Group"), formerly IFINT, S.A. EXOR Group, a Luxembourg
corporation, is the international investment holding company of IFI,
S.p.A., the parent company of the Agnelli Group. The address of FIMA is
Wickhams Cay, Road Town, Tortola, British Virgin Islands.
(3) Assumes that none of the Options, pursuant to which 4,510,210 shares are
issuable, are exercised.
(4) The Lehman Funds have collectively, and FIMA has, granted to the
Underwriters an option to purchase up to an aggregate of 2,475,000 and
525,000 additional shares of Common Stock, respectively, exercisable solely
to cover over-allotments. See "Underwriting." The data set forth in the
table assume that the Underwriters' over-allotment option is not exercised.
In 1988, FIMA first acquired an ownership interest in the Company by
purchasing 6,435,000 shares of Common Stock of the Company. In 1991, FIMA and
the Lehman Funds acquired an aggregate of 14,999,985 additional shares from the
Company for an aggregate purchase price of $75.0 million and certain additional
shares of Common Stock from certain other stockholders (the "1991 Common Stock
Acquisition"). In 1992, the Company sold an additional $20.0 million worth of
Common Stock to the Lehman Funds and FIMA (the "1992 Common Stock Acquisition").
In connection with the 1991 Common Stock Acquisition, the 1992 Common Stock
Acquisition, the offering of the Senior Subordinated Notes, the NAB Acquisition,
the offering of the Subordinated Notes, the IPO, the AIH Acquisition and the
Offerings, Lehman Brothers, an affiliate of the Lehman Funds, has received
compensation from the Company comprising underwriting fees, discounts and
commissions and financial advisory fees. In addition, Lehman Commercial Paper
Inc., an affiliate of the Lehman Funds, has from time to time been a lender
under the Company's credit facilities and has received customary fees in such
capacity.
46
<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock, par value $0.01 per share, and 15,000,000 shares of Preferred
Stock, par value $0.01 per share.
COMMON STOCK
As of September 19, 1995, there were 46,223,011 shares of Common Stock
outstanding. Holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Cumulative voting is not
permitted. Subject to preferences of any Preferred Stock that may be issued in
the future, the holders of Common Stock are entitled to receive such dividends
as may be declared by the Board of Directors. The Company is currently
restricted under the terms of the Credit Agreement and of the Indentures
governing the Senior Subordinated Notes and the Subordinated Notes from paying
dividends to holders of Common Stock. In the event of a liquidation, dissolution
or winding up of the Company, and subject to preferences of any Preferred Stock
that may be issued in the future, the Common Stock is entitled to receive pro
rata all of the assets of the Company available for distribution to its
stockholders. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are fully paid and
non-assessable, and the shares of Common Stock to be outstanding upon the
closing of the Offerings will be fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 15,000,000 shares
of Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rates, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, which may be superior to those of the Common Stock,
without further vote or action by the stockholders. Although it presently has no
intention to do so, the Board of Directors, without stockholder approval, can
issue Preferred Stock with rights that could adversely affect the Common Stock.
The issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company. There will be no shares of
Preferred Stock outstanding upon the closing of the Offerings and the Company
has no present plans to issue any Preferred Stock.
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
The Lehman Funds, FIMA and certain current and former officers and
employees of the Company are parties to the Stockholders and Registration Rights
Agreement, which contains certain provisions as to the voting and transfer of
Common Stock held by those stockholders.
Under the Stockholders and Registration Rights Agreement, the parties
thereto who hold Common Stock have the following registration rights. On or
prior to September 28, 1996, the holders of at least 20% of the fully diluted
shares of Common Stock held by parties to the Stockholders and Registration
Rights Agreement that have not been transferred pursuant to an effective
registration statement or an exemption from the registration requirements of the
Securities Act and that continue to bear a legend referencing such agreement
("Registrable Securities") may require the Company, subject to certain
conditions, to effect the registration under the Securities Act of not less than
15% of the Registrable Securities. After September 28, 1996, the holders of at
least 10% of the Registrable Securities may require the Company, subject to
certain conditions, to effect the registration of not less than 10% of the
Registrable Securities. Upon receipt of a valid registration request, the
Company is required to notify other parties to the Stockholders and Registration
Rights Agreement of such request, and those parties may, subject to certain
conditions, require the Company to include any of their Registrable Securities
in any registration statement filed pursuant to such request.
Unless the holders of the Common Stock making a registration request
otherwise consent in writing, no other person, other than a holder of Common
Stock who is a party to the Stockholders and Registration Rights Agreement and
who requests that its shares be included in such registration and, in the case
of an underwritten offering, the Company, would be permitted to offer any
securities pursuant to such registration.
47
<PAGE> 52
Subject to certain exceptions, the Company is required to pay all expenses
incurred in connection with up to a maximum of four valid registration requests
and, if any requested registration is in the form of an underwritten offering,
the Stockholders and Registration Rights Agreement requires the Company to
designate Lehman Brothers Inc. as the managing underwriter of the offering.
In addition to the demand registration rights summarized above, the parties
to the Stockholders and Registration Rights Agreement also may, subject to
certain limitations, require the Company to register their shares of Common
Stock whenever the Company registers any of its equity securities under the
Securities Act, whether for sale for its own account or not. The Stockholders
and Registration Rights Agreement provides for, in the case of underwritten
offerings, certain registration priorities in the event that the managing
underwriter advises the Company that the number of shares of Common Stock
proposed to be included in any registration under the Securities Act exceeds the
largest number of shares which can be sold without having an adverse effect on
the offering. In addition, the Company and the other parties to the Stockholders
and Registration Rights Agreement are subject to certain holdback provisions
during the registration and sale of shares of Common Stock. Under the
Stockholders and Registration Rights Agreement, the Company has agreed to
indemnify selling stockholders against certain liabilities.
CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND
RESTATED BY-LAWS
The by-laws of the Company provide that the Company shall indemnify each
officer and director of the Company to the fullest extent permitted by
applicable law. The Restated Certificate of Incorporation also provides that, to
the fullest extent permitted by the Delaware General Corporation Law, the
directors of the Company shall be indemnified by the Company and shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director.
Certain provisions of the Company's Restated Certificate of Incorporation
and by-laws may have the effect of preventing, discouraging or delaying any
change in control of the Company and may maintain the incumbency of the Board of
Directors and management. The authorization of undesignated Preferred Stock will
make it possible for the Board of Directors to issue Preferred Stock without
voting or other rights or preferences that could impede the success of any
attempt to change control of the Company. The Company's Restated Certificate of
Incorporation provides that the Board of Directors of the Company will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for Cause (as defined below) and only by the
affirmative vote of the holders of a majority of the then-outstanding shares of
capital stock entitled to vote generally in an election of directors. Vacancies
on the Board of Directors may be filed only by the remaining directors and not
by the stockholders. "Cause" is defined as the willful and continuous failure
substantially to perform one's duties to the Company or the willful engaging in
gross misconduct materially and demonstrably injurious to the Company.
The by-laws provide that special meetings of stockholders may be called by
the chairman, the president, any vice president, the secretary or any assistant
secretary of the Company and must be called by any such officer at the request
in writing of a majority of the Board of Directors or at the request in writing
of stockholders owning at least a majority of the capital stock of the Company
issued and outstanding and entitled to vote. The by-laws establish an advance
notice procedure for the nomination, other than by or at the direction of the
Board of Directors, of candidates for election as directors as well as for other
stockholder proposals to be considered at annual meetings of stockholders. In
general, notice of intent to nominate a director must be received by the
secretary of the Company not less than 60 nor more than 90 days prior to the
date of the annual meeting, and must contain certain specified information
concerning the person to be nominated. Notice of intent to raise business at
such meeting must be received by the secretary of the Company not less than 120
nor more than 150 days prior to the first anniversary of the date of the
Company's consent solicitation or proxy statement released in connection with
the previous year's meeting.
DELAWARE ANTI-TAKEOVER LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Anti-Takeover Law") regulating corporate
takeovers. The Anti-Takeover Law prevents certain Delaware
48
<PAGE> 53
corporations, including those whose securities are listed on the New York Stock
Exchange, from engaging, under certain circumstances, in a "business
combination" (which includes a merger or sale of more than 10% of the
corporation's assets) with any "interested stockholder" (a stockholder who
acquired 15% or more of a corporation's outstanding voting stock without the
prior approval of the corporation's board of directors) for three years
following the date that such stockholder became an "interested stockholder." The
current stockholders of the Company may not, by virtue of their current
holdings, be deemed to be "interested stockholders" under this statute. A
Delaware corporation may "opt out" of the Anti-Takeover Law with an express
provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares. The
Company has not "opted out" of the provisions of the Anti-Takeover Law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is The Bank
of New York, located in New York, New York.
LISTING
The Common Stock is listed on the New York Stock Exchange under the symbol
LEA.
49
<PAGE> 54
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
holder that is not a "U.S. person" (a "non-U.S. holder"). A "U.S. person" is a
person or entity that, for U.S. federal income tax purposes, is a citizen or
resident of the United States, a corporation or partnership created or organized
in the United States or under the laws of the United States or of any political
subdivision thereof, or an estate or trust whose income is includible in gross
income for U.S. federal income tax purposes regardless of its source. An
individual will be deemed to be a resident of the United States for U.S. federal
income tax purposes if: (1) such individual is a lawful permanent resident of
the United States at any time during the taxable year; (2) such individual makes
an election to be treated as a resident pursuant to the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"); or (3) such individual
is present in the United States for an aggregate of 183 days or more during the
calendar year. In addition, an individual will be presumed to be a resident of
the United States for U.S. federal income tax purposes if such individual is
present in the United States on at least 31 days in the current calendar year
and for an aggregate of 183 days during the three-year period ending with the
current calendar year (counting, for such purposes all of the days present in
the United States during the current year, one-third of the days present during
the immediately preceding year and one-sixth of the days present during the
second preceding year). This presumption of residence may be rebutted if it is
established that such individual has a "tax home" in a foreign country and a
"closer connection" to such foreign country than to the United States, with such
terms being defined in the Code. Furthermore, the determination of residence
under the Code may be rebutted by application of an applicable tax treaty or
convention between the United States and an appropriate foreign country that may
also treat such individual as a tax resident of such country. A special
definition of U.S. resident applies for U.S. federal estate tax purposes.
Resident aliens are subject to U.S. federal tax as if they were U.S. citizens.
This discussion is based on Code and administrative and judicial
interpretations as of the date hereof, all of which may be changed either
retroactively or prospectively. This discussion does not address all the aspects
of U.S. federal income and estate taxation that may be relevant to non-U.S.
holders in light of their particular circumstances, nor does it address tax
consequences under the laws of any U.S. state, municipality or other taxing
jurisdiction or under the laws of any jurisdiction other than the United States.
Prospective holders should consult their own tax advisors about the
particular U.S. federal tax consequences to them of holding and disposing of
Common Stock, as well as any tax consequences that may arise under the laws of
any state, local or foreign taxing jurisdiction.
DIVIDENDS
In the event that dividends are paid to a non-U.S. holder, such dividends
will be subject to United States federal withholding tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Under current
U.S. Treasury regulations, dividends paid to an address outside the United
States are presumed to be paid to a resident of the country of address for
purposes of the withholding tax. Under the current interpretation of U.S.
Treasury regulations, the same presumption generally applies to determine the
applicability of a reduced rate of withholding under a U.S. tax treaty. Thus,
non-U.S. holders receiving dividends at addresses outside the United States
generally are not yet required to file tax forms to obtain the benefit of an
applicable treaty rate. If there is excess withholding on a person eligible for
a treaty benefit, the person can file for a refund with the U.S. Internal
Revenue Service (the "IRS").
Under U.S. Treasury regulations which were proposed in 1984 and which have
not yet been put into effect, to claim the benefits of a tax treaty, a non-U.S.
holder of Common Stock would have to file certain forms accompanied by
statements from a competent authority of the treaty country attesting to the
holder's eligibility to claim treaty benefits.
Generally, upon the filing of a Form 4224 with the Company, there is no
withholding tax on dividends that are effectively connected with the non-U.S.
holder's conduct of a trade or business within the United States. Instead, the
effectively connected dividends are subject to the U.S. federal income tax on
net income
50
<PAGE> 55
applicable to U.S. persons. Effectively connected dividends received by a
foreign corporation may be subject to an additional "branch profits tax" at a
30% rate (or a lower rate under an applicable income tax treaty) when such
dividends are deemed repatriated from the United States.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Common Stock unless (i) the
gain is effectively connected with the conduct of a trade or business of the
non-U.S. holder in the United States, (ii) in the case of a non-U.S. holder who
is an individual and holds the Common Stock as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year of the
disposition and either (x) has a "tax home" in the United States (as specially
defined for U.S. federal income tax purposes) or (y) maintains an office or
other fixed place of business in the United States and the income from the sale
of the stock is attributable to such office or other fixed place of business,
(iii) in the case of a non-resident individual who is a partner in a foreign
partnership holding the Common Stock, such non-resident individual is present in
the United States for 183 or more days in the taxable year of the disposition or
the gain is effectively connected with a trade or business conducted by such
partnership in the United States, (iv) the non-U.S. holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates or (v) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes. The Company is not currently, has
not been and does not anticipate becoming a "U.S. real property holding
corporation" for U.S. federal income tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the IRS and to each non-U.S. holder the
amount of dividends paid to, and the tax withheld with respect to such holder,
regardless of whether tax was actually withheld. That information may also be
made available to the tax authorities of the country in which the non-U.S.
holder resides.
United States federal backup withholding (which generally is withholding
imposed at the rate of 31% on certain payments to persons not otherwise exempt
who fail to furnish certain identifying information to the IRS) will generally
not apply to dividends paid to a non-U.S. holder that are subject to withholding
at the 30% rate (or would be so subject but for a reduced rate under an
applicable treaty). In addition, the payor of dividends may rely on the payee's
foreign address in determining that the payee is exempt from backup withholding,
unless the payor has knowledge that the payee is a U.S. person.
The backup withholding and information reporting requirements also apply to
the gross proceeds paid to a non-U.S. holder upon the disposition of Common
Stock by or through a U.S. office of a U.S. or foreign broker, unless the holder
certifies to the broker under penalty of perjury as to its name, address and
status as a non-U.S. holder or the holder otherwise establishes an exemption.
Information reporting requirements (but not backup withholding) will apply to a
payment of the proceeds of a disposition of Common Stock by or through a foreign
office of (i) a U.S. broker, (ii) a foreign broker 50% or more of whose gross
income for certain periods is effectively connected with the conduct of a trade
or business in the United States or (iii) a foreign broker that is a "controlled
foreign corporation" for U.S. federal income tax purposes, unless the broker has
documentary evidence in its records that the holder is a non-U.S. holder and
certain other conditions are met, or the holder otherwise establishes an
exemption. Neither backup withholding nor information reporting will generally
apply to a payment of the proceeds of a disposition of Common Stock by or
through a foreign office of a foreign broker not subject to the preceding
sentence.
Any amounts withheld under the backup withholding rules will be refunded or
credited against the non-U.S. holder's United States federal income tax
liability, provided that required information is furnished to the IRS.
The backup withholding and information reporting rules are currently under
review by the Treasury Department, and their application to the Common Stock is
subject to change.
51
<PAGE> 56
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is neither a
citizen nor a resident of the United States for federal estate tax purposes at
the date of death will be included in such individual estate's for U.S. federal
estate tax purposes and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise. Estates of nonresident aliens
are generally allowed a statutory credit that is the equivalent of an exclusion
of $60,000 of assets from the estate for U.S. estate tax purposes. Estate tax
treaties may permit a larger credit. A special definition of U.S. resident
applies for U.S. federal estate purposes.
UNDERWRITING
Under the terms of, and subject to the conditions contained in, the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement, the underwriters named below (the "U.S. Underwriters"),
for whom Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, PaineWebber
Incorporated and Schroder Wertheim & Co. Incorporated are acting as
representatives (the "Representatives"), have severally agreed to purchase from
the Company and the Selling Stockholders, and the Company and the Selling
Stockholders have agreed to sell to each U.S. Underwriter, the aggregate number
of shares of Common Stock set forth opposite the name of each such U.S.
Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
------------------------------------------------------------------ ----------
<S> <C>
Lehman Brothers Inc. ............................................. 2,942,500
Morgan Stanley & Co. Incorporated................................. 2,942,500
PaineWebber Incorporated.......................................... 2,942,500
Schroder Wertheim & Co. Incorporated.............................. 2,942,500
CS First Boston Corporation....................................... 330,000
Chemical Securities Inc. ......................................... 330,000
Donaldson, Lufkin & Jenrette Securities Corporation............... 330,000
Dresdner Securities (USA), Inc. .................................. 330,000
Goldman, Sachs & Co. ............................................. 330,000
McDonald & Company Securities, Inc. .............................. 330,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................ 330,000
Salomon Brothers Inc.............................................. 330,000
Smith Barney Inc. ................................................ 330,000
Societe Generale Securities Corporation........................... 330,000
Wasserstein Perella Securities, Inc. ............................. 330,000
First of Michigan Corporation..................................... 200,000
Gabelli & Company, Inc. .......................................... 200,000
Roney & Co. ...................................................... 200,000
----------
Total........................................................ 16,000,000
==========
</TABLE>
Under the terms of, and subject to the conditions contained in, the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement, the managers named below of the concurrent
offering of the Common Stock outside the United States and Canada (the
"International Managers" and together with the U.S. Underwriters, the
"Underwriters"), for whom Lehman Brothers International (Europe), Morgan Stanley
& Co. International Limited, PaineWebber International (U.K.) Ltd. and J. Henry
Schroder & Co. Limited are acting as lead managers (the "Lead Managers"), have
severally agreed to purchase from the Company and the Selling Stockholders, and
the Company and the
52
<PAGE> 57
Selling Stockholders have agreed to sell to each International Manager, the
aggregate number of shares of Common Stock set forth opposite the name of each
such International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
------------------------------------------------------------------- ---------
<S> <C>
Lehman Brothers International (Europe)............................. 925,000
Morgan Stanley & Co. International Limited......................... 925,000
PaineWebber International (U.K.) Ltd. ............................. 925,000
J. Henry Schroder & Co. Limited.................................... 925,000
ABN AMRO Bank N.V. ................................................ 75,000
Credit Lyonnais Securities......................................... 75,000
Dresdner Bank Aktiengesellschaft................................... 75,000
Societe Generale................................................... 75,000
---------
Total......................................................... 4,000,000
=========
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that the
obligations of the U.S. Underwriters and the International Managers to purchase
shares of Common Stock are subject to certain conditions, and that if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant to
the International Underwriting Agreement, all the shares of Common Stock agreed
to be purchased by either the U.S. Underwriters or the International Managers,
as the case may be, pursuant to the respective Underwriting Agreements must be
so purchased. The offering price and underwriting discounts and commissions for
the U.S. Offering and the International Offering are identical. The closing of
the U.S. Offering is a condition to the closing of the International Offering,
and the closing of the International Offering is a condition to the closing of
the U.S. Offering.
The Company has been advised that the U.S. Underwriters and the
International Managers propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain selected dealers (who may include the U.S.
Underwriters and the International Managers) at such public offering price less
a selling concession not in excess of $.57 per share. The selected dealers may
reallow a concession not in excess of $.10 per share to certain brokers and
dealers. After the public offering, the public offering price, the concession to
select dealers and reallowance may be changed by the U.S. Underwriters and the
International Managers.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the U.S. Underwriters and the International Managers may be required to
make in respect thereof.
The Selling Stockholders have granted to the U.S. Underwriters and the
International Managers an option to purchase up to an aggregate of 2,400,000 and
600,000 additional shares of Common Stock, respectively, exercisable solely to
cover over-allotments, at the offering price to the public less the underwriting
discounts and commissions shown on the cover page of this Prospectus. All of the
shares of Common Stock sold upon any exercise of this over-allotment option will
be sold by the Selling Stockholders. Such option may be exercised at any time
until 30 days after the date of the U.S. Underwriting Agreement and the
International Underwriting Agreement, respectively. To the extent that the
option is exercised, each U.S. Underwriter or International Manager, as the case
may be, will be committed, subject to certain conditions, to purchase a number
of the additional shares of Common Stock proportionate to such U.S.
Underwriter's or International Manager's initial commitment as indicated in the
preceding tables.
The Company, the Selling Stockholders and certain existing stockholders,
including all of the executive officers of the Company, have agreed that they
will not, subject to certain limited exceptions, for a period of 120 days from
the date of this Prospectus, directly or indirectly, offer, sell or otherwise
dispose of any shares of
53
<PAGE> 58
Common Stock or any securities convertible into or exchangeable or exercisable
for any such shares without the prior written consent of the Representatives.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers pursuant to which
each U.S. Underwriter has agreed that, as part of the distribution of the shares
of Common Stock offered in the U.S. Offering, (i) it is not purchasing any such
shares for the account of anyone other than a U.S. person (as defined below) and
(ii) it has not offered or sold, will not offer, sell, resell or deliver,
directly or indirectly, any of such shares or distribute any prospectus relating
to the U.S. Offering outside the United States or Canada or to anyone other than
a U.S. Person. In addition, pursuant to such agreement each International
Manager has agreed that, as part of the distribution of the shares of Common
Stock offered in the International Offering, (i) it is not purchasing any such
shares for the account of a U.S. Person and (ii) it has not offered or sold, and
will not offer, sell, resell or deliver, directly or indirectly, any of such
shares or distribute any prospectus relating to the International Offering in
the United States or Canada to any U.S. Person. Each International Manager has
also agreed that it will offer to sell shares only in compliance with all
relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the
Representatives and the Lead Managers. As used herein, (a) the term "United
States" means the United States of America (including the District of Columbia)
and its territories, its possessions and other areas subject to its
jurisdiction, and (b) the term "U.S. Person" means any resident or national of
the United States or Canada or its provinces, any corporation, partnership or
other entity created or organized in or under the laws of the United States or
Canada or its provinces, or any estate or trust the income of which is subject
to United States or Canadian income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States or Canadian branch of a person other than a U.S. Person.
Each International Manager has represented and agreed that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
shares of Common Stock will not offer or sell any shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the shares of Common Stock in,
from or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on, and will only issue and pass on to any person in the United Kingdom,
any investment advertisement (within the meaning of the 1986 Act) relating to
the shares of Common Stock if that person falls within Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995.
The shares of Common Stock may not be offered or sold directly or
indirectly in Hong Kong by means of this document or any other offering material
or document other than to persons whose ordinary business it is to buy or sell
shares or debentures, whether as principal or as agent. Unless permitted to do
so by the securities laws of Hong Kong, no person may issue or cause to be
issued in Hong Kong this document or any amendment or supplement thereto or any
other information, advertisement or document relating to the shares of Common
Stock other than with respect to shares of Common Stock intended to be disposed
of to persons outside Hong Kong or to persons whose business involves the
acquisition, disposal or holding of securities, whether as principal or as
agent.
54
<PAGE> 59
The shares of Common Stock have not been registered under the Securities
and Exchange Law of Japan and are not being offered and may not be offered or
sold directly or indirectly in Japan or to residents of Japan, except pursuant
to applicable Japanese laws and regulations.
No action has been taken or will be taken in any jurisdiction by the
Company or the International Managers that would permit a public offering of the
shares offered pursuant to the Offerings in any jurisdiction where action for
that purpose is required, other than the United States and Canada and its
provinces. Persons into whose possession this Prospectus comes are required by
the Company and the International Managers to inform themselves about and to
observe any restrictions as to the offering of the shares offered pursuant to
the Offerings and the distribution of this Prospectus.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
Prior to the Offerings, the Lehman Funds, each an affiliate of Lehman
Brothers and Lehman Brothers International (Europe), beneficially own, in the
aggregate, approximately 56% of the outstanding Common Stock of the Company
(assuming no outstanding Options are exercised). Therefore, the underwriting
arrangements for the Offerings will comply with the requirements of Schedule E
to the Bylaws of the National Association of Securities Dealers, Inc. ("NASD")
regarding an NASD member firm's participation in distributing its affiliate's
securities. In accordance with Schedule E, the Underwriters will not make sales
of shares of Common Stock offered hereby to customers' discretionary accounts
without the prior specific written approval of such customers.
The Lehman Funds will receive a portion of the proceeds from the Offerings.
Five of the ten members of the Company's Board of Directors presently are
employed by Lehman Brothers or The Cypress Group L.L.C., a company that provides
consulting services to Lehman Brothers with respect to the management of the
equity investments of the Lehman Funds. Lehman Brothers has from time to time
provided investment banking, financial advisory and other services to the
Company, for which services it has received fees.
LEGAL MATTERS
The validity of the issuance of shares of Common Stock offered hereby will
be passed upon for the Company by Winston & Strawn, Chicago, Illinois. Certain
legal matters in connection with the Offerings will be passed upon the U.S.
Underwriters and the International Managers by Cravath, Swaine & Moore, New
York, New York. Cravath, Swaine & Moore has performed, and continues to perform,
services for the Lehman Funds from time to time.
EXPERTS
The audited financial statements and schedule of the Company incorporated
by reference into this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon authority of said firm as
experts in giving said reports.
The audited financial statements of the FSB incorporated by reference into
this Prospectus have been audited by Arthur Andersen & Co., s.a.s., as indicated
in their report with respect thereto, and are included herein in reliance upon
authority of said firm as experts in giving said report.
The audited financial statements of AIH and its subsidiaries incorporated
by reference into this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon authority of said firm as
experts in giving said report.
The audited financial statements of Plastifol incorporated by reference
into this Prospectus have been audited by KPMG Deutsche Treuhand --
Gesellschaft, as indicated in their report with respect thereto, and are
included herein in reliance upon authority of said firm as experts in giving
said report.
55
<PAGE> 60
[LEAR LOGO]
[Lear Seating Corporation is the world's
largest independent automotive supplier of
seat and interior systems -- with 33,000
quality-dedicated, customer-focused people
through 107 facilities in 18 countries
around the globe.]
LEAR TOTAL SYSTEMS CAPABILITIES
[Diagram of Lear Total Systems Capabilities]
<PAGE> 61
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE U.S. UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE
TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 11
Common Stock Price Range and
Dividends........................... 11
Capitalization........................ 12
Pro Forma Financial Data.............. 13
Selected Financial Data of the
Company............................. 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 18
Business of the Company............... 24
Selected Financial Data of Automotive
Industries Holding, Inc. ........... 36
Management's Discussion and Analysis
of Results of Operations of
Automotive Industries Holding,
Inc. ............................... 37
Business of Automotive Industries
Holding, Inc. ...................... 39
Management............................ 44
Selling Stockholders.................. 46
Description of Capital Stock.......... 47
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 50
Underwriting.......................... 52
Legal Matters......................... 55
Experts............................... 55
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
20,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
September 20, 1995
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SCHRODER WERTHEIM & CO.
------------------------------------------------------
------------------------------------------------------
<PAGE> 62
[ALTERNATE PAGE FOR INTERNATIONAL OFFERING]
PROSPECTUS
20,000,000 Shares
[LEAR LOGO]
COMMON STOCK
---------------------------
Of the 20,000,000 shares of Common Stock ("Common Stock") of Lear Seating
Corporation ("Lear" or the "Company") being offered hereby, 10,000,000 shares
are being offered by the Company and 10,000,000 shares are being offered by
certain stockholders of the Company (the "Selling Stockholders"). See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders. Of the 20,000,000 shares of Common
Stock being offered hereby, 4,000,000 shares are being offered initially outside
the United States and Canada by the International Managers (the "International
Offering") and 16,000,000 shares are being offered initially in the United
States and Canada by the U.S. Underwriters (the "U.S. Offering" and, together
with the International Offering, the "Offerings"). The public offering price and
underwriting discounts and commissions per share are identical for both
Offerings. See "Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "LEA." On September 19, 1995, the reported last sale price of the
Common Stock on the New York Stock Exchange Composite Tape was $29 3/8 per
share.
SEE "RISK FACTORS" ON PAGE 9 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $29.25 $0.95 $28.30 $28.30
-------------------------------------------------------------------------------------------------------
Total(3)............................... $585,000,000 $19,000,000 $283,000,000 $283,000,000
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Lear and the Selling Stockholders have agreed to indemnify the International
Managers, the U.S. Underwriters and certain other persons against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by Lear estimated at $2,000,000.
(3) The Selling Stockholders have granted the International Managers and the
U.S. Underwriters a 30-day option to purchase up to an aggregate of
3,000,000 additional shares of Common Stock on the same terms and conditions
as set forth above solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $672,750,000,
$21,850,000 and $367,900,000, respectively. See "Underwriting."
---------------------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of certificates for shares will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about September 25, 1995.
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INTERNATIONAL
PAINEWEBBER INTERNATIONAL
SCHRODERS
ABN AMRO HOARE GOVETT CREDIT LYONNAIS SECURITIES
DRESDNER BANK
AKTIENGESELLSCHAFT SOCIETE GENERALE
September 20, 1995
<PAGE> 63
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE INTERNATIONAL
MANAGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 11
Common Stock Price Range and
Dividends........................... 11
Capitalization........................ 12
Pro Forma Financial Data.............. 13
Selected Financial Data of the
Company............................. 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 18
Business of the Company............... 24
Selected Financial Data of Automotive
Industries Holding, Inc. ........... 36
Management's Discussion and Analysis
of Results of Operations of
Automotive Industries Holding,
Inc. ............................... 37
Business of Automotive Industries
Holding, Inc. ...................... 39
Management............................ 44
Selling Stockholders.................. 46
Description of Capital Stock.......... 47
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 50
Underwriting.......................... 52
Legal Matters......................... 55
Experts............................... 55
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
20,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
September 20, 1995
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INTERNATIONAL
PAINEWEBBER INTERNATIONAL
SCHRODERS
ABN AMRO HOARE GOVETT
CREDIT LYONNAIS SECURITIES
DRESDNER BANK
AKTIENGESELLSCHAFT
SOCIETE GENERALE
------------------------------------------------------
------------------------------------------------------
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by the
Registrant in connection with the issuance and distribution of the securities
being registered hereby (other than underwriting discounts and commissions). All
of such expenses, except the S.E.C. filing fee and the NASD filing fee, are
estimated.
<TABLE>
<S> <C>
SEC filing fee............................................... $ 218,729
NASD filing fee.............................................. 30,500
Blue sky fees and expenses................................... 25,000
Legal fees and expenses...................................... 200,000
Accounting fees and expenses................................. 250,000
Printing and engraving....................................... 500,000
Listing fees................................................. 100,000
Miscellaneous................................................ 150,771
----------
Total................................................... $1,475,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is a Delaware corporation. Reference is made to Section 145
of the Delaware General Corporation Law, as amended (the "GCL"), which provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at its request in such capacity of another corporation or
business organization against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
person's conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of a corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses that such officer or director actually and reasonably
incurred.
Reference is also made to Section 102(b)(7) of the GCL, which permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL or (iv) for any transaction from which the director
derived an improper personal benefit.
The certificate of incorporation of the Registrant provides for the
elimination of personal liability of a director for breach of fiduciary duty as
permitted by Section 102(b)(7) of the GCL and the by-laws of the Registrant
provide that the Registrant shall indemnify its directors and officers to the
full extent permitted by Section 145 of the GCL.
The Registrant has directors and officers liability insurance that insures
the directors and officers of the Registrants against certain liabilities. In
addition, Lehman Brothers Inc. has agreed to indemnify Jeffrey P. Hughes, David
P. Spalding, James A. Stern, Eliot Fried and Alan Washkowitz, each being a
director of the Registrant and an officer or former officer of Lehman Brothers
Inc., in connection with their service as directors of the Registrant.
II-1
<PAGE> 65
The Underwriting Agreements provide for indemnification by each of the U.S.
Underwriters and each of the International Managers, as the case may be, of
directors and officers of Lear against certain liabilities, including
liabilities under the Securities Act of 1933, under certain circumstances.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A list of exhibits is set forth on the Index to Exhibits.
ITEM 17. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
2. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(b) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein and this offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrants' annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Southfield, State of Michigan on September 19, 1995.
LEAR SEATING CORPORATION
By: /s/ KENNETH L. WAY
--------------------------------------
Kenneth L. Way
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
------------------------------------- ----------------------------- ------------------
<S> <C> <C>
/s/ KENNETH L. WAY Chairman of the Board and September 19, 1995
------------------------------------- Chief Executive Officer
Kenneth L. Way (Principal Executive Officer)
* President, Chief Operating September 19, 1995
------------------------------------- Officer and Director
Robert E. Rossiter
/s/ JAMES H. VANDENBERGHE Executive Vice President September 19, 1995
------------------------------------- and Chief Financial Officer
James H. Vandenberghe (Principal Financial and
Principal Accounting Officer)
* Director September 19, 1995
-------------------------------------
Larry W. McCurdy
* Director September 19, 1995
-------------------------------------
Gian Andrea Botta
* Director September 19, 1995
-------------------------------------
Eliot Fried
* Director September 19, 1995
-------------------------------------
Robert W. Shower
* Director September 19, 1995
-------------------------------------
Jeffrey P. Hughes
</TABLE>
II-3
<PAGE> 67
<TABLE>
<CAPTION>
NAME TITLE DATE
------------------------------------- ----------------------------- ------------------
<S> <C> <C>
* Director September 19, 1995
-------------------------------------
David P. Spalding
* Director September 19, 1995
-------------------------------------
James A. Stern
* Director September 19, 1995
-------------------------------------
Alan Washkowitz
*By: /s/ JAMES H. VANDENBERGHE
-------------------------------------
James H. Vandenberghe
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 68
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBER EXHIBIT NUMBERED PAGE
-------------- ---------------------------------------------------------------- -------------
<S> <C> <C> <C>
**1.1 -- Form of U.S. Underwriting Agreement. *
**1.2 -- Form of International Underwriting Agreement. *
**2.1 -- Agreement and Plan of Merger, dated as of July 16, 1995, among *
Lear, AIHI Acquisition Corp. and Automotive Industries Holding,
Inc. ("AIH") (incorporated by reference to Exhibit 2.1 to Lear's
Current Report on Form 8-K dated August 28, 1995).
5.1 -- Opinion of Winston & Strawn, special counsel to Lear. *
23.1 -- Consent of Arthur Andersen LLP. *
23.2 -- Consent of Arthur Andersen LLP with respect to AIH Financial *
Statements.
23.3 -- Consent of Arthur Andersen & Co., s.a.s. with respect to FSB *
Financial Statements.
23.4 -- Consent of KPMG Deutsche Treuhand-Gesellschaft with respect to *
the Plastifol Financial Statements.
23.5 -- Consent of Winston & Strawn (included in Exhibit 5.1). *
** 24.1 -- Powers of Attorney. *
** 27.1 -- Financial Data Schedule (incorporated by reference to Exhibit *
27.1 to Lear's Quarterly Report on Form 10-Q filed August 4,
1995).
** 99.1 -- Amended and Restated Stockholders and Registration Rights *
Agreement dated as of September 27, 1991 by and among Lear, the
Lehman Funds, Lehman Merchant Banking Partners Inc., as
representative of the Lehman Partnerships, FIMA Finance
Management Inc., a British Virgin Islands corporation, and the
Management Investors (incorporated by reference to Exhibit 2.2
to Holdings' Current Report on Form 8-K dated September 24,
1991).
** 99.2 -- Waiver and Agreement dated September 27, 1991, by and among *
Holdings, Kidder Peabody Group Inc., KP/Hanover Partners 1988,
L.P., General Electric Capital Corporation, FIMA Finance
Management Inc., a Panamanian corporation, FIMA Finance
Management Inc., a British Virgin Islands corporation, MH
Capital Partners Inc., successor by merger and name change to MH
Equity Corp., SO.PA.F Societa Partecipazioni Finanziarie S.p.A.,
INVEST Societa Italiana Investimenti S.p.A., the Lehman
Partnerships and the Management Investors (incorporated by
reference to Exhibit 2.3 to Holdings' Current Report on Form 8-K
dated September 24, 1991).
** 99.3 -- Amendment to Amended and Restated Stockholders and Registration *
Rights Agreement (incorporated by reference to Exhibit 10.24 to
Lear's Transition Report on Form 10-K filed March 31, 1994).
**99.4 -- Waiver to Amended and Restated Stockholders and Registration *
Rights Agreement dated August 15, 1995.
</TABLE>
-------------------------
** Previously filed.
<PAGE> 1
EXHIBIT 5.1
September 20, 1995
Lear Seating Corporation
21557 Telegraph Road
Southfield, MI 48034
Re: Registration Statement on Form S-3
of Lear Seating Corporation (No. 33-61583)
(the "Registration Statement")
Gentlemen:
We have acted as special counsel to Lear Seating Corporation, a
Delaware corporation (the "Company"), in connection with the registration on
Form S-3 of the offer and sale (the "Offering") of up to 23,000,000 shares of
Common Stock of the Company, par value of $.01 per share (the "Common Stock").
Of the 23,000,000 shares being offered in the Offering, (i) 10,000,000 shares
are being offered by the Company and (ii) 13,000,000 (assuming the exercise of
the Underwriters' overallotment option) are being offered by selling
stockholders (the "Selling Stockholders").
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement relating to the Common Stock, as filed with the
Securities and Exchange Commission (the "Commission") on August 4, 1995 under
the Act, as amended by Amendment No. 1 thereto filed with the Commission on
September 1, 1995 and by Amendment No. 2 thereto filed with the Commission on
September 20, 1995 (as so amended, the "Registration Statement"); (ii) the
United States preliminary prospectus dated September 1, 1995; (iii) the
International preliminary prospectus dated September 1, 1995; (iv) the Restated
Certificate of Incorporation of the Company, (the "Charter"); (v) the Amended
and Restated By-Laws of the Company, (the "By-Laws"); (vi) the form of the
United States Underwriting Agreement to be entered into by the Company, the
Selling Stockholders, Lehman Brothers Inc., PaineWebber Incorporated, Morgan
Stanley & Co. Incorporated and Schroder Wertheim & Co. Incorporated (the "U.S.
Underwriting Agreement"); (vii) the form of the International Underwriting
Agreement to be entered into by the Company, the Selling Stockholders, Lehman
Brothers International (Europe), PaineWebber International (U.K.) Ltd., Morgan
Stanley & Co. International Limited and J. Henry Schroder & Co. Limited (the
"International Underwriting Agreement," and together with the U.S. Underwriting
Agreement, the "Underwriting Agreements") and (viii) resolutions of the Board
of Directors of the Company and its Pricing Committee relating to, among other
things, the issuance and sale of the Common Stock and the filing of the
Registration Statement. We have also examined such other documents as we have
deemed necessary or appropriate as a basis for the opinion set forth below.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents. As to any facts material to this opinion
which we did not independently establish or verify, we have relied upon oral or
written statements and representations of officers and other representatives of
the Company and others.
Based upon and subject to the foregoing, we are of the opinion that:
(a) the 10,000,000 shares of Common Stock covered by the Registration
Statement, when sold by the Company in accordance with the provisions of the
Underwriting Agreements following approval thereof by the Pricing Committee of
the Board of Directors of the Company, shall be legally issued, fully paid and
non-assessable.
(b) The 13,000,000 shares of Common Stock covered by the Registration
Statement are and, when sold by the Selling Stockholders in accordance with the
provisions of the Underwriting Agreements, will be legally issued, fully paid
and non-assessable.
We hereby consent to the reference to our firm under the heading "Legal
Matters" in the prospectus included in the Registration Statement and to the
filing of this opinion with the Commission as an exhibit to the Registration
Statement. In giving such consent, we do not concede that we are experts
within the meaning of the Act or the rules and regulations thereunder or that
this consent is required by Section 7 of the Act.
Very truly yours,
Winston & Strawn
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 15,
1995 included in Lear Seating Corporation's Form 10-K for the year ended
December 31, 1994, and to all references to our firm included in this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Detroit, Michigan
September 18, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated November 30,
1994 included in Lear Seating Corporation's Form 8-K/A filed on February 28,
1995, and to all references to our firm included in this registration statement.
/s/ Arthur Andersen & Co., s.a.s.
ARTHUR ANDERSEN & CO., s.a.s.
Turin, Italy
September 18, 1995
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 26, 1995
included in Lear Seating Corporation's Form 8-K filed on August 28, 1995, and to
all references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
September 18, 1995
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of LEAR SEATING Corporation of our report dated August 23, 1995 with respect to
the balance sheet of Plastifol GmbH & Co. KG as of 31 December 1994 and the
related profit and loss account and cash flow statement for the year then ended
which report appears in the Form 8-K of LEAR SEATING Corporation filed on August
28, 1995.
/s/ KPMG Deutsche Treuhand-Gesellschaft
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
Munich, Germany
September 19, 1995
