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Home My WebLink About2005-02-10 Info Packet CITY COUNCIL INFORMATION PACKET (~ITY OF IOW2~ (~ITY February 10, 2005 www.icgov.org IP1 City Council Meetings and Work Session Agendas IP2 Memorandum from Associate Planner: Site Location Review for a FY05 HOME/CDBG Funded Housing Project I IP3 Memorandum from the Community and Economic Development Coordinator: Community Development Block Grant (CDBG) Program Changes Proposed IP4 Letter from Ed Zastrow to City Hall: Pop Fund Donation to the Ronald McDonald House IP5 Police Department P.A.U.L.A Report - December 2004 IP6 Agenda (Mike Sullivan): Johnson County Board of Supervisors Public Leadership Summit - February 8, 2005 IP7 Quarterly Budget Report IP8 Agenda: Economic Development Committee: February 17, 2005 I PRELIMINARY DRAFT/MINUTES IP9 Planning and Zoning Commission: January 20, 2005 IP10 Deer Task Force: January 18, 2005 IPll Police Citizen Review: February 8, 2005 City Council Meeting Schedule and CiTY OF IOWA CITY Work Session Agendas February 10, 2005 www.icgov.org · MONDAY, FEBRUARY 14 Emma J. Ha/vat Hall 6:30p Council Work Session Planning and Zoning Items Habitat for Humanity-Lot Purchase Community Foundation Affiliate Agenda Items Council Appointments Council Time Identification of Priorities for Discussion · TUESDAY, FEBRUARY 15 Emma J. Harvat Hall 7:00p Regular Formal Council Meeting TENTATIVE FUTURE MEETINGS AND AGENDAS I · MONDAY, FEBRUARY 28 Emma J. Harvat Hall 6:30p City Conference Board Meeting Separate Agenda Posted TBA Council Work Session · TUESDAY, MARCH 1 Emma J. Harvat Hall 7:00p Regular Formal Council Meeting · MONDAY, MARCH 21 Emma J. Harvat Hall 6:30p Special Council Work Session · TUESDAY, MARCH 22 Emma J. Ha/vat Hall 7:00p Special Formal Council Meeting · MONDAY, APRIL 4 Emma J. Harvat Hall 6:30p Council Work Session · TUESDAY, APRIL 5 Emma J. Harvat Hall 7:00p Regular Formal Council Meeting · MONDAY, APRIL 18 Emma J. Ha/vat Hall 6:30p Council Work Session · TUESDAY, APRIL 19 Emma J. Ha/vat Hall 7:00p Regular Formal Council Meeting · WEDNESDAY, APRIL 27 Coralville City Hall 4:00p Joint Meeting Meeting dates/times/topics subject to change FUTURE WORK SESSION ITEMS Regulation of Downtown Dumpsters Date: February 10, 2005 To: Towa City City Council From: Tracy Hightshoe, Associate Planner Re: Site Location Review for a FY05 HONE/CDBG Funded Housing Project Iowa Valley Habitat for Humanity received FY05 HONE and CDBG funds for the acquisition of five lots for the construction of affordable, single family owner-occupied homes. In October 2004, Habitat purchased two lots on St. Anne's Drive (Shimek Elementary attendance area) and recently identified a lot on Crescent Street they would like to purchase (Twain Elementary attendance area). Habitat is subject to the site guidelines found within the FY05 Applicant Guide for CDBG/HOME projects. The guide states that housing projects that propose a location or locations within elementary school districts that are over the ICCSD average of 20% Iow-moderate income students may be denied funding or other support by HCDC or the City Council. Twain Elementary is over the district average of 20% Iow-moderate income, thus the Council is being asked to consider the approval of the Crescent Street site before Habitat acquires the land. Upon discussion with the Housing and Community Development Commission (HCDC) and the HCDC chair, each site subject to HCDC and/or Council approval, will be submitted directly to the Council until a scattered site policy has been adopted. If you would like additional information, please contact me at 356-5244 or by e-mail at tracy- hightshoe@iowa-city.org. cc: Karin Franklin Steve Nasby IP3 MEMORANDUM DATE: February 9, 2005 TO: City Council City rvlanager FROM: Steven Nasby, Community and Economic Development Coordinator RE: Community Development Block Grant (CDBG) Program Changes Proposed On February 3, 2005, the U. S Department of Commerce officially acknowledged that the economic development and community development programs (e.g., CDBG and Brownfields) operated by the U.S. Department of Housing and Urban Development (HUD) are proposed to be moved to the Commerce Department. This was confirmed with this week's release of the Budget of the United States Government - Fiscal Year 2006. The President's FY06 Budget proposes to consolidate :[8 existing economic and community development programs from 5 different Federal agencies (HUD, Agriculture, EDA, HHS, and Treasury) into one single program (see attached list). This consolidation of programs is entitled "Strengthening America's Community's Tnitiative". The Commerce Department states that the President is moving in this direction because economic growth is not being felt throughout the country and that the existing economic and community development programs are fragmented, duplicative and do not show results. The Budget of the United States Government - Fiscal Year 2006 proposes to fund this single program at $3.71 billion in FY06. As such, we anticipate sharp decreases within each of the 18 existing programs as CDBG alone was funded at $4.7 billion ($4.1 billion in formula funding) in FY05. It is widely anticipated that the cut to CDBG will be between 40% 50%. In addition to the reduction in funding, the remaining monies may be allocated or targeted to what the administration is referring to as the most economically distressed communities. The Office of Management and Budget (OMB) and the Budget of the United States Government - Fiscal Year 2006 have stated the following: "Nany communities no longer in need of assistance continue to receive funding, undermining the purpose of some programs - to help d/stressed communities. For example, the CDBH program at HUD was created to serve d/stressed communities, but 38 percent of the funds currently goes to communities and 5tares with/ess poverty than the national average." This assertion is questioned by organizations such as the National Community Development Association (NCDA) and U,S. Conference of Mayors. They state that CDBG was never created to be an anti-poverty program. The impact on Iowa City of targeting these funds to distressed communities may not be known for sometime as the criteria used by the Department of Commerce to identify these areas has not been released. February 9, 2005 Page 2 The idea to consolidate these :t8 programs into one program is also based on the Office of Management and Budget's review of federal programs and that OMB identified overlap, little accountability, and no measure of achievement of long term success in each of these program areas. States and CDBG Entitlement communities believe that CDBG is very results-oriented and HUD has a great deal of accomplishment data on the program. Many cities and states have been working with their respective national organizations, HUD and OMB to develop performance measures for the program. The Commerce Department plans to develop enabling legislation by the Summer to send to Congress to enact this proposal. Congress' pursuit of such a major reorganization and consolidation effort will affect numerous authorizing committees, each of which will want to hold hearings on this effort before any legislation is enacted. As such, the timing for accomplishing this task is to be determined. Over the last five years, (City FY00 - City FY05) Iowa City has already seen a reduction in CDBG funding of 18.4% or $172,000. Tf the proposed 40% - 50% funding cuts were enacted, independent of the move from HUD to the Commerce Department, the impact on :Iowa City's CDBG program would be profound. We will continue to update you on this matter as new information becomes available. Tn the upcoming weeks extensive communications with our federal elected officials will be important to let them know how CDBG is being used in our community and the devastating impacts a 40% - 50% reduction in funding would be to the community and especially the Iow-moderate income households that depend upon CDBG funded programs. Cc: Karin Franklin, Director of Planning and Community Development Housing and Community Development Commission Attachment Programs to be Consolidated Under the President's Strengthening America's Community's Initiative Housing and Urban Development CDBG Formula Grants National Community Development Initiative CDBG Set-Asides Brownfields Economic Development Initiative Rural Housing and Economic Development Urban Empowerment Zones Round II Grants Community Development Loan Guarantees Commerce Economic Development Administration Agriculture Rural Business Enterprise Grants Rural Business Opportunity Grants Economic Impact Grants Rural Empowerment Zones (EZ)/Enterprise Communities (EC) Treasury Community Development Financial Institutions (CDFI) Program Bank Enterprise Award (BEA) Program CDFI Native Initiatives Health and Human Services Community Services Block Grant Urban and Rural Community and Economic Development Rural Community Facilities IP4 730 HAWKINS DRIVE" IOWA CITY, IA 52246-2509 ° PHONE: 319-356-4578 ' FAX: 319-353-6873 mchouse@uihc, uiowa.edu ° www. uihealthcare.com/ro naldmcdonaldhouse February 7, 2005 City of Iowa City Leigh Lewis 410 E Washington St Iowa City, IA 52240-1826 Dear Emp,oyee Pop und Donors, Thank youl Your gift of $250.00 to the Iowa City Ronald AAcDonald House is welcome and needed. The House uses no state or federal tax dollars, relying 100% on private gifts, such as yours, for its operations. We appreciate that there ore many worthy charities you can support, so we work to spend your dollars wisely. We work hard to contain costs. In 2003, 89% of our expenses went to direct services for families and children; fundraising and administrative costs were just 11% of our expenses. In year 2003, we reduced net costs by 7%, or $56,333, from 2002. 5ource: 2003 Annual Audit by RA45 A4cG/adrey Pullen, LLP. Thank you again very much for helping to sustain the "House that love built." Executive Director Iowa City Ronald McDonald House is a 501 (c) (3) non-profit charity (federal tax ID Ct 42-1189-783) recognized by the IRS. Gifts are tax deductible. RMS McGladrey Pullen, LLP, audits our financial operations annually. Hou that Iov bui/f:.... (¢ Iowa City Police Department P.A.U.L.A. Report -- December 2004 (PAULA = Possession of Alcohol Under the Legal Age) Month~ , Totals Year-to-Date Totals PAULA per Visit Business Name [occupancy] visits arrests visits arrests (year-to-date) 606 [176] (opened June) 3 0 60 61 1.220 Airliner [265] 20 16 0.800 American Legion [140] 6 0 0.000 Aoeshe Restaurant [156] I Atlas World Grill [165] 20 2 0.100 Baldy's Wraps [47] B.P.O. Elks #590 [205] Bo-James [111] 2 0 68 8 0.118 Bob's Your Uncle [204*] Boneheads [226] (opened August) 4 : 1 0.250 Brown Bottle [289] Buffalo Wild Wings Grill & Bar [179] . 12 1 0.083 Caf6 Z [56] (licensed October) Carlos O'Kelly's [299] China Moon [118] _ College St Billiard Club [250] 3 0 78 2 0.026 Colonial Bowling Lanes [502] 7 0 0.000 Cottage Bakery & Caf6 [156 ~ . Dave's Fox Head Tavern [87] Deadwood Tavern [218] 1 0 25 0 0.000 Devotay [45] Diamond Dave's (Old Capitol) [203] 6 0 0.000 Diamond Dave's (Sycamore) [104] 1 0 0.000 Dublin Underground [57] 21 3 0.143 Et Cetera [178] 62 54 0.871 El Ranchero [161] First Avenue Club [500] _ ~ . 4 0 __ 0.000 Fitzpatrick's/Brewery [394*] (closed May) 3 0 0.000 Fitzpatrick's [116] (issued November) Fraternal Order of Eagle's [315] _ _ 1 __ 0 _ 0.000 Gabe's [339] ' 11 1 0.091 General Japanese Restaurant [87] George's Buffet [75] i i ~ 1 ~ 0 0.000 Givanni's [187] Godfather's Pizza [170] 7 0 0.000 Green Room [144] Gringos Mexican Bar & Grill [180] Grizzly's South Side [265] 1 0 20 ~ 0 0.000 Ground Round Restaurant [192] Hanrahan's Pub [72] 2 0 0.000 Happy Joe's Pizza [84] Hilltop Lounge [90] 3 0 0.000 India Caf6 [100] Iowa City Yacht Club [119] 1 0 12 1 0.083 It's Brothers Bar & G[ill [456] : 88 35 0.398 Joe's Place [161] ~ 2 0 29 1 0.034 Kandy Land [120] (issued November) ~ 4 0 0.000 Kitty Hawk [225] Lark Restaurant [289] I : / La Casa [300] Linn Street Caf~ [80] Los Portales [161] 1 ' 0 0.000 Loyal Order of Moose [476] Malone's Irish Pub [176] (closed May) ~ 30 52 1.733 Masala [46] ~ Martinis [166] 1 0 53 4 0.075 Mclnnerney's [154] 14 0 0.000 Memories [120] (closed November) 8 0 0.000 Mia Milano (opened August) Micky's [70] 1 0 1.6 3 0.188 Mike's Tap [56] 1 0 0.000 Mill Restaurant [325] 3 0 0.000 Minerva's Bar & Grill [220] 2 0 0.000 Mondo's (Downtown) [226] (closed July) Motley Cow Caf6 [25] Mumm's Saloon & Eatery [230*] 1 0 0.000 Yen Ching Restaurant [247] Okoboji Grill [222] Old Capitol Brew [394*] (opened October) One-Eyed Jake's [355] 1 2 45 81 i .~00 One Twenty Six/Loft [105] 4 0 0.000 Pagliai's Pizza [113] Panchero's (Clinton St) [62] Panchero's (Riverside Dr) [95] Parthenon [320] Pizza Hut [68] Piano Lounge [65] ; 3 0 31 0 0.000 Quality Inn/Highlander [971] _ . 1 0 0.000 Que Bar [458] ~ 2 0 51 31 0.608 Quinton's Bar & Deli [149] I 2 0 27 0 0.000 Rick's Grille & Spirits [120] (opened June) ~ R.T.'~ i770] ! / 4 2 0.500 sam's Pizza [94] ~ Sanctuary Restaurant & Pub [132] Seoul Garden [73] Shakespeare's [120] 6 0 0.000 Sheraton/Morgan's Bar & Grill [214] . 1~0 _ 1 0.100 Siren [120] (opened June) 1 0 8 0 0.000 Skybox [47] (opened October) 3 ~ 9 3.000 Sports Column [249] 2 0 108 187 1.731 Studio 13 [230] 24 1 0.042 Summit Restaurant & Bar [484] 2 0 86 178 2.070 Sushi Po Po [84] Takanami [148] Thai Flavors [60] Thai Spice [91] Third Base/Fieldhouse [420] 2 3 114 88 0.772 Union Bar [725] (closed May to July) 2 2 93 165 1.774 VFW Post #3949 [197] Vine Tavern [170] 2 2 1.000 Vito's [235] 2 0 74 76 1.027 Wig & Pen Pizza Pub [203*] Zio Johno's Spaghetti House [94] Z'Mariks Noodle Caf6 [47] Totals:I 34 ! 711385 1066 0.770 Other PAULA at non-business locations: 14 ~ 262 PAULA Totals: 21 1328 current rnonlh year-to.ate [*includes outdoor area] Agenda for Tuesday's meeting 1 Marian Karr IP6 From: Mike Sullivan [msulliva@co.johnson.ia.us] Sent: Monday, February 07, 2005 10:34 AM To: Alburnett; Arnold-Olson & Associates; Cedar Rapids; CenterPoint; Central City; ECICOG; Ely; Fairfax; Hiawatha; Hills; Howard R. Green; IowaCity Clerk; Iowa City Manager; Iowa Environmental Education Project; James Houser; Jane Tompkins; JCCOG; Johnson County; Kelly Hayworth; LindaLangston; Linn County Supervisors; Lisbon; LoneTree; Lu Barron; Marion; Mike Goldberg; Mount Vernon; North Liberty; NorthLiberty City Administrator; Palo; Patrick Murphy; PriorityOne; Robins; Sharon Meyer; Shueyville; Solon; Springvilie; Tiffin; University Heights Subject: Agenda for Tuesday's meeting Importance: High Attached is the agenda for Tuesday's Public Leadership Summit meeting. Mike <<02-08i - WS - Public Leadership Summit.doc>> Mike Sullivan Johnson County Executive Assistant 913 South Dubuque Street, Suite 201 Office (319) 339-6198, extension 309 Fax (319) 356-6036 msulliva@co.johnson.ia.us *** eSafe scanned this email for malicious content **'~ *** IMPORTANT: De not epen attachments from unrecegnized senders *** 2/7/2005 BOARD OF SUPERVISORS Sally Stutsman, Chairperson Pat Hamey Mike Lehman Terrence Neuzil Rod Sullivan Agenda Public Leadership Summit Howard R. Green Company - Conference Room 8710 Earhart Lane SW, Cedar Rapids (East of 1-380/Airport exit - North off of Wright Brothers Blvd.) Tuesday, February 8, 2005 INFORMAL MEETING Work Session 1. Call to order 4:30 p.m. 2. Welcome and Introductions · Sally Stutsman, Chairperson - Johnson County Board of Supervisors · Linda Langston, Chairperson - Linn County Board of Supervisors 3. Mark Gilbert, Gartner Group, Inc. Technology and Economic Development, government convergence and cooperation 4. Sheriff Zeller and Sheriff Pulkrabek Communications Inter-operability 5. Mike Wentzein, ISAC Supervisors Lobbyist Larry Murphy, Linn County Lobbyist Governor's Governance Committee, update and report 913 SOUTH DUBUQUE STREET, SUITE 201 * IOWA CITY, IOWA 52240-4207 * PHONE: (319) 356-6000 * FAX: (319) 356-6036 2-8-05 Page 2 6. Chamber trip update Sally Stutsman and Linda Langston 7. Future direction of this group 8. Future agenda items 9. Next meeting date and location 10. Other 11. Adjournment IP7 City of Iowa City- FY2005 Comparison of Revenue & Expenditures For the six months ending December 31, 2004 An analysis of revenues, expenditures and current cash position for operating accounts. Prepared by: Leigh Lewis / Finance Administration Table of Contents General Fund ........................................................................................................................................................ 1 Revenue .................................................................................................................................................. 1 Property Taxes ....................................................................................................................... 1 Other City Taxes .................................................................................................................... 1 Licenses & Permits ............................................................................................................... 2 Use of Money & Property .................................................................................................... 2 Intergovernmental Revenue ............................................................................................... 2 Charges for Services ............................................................................................................ 3 Fine Revenue ......................................................................................................................... 3 Intra-city Charges .................................................................................................................. 4 Bond Proceeds ...................................................................................................................... 4 Road Use Tax ......................................................................................................................... 4 Miscellaneous Other Revenue ........................................................................................... 4 Expenditures ......................................................................................................................................... 6 Personnel ................................................................................................................................ 6 Service Expenditures ........................................................................................................... 6 Operating Supplies ............................................................................................................... 6 Transfers Out of General Fund .......................................................................................... 7 Expenditures by Program Area ......................................................................................... 7 Enterprise Funds ................................................................................................................................................. 9 Parking ................................................................................................................................................... 9 Wastewater .......................................................................................................................................... 11 Water ................................................................................................................................................. 12 Refuse ................................................................................................................................................. 13 Landfill ................................................................................................................................................. 13 Airport ................................................................................................................................................. 14 Stormwater Management ................................................................................................................. 14 Broadband Telecommunications ................................................................................................... 15 Other Funds ........................................................................................................................................................ 16 Equipment/Fleet Maintenance ....................................................................................................... 16 Information Technology Services (ITS) ......................................................................................... 17 Purchasing ........................................................................................................................................... 18 CITY OF IOWA CITY QUARTERLY ANALYSIS / BUDGET TO ACTUAL COMPARISON FOR THE SlX (6) MONTHS ENDING DECEMBER 31, 2004 General Fund - Revenue General Fund revenues for FY2005 were budgeted at $42,763,619. Receipts through December 31, 2004, total $20,829,211 and are 49% of budget. The following table summarizes General Fund revenues into thirteen (13) major categories and is followed by an analysis of each. Property Taxes 27,356,197 52% 10,378,455 37%, OtherOityTaxes 990,964 33O/o 298,733 10o/0 Licenses & Permits 1,186,001 56% 770,004 -14% Use of Money & Property 728,414 47% 504,204 -33% Intergovernmental Revenue 2,733,934 24% 11689,910-60% Charges for Serv ces 1,676,238 470/0 927,256 _4o/0 Fines (Magistrate, Parking & Library) 1,254,500 0~4 46% 652,609 -11% Intra-City Charges 1,500,089 ~i~~ 470/0 664,044 60/0 Bond Proceeds 317,400 0% n/a Road UseTax 3,429,667 500/0 1,383,777 240/0 Misc. Other Revenue 1,390,015 55% 439,939 74% G~od ~o~! Revenue, Property Taxes Property tax receipts account for over half of General Fund revenues, with just over $14 million received through December 31, 2004, approximately 52% of budget. The balance of property tax revenue is anticipated in April and May. Current receipts reflect $8.5 million from the general levy, $3.7 million from employee benefits, $1.0 million from transit, and $561,000 combined from the library and emergency levies. Revenue from the employee benefit's levy covers the employer's share of FICA, IPERS, health, life and dental insurance costs, unemployment expense and police and fire pension contributions for the General Fund. *Note: Fiscal year 2004 property tax receipts do not reflect revenue from the employee benefit and emergency levies, which total $3.987 million in FY05. Other City Taxes Other City Taxes include excise tax revenue from gas and electric utilities and Hotel/Motel tax revenue. Gas & Electric excise tax revenue, budgeted at $440,964, is received from the County Treasurer along with property tax receipts and adjusted for at fiscal year-end. Hotel/Motel Tax receipts are distributed by the State, and up ten percent (10%) from this same time last year at $329,651. Licenses & Permits This category includes animal, liquor and construction-related licensing, permit and inspection fees. Receipts through December 31, 2004 totaling $662,215 are fifty-six percent (5'6%) of budget. Fees were significantly higher in FY2004 due to construction activities on parcel 64-1A and development of a high-density multi-family housing unit off of State Highway 1 in Iowa City. Use of Money & Property Use of Money & Property includes a budgeted $260,000 in Transit revenue, anticipated upon completion and opening of the Court Street Transportation Facility during the spring of 2005. It is estimated that this project will now be completed during the early months of fiscal year 2006. A budget amendment has been prepared to reduce FY05 budget authority. Excluding this amount brings Use of Money & Property to seventy-two percent (72%) of budget, with interest revenue of $278,522 at ninety percent (90%) of budget. Intergovernmental Revenue Local, state and federal funding is budgeted at $2.7 million and includes the state-distributed Bank Franchise Tax, 28-E service agreements with other local governments, as well as state and federal grant funding. Bank Franchise Tax(1) 64,190 n/a 21,193 203% Local Governments® 591,589 335,608 57% 288,485 16% University of Iowa Fire Contract(3) 1,225,199 0% 1,124,028 -100% State Transit Assistance 326,430 172,773 53% 184,472 -6% Federal Grants - Transit (4) 444,955 4,648 1% n/a Public Safety Grants 125,636 71,279 57% 54,155 32% Misc. Other 20,125 19,194 95% 17,576 9% Total- Intergovernmental: 2,733,934 667,692 24% 1,689,910 -60% Receipts through December 31, 2004 are twenty-four percent (24%) of budget at $667,692. A breakdown of intergovernmental funding is provided below: (1) The state legislature eliminated the local share of Bank Franchise Tax receipts during the 2003 state legislative session. A final receipt of $64,190 was received by t~e City in August of 2004. (2) Service-related 28E agreements are fifty-seven percent (57%) and include the following agreements (with/for): $ 298,802 Johnson County/Library $ 82,586 Iowa City Community School District / Mercer Park Aquatic Center $ 79,723 Coralville / Animal Care & Adoption $ 75,000 Johnson County / Senior Center $ 42,275 University Heights / Dispatch $ 28,680 University Heights / Transit Services -2- (3) Fire protection services are provided to the University of Iowa by contract. Fees are based on the Fire Department's prior year operational costs and the estimated square footage of University buildings. This year's contract totals $1.33 million of which $1.119 million is receipted into General Fund, $28,987 transferred to the Fire Equipment Replacement Reserve and $182,647 transferred to the Employee Benefits Fund. Payment from the University of Iowa is anticipated during the third quarter of this fiscal year. (4) Federal Transit grant monies are typically received late in the fiscal year. Char.qes for Services: Charges for services totaling $888,670 are 47% of budget. This category includes fees related to Housing and Building Inspection Services, police and fire protection, transit use and recreational activities. Building/Development Permits & Inspections (4) 377,690 225,891 60% 311,810 -28% Transit Fees(2) 730,300 389,758 53% 335,137 16% Recreation Fees(3/ 586;448 197,571 34% 212,185 -7% Senior Center Fees (41 35,000 18,772 54% 16,859 11% Misc. Other Charges for Services 146,800 56,680 39% 51,265 11% ~otai ~ f°~ Se~iCesi ~8~$i~ 888i670 ~% (1) Housing & Inspection Services charge a fee when they review development and construction plans. Receipts in this area were significantly higher during fiscal year 2004 due to development acitivities (see Licenses and Permits). (2) Transit fees are up sixteen percent (16%) from this time last year, due primarily to an increase in UI faculty/staff and student passes, and including the extension of this program to students of Kirkwood Community College. (3) Recreation fees are thirty-four percent (34%) of budget, down seven percent (-7%) from the same time last year. Pool admissions specifically are down thirty-three percent (33%) from the same time last year. (4) Senior Center class fees were increased in FY2004 to counter a forty-seven percent (47%) reduction in funding from Johnson County over the prior two fiscal years. Program fees are currently fifty-four percent (54%) of budget. Fine Revenue Fine revenue is down eleven percent (-11%) from the prior fiscal year at $579,074. This category includes parking ($295,329), library ($99,901), magistrate court ($177,067) and miscellaneous other fines related to city code enforcement. Parking violations other than Expired Meter are receipted directly into the General Fund and are down seventeen percent (-17%) from the prior year. A total of 12,484 non-meter tickets were issued between July I and December 31, with $295,329 in fines paid through the end of December. This compares with 17,864 tickets and $354,420 paid during the same period last year. Iowa City's parking fine ordinance was revised in FY04, including an increase in five dollar ($5) tickets to ten dollars ($10) and a revision of the escalation period by which $10 tickets increase to $15 after 30 days. Magistrate Court fines are down nineteen percent (-19%) at $177,067 when compared with last year. This follows a two-year period during which revenue of this category had increased fifty-one percent. Fluctuations during this time have been the result of changes in watch command priorities, additional funding received in FY04 through the Governor's Traffic Safety Bureau and a council-directed increase in PAULA enforcement (Possession of Alcohol Under the Legal Age). Magistrate Court Fines 375,500 177,067 47% 218,162 -19% Parking Fines (Statutory) 700,000 295,329 42% 354,420 -17% Library Fines 160,000 99,901 62% 76,179 31% Misc. Other Fines 19,000 6,776 36% 3,848 76% Total Fine Revenue 1,254,500 579,074 46% 652,609 -11% Intra-City Charges Intra-city charges, budgeted at $1,500,089, are forty-seven percent (47%) of budget. This category includes charges for services provided by the City Attorney, Document Services, Finance Administration, Treasury and Public Works Administration to other divisions not within the General Fund. Bond Proceeds General obligation bond proceeds which were designated for capital projects within the General Fund will be transferred in accordance with project expenditures. Road Use Tax This state-levied gas tax is apportioned to municipalities on a per-capita basis to finance street and traffic-related projects and operations. These monies are receipted into the City's Road Use Tax Fund with a portion then transferred to the General Fund to cover Traffic Engineering and Streets division operating expenses. Transfers into the General Fund are fifty percent (50%) of budget at $1.7 million and are twenty-five percent (25%) higher than this time last year. Misc. Other Revenue Miscellaneous revenue is fifty-two percent (55%) of budget at $765,465 and includes the following: sale of condemned property ($92,000), sale of Peninsula property ($180,747), transfer from Broadband ($76,412), transfer from Parkland Acquisition Reserve ($50,000) and a final $100,000 loan payment from the Englert Civic Theater. -4- FY2005 General Fund Receipts Thru December 31,2004 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Property Taxes Other City Taxes I(1) Licenses & Permits 56 % Use of Money & Property Intergovernmental Revenue Charges for Services Fines (Magistrate, Parking & Library) Intra-City Charges Bond Proceeds Road Use Tax 50% Misc. Other Revenue 55% Notes: (1) Gas & Electric excise tax revenue, budgeted at $440,964, is received from the County Treasurer along with property tax receipts and adjusted for at fiscal year-end. (2) The University Fire Contract is budgeted at $1.33 million, with receipts anticipated during the third quarter of the fiscal year. (3) General obligation bond proceeds which are designated for capital projects within the General Fund will be transferred in accordance with project expenditures. -5- General Fund Expenditures General Fund expenditures total $21,577,858 through December 31, 2004 and are fifty-one percent (51%) of budget. The following table is categorized by expenditure type. Personnel 29,804,875 14,774,406 50% 14,214,311 4% Services 7,948,968 4,483,339 56% 4,830,827 -7% Operating Supplies 1,812,035 965,824 53% 706,853 37% Capital Outlay 1,590,395 920,042 58% 1,146,658 -20% Transfers Out of General Fund 1,184,120 434,097 37% 10,173 4167% Contingency 302,919 150 0% 0% Personnel Personnel costs include salaries and wages; health, dental, disability and life insurance, FICA, MFPRSI (Municipal Fire & Police Retirement System of Iowa) and IPERS (Iowa Public Employees Retirement System) contributions, longevity pay and other benefit costs. Personnel costs represent sixty-eight percent (68%) of General Fund expenditures through December 31, 2004. Service Expenditures Service expet~ditures are fifty-six percent (56%) of budget at $4.48 million, down seven percent (7%) from this time last year. General Fund's loss reserve payment, budgeted at $300,000 will take place at fiscal year end. Excluding the loss reserve payment from FY04 and FY05, service expenditures are up ten percent (10%) from last year. Electric utilities are up ten percent 10% when compared with last year at $410,529, along with heating fuel/gas, which is up twelve percent (12%) at $55,267. Increased energy costs are primarily due to expansion of the public library and continued expansion and improvement of street lighting and traffic control systems (signalization, etc). Operating Supplies Operating Supplies are fifty-three percent (53%) of budget at $965,824, up thirty-seven percent (37%) from this time last year. A significant portion of this increase can be attributed to an increase in diesel fuel prices and purchase of traffic control equipment. r~ Rack prices on #2 Diesel have risen significantly over the past year and a half, from $.86/gallon at the start of fiscal year 2004 to $1.64/gallon in mid-October of FY05. Prices have declined since that time to $1.27/gallon on December 30, 2004. A FY05 budget amendment of $48,000 is pending per a fifty percent (50%) increase in diesel fuel costs over this time last year. r~ Traffic control supplies and equipment are 120% of budget at $198,955, compared with $31,184 at this time last year. A budget amendment estimated at $122,000 will be necessary prior to fiscal year end. -6- Transfers out of General Fund Transfers out of General Fund are thirty-seven percent (37%) of budget at $434,097. Budgeted items include capital project funding, GO. debt service abatement, JCCOG and Airport operating subsidies, Library Equipment Replacement Reserve contributions, operational funding from Parkland Acquisition and interfund loan repayments. Transfers to capital projects are made as expenditures occur and are $27,640 of the $313,583 budget through December 31, 2004. An abatement of $50,000 is intended for debt service on the 2002 GO issue, pending lease revenue from Library's commercial space. Excluding capital project funding and GO abatement, transfers of General Fund are fifty pement (50%) of budget. Contin,qency A contingency of $414,000 was budgeted for FY05. Amendments reallocate budget authority from the contingency line item to another expenditure type. Amendments totaling $111,081 have therefore reduced the contingency budget to $302,919 as outlined below: $ 489 Traffic Engineering - Sign crew cellular service $ 1,000 Johnson County Child Initiative - Contribution $ 3,991 Police Emergency Communications- Dictaphone $ 4,000 Transit Operations- Used Transit Bus $ 4,000 Recreation / Scanlon Gym - Lobby Chairs $ 9,480 Police Records- (9) Double-monitor Setup $ 11,987 Police Patrol - Training & Education (adjustment correction) $ 12,334 Fire Prevention - 30% local match -Auto Fire Sprinkler Trailer $ 13,800 Fire Training - Training Tower $ 50,000 Deer Control - Establish budget authority for FY05 $111.08'1 Contingency use through December 31, 2004 Expenditures by Pro,qram Area The State of Iowa requires that expenditures be reported in specified program areas. The following table looks at General Fund expenditures through December 31, 2004 according to those definitions. Public Safety 15,047,096 7,596,378 50% 7,226,762 5% Public Works 9,389,686 4,701,963 50% 4,288,144 10% Culture & Recreation 9,269,500 4,514,466 49% 4,552,212 -1% Community & Economic Development 1,374,667 607,744 44% 618,673 -2% General Government 6,378,243 3,722,982 58% 4,212,657 -12% Capital Projects 228 n/a n/a Transfers Out of General Fund 1,184,120 434,097 37% 10,173 4167% G~ne~i FUnd E~P~nd~,reSi 5~=/. 20i908721 -7- FY200$ General Fund Expenditures Thru December 31, 2004 by Expenditure Type 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personnel ~~ 50% ' 56% Services ~ Operating Supplies ~~ ~A153 Capital Outlay ~ ~ ~ ~ ~ ~ 58% Transfers Out of General Fund ~ ~ ~ ~ 37% FY2005General Fund Expenditures Thru December 31, 2004 by Program Area 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Public Safety 50% Public Works 50% Culture & Recreation 49% Community & Economic 44% Development General Government ~8% Capital Projects Transfers Out 37% = of General Fund I ~ j , , -8- ENTERPRISE FUNDS The enterprise funds include Parking, Wastewater Treatment, Water, Refuse, Landfill, Airport, Broadband Telecommunications and Housing Authority. Funding comes, in part, from user fees and charges for the services provided to individual customers. The following summaries examine revenue and expenditure levels for operations. Parking Fund Revenue Interest Income 50,000 21,800 44% 4,336 403% Parking Fines & Fees (4) 3,848,150 2,093,270 54% 2,116,286 -1% Property Sales (4) 100,000 0% n/a Loan Repayments(2) 14,950 7,474 50% 7,475 0% Misc. Other Revenue(3) 20,400 15,079 74% 18,281 -18% Total Revenue 4,033,500 2,137,623 53% 2,146,377 0% Expenditures Operations 2,453,620 989,565 40% 1,067,154 -7% Capital Outlay & Projects 87,003 39,488 45% n/a Debt Service Funding 1,287,654 498,827 39% 384,559 30% Improvement Reserve 200,000 100,000 50% 65,000 54% Misc. Transfers Out 222,191 0% n/a Expenditures 4,250,468 1,627,880 38% 1,516,713 7% Net (216,968) 509,743 629,664 Parking revenue is fifty-three percent (53%) of budget at $2,137,623. Parking fines and fees comprise the majority of Parking Fund's revenue and are down one percent (-1%) from the prior fiscal year. The table on the following page is a detailed look at parking fines and the various fee types. Property Sales was budgeted at $100,000 due to a payment scheduled for December 1, 2004. This payment relates to the 2002 purchase of condominium unit 1-C in Tower Place by human services agency United Action for Youth (UAY). The payment schedule, as amended in July 2004, was amended a second time by Council resolution on February 1, 2005. This revised agreement is for $25,000 to be paid by March 1, 2005; $125,000 by December 31, 2005 and $125,000 by December 31, 2006. The budget will be amended to reflect these changes. -9- Parking Fines (~) 493,000 226,854 46% 266,433 -15% On Street Meters 600,000 322,539 54% 322,755 0% Metered Lots (2) 172,000 43,471 25% 57,257 -24% Permit Lots 100,000 90,384 90% 65,969 37% Meter Hoods & Rentals 20,000 24,621 123% 17,288 42% Capitol St. Ramp 1,100,000 601,801 55% 592,283 2% Dubuque St. Ramp 618,000 380,958 62% 368,582 3% Chauncey-Swan Ramp 217,000 126,121 58% 140,856 -10% Tower Place Ramp 455,000 241,305 53% 250,899 -4% Park & Shop Program 73,150 35,216 n/a 33,965 (x) Fee Revenue 3,848,150 2,093,270 64% 2,116,286 -1% (1) Parking fine revenue is down fifteen percent (-15%) from last year at this time. The total number of tickets issued is down significantly from the same time period last year. Changes which occurred during fiscal year 2004 include new fine and escalation schedules and an increase in the number of on-street meters. Also of note, on-line payments totaled $116,161 or twenty-two percent (22%) of fine revenue (including General Fund) through December 31. (2) Metered-lot revenue is down due to the sale of a lot 64-1A, which previously provided metered parking adjacent to the public library and pedestrian mall. Expenditures are thirty-eight percent (38%) of budget through December 31, 2004, at $1,627,880. Parking's Loss Reserve payment ($100,000), and transfers to debt service ($789,000) and General Fund ($200,000) will not take place until year-end. Excluding these transactions, operational costs are less than budget for the six months in personnel costs, electrical charges, structural repair and equipment purchases. -10- Wastewater Treatment Fund Beginning Balance 5,055,483 5,055,483 3,902,397 Revenue 12,185,000 6,300,850 52% 8,476,051 -26% Expenditures (13,258,440) (5,675,285) 43% (6,633,744 -14% Ending Cash Balance 3,982,043 5,681,048 5,744,704 Wastewater revenue is fifty-two percent (52%) of budget through December 31, 2004, with ninety-eight percent (98%) of receipts from wastewater collection fees. Expenditures are forty-three percent (43%) of budget. Utility expenditures are lower than anticipated by an estimated $155,750 for electric, heating fuel/gas and water, combined. Insurance-related transfers ($257,276), capital expenditures ($1.34 million) and debt service transfers ($3.6 million) will take place at fiscal year end. During fiscal year 2004, the City's arbitrage consultant advised a reduction and consolidation of bond reserve funds due to savings realized with the 2002 Sewer Refunding. The net result of this action was $1,061,400 receipted into Wastewater Operations. Personnel 1,702,015 847,332 50% 804,636 5% Services 2,270,683 864,082 38% 1,141,174 -24% Supplies 481,672 220,618 46% 202,279 9% Capital Outlay 670,794 40,135 6% 45,713 -12% Operational Costs 5,125,164 1,972,166 38% 2,193,802 -10% Capital Projects ¢) 670,000 55,658 8% 55,361 1% Debt Service Funding (2) 7,463,276 3,647,461 49% 3,630,405 0% Misc. Transfers (3) n/a 754,176 -100% Total Expenditures: 13,258,440 5,675,285 43% 6,633,744 -14% -11 - Water Operatin.q Fund Beginning Balance 8,949,051 8,949,051 6,772,328 Revenue 9,761,835 4,646,092 48% 6,122,889 -24% Expenditures (10,601,613) (3,712,634) 35% (4,024,258) -8% Ending Cash Balance 8,109,273 9,882,509 8,870,959 Total revenue is $4,646,092 and forty-eight (48%) of the FY05 budget. FY2004 revenue includes sale of Madison Street facilities to the University of Iowa for $1,106,000. Excluding this transaction, metered water service was ninety-three percent (93%) of this fund's revenue, with receipts through December 31 totaling $4,646,092. Water rates were reduced five percent (-5%) on July 1, 2003, and an additional five percent (-5%) on July 1, 2004, with the intent of lowering the fund's cash balance. Expenditures are thirty-five percent (35%) of budget. The FY2005 budget was estimated during the first year of operations at the new treatment facility on North Dubuque Street. Operating supplies currently are twenty-seven percent (27%) of budget, with electric charges, chemicals and water system improvement materials currently lower than anticipated. Larger expenditure items slated for the second half of this fiscal year include capital expenditures of $1.742 million, year-end transfers to debt service totaling $2.18 million, transfer to the Improvement Reserve of $250,000, Water system improvements ($176,000), Management Services totaling $114,000 and insurance-related costs of just under $100,000. Personnel 2,020,387 921,086 46% 930,675 -1% Services 1,797,504 795,806 44% 908,887 -12% Operating Supplies 828,141 225,429 27% 230,497 -2% Capital Outlay 1,308,806 250,638 19% 153,406 63% Operational Costs 5,954,838 2,192,959 37% 2,223,465 -1% Transfers to: Capital Projects 700,000 0% 262,940 -100% Debt Service Funding 3,446,775 1,269,675 37% 1,287,853 -1% Improvement Reserve 500,000 250,000 50% 250,000 0% Non-Operational Costs 4,646,775 1,519,675 33% 1,800,793 -16% -12- Refuse Collection Fund Beginning Balance 748,966 748,966 882,695 Revenue 2,192,600 1,097,403 50% 1,090,299 1% Expenditures (2,329,630) (1,128,558) 48% (1,287,960) -12% Ending Cash Balance 611,936 717,811 685,034 Revenue is on target at the end of the second quarter at fifty percent (50%) of budget. Collection / user fees comprise over ninety-eight percent (98%) of this fund's revenue, with $302,558 generated by recycling activities. Expenditures are forty-eight percent (48%) of budget. Landfill Operations Fund ....... Beginning Balance 20,987,848 20,987,848 18,679,971 12% Revenue 4,103,973 2,346,873 57% 2,025,522 16% Expenditures (2,996,920) (1,608,164) 54% (1,641,236) -2% Ending Cash Balance 22,094,901 21,726,557 19,064,256 14% Revenue totaling $2,346,873 is fifty-seven percent (57%) of the FY05 budget and up sixteen percent from last year. Expenditures totaling $1,608,164, are fifty-four percent (54%) of budget and comparable to the prior year. Two budget amendments are being processed, one for Engineering Services ($115,800 at 12/13/04, $25,000 budgeted), the other for Contracted Improvements ($123,000 at 12/31/04, $39,000 budgeted). -13- Airport Operations ~irP0~ ~ ~i~n~ Beginning Balance 33,291 33,291 7,099 Revert ue 347,155 161,326 46% 99,529 62% Expenditures (328,956) (141,385) 43% (163,840) -14% Ending Cash Balance 51,490 53,232 (57,212) Airport revenue is forty-six percent (46%) of budget through December 31. Rental income is expected to cover approximately sixty-three percent (63%) of total revenue for the year, actual receipts to date total $94,249. Airport operations continue to rely on a General Fund subsidy for a budgeted thirty-two percent (32%) of total revenue. Cash balance will be reviewed at fiscal year-end and appropriate adjustments made to General Fund subsidy. Expenditures are forty-three percent (43%) of budget through December 31, 2004, due primarily to wages budgeted for the Airport Manager. Stormwater ManaRement Beginning Balance 21,036 21,036 75 Revenue 420,000 296,644 71% n/a Expenditures (174,685) (42,905) 25% (6,378) 573% Ending Cash Balance 266,351 274,775 (6,303) The stormwater management fee went into effect with the June, 2004 utility billings. The revenue budget estimate for FY05 appears to be Iow, with $296,644 in receipts or 71% of budget. Proceeds from the stormwater management fee will be used for construction, maintenance and improvement projects involving storm sewer. Capital projects are budgeted at $130,000 in FY2005. -14- Broadband Telecommunications Fund Beginning Balance 813,243 813,243 854,149 -5% Revenue 665,300 356,662 54% 320,945 11% Expenditures (718,837) (332,362) 46% (255,275) 30% Ending Cash Balance 759,706 837,542 919,819 -9% This summary includes Cable TV Administration and Support and Local Access Pass Thru funds. Based on the current cable franchise agreement, Mediacom is to make quarterly payments of a five percent (5%) cable franchise fee and monthly payments of a fifty-cent ($.50) local programming fee. Actual receipts through December 31, 2004 are $286,079 and $64,867 respectively, and are fifty- four percent (54%) of budget. Expenditures are forty-six percent (46%) through December 31. A thirty percent (30%) increase from FY04 expenditures is primarily the result of General Fund subsidy transfers, which began in January, 2004. Other Funds Other funds included in this analysis are the internal service funds including Information Technology Services (ITS), Equipment & Fleet Maintenance and Central Services. Funding of internal service funds comes from chargebacks to departments and divisions for services rendered. Equipment / Fleet Maintenance The Fleet Maintenance fund accounts for maintenance on all City vehicles and equipment outside of the Transit Division. Revenues are generated from charges to City departments and divisions and based on vehicle usage and routine maintenance costs. Amended; D~embe~ : ; De~,3~ Vlaint. & Repair Services 501,200 321,790 64% 288,945 11% Equipment/Vehicle Rental 2,192,606 1,141,280 52% 1,098,849 4% Interest 62,000 25,671 41% n/a Sale of Assets 15,000 15,294 102% 44,270 -65% Total Revenue: 2,770,806 1,504,035 54% 1,432,064 5% Personnel 703,713 350,970 50% 330,388 6% Se~ices 247,232 97,855 40% 176,149 -44% Operating Supplies 863,624 544,551 63% 407,534 34% Capital Outlay 1,051,638 1421246 14% 376,705 -62% Total Expenditures: 2,866,207 1,135,622 40% 1,290,777 -12% Revenue totaling $1,504,035 is fifty-four percent (54%) of budget. This includes $1,141,280 for equipment and vehicle rental, $321,790 in maintenance and repair charges and $15,294 for sale of assets. Expenditures are $1,135,622 or forty percent (40%) of budget with service expenditures at forty percent of budget and an estimated $ 909,392 in unexpended capital outlay scheduled for replacement prior to fiscal year-end. -16- Information Technology Services Fund Charges from Information Technology Services are based on hardware, network and internet usage; staff-provided training, software and hardware support time, database development services and equipment replacement costs. Revenue of $1,216,777 is 73% of budget, partially because server and PC/desktop support charges are processed at the start of the fiscal year. Variances in budget to actuals and between the fiscal years 04~05 are primarily due to changes in the chargeback system. Expenditures are forty-eight percent (48%) of budget through December 31, 2004. File Servers & System Support 524,776 587,507 112% n/a Desktop Support 158,625 190,554 120% 676,343 -72% Network & Intemet Support 183,988 125,692 68% 131,555 -4% Replacement Fund 242,689 160,334 66% 212,624 -25% Police Computer Replacement Fund 109,042 37,665 35% 52,119 -28% Web Administration & Services 208,852 18,125 9% n/a Phone Administration 230,568 96,900 42% 50,765 91% Total Revenue: 1,658,540 1,216,777 73% 1,123,406 8% Personnel 591,349 291,733 49% 265,657 10% Services 645,588 346,607 54% 296,947 17% Operating Supplies 31,461 7,534 24% 5,702 32% Capital Outlay 263,883 93,187 35% 99,416 -6% Total Expenditures: 1,532,281 739,061 48% 667,722 11% ~et ~ti~ris -17- Purchasin.q Revenue 278,027 179,468 65% 148,628 21% Expenditures 262,061 124,106 47% 28,258 339% Net Operations 15,966 55,362 120,370 Purchasing accounts for the centralized purchase of paper and printing supplies, distribution and billing for U.S. mail, purchase/lease of City-owned copy and fax machines and administration of City RFP's and service contracts. Equipment and service charges account for ninety-three percent (93%) of revenue. Local governments contribute seven percent (7%) for use of city-administered radio system. Mail expenditures total $24,996 through December 31, 2004, and are twenty-two percent (22%) of budget. This reflects the City's use of postage-on-demand, in which $20,000 in postage is purchased as needed. Capital outlay purchases, budgeted at $45,000, total $6,171 to date. -18- AGENDA City of Iowa City City Council Economic Development Committee Thursday, February 17, 2005 9:00 a.m. City Hall Lobby Conference Room 410 East Washington Street 1. Call to Order 2. Approval of Minutes - February 1, 2005 3. Discussion of Request for Financial Assistance -Lear Corporation 4. Adjournment MINUTES CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE FEBRUARY 1,2005 CITY HALL, PLANNING & COMMUNITY DEVELOPMENT DEPT. CONFERENCE ROOM Members Present: Ernie Lehman, Bob Elliot, Regenia Bailey Members Absent: None Staff Present: Steve Nasby CALL MEETING TO ORDER Chairperson Lehman called the meeting to order at 2:00 P.M. APPROVAL OF THE MINUTES FROM NOVEMBER 19, 2004 Motion: Elliot moved to approve the minutes from November 19, 2004 meeting as written. Bailey seconded. Motion passed 3-0. TOUR OF LEAR CORPORATION PLANT Nasby said that the group was invited to tour the Lear Corporation Plant in Iowa City, located at 2500 Highway 6. He said that transportation had been arranged so members of the public or media were welcome to join the tour. The Committee boarded an Iowa City bus and traveled to Lear for a plant tour. Upon arrival at Lear several members of the Lear management team highlighted the operations of the Iowa City facility and invited the Committee to do a walk through the plant to see the operations first hand. Following the completion of the plant tour the Committee thanked the Lear management team for the tour and information. The Committee boarded the bus and traveled back to City Hall. ADJOURNMENT The meeting adjourned at 4:10 P.M. Council Economic Development Committee Attendance Record 2005 Term Name Expires 02101 00/00 00/00 00/00 00/00 00/00 00/00 Regenia Bailey 01/02/08 x Bob Elliott 01/02/08 x Ernest Lehman 01/02/06 x Key: X = Present O = Absent O/E = Absent/Excused NM = No Meeting .... = Not a Member MEMORANDUM DATE: February 9, 2005 TO: Council Economic Development Committee FROI~h Steven Nasby, Community and Economic Development Coordinator~('~' RE: Request for Business Assistance from Lear Corporation In the meeting packet there is an application from Lear Corporation's ~[owa City Plant, located at 2500 Highway 6 East, for business assistance. Lear Corporation is requesting $250,000 in assistance from the City of Iowa City for the retention of iobs. Lear Corporation is in the process of competing for several new product lines for the Iowa City Plant. Lear Corporation anticipates that approximately $17 million of new investment in equipment and facility improvements will be needed. To assist them with this project, Lear Corporation is submitting an application to the State of Towa later this month for $500,000. A copy of Lear Corporation's application to the State of Iowa will be available for your meeting. The State of Iowa requires that local .~urisdictions provide a minimum match of 50% for CEBA applications. Lear Corporation is requesting that the City's match take the form of public infrastructure improvements. The public improvement that has been requested by the company would include a turn lane on Industrial Park Road onto Highway 6. This turn lane would facilitate a more efficient movement of employee traffic and distribution {semi- truck delivery and load out). Depending upon the extent of the work necessary, the improvements to Industrial Park Road could be sufficient to meet the minimum CEBA matching requirement. Lear Corporation's :Iowa City Plant currently employs 746 persons. The product lines being sought by Lear Corporation are directly related to the retention of 3:[8 jobs within the Iowa City Plant. In addition to the CEBA application, Lear Corporation is also eligible for the State's New Capital Improvement Program (NCIP). The Iowa Department of Economic Development (IDED) requires City Council Resolutions of Support for CEBA and NCIP. These resolutions are scheduled to be on the City Council's March 1 agenda. Representatives from Lear Corporation's Iowa City Plant will be attending the meeting to answer questions. :If you need additional information, please contact me at 356-5248 or via e-mail at Steven-Nasby@iowa-city.orq. Cc: Karin Franklin, Director of Planning and Community Development APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE CITY OF IOWA CITY Economic Development Division 2005 Application for Business Financial Assistance Projects INSTRUCTIONS · An "Application for Business Financial Assistance Projects" should be completed when requesting financial assistance to directly assist a private business. An "Application for Economic Development Support Projects" should be completed for projects and programs that support economic development activities such as micro-business enterprise training programs, area business development programs, or specific area fa(~ade renovation programs. · Prior to completing an application, an applicant is strongly encouraged to contact the;City's · Economic Development Coordinator to discuss the project for which they are requesting funding. (See contact inf~)rmation at bottom of this page). · If this application is reproduced, it must remain in the original format and order in its entirety, or the application may be returned for correction. An electronic copy of the application is available in Microsoft Word or on the City's Web site (www. icgov, org). · Fill out the application completely. If any questions are left unanswered or required attachments are not submitted, an explanation for the omission must be included. · Only typed applications will be accepted and reviewed. · Application Deadlines: The City Coun.cil Economic Development Committee meets the third Thursday of the month. Completed applications for Business Financial Assistance projects should be submitted to the Economic Development Coordinator two weeks prior to the meeting at which the applicant wishes to have the Committee review the application. However, under special circumstances the Economic Development Committee will call special meetings to review Business Financial Assistance Applications. · Submit completed applications, with attachments to: Steven Nasby Community and Economic Development Coordinator City of Iowa City 410 E. Washington Street Iowa City, IA 52240 Phone: (319) 356-5236 Fax: (319) 356-5217 January 2002 1 c:\learcit~ doc City of Iowa City Application for Business Financial Assistance Business Requesting Financial Assistance: Business Name: Lear Corporation Name of Authorized Person to Obligate the Business: Brian Pedrick Business Address: 2500 highway 6 E. Iowa City IA Business'::Contact Person: Dave Neipp Title: Six Sigma Telephone: 319 688 6437 Fax: 319 338 9533 E-mail Address: dneipD(~.lear.com Business Federal ID#: 34-6534576 Date of Application Submittal: February 3, 2005 Release of Information and Certification NOTE: Please read carefully before signing I hereby give permission to the City of Iowa City (the City) to research the company's history, make credit checks, contact the company's financial institution, and perform other related activities necessary for reasonable evaluation of this proposal. I understand that all information submitted to the City relating to this application is subject to the Open Records Law (1994 Iowa Code, Chapter 22) and that confidentiality may not be guaranteed. I hereby certify that all representations, warranties or statements made or furnished to the City in connection with this application are true and correct in all material respects. I understand that it is a criminal violation under Iowa law to engage in deception and knowingly make, or cause to be made, directly or indirectly, a false statement in writing for the purpose of procuring economic development assistance from a state agency or political subdivision. SIGNATURE OF COMPANY OFFICER AUTHORIZED TO OBLIGATE BUSINESS: NOTE: The City will not provide assistance in situations where it is determined that any repre- sentation, warranty or statement made in connection with this application is incorrect, false, misleading or erroneous in any material respect. If assistance has already been provided by the city prior to discovery of the incorrect, false or misleading ~ representation, the city may initiate legal action to recover city funds. January 2002 2 c:\tearcity.eoc Section 1: Description of Business and Proposed Project 1.1. Describe in detail the proposed "project" (for example, company relocation, plant expansion, remodeling, new product line, size of building expansion, number of new jobs, amount of investment in machinery and equipment etc.):. Within Lear, products being manufactured for a specific model vehicle receive an alpha or numerical designation. The DR program is for Daimler Chrysler and the instrument panel for the Dodge Ram. Initial product production is scheduled to begin in June 2005. The spray urethane program is an instrument panel for the 222 Buick and the 272 Cadillac. Production will begin sometime during the summer 2005. The C segment is an instrument panel for the vehicle replacing the Daimler Chrysler Neon. At this time, Lear has not been notified of the name of the new car. . Production will begin at the end of 2005 or the beginning of 2006. RTwill be an instrument panel for the new Dodge Caravan, whose production will start sometime in 2006. Finally, the last business Lear - Iowa City is trying to obtain, is the GMT 900. This is a door panel for the new Cadillac Escalade. The anticipated start of production is sometime in the spring of 2006. One other point is that is in addition to all of the instrument panels, Lear will manufacture a glove box door, air vents, and other related products that attach to the instrument panel. Lear Corporation will be investing 17 million dollars in new machinery and equipment for the propose new business. If we receive all these new production lines we will be able to retain 318 jobs with a payroll of over 10 million dollars. At this time we can not commit to any new jobs, but that is a definite possibility. 1.2. Provide a description and history of business: The business has been located in Iowa City since 1964. It has been sold twice during that time - the current owner is Lear Corporation. Lear Corporation is a Fortune 500 company, with corporate offices located in Southfield, MI. Lear is the world's largest automotive supplier with approximately 110,000 employees located in 280 plants across 34 countries. The Iowa City facility predominantly manufactures armrests and door and instrument panels. Lear- Iowa City's main customer base includes General Motors and Daimler Chrysler. Over the last several years, however, Lear has been manufacturing parts for Ford and Toyota, as well. 1.3. Describe the organizational structure of the business, including any parent companies, subsidiaries, sister companies, etc Lear Corporation is ranked 129 on the Fortune 500. Lear is the world's largest automotive supplier with approximately 110,000 employees located in 280 plants across 34 countries. 1.4. List the names of the business owners and the percent of ownership held by each. Public held company 1.5. List the business' five-digit and six-digit North American Industry Classification System (NAICS) codes or the primary and secondary Standard Industrial Codes (SIC codes)). Codes are 326'14 (urethane) & 33630 (Motor vehicle seating & interior trim manufacturing) January 2002 3 c:\learcit7 doc 1.6. Will the project involve a transfer of operations or jobs from any other Iowa City or Johnson County facility or replace operations or jobs currently being provided by another Iowa City or Johnson County company? If yes, please indicate the facility(s) and/or company(s) affected. No 1.7. What date wilt the project begin? July 2005 1.8. Be completed? December 2007 1.9. Has any part of the project been started? If yes, please describe. No , - Section 2: Financial Contributions to the Proposed Project 2.1. What type and amount of financial assistance are you requesting from the City (for example, grant, forgivable loan, loan, property tax exemption, tax increment financing rebate, etc.)? 1. $250,000 requested as the required CEBA match 2. Infrastructure improvements 2.1a. If Community Development Block Grant Funds are being requested, please describe how the proposed project addresses the priorities, strategies, and goals cited in CITY STEPS 2001-2006. Encourage the expansion and retention of business and industry that meets the state's CEBA wage thresholds. 1. Further the expansion of business and industry by: facilitating infrastructure improvements. 2. Investigating the feasibility of a business incubator: Reviewing current zoning policies to better serve business expansion needs. 2.2. Explain why assistance is needed from the City, and why it cannot be obtained elsewhere. (Specific supporting documentation evidenced by cash flow statements, income statements, etc., is requested.) If the City did not provide financial assistance, could the project proceed? The Iowa City facility competes for business internally against other Lear plants as well as outside competitors. Lowest cost ultimately determines where products will be manufactured. One of the major disadvantages the Iowa City facility has is its distance to the customers' assembly plants. At one time, Lear - Iowa City was the capitol for making instrument panels, but now the Lear plant in Warren, MI is fast becoming a major competitor to Iowa City for future business. The DR program (Dodge Ram) could be relocated because of the distance the Iowa City facility is from the assembly plant. The Warren, MI plant is nine miles from the Daimler Chrysler plant while Iowa City is five hundred miles away. The Iowa City plant also competes against other plants with significantly lower costs. The Mexico plant, for example, pays $2.40 per hour, including benefits. The Iowa City plant has taken a product line, set up the manufacturing process, optimized the process, and then moved the production to Mexico, as instructed by corporate. Lear Corporation recently built a new plant in Chicago next to the new January 2002 4 c:\learcity,doc Ford plant. It was located there to lower transportation costs, reduce inventory, and was highly encouraged by Ford. The same scenario is now occurring in Texas for a Toyota plant. Lear- Iowa City must maintain a constant and innovative focus in relation to growth efficiencies. This project is crucial in establishing and separating the Iowa City facility from our competition, both internally as well as externally. Bottom line is that we have 318 employees at risk if we do not acquire or keep any of this business. Infrastructure improvements will enhance the overall efficiency of our operations. It will also make it much easier for trucks to enter and leave our premises. 2.3. In what form is the business contribution to the project? Please explain clearly (for example, sale of stock, equity investments, subordinated debt, etc.). Lear is a public held company and the money would be coming out of corporate debt, 2.4. Identify all agencies or institutions involved in the'Project (financial and otherwise) and what their involvement is: State of Iowa through a requested CEBA grant and our request to you the city. 2.5. What type and amount of security will the assisted business provide the City? If no security is offered, an explanation must be provided. Note: as a general rule, for those businesses not publicly traded, personal guarantees are required in addition to other pledged business assets. Mortgage $. What seniority or position? Lien on $ What seniority or position? Personal guarantee $. Other $ None (if none, please explain) N/A. This request is for public improvements that will be under public ownership. (e.g. Streets etc.) January 2002 5 c:\learcity doc 2.6. Summary of Project Costs and Proposed Financing Sources SOURCES (Summarize All Sources From Question USE OF FUNDS 2.7) . Activity Cost A B C D Land acquisition $ Site preparation $ Building acquisition $ Building construction $ Building remodeling $ Machinery & equipment $17,150,000 i6,650,000 $500,000 Furniture & fixtures $ Permanent working capital $ (detail:) Other public infrastructure $250,000 $250,000 improvements Other $ / TOTAL: $17,150,000 16,650,000 $500,000 $250,000 $ 2.7. Terms of Proposed Financing Code Source (include all sources in Question 2.6) Amount Typem Rate Term Source A: Lear Corporation $16,650,000 Equity' Source B: State of la. CEBA $ 500,000 Grant Source C: Iowa City $ 250,000 N/A Source D: $ I J Total: $17,400,000 mFor example: forgivable loan, direct loan, grant, equity, tax abatement, etc. January 2002 6 c:\Jearcity.doc 2.8. Generally a decision by the City on this application can be expected within 30 days of receipt of the application. If there is an urgent need for a more immediate decision on this application, please indicate the desired timeframe and the reason for the urgency. No, CEBA decision expected on March 17th Section 3: Quality of Jobs to Be Created 3.1. How many employees are currently employed by the company worldwide (total employment including all locations, subsidiaries, divisions, affiliates, etc.)? Currently there are approximately 110,000 employees in Lear Corporation 3.2. If an existing Iowa City business, how many total individuals have been employed by the company at the Iowa City facility during the past year? 746 3.3. if aWarded funds, how many new full-time employees will you add to the payroll at the Iowa City facility within 12 and 24 months of the award date? The business acknowledges if it fails to create the jobs pledged below by the end of the project period and maintain them for a period of time (usually 36 months from the date of the award), it may be required to reimburse City funds for the employment shortfall, if the loan/grant was based on job creation. Full-Time: Pad-Time: 12'months zero 12 months zero Cumulative Cumulative Full-Time: Part-Time: 24 months zero 24 months zero Cumulative Cumulative Note: Jobs created or retained using Community Development Block Grant Funds must be "held by" or "available to" Iow- or moderate-income individuals. 3.4. What is the estimated annual payroll for the new employees resulting from tills project? Zero 3.5. What is the starting average hourly wage rate (not including fringe benefits) projected to be: For the new employees? For existing employees? Minimum $14.00 per hour For existing and new employees? $14.00/hr January 2002 7 c:\learcity doc 3.6. In the following table, list positions and hourly rates for each job classification to be created and retained. List of Positions and Hourly Rate for Created and Retained Positions (use additional sheets if needed) No. Hours Hourly Create Retain Position Title Per Week Rate of Pay 8 Journey electricians 40 $19.53 7 Journey Mechanics 40 $18.95 7 Apprentice Mechanic 40 $1727 2 Group leaders 40 $15.96 4 Mold setters apprentices 40 $15.94 3 Odtside truck drivers 40 $15.49 7 Heavy Welders 40 $15.26 10 Rotocast operators 40 $15.06 14 Handspray operators 40 $14.82 31 Packers 40 $14.60 8 Injection service 40 $14.60 4 Pourhead operators 40 $14.60 8 Service 40 $14.60 50 Injection operators 40 $14.60 1 Janitor 40 $14.40 10 Rotocast preps 40 $14.2!. 135 Finish 40 $14.09 9 Production supervisors 40 $19.23 Note: Every applicant should provide average hourly wages for all new and existing jobs which meet or exceed the average county wage rate by industry. Ninety percent of the project positions should have a wage greater than the federal poverty wage rate for Iowa City (30% of median income for a four person household in Iowa City). Under special circumstances, consideration will be given to those companies who cannot meet this requirement. (Contact the Economic Development Coordinator at the City for current figures.) January 2002 ' 8 c:\learcity doc 3.7. Will any of the current employees lose their jobs if the project does not proceed? If yes, how many? Explain why: Yes, they may all be at risk. Here is why. The Iowa City facility competes for business internally against other Lear plants as well as outside competitors. Lowest cost ultimately determines where products will be manufactured. One of the major disadvantages the Iowa City facility has is its distance to the customers' assembly plants. At one time, Lear - Iowa City was the capitol for making instrument panels, but now the Lear plant in Warren, MI is fast becoming a major competitor to Iowa City for future business. The DR program (Dodge Ram) could be relocated because of the distance the Iowa City facility is from the assembly plant.. The Warren, MI plant is nine miles from the Daimler Chrysler plant while Iowa City isfive hundred miles away. The Iowa City plant also competes against other p!ants with signi.ficantly lower costs. The Mexico plant, for example, pays $2.40 per hour, including benefits. Local management is trying to be conservative in the hiring of new employees. Lear works in a volatile industry and at the mercy of their customers. An example of this is the new contract the Iowa City plant secured to make end gates for the new GMC Envoy. This year, projected sales were 20 million dollars of end gates, but total sales for 2004 were only 4 million dollars. Due to the great decrease in sales, Lear had to lay off employees. infrastructure improvements play an important part to improving the plant's efficiency as we compete for the new product lines. 3.8. Please describe the types of worker safety programs that would be available for your employees. We have two salary people that work on safety at the plant. We also have a safety committee that is composed of both hourly and salary. Lear Iowa City won the highest award possible for a Lear plant, that award was the president's award. Each employee will pick from a selection of about 20 gifts with average retail value of $200.00. We are also having a prime rib dinner for all employees in the beginning of March. At the dinner some of Lear Corporation's highest-ranking officers will be there to congratulate the plant and all the employees. There will be three dinners one for each shift. Finally we have had over 2,000,000 accident free hours. (please see the attached president award letter and gifts attachment #1) 3.9. Does the business provide standard medical and dental insurance for full-time employees? If so, what percentage of the standard medical and dental insurance package expense does the company provide? Plan Provisions Employee Benefits Total Cost (Premiums) Amount or Percentage (Include deductibles, coinsurance %, Provided by the of Costs Paid by the office visit co-payments, annual out-of- Business per Employee Business pocket maximums, face amounts, company match, etc.) Employee Family Employe Family e Single $40.04 £ear Lear Depends on the plan, each person Medical/Health pays per Pays pays has a choice of two different plans. Insurance $24.88 month $304.90 $991.27 The HMO plan is out of pocket cost per per per of $10.00 per visit. £lease see month month month attached documents for more details.. danuary 2002 9 c:\learcity doc ]s ]s Is ]s Typically our employee pays 20% Dental Insurance included included included include and the company pays 80%. Please in the in the in the in the see attached documents for more health health health health details. ins. ins. ]ns. ins. none none all all $24,500 per employee Life Insurance none none all all $250. OO per week per employee Short Term and/or Long Term Disability Retirement plan none none all all $34. O0 per month per year worked Pension, 401(K) 401 k plan but currently no matching funds Holidays None None All Ail 13 paid holidays per year . Pd. vacation None None All All ] week of vacation after one year '- 2 weeks after 3 years 3 weeks after 8 years 4 weeks after 15 years 5 weeks after 22 years Funeral leave None None All All Up to 3 days for family members Jury duty None None All All Full pay forjury duty minus jury pay Paternity leave One day paid Prescription drugs Part of Part of $5.00 generic $10.00 name brand health health co/pay Vision check premium premium $10.00 co-pay Please see two other attachments. (attachment #2) Section 4: Economic Impact 4.1. Please document how much of your operating expenditures (raw materials, supportive services, machinery, equipment, and labor will be spent within Johnson County. Please see attachment (# 3) for all venders we,use in Johnson county and amounts. The economic impact of these retained jobs is over 9 million dollars in additional revenue for the community. 4.2. What Johnson County companies do you expect to sell to that currently buy from non-eastern Iowa companies? What ~ercentage of your sales will fall into this category? Probably none 4.3. What other Johnson County compames could be considered to be your competitors? None 4.4. How will this project benefit the City/County? · Payroll impact of retained jobs $9,297,256 · Operations Impact or retained jobs 704.9 employees · Payroll employment of retained jobs 79.2 employees (Please see attachment #4) January 2002 10 c:\learcit7 doc 4.5. How will this project grow the property tax base of Iowa City? We believe the numbers in 4.4 show the potential growth for the property tax base in Iowa City. 4.6 Beyond the present project, what future growth potential is there for the Iowa City operation? The splay urethane program has great future potential. Porsche flew all the-way,in from Germany last month to look at the process. They stated they were totally amazed at the potential of this process. We will have many other customers in the near future to look at this process. The question will be if it will stay in Iowa City. If we can be successful in this new product line, the potential for growth at the iowa City will be very favorable. Section 5: Environmental Impact 5.1. Please describe the energy and resource efficiency programs, waste reduction,waste exchange, and recycling programs at your Iowa City operation. Plant has been ISO environmentally certified since 2001. Waste reduction projects from the plant have won the 1991 & 1996 Iowa Governor's Waste Reduction Award and the 199'1 Iowa City chamber of commerce award for innovative business practices in sold waste management. 5.2. Do you use recycled materials in the production of any products or through the provision of any Services at your facility? If so, please describe. We recycle hydraulic oil for reuse in our injection machines and use regrind plastic for our in-house injection machines. 5.3. Will you be treating, transporting, storing, and disposing above ground, on or ,about your business premises, in tanks or otherwise, for any length of time or for any purpose: petroleum products, agricultural or other chemicals, waste oil or other liquid waste, or any other inflammable, corrosive, reactive, or explosive liquid or gas? If yes, please specify. Yes, many of the raw materials we use in our processes are transported in bulk tankers and stored in above grOund tanks located inside the building. 5.4. Will the Iowa City operation develop renewable energy resources or products that conserve energy? If so, please describe. We are working with Sam Thissen (awarded a swap grant) for burning our garbage in our boilers in the future. He has spoken to the University of Iowa in .regards to this project. We also try to produce a lighter product for the automobile industry to decrease gas use. Section 6: Community Involvement; Compliance with Law; Repayment Agreement 6.1. Please describe your business' history of contributing to the community through volunteer work, financial contributions, or other means. If a new start-up business, please describe commitment to becoming involved in the community. We have many fund raising events in our cafeteria for local charities, and special needs in the community that are not on this list. Please see the attached list. (# 5) January 2002 11 c:\learcity.doc 6.2. Has the business been cited or convicted for violations of any federal or state laws or regulations within the last five years (including environmental regulations, Occupational Safety And Health laws, Fair Labor Standards, the National Labor Relations Act, the Americans With Disabilities Act)? If yes, please explain the circumstances of the violation(s). We have been cited but no fines. The matter has been resolved. Please,see attached ..... ., paper work. (# 6) 6.3. Financial assistance from the City of Iowa City requires a repayment clause in the loan , agreement with the City. The repayment clause requires a prorated repayment of the ' financial a~istance if the co'mpany does not meet its job attainment obligation and other . obligations of this agreement. Is the company willing to enter into a loan agreement that, contains a repayment clause? Yes Section 7: Required Attachments Check off each attachment submitted. If not submitted, explain why. [ ] Business plan (if new business) [ ] Profit and loss statements (3 year historical and 2 year projections) Please see attachment # 7. [ ] Balance sheets and Cash Flow Statement - Balance sheets (3 year historical if an existing business) and 2 year projections using the forms provided herein. One year of projected cash flow (using the format provided herein). Please see attachment # 7. [ ] Letters of commitment of project funds (from banks, applicant, etc.) [ ] Description of fringe benefits provided to employees Please see attachment #8. January 2002 12 c:\learcity.doc [ ] Copies of the company's quarterly Iowa "Employer's Contribution and Payroll Report" for the past year and a copy of the most recent monthly payroll register Please see attachment # 9. [ ] Map indicating the location of the project within the community Cost estimates for construction, machinery/equipment, permanent working capital, and purchases. Please see attachment # 10. [ ] Certificate of Good Standing from the Iowa Secretary of State or an'authorization to conduct business in Iowa. Lear Corporation is based in Michigan. [ ] Certificate of Incumbency listing the current board of directors and current officers if a corporation or a listing of the general partners if a partnership Please see attachment #11, [ ] Corporate resolution authorizing the application for City funds [ ] Corporate signatory authorization naming an officer to execute the City application and City loan doCuments, if approved [ ] Other Explanation/other comments: January 2002 13 c:\learcity doc Upon review of a submitted application, the City reserves the right to request additional information in order to assist the City with its evaluation of an application January 2002 14 c:\learcity.doc MapQuest: Maps Page 1 of 1 ~ S_end ToZrjoter ._Back to_l~p 2500 Highway 6 E Iowa City IA 52240-2608 us Notes: 600m ECou~ 8t~ ~*~ Cro~ Park Ave ~ ~ ~ -- E ' 42~ St S~ ~Sycamo,~ st S, ,~. 2005 MapOuest,com. Inc,; © 2{305 NAVTEQ ~AII r g_h_ts reser.v_ed use.Subject to___Licen~se~__C_opD, ri~g_ht; I Map Le~Le_nd This map is informational only. No representation is made or warranty given as to its content. User assumes all risk of use. MapQuest and its suppliers assume no responsibility for any loss or delay resulting from such use. http://www.mapquest.c~m/maps/print.adp?mapdata=sN3vkVrtUeAziTQiJhk~DFBBFrqEbdcTAzd... 2/9/2005 LEAR CO R~ORA TION NTERIOR & ELEOTRONIG$ DIVISION cong!~atulaUOns! It is with great .pleasure that we recognize you and your plant as a '~Presiden~s Safety Award'~ winner for the Lear Corporation's Interior and Electronics top designation is awarded annually and recognizes your individual and teams °Lit~tanding overall Safety Performance in 2004. Our ongoing focus on safety and .'a safe W°rk environment is the cornerstone of the Lear Safety Achievement Recognition dr commitment and dedication as this years "President's Safety Award" winner is'apt>reciated and recognized. ' ~e enclosed award packet is our way of sayin§ ~'l'hank You" for your achievement. from this collection. Complete ordering instructions are outlined choOse. once again for Your contribution and focus on Safety. LEAR CORPORATION INTERIOR & ELECTRONICS DIVISION DVD/VCR COMBO Slim design progressive scan D~/D player with Hi£i VCI~, picture CD and jpeg CD viewer, rap3 and , . ~ ~ I[ ......... CD-R/RW playback capability. 123-L04 10" COMPOUND MITER SAW Comes with a powerful 15 amp motor, built in arbor lock for blade changing, and electric brake for safety. Includes 10' blade, dust bag, and support arms. 124-L04 FISHER SUM PROFILE AUDIO SYSTEM This ultra thin system (3 1/2' deep) works great to mount on wall or fit in tight spoL 20-track programming and digital am~fro stereo radio with 30 memory pre-sets & detachable speakers. 125-L04 BINOCULAR WITH DIGITAL CAMERA This set of binoculars combines a powerful, long-range binocular with a compad; Z1 Mega pixel digital camera. 126-L04 10 AMP SAWZALL The 10 amp Sawzall features variable speed trigger, quick lock blade, center pivot adjustable shoe and rubber boot for superior gripping. Comes with two blades. 127-L04 CLOCK/JEWELRY BOX Honey maple finish clock with hidden mirrored back jcwclo/ box. 128-L04 GOLF CLUBS Includes 1,3,5 titanium-enhanced woods with graphite shafts and 3-PW steel shafted irons. 129-L04 LEAR INTERIOR & ELECTRONICS DIVISION MICROWAVE TOASTER COMBINATION :_ :-~: :~: ::::~,-. High-tech microwave toaster oven features a 900 watts microwave and two slot toaster. 116-L04 19" COLOR TELEVISION i This 19" TV can receive up to 18~ channels and features a sleep timer, programmable channel skip, full function remote, and trilingual capabilities. :I 17-L04 HOWARD MILLER EVEREFI' WAll CLOCK Classic look wall clock with swan neck pediment Ouar~z movement plays Westminster or Whittington chimes. 118-L04 DELUXE POWER VACUUM Features an allergen filtration system, on board tools, headlight dual brush agitator, and bag check indicator. 119-L04 CART BAG This bag features full length club dividers, 3 ball dispenser, fleece-lined valuables pocket and 7 zippered pockets. 120-L04 OUTDOOR COOKING SYSTEM F Versatile outdoor cooking system that can be used as a gas grill, gas i ~i; l smoker, charcoal grill, charcoal smoker, or gas cooker/fryer.121_L04 i~i MODIFIED 3 ROOM DOME 'II?NT This dome tent features three rooms that will sleep up to eight. Tent is 13'x13' with a 72" center. 122-L04 CORPORATION INTERIOR & ELECTRONICS DIVISION MEN'S OR WOMEN'S WATCH 0 Men's or Women's two-tone custom medallion watch. 108-L04 Men's 109-L04 Ladies' STAINLESS STEEL PARIY COOLER This stainless steel tub holds 32 cans or 1.5 1 bottles. Spigot doubles as punch dispenser or drain. Keeps ice for 12 hours. 110-L04 CORD[FRS RADIO WiTH BATTERY CHARGER. Heavy-duty am/fin radio features one hour charger, auxiliary port, high impact roll cage, and steel speaker grills. 111-L04 EUZABEm JEWELRY BOX Chero/ wood box with hooks and pouch in lid, four partitions and ring bar as well. Drawers lined to accommodate earrings, bracelets and pins. 112-L04 3-PIECE LUGGAGE SET Set includes a 25" upright 21" upright and shoulder tote. Verticals expand for 35% extra packing. Comes with locking handle zips and wide track in-line skate wheels. 113-L04 PROFILE SANDER KiT Featuring an in-line sanding motion for detailed sanding, 17 different sanding profiles, and thumb controlled on/off switch. 114-L04 SLIM 1800 AM/FM/CD MICRO SYSTEM This slim am/fin/CD micro system can be mounted under the counter, on the wall, or can stand vertically. CD disc loads vertical or horizontally. 5 watts per channel with remote. 115-L04 LEAR INTERIOR & ELECTRONICS DIVISION THINCAM 2.0 MEGA PIXEL DIGITAL CAMERA This 2.0 mega pixel digital camera comes with built in flash, movie made, and 2x digital zoom. 101-L04 MEN'S & WOMEN'S GOLD BRACELET WATCH The men's watch is 18k gold plated stainless steel with a silver sunray Dial. Includes seconds hand and date display and is water resistant to 99 feet. !02-L04 Ladles' 103-L04 Men's CLASSICOR 19 PIECE SET This 19 piece cookware set includes 1, 2, and $ quart covered saucepans, 5.5 quart covered dutch oven, 8 and 10 inch fo/pans, ~ 2 quart steamer and tool set. 104 -LO4 SEIKO MANTEL CLOCK Comes with dark brown solid oak ca se, hand rubbed finish, glass crystal, and brass handle. 105-L04 LEATHER VARSI*IY JACKET Custom leather jacket embroidered with the Lear logo. Allow up to 10 weeks for delivery. Available S-3Xl- 106-L04 CIRCULAR SAW COMBO Combo includes a 5 3/8" cordless drcular saw and a 7 I/4" corded drcular saw. Indudes a 18V battery, spare carbon brushes, hex wrench, and spanner wrench. 107-L04 , Comparison of Benefits dective 1/1/02 IOHN DEERE HEALTHPLAN (HMO) BENEFITS ASSURECARE Access to Providers Any Provider may be used Open Access. any participating Provider may be seen. ~o referral ncccssa~' to sec a pa~icipating specialist. $200 Single None Deductible $400 Fmily 800/~0,A , 4one .. Coinsurance . Out of Pocket $1,000 Single $1,000 Single :$2,000 F~ily $2 500 Fa nily M~xlmum prcvcntatlw Bcn~fi~ . Not Covered $10 Copay Physical Exam $ I 0 Copay Well Baby C~e Not Cove~d lmmunlzations & Injections Not Covered 00 % Paid Physician Bane fits 80'/~0~. aaer deductible Office VislU 800/~0% a~er deductlble $ I 0 Copay tome Visiu 80'/~0'/* attar deductible $ I 0 Copay Hospital $~00 Copay par Procedure Surge~ 800/~0% aae~ deductible - '. Inpatient 100% Paid (for ceflaln surgeries) ~ 50 Copay per Procedure ' Outpatient Hos~tal Benefits ;0*/~0*A aRer deductible $125 Copay per Hospital Day Inpatient 100V* Paid (l~r ccflain surgeries) ~100 Copay per Admission Outpatient X-Ray & Lab 80~0'/* aller deductible 100% Paid Inpatient 100V* Paid {tBr certain surgeries) 100% Paid Outpatient 80~0% al~er deductible . 00% Paid )urable Medical Equipment &~ubula~me 80~/~0% alter deductible 550 Copay per Transport Emergency Room ;0'V~0% al~er deductible S50 Copay Accldcnt 80*/~0% alter deductible $50 Copay Mental IleaR~Chcmical Dcpeudcncy 8110/~0% a~cr deductible '$125 Copay per day { I0 Days combined M[VCD Inpatient Hospital caleudar year maximum) 535 Copay per visit (20 Days combined 80*/~0% slier deductible inpatienffoutpatienqollice visi~ calendar year Inpatient Physician maximum.) $50 Copay per day (20 days combined M~CD calendar Outpatient Hospital 80Y~0'/* slier deductible ) ear maximum) $35 Copay per visit (20 Days combined Outpatient Physician 80~0% alter deductible inpatienffoutpatienffoffice visits calendar year m~xlmum,) ' 80*/M0% allot deductible $35 Copay per visit (20 Days combined inpatienffoutpatienffoffice vlsiu calendar year Physician Office m~ximum.) ~ ~5 Copay (Generic Dru~) ' -I 80~/~0% aaer deductible - prescription Drugs Sl0 Copay ~ame Brand Drug) (Express ScrlpU) 80y~0% aaer deductible $ I 0 Copay Chiropractic C~e (Frequency Limiu) Not Covered Sl0 Copay {Limit once eve~ 2 yeah) Vision Check Co-lnsur~ce will apply to Usual, Re~onable Custom~ Ch~ges (AssureC~e only) Ple~e refer to Subscriber Agreement ~or detailed inFo.etlon on how only for comparison of benefiu. G DELTA DENTAL' DeltaPreferred Option point-of-service USA Summary of Dental Plan Benefits For Group#0009600-4201, 4203 LEAR CORPORATION This Summary of Dental Plan Benefits should be read in conjunction with your Dental Care Certificate. Your Dental Care Certificate will provide you with additional information about your Delta Dental plan, including information about plan exclusions and limitations. In the event that you seek treatment fi'om a dentist that does not participate in any of Delta Dental's programs, you may be responsible for more than the percentage indicated below. Control Plan - Delta Dental Plan of Michigan Benefit Year - January 1 through December 31 DPO Member DeltaPremier or Dentist Non-Participating Dentist Covered Services- I Plan Pays ] You Pay I Plan Pays [ You Pay Ciass___~I Benefi._~__~ Diagnostic and Preventive Services - Used to diagnose and/or prevent dental abnormalities or disease (includes exams, cleanings and fluoride treatments) Emergency Palliative Treatment - Used to temporarily relieve pain Radiographs - X-rays Sealants - Used to prevent decay of pits and fissures of permanent back teeth Class II Benefits Oral Surgery Services - Extractions and dental surgery, including preoperative and postoperative care Endodontic Services - Used to treat teeth with diseased or damaged nerves (for example, root canals) Periodontic Services - Used to treat diseases of the gums and supporting structures of the teeth Relines and Repairs - Relines and repairs to bridges and dentures Minor Restorative Services - Used to repair teeth damaged by disease or injury (for example, fillings) Major Restorative Services - Used when teeth can't be restored with another filling material (for example, crowns) Class III Benefits Prosthodontic Services - Used to replace missing natural teeth (for example, bridges md dentures) Class IV Benefits Orthodontic Services (to age 19) - Used to correct malposed teeth and/or fi~cial 60% bones (for example, braces) Benefits for bitewing X-rays are payable twice per calendar year. Benefits for full mouth X-rays (which include bitewing X-rays) are payable once every three calendar years. Benefits for prophylaxes and oral examinations are payable twice per calendar year. Benefits for fluoride treatment are payable twice per calendar year to age 19. Space maintainers are payable for children under age 15. Sealants are only payable for the occlusal surface of bicuspids and molars to age 14. The surface must be free fi'om decay and restorations. Sealants are payable once per tooth per three-year period. Inlays will be covered under this plan. August2,2004 List of some of the companies we do business with in Johnson county. 1. City Electric 2. Econogas Service 3. Dan's overhead doors 4. Hawkeye Fire Safety co. 5. Iowa City Tire 6. North Liberty Flower shop 7. Quality Care Landscape 8. Roto Rooter 9. Sherwin Williams 10. T & K roofing 11. Freeman Lock and Alarm Inc. 12. Hawkeye Food Systems 13. Pip Printing 14. Suburban Amoco 15. Gerard Electric Inc. 16. Merit Electric 17. Fastenal 18. Shay Electric Service 19. Mid-America Gas and Electric 20. Hy-Vee 21. AAA Mechanical 22. Borgstahl Plumbing 23. Iowa City Brake 24. Bud's Tire 25. Keil's Maintenance 26. Crane Rental and rigging 27. Doc's Standard 28. Aero Rental 29. Enterprise Rent a car 30. The Lark 31. Iowa City Optical 32. Mercy City Occupational Health Clinic 33. City of Iowa City 34. AAA Investigation and Security 35. RMB Co. Inc, 36. Sheraton Iowa City Hotel 37. Hampton Inn 38. Plumber's supply 39. Contractor's tool 40. Nagle Lumber 41. Ace Hardware 42. Harney Oil 43. Menards 44. Office Depot 45. Wal-mart 46. Big Ten Rental 47. Davis Heating and Air 48. Culligan Water ConditiOning 49. Hartwig Motors 50. L.L. Pelling Co. 51. Hawkeye Waste Systems 52. City Carton 53. Precision Transmission 54. Morgan Painting 55. Anderson Precision Machining 56. K-Mart 57. Paul's Discount 58. Kel Weico Plus many more. This is a partial list. Institute for Decision Making of College of Business Administration Northernlowa Economic Impact Analysis Summary Lear Corp. Using numbers provided by Iowa City Area Development Group, the Institute for Decision Making (IDM) at the University of Northern Iowa completed the following economic impact analysis for Lear Corp. in Johnson County, Iowa. IDM used IMPLAN* to complete the analysis. · The first area of analysis is called Operations Output and is the total output in the region generated directly by the finn's sales and indirectly from the multiplier effect. This impact occurs each year. Direct Indirect Induced Total Impacts Existing impact $146,000,000 34,454,164 25,784,363 $206,238,527 2006 impact $280,000,000 66,076,488 49,449,463 $395,525,939 2006 retained $156,000,000 36,814,038 27,550,415 $220,364,446 · Payroll (or employment) output is the money employees from Lear Corp. will spend in the community each year, assuming they are all local employees and spend 75% of their payroll locally. This impact occurs each year. Direct Indirect Induced Total Impacts Existing impact $22,155,750 2,557,429 2,751,846 $27,465,025 Retained impact $ 7,500,000 865,722 931,534 $ 9,297,256 · Next, we examine Operations Employment that is the total employment in the region generated by the firm's sales. Direct Indirect Induced Total Impacts Existing impact 749.0 430.7 420.0 1,599.7 employees Retained impact 330.0 189.8 185.1 704.9 employees Curris BusinessBuilding Suite 5 · CedarFalls. Iowa50614-0120 · Phone: 319-273-694l · Fax: 31%273-6830 · www.bcs.uni.edu/idm University of Institute for Decision Making North(~rnlowa College of Business Administration · Payroll Employment is employment generated by the spending of the payroll of the Lear Corp. employees. This is employment that is in addition to the employment at Lear. For example, grocery stores and restaurants originally had to hire more employees to deal with the spending of the employees at Lear. Direct Indirect Induced Total Impacts Existing impact 161.1 30.9 42.0 234.0 employees Retained impact 54.5 10.5 14.2 79.2 employees The total economic impact of Lear Corp. is $233,703,552 and it accounts for 1,833.7 jobs in the economy. The retained impact will be $77,101,702 and 784.1 jobs. In 2006, the economic impact will be $422,990,964, with a retained impact of $229,661,702. Direct effects are those directly tied to Lear Corp. Indirect effects are the results of local industries purchasing from each other. This includes business growth/decline resulting from changes in sales for suppliers to the directly affected businesses. Induced effects reflect changes in spending from households as income/population increases or decreases due to the changes in production. This includes shifts in spending on food, clothing, shelter and other consumer goods and services, as a result of the change in workers and payroll of directly and indirectly affected businesses. This analysis is based on the following numbers provided by Iowa City Area Development Group: NAICS code 336360 - Motor vehicle seating and interior trim manufacturing Total employment: 749 existing; 330 reta'med Annual payroll 2005:$29,541,000 existing; $10 million retained Annual sales 2005:$146 million existing 2006 sales: $280 million; $156 million retained Counties for analysis: Johnson, Cedar, Washington IMPLAN is a PC based economic analysis system composed of data files and software. For additional information on IMPLAN, please refer to their website at www.implan.com. Curris Business Building Suite 5 · Cedar Falls. Iowa 50614-0120 · Phone: 319-273-6941 * Fax: 319-273-6830 · www.bcs.uni~edu/idm Employment Impact , .. 24.2oo5 IMPACT NAME: employ330 MULTIPLIER: Type 1] Co~y~Mm 2oos L~arCorplowaCity.iap Industr~ Direct* Indirect* Induced* Total* 1 Oilseed farming 00 0.0 00 0.0 2 Groin farming 0.0 0.0 0.1 0.1 3 Vegetable and melon farming 00 0.0 00 0.0 # 4 Tree nut fanning 0.0 0.0 0.0 0.0 # 5 Fruit farming 0.0 0.0 0.0 0.0 # 6 Greenhouse and nursery production 0.0 0.0 0.0 0.0 # 10 All other crop farming 0.0 0.0 0.1 0.1 11 Cat~le ranching and fanning 0.0 0.2 0.5 0.8 12 Poultry and egg production 0.0 0.0 0.0 0.0 13 Animal production- except cattle and 0.0 0.1 0.1 0.2 18 Agriculture and fomslry support activ 0.0 0,0 0.1 0,1 24 Stone mining and quarrying 0.0 0.0 0,0 0.0 25 Sand- gravel- clay- and refractory mi 0.0 0.1 0.0 0.1 30 Power ganemtion and supply 0.0 0.5 0.3 0.9 31 Natural gas distribution 0.0 0.0 0.0 0.1 42 Maintenance and repair of farm and 0.0 0.0 0.3 0.3 43 Maintenance and repair of nonresiden 0.0 2.2 0.7 2.9 45 Other maintenance and repair constra 0.0 0. I 0.2 0.3 47 Other animal food manufacturing 0.0 0.0 0.0 0.0 # 48 Flour milling 0.0 0.0 0.0 0.0 # 54 Fats and oils refining and blending 0.0 0.0 0.0 0.0 # 61 Fruit and vegetable canning and di~i 0.0 0.0 0.0 0.0 # 62 Fluid milk manufacturing 0.0 0.0 0.1 0.1 64 Cheese manufacturing 0.0 0.0 0.1 0.1 67 Animal- except poultry- slaughtering 0.0 0.1 0.1 0.2 68 Meat processed from camasses 0.0 0.0 0.0 0.1 69 Rendering and meat byproduct proce 0.0 0.1 0.0 0.1 73 Bread and bakery product- except fr 0.0 0.0 0.6 0.6 85 Soft drink and ice manufacturing 0.0 0.0 0.0 0.0 # 86 Breweries 0.0 0.0 0.0 0.0 # 97 Textile and fabric finishing mills 0.0 0.3 0.0 0.3 101 Textile bag and canvas mills 0.0 0.0 0.0 0.0 # 107 Cut and sew apparel manufacturing 0.0 0.0 0.0 0.0 # 110 Footwear manufacturing 0.0 0.0 0.0 0.0 112 Sawmills 0.0 0.0 0.0 0.0 # 116 Engineered wood member and Iruss m 0.0 0.0 0.0 0.1 117 Wood windows and door manufactur 0.0 0.0 0.0 0.0 120 Wood container and pallet manufactu 0.0 0.8 0.0 0.8 122 Prefabricated wood building manufac 0.0 0.0 0.0 0.0 # 123 Miscellaneous wood product manufac 0.0 0.0 0.0 0.1 126 Paperbeard container manufacturing 0.0 0.1 0.0 0.1 129 Coated and laminated paper and pack 0.0 0.2 0.0 0.2 131 Die-cut paper office supplies manufa 0.0 0.0 0.0 0.0 # 136 Manifold business forms printing 0.0 0.1 0.0 0.1 139 Commercial printing 0.0 0.6 0.4 1.1 143 Asphalt paving mixture and block ma 0.0 0.0 0.0 0.0 # 158 Fertilizer- mixing only- manufactudn 0.0 0.0 0.0 0.0 # 160 Pharmaceutical and medicine manufa 0.0 0.0 0.1 0.1 161 Paint and coating manufacturing 0.0 0,0 0.0 0.0 166 Toilet preparation manufacturing 0.0 0.0 0.1 0.2 173 Plastics pipe- fittings- and profile sh 0.0 0.1 0.0 0.2 177 Plastics plumbing fixturos at~d all othe 0.0 6.9 0.4 7.3 17~ Foam product manufacturing 0.0 0.5 0.0 0.5 181 Other rubber product manufacturing 0.0 0.0 0.0 0.0 # 183 Vitreous china and earthenware amc 0.0 0.0 0.0 0.0 192 Ready-mix concrete manufacturing 0.0 0.0 0.0 0.0 195 Other concrete product manufacturin 0.0 0.0 0.0 0.0 # 199 Cut stone and stone product manufac 0.0 0.0 0.0 0.0 # 206 Rolled steel shape manufacturing 0.0 7.6 0.0 7.6 221 Ferrous metal foundaries 0.0 1.0 0.0 222 Aluminum foundries 0.0 4.0 0.0 4.0 233 Fabricated structural metal manufacl 0.0 0.0 0.0 0.0 # *Dollars ~:~0,o2, Page # I Report IM020 Employment Impact IMPACT NAME: employ330 MULTIPLIER: Type II Co~y.o~ ~ao ~c~ LeatCorplowaCity. iap Industry Direct* Indirect* Induced* Total* 234 Plate work manufacturing 0.0 0.1 0.0 0.1 235 Metal window and door manufacturi 00 0~0 0.0 0.0 237 Ornamental and amhitectuml metal 00 0.0 0.0 0.0 238 Power boiler and heat exchanger man 0.0 0.0 0.0 00 # 242 Spring and wire product manufactufi 00 0.4 0.0 0.4 243 Machine shops 0.0 9:8 0.1 9,8 244 Turned product and screw- nut- and 0,0 1.6 0,0 1.6 246 Metal coating and nonpmcious engra 0.0 0.0 0.0 0.0 # 247 Electroplating- anodizing- and colori 0.0 0,5 0.0 0.5 248 Metal valve manufacturing 0.0 0.7 0,0 0.7 255 Miscellaneous fabricated metal produ 0.0 0.0 0.0 0.0 # 257 Farm machinery and equipment manu 60 0.0 0.0 0.0 259 Constraction machinery manufacturi 0.0 0.1 0,0 0.1 266 Printing machinery and equipment m 0.0 0.0 0.0 0.0 # 271 Of~ticat instrument and lens manufact 0.0 0.0 0.0 0.0 273 Other commercial and service indust 0.0 0.2 0.0 0.2 280 Metal cutting machine tool manufact 0.0 0.1 0.0 0.1 292 Conveyor and conveying equipment 0.0 0.1 0,0 0.1 311 Semiconductors and related device m 0.0 0,2 0,0 0.2 313 Etectromedical apparatus manufantur 0.0 0.0 0.0 0.0 314 Search- detection- and navigation in 0.0 0.0 0.0 0.0 319 Analytical laboratory instrument man 0.0 0.0 0.0 0.0 322 Software reproducing 0.0 0.0 0.0 0.0 327 Electric housewares and household f 0.0 0.0 0.0 0.0 333 Electhc power and specialty transfo 0,0 0.0 0.0 0.0 336 Relay and industrial control manufac 0.0 0.0 0.0 0,0 347 Truck trailer manufacturing 0.0 0.0 0,0 0.0 349 Travel trailer and camper manufactur 0.0 60 0.1 0.1 350 Motor vehicle parts manufacturing 330.0 5.2 0.1 335.3 362 Wood kitchen cabinet and countertop 0.0 0.1 0.1 0.1 364 Nonupholstered wood household fum 0.0 0.0 0.0 0.0 # 371 Showcases- petitions- shelving- and 0.0 0.0 0.0 0.0 375 Surgical and medical instrument man 0.0 0.0 0.1 0.l 376 Surgical appliance and supplies raanu 0.0 0.0 0.0 0.0 # 378 Ophthalmic goods manufacturing 0.0 0.0 0.0 0.0 # 379 Dental laboratories 0.0 0.0 0.1 0.1 380 Jewelu and silverware manufacturin 0.0 0.0 0.0 0.0 381 Sporting and athletic goods manufact 0.0 0.0 0.0 0,0 # 382 Doll- toy- and game manufacturing 0.0 0.0 0.0 0.0 # 384 Sign manufacturing 0.0 0.0 0.0 0.0 # 386 Musical instrument manufacturing 0.0 0.0 0.0 0.0 # 387 Broom- brush- and mop manufactuh 0.0 0,1 0.0 0.2 389 Buttons- pins- and all other misce[l 0.0 0.0 0.0 0.0 # 390 Wholesale trade 0.0 33,9 5,1 38.9 391 Air hansportation 0.0 0.1 0.1 0.2 392 Rail transportation 0.0 0.3 0.0 0,3 394 Truck transportation 0.0 8.7 1.4 t0.1 395 Transit and ground passenger transpo 0.0 0.5 0.6 1.1 396 Pipeline transportation 0.0 0.0 0.0 0.0 # 398 Postal service 0.0 1,5 0.8 2.3 399 Couriers and messengers 0.0 0.9 0.3 1.2 400 Warehousing and storage 0.0 2.5 0.2 2.7 401 Motor vehicle and parts dealers 0.0 0.3 4,8 5.1 402 Furniture and home furnishings store 0.0 0.1 1.6 1.7 403 Electronics and appliance stores 0.0 0.4 1.5 2.0 404 Building material and garden supply 0.0 0.6 2,7 3.3 405 Food and beverage stores 0.0 1.1 7.7 8.8 406 Health and personal care stores 0.0 0.6 2.3 2.8 407 Gasoline stations 0,0 0.2 2.6 2,8 408 Clothing and clothing accessories sto 0.0 0.3 4.8 5.1 409 Sporting goods- hobby- book and taus 0.0 0.4 2.0 2.4 410 General merchandise stores 0.0 0.6 7.8 8.4 *Dollars v.~.~ ...... Page # I Report 1M020 Employment Impact , . 24,2oo5 IMPACT NAME: employ330 MULTIPLIER: Type II co~ vno 2oos LearCorpIowaCity. iap Industry Direct* Indirect* Induced* Total* 411 Miscellaneous store retailers 0.0 0.6 4.1 4.7 412 Nonstore retailers 0.0 0.4 5.6 5.9 413 Newpaper publishers 0,0 1.0 0.7 1.7 414 Periodical publishers 0.0 0.0 0.0 0.1 415 Book publishers 0.0 0.0 0.0 0.0 # 417 Software publishers 0.0 0.0 0.0 0.0 # 418 Motion picture and video industries 0.0 0.4 0.4 0.8 419 Sound recording industries 0.0 0.0 0.0 0.0 # 420 Radio and television broadcasting 0.0 0.5 0.3 0.8 422 Telecommunications 0.0 2.0 1.1 3.1 423 Information services 0.0 0.1 0.0 0.1 424 Data processing services 0.0 1.4 0.1 1.5 425 Nondepesito~ credit intermediatiun a 0.0 2.7 1.3 4.0 426 Securities- commodity contracts- inv 0.0 2.4 2.2 4.5 427 Insurance carriers 0.0 0.5 2.0 2,5 428 Insurance agencies- brokerages- and r 0.0 0.3 1.0 1.3 429 Funds- Wasts- and other financial veh 0,0 0.0 0.1 0.1 430 Monetm3' authorities and depository c 0.0 2.4 3,6 6.0 431 Real estate 0.0 2.5 6,4 8.9 432 Automotive equipment rental and lea 0.0 0.2 0.2 0.3 433 Video tape and disc rental 0.0 0.0 0.7 0.? 434 Machinery and equipment rental and 0.0 0.2 0,0 0.2 435 General and consumer goods rental ex 0.0 0.8 0.5 1.3 436 Lessors ofnonfinancial intangible ass 0.0 0,1 0.0 ' 0.1 437 Legal services 0.0 1.2 2.0 3.1 438 Accounting and bookkeeping service 0.0 4.0 1,2 5.2 439 Architectural and engineering service 0.0 8.9 0.5 9.4 440 Specialized design services 0.0 0.1 0.1 0.2 441 Custom computer programming servi 0.0 0.3 0.0 0.3 442 Computer systems design services 0.0 0.3 0.1 0.3 443 Other computer related services- inclu 0.0 0.3 0.0 0.3 444 Management consulting services 0.0 1.7 0.5 2.2 445 Environmental and other technical co 0.0 0.1 0.0 0.1 446 Scientific research and development s 0.0 14,4 0,5 14.9 447 Advertising and related services 0.0 0.3 0.2 0.6 448 Photographic services 0.0 0.0 0.4 0.5 449 Veterinary services 0,0 0.1 0.7 0.8 450 All other miscellaneous professional 0.0 4.7 0.2 4.9 451 Management of companies and enterp 0.0 2.8 0.3 3.1 452 Office administrative services 0.0 0.5 0.3 0.9 454 Employment services 0.0 3.7 2.1 5.7 455 Business support services 0.0 2.1 1.2 3.3 456 Travel arrangement and reservation s 0.0 0.1 0.2 0.3 457 Investigation and security services 0.0 0.7 0.5 1.2 458 Services to buildings and dwellings 0.0 1.7 1.8 3.5 459 Other support services 0.0 0.1 0A 0.2 460 Waste management and remediation s 0.0 0.8 0.3 1.1 461 Elementary and secondary schools 0.0 0.0 1.3 1.3 462 Colleges- universities- and junior col 0.0 0.0 0.0 0.0 # 463 Other educational services 0.0 0,7 0.6 1.3 464 Home health care services 0.0 0.0 0.9 0,9 465 Offices of physicians- dentists- and o 0,0 0.0 8,2 8.2 466 Other ambulatory health care services 0.0 0.0 1.7 1.7 467 Hospitals 0.0 0.0 4.8 4.8 468 Nursing and residential care facilities 0.0 0.0 8.5 8.5 469 Child day care services 0.0 0.0 4.7 4.7 470 Social assistance- except child day ca 0.0 0,0 5.9 5.9 471 Peffonmng arts companies 0.0 0.1 0.6 0.8 472 Spectator sports 0.0 0.4 0.5 0.8 473 Independent artists- writers- and per 0.0 0~4 0.1 0.5 474 Promoters of performing arts and spo 0.0 0.1 0,1 0.2 475 Museums- historical sites- z~os- and 0.0 0.0 0.2 0.2 *Dollars v.~ ...... Page # 1 Report IM020 Employment Impact IMPACT NAME: employ330 MULTIPLIER: Type II Cop~ghl MJG 2005 LearCorplowaCity. iap Industry Direct* Indirect* Induced* Total* 476 Fitness and recreational sports center 0.0 1.0 2.0 3.0 477 Bowling centers 0~0 0.0 0.2 0~2 478 Other amusement- gambling- and mcr 0.0 0.1 2.6 2.7 479 Hotels and motels- including casino h 0.0 2.4 1.6 4.0 480 Other accommodations 0.0 0.0 0.2 0.2 481 Food services and drinking places 0.0 5.8 24.2 30.0 482 Carwashes 0.0 0.1 0.5 0.5 483 Automotive repair and maintenance- 0,0 6.1 4.7 10.8 484 Electmnic equipment repair and mai 0.0 1.1 0.2 1.3 485 Commercial machinery repair and ma 0.0 2.5 0.2 2.7 486 Household goods repair and mainten 0.0 0.3 0.1 0.4 487 Personal care services 0.0 0.0 1.7 1.7 488 Death cam services 0.0 0.0 0.5 0.5 489 Drycleaning and laundry services 0.0 0.1 0.5 0.7 490 Other personal services 0.0 0.0 0.3 0.3 491 Religious organizations 0.0 0.0 0.2 0.2 492 Granlmaking and giving and social a 0.0 0.0 1.3 1.3 493 Civic- social- professional and simila 0.0 1.6 3.3 4.9 494 Private households 0.0 0.0 4.9 4.9 496 Other Federal Government enterprise 0.0 0.1 0.3 0,4 497 State and local government passenger 0,0 0.2 0.3 0.6 499 Other State and local govemreent ente 0.0 0.8 1.8 2.7 330.0 189.8 185.1 704.8 *Dollars v.~o,o~, Page # 1 Report IM020 Employment Impact IMPACT NAME: employ749 IvlULTIPLIER: Type II Comi~me 2~s LearCorplowaCity. iap Industry Direct* Indirect* Induced* Total* 1 Oilseed farming 0.0 0.0 0.1 01 2 Grain farming 00 0,0 0.2 0.2 3 Vegetable and melon farming 0.0 0.0 0.0 0.0 4 Tree nut fanning 0.0 0.0 0.0 0.0 5 Fruit farrmng 0.0 0.0 0.0 0.0 # 6 Greenhouse and nursery production 0.0 0.0 0,0 0.1 10 All other crop farming 0.0 0,1 0.1 0.2 11 Cattle ranching and farming 0.0 0.5 1.2 1.7 12 Poultry and egg pmducllon 0,0 0.0 0.0 0.0 13 Animal production- except cattle and 0.0 0.2 0.3 0.6 18 Agriculture and fomstty support activ 0.0 0.1 0.:2 0.3 24 Stone mining and quarrying 0.0 0.0 0.0 0.0 # 25 Sand- gravel- clay- and refractory mi 0.0 0.2 0.0 0.2 30 Power generation and supply 0.0 1.2 0.8 1.9 31 Natural gas distribution 0.0 0.1 0.0 0.1 42 Maintenance and repair of farm and 0.0 0.0 0.6 0.6 43 Maintenance and repair of nonresidan 0 0 5.1 1 6 6 7 45 Other maintenance and repair constm 0.0 0.2 0.4 0.6 47 Other animal food manufacturing 0.0 0.0 0.0 0.0 # 48 Flour milling 0.0 0.0 0.0 0.0 # 54 Fats and oils refining and blending 0.0 0.0 0.0 0.0 61 Fruit and vegetable canning and dryi 0,0 0,0 0.0 0.0 # 62 Fluid milk manufacturing 0,0 0.0 0.3 0.3 64 Cheese manufacturing 0.0 0.0 0.2 0.3 67 Animal- except poultry- slaughtering 0.0 0.3 0.1 0.4 68 Meat processed from carcasses 0.0 O. 1 O. 1 0.2 69 Rendering and meat byproduct proce 0.0 0.1 0.0 0.1 73 Bread and bakery product- except fr 0.0 0.1 1.3 1.4 85 Soft drink and ice manufacturing 0.0 0.0 0.0 0,0 # 86 Breweries 0.0 0.0 0.0 0.0 # 97 Textile and fabric finishing mills 0.0 0.7 0.0 0.8 101 Textile bag and canvas mills 0.0 0.0 0.0 0.0 # 107 Cut and sew apparel manufactming 0.0 0.0 0.0 0.0 # 110 Footwear manufacturing 0,0 0.0 0.0 0,0 # 112 Sawmills 0.0 0.1 0.0 0.1 116 Engineered wood member and tress m 0.0 0.1 0.0 0.1 117 Wood windows and door manufactur 0.0 0.0 0.0 0.1 120 Wood container and pallet manufactu 0.0 1.8 0.1 1,9 122 Prefabricated wood building manufac 0.0 0.0 0.0 0.0 # 123 Miseallaneous wood product manufac 0.0 0.1 0.0 0.1 126 Papcrboard container manufacturing 0.0 0.1 0.0 0.1 129 Coated and laminated paper and pack 0.0 0.4 0.1 0.5 131 Die-cut paper office supplies manufa 0.0 0.0 0.0 0.0 # 136 Manifold business forms printing 0.0 0.1 0.1 0.2 139 Commercial printing 0.0 1.4 1.0 2.4 143 Asphalt paving mixture and block ma 0.0 0,0 0.0 0.0 # 158 Fertilizer- mixing only- manufastufin 0.0 0.0 0.0 0.0 # 160 Pharmaceutical and medicine ma#ufa 0.0 0.0 0.1 0.1 161 Paint and coating manufacturing 0.0 0.0 0.0 0.0 # 166 Toilet preparation manufacturing 0.0 0.0 0.3 0,4 173 Plastics pipe- fittings- and profile sh 0.0 0.3 0.0 0.3 177 Plastics plumbing fixtures and all othe 0.0 15.7 0.9 16.6 178 Foam product manufacturing 0.0 1. I 0.1 1.2 181 Other robber product manufacturing 0.0 0,0 0.0 0.0 # 183 Vitreous china and earthenware attic 0.0 0.0 0.0 0.0 # 192 Ready-mix concrete manufacturing 0.0 0.0 0.0 0.0 # 195 Other concrete product manufacturin 0.0 0.0 0.0 0,0 199 Cut stone and stone product reanufac 0.0 0.0 0.0 0.0 # 206 Rolled steel shape manufacturing 0.0 17.3 0.0 17.3 221 Ferrous metal foundaries 0.0 2.4 0.0 2.4 222 Aluminum foundries 0.0 9.1 0.0 9,1 233 Fabricated structural metal manufaet 0.0 0.0 0.0 0.0 # *Dollars ........ Page # I Report IM020 Employment Impact , .u 24,2o05 IMPACT NAME: employ749 MULTIPLIER: Type II Copmsht~a~G 2~S LearCorplowaCity. iap Industry Direct* Indirect* Induced* Total* 234 Plate work manufacturing 0,0 0.2 0.0 0.2 235 Metal window and door manufacturi 0.0 0.0 0.0 00 237 Ornamental and amhitectural metal 0.0 0.0 0.0 0.0 # 238 Power boiler and heat exchanger man 0.0 0.1 0.0 0.1 242 Spring and wire product manufacturi 0.0 0.8 0.0 0.9 243 Machine shops 0.0 22.2 0.1 22.3 244 Turned product and screw- nut- and 0,0 3.6 0,0 3.6 246 Metal coating and nonprecious engra 0.0 O. 1 0,0 0,1 247 Electroplating- anodizing- and colori 0.0 1.2 0.0 1.2 248 Metal valve manufacturing 0.0 1.6 0,0 1.7 255 Miscellaneous fabricated metal produ 0.0 0.0 0.0 0.0 # 257 Farm machineD' and equipment manu 0.0 0.0 0.0 0,0 # 259 Construction machinery manufaeturi 0.0 0.2 0.0 0.2 266 Printing machinery and equipment m 0~0 0.0 0.0 0.0 # 271 Optical inslrument and lens manUfact 0.0 0.0 0.0 0.0 # 273 Other commemial and service indust 0.0 0,5 0.0 0.5 280 Metal culling machine tool manufact 0.0 0.2 0.0 0.2 292 Conveyor and conveying equipment 0.0 0.1 0.0 0.1 311 Semiconductors and related device m 0.0 0,4 0.0 0.4 313 Electromodical apparatus manufactur 0.0 0.0 0.0 0.0 # 314 Seamh- detection- and navigation in 0.0 0.0 0.0 0.0 # 319 Analytical laboratory instrument man 0.0 0.0 0.0 0.0 # 322 Software reproducing 0.0 0.0 0.0 0.0 # 327 Electric housewares and household f 0.0 0.0 0.0 0.0 # 333 Electric power and specialty transfo 0.0 0,0 0.0 0.1 336 Relay and industrial control manufac 0.0 0.1 0.0 0,1 347 Truck trailer manufaettmng 0.0 0.0 0.0 0.0 # 349 Travel trailer and camper manufaetur 0.0 0.0 0.1 0.1 350 Motor vehicle parts manufacturing 749.0 i 1.9 0.2 761.1 362 Wood kitchen cabinet and countertop 0.0 0.1 0.1 0,3 364 Nonupholstered wood household furn 0.0 0.0 0. I 0.1 371 Showcases- partitions- shelving- and 0.0 0.0 0.0 0.0 # 375 Surgical and medical instrument man 0.0 0.0 0.2 0.2 376 Surgical appliance and supplies manu 0.0 0.0 0.0 0.0 378 Ophthalmic goods manufacturing 0.0 0,0 0.1 0.1 379 Dental laboratories 0.0 0.0 0,2 0.2 380 Jewelry and silverware manufaeturin 0.0 0.0 0.0 0.0 # 381 Sporting and athletic goods manufaet 0.0 0.0 0.0 0.0 # 382 Doll- toy- and game manufacturing 0.0 0.0 0.0 0.0 # 384 Sign manufaetaning 0.0 0.0 0.0 0.0 # 386 Musical instrument manufacturing 0.0 0.0 0.0 0.0 387 Broom- brush- and mop manufacturi 0.0 0,3 0.1 0.4 389 Buttons- pins- and all other miscall 0.0 0.0 0.0 0.0 # 390 Wholesale trade 0.0 76.9 11.5 88.4 391 Air transportation 0.0 0.2 0.3 0.4 392 Rail transportation 0.0 0.6 0.1 0.7 394 Truck tnmsportation 0.0 19.7 3.2 22.9 395 Transit and ground passenger transpo 0.0 1,1 1.4 2.5 396 Pipeline transportation 0.0 0.0 0.0 0.1 398 Postal service 0,0 3.4 1.8 5.2 399 Couriers and messengers 0.0 2.1 0.6 2.7 400 Warehousing and storage 0.0 5.8 0.4 6.1 401 Motor vehinie and parts dealers 0.0 0.7 10.8 11.5 402 Furniture and home furnishings store 0.0 0.2 3.7 3.9 403 Electronics and appliance stores 0.0 1,0 3.5 4.5 404 Building material and garden supply 0.0 1.3 6.2 7.5 405 Food and beverage stores 0.0 2.5 17.5 19.9 406 Health and personal care stores 0.0 1.3 5.1 6.4 407 Gasoline stations 0.0 0.4 6.0 6,5 408 Clothing and clothing accessories sro 0.0 0.7 10.8 11.6 409 Sporting goods- hobby- book and taus 0.0 0.9 4.5 5.4 410 General merchandise stores 0.0 1.5 17.7 19.1 *Dollars v ......... Page # l Report 13/1020 Employment Impact IMPACT NAME: employ749 MULTIPLIER: Type II Copydghl MIG 2005 LearCorplowaCity. iap Industry Direct* Indirect* Induced* Total* 411 Miscellaneous store retailers 0.0 1.3 93 106 412 Nonstore retailers 0.0 0,8 12.7 135 413 Newpaper publishers 0.0 2.4 1.6 3.9 414 Periodical publishers 0,0 0.1 0.1 0.2 415 Book publishers 0.0 0.0 0.0 0.0 # 417 Software publishers 0.0 0.0 0.0 0.1 418 Motion picture and video industries 0.0 0.8 0.9 1.7 419 Sound recording industries 0.0 0.0 0.1 0.1 420 Radio and television broadcasting 0.0 1.1 0.8 1.8 422 Telecommunications 0.0 4,6 2.4 7.1 423 Information services 0.0 0A 0.0 0.2 424 Data processing services 0.0 3.1 0.3 3.4 425 Nondepository credit imermediation a 0.0 6.1 2.9 9.0 426 Securities- commodity contracts- inv 0.0 5.3 4.9 10.3 427 Insurance carriers 0,0 1,1 4.6 5.8 428 Insurance agencies- brokerages- and r 0.0 0.6 2.4 3.0 429 Funds- trusts- and other financial veh 0.0 0.0 0.3 0.3 430 Monetary authorities and depositopj c 0.0 5.5 8. I 13.6 431 Real estate 0.0 5.6 14.6 20.2 432 Automotive equipment mnml and lea 0,0 0.4 0.4 0.7 433 Video tape and disc rental 0.0 0.0 1.5 1.6 434 Machinery and equipment rental and 0,0 0.4 0.1 0.5 435 General and consumer goods rental ex 0.0 1.9 1.0 2.9 436 Lessors of nonfinuncial intangible ass 0.0 0.2 0,0 0.2 437 Legal services 0,0 2.7 4,4 7.1 438 Accounting and bookkeeping service 0,0 9.0 2,8 11.8 439 Architectural and engineering service 0.0 20.3 1.2 21.4 440 Specialized design services 0~0 0.2 0.2 0,4 441 Custom computer progrmmmng servi 0.0 0.7 0.1 0.8 442 Computer systems design services 0.0 0,6 0.1 0.7 443 Other computer related services- inclu 0.0 0.6 0.1 0.7 444 Management consulting services 0.0 3.9 1.2 5,1 445 Environmental and other technical co 0.0 0.1 0,1 0.2 446 Scientific research and developmem s 0.0 32.8 1.1 33.9 447 Advertising and related services 0.0 0.8 0.5 1.3 448 Photographic services 0.0 0.1 1.0 1,1 449 Veterinary services 0.0 0.1 1.7 I. 8 450 All other miscellaneous professional 0.0 10.6 0.4 11,0 451 Management of companies and entetp 0.0 6.5 0.6 7.I 452 Office administrative services 0.0 1.2 0.8 2.0 454 Employment services 0.0 8.4 4.7 13.0 455 Business support services 0,0 4~8 2.7 7,5 456 Travel arrangement and reservation s 0.0 0.2 0.5 0.7 457 Investigation and security services 0.0 1.7 1.I 2.8 458 Services to buildings and dwellings 0.0 3.9 4.1 8.0 459 Other support services 0.0 0.3 0,2 0.5 460 Waste management and remediation s 0.0 1.8 0.6 2.4 461 Elementary and secondary schools 0.0 0.0 3.0 3.0 462 Colleges- universities- and jualor col 0.0 0.0 0.0 0.1 463 Other educational services 0.0 1.6 1.3 2.9 464 Home health care services 0.0 0.0 2.0 2.0 465 Offices of physicians- dentists- and o 0.0 0.0 18.7 18.7 466 Other ambulatory health care services 0.0 0.0 3.8 3.8 467 Hospitals 0.0 0.0 10.9 10.9 468 Nursing and residential care facilities 0.0 0.0 19.2 19.2 469 Child day care services 60 0.0 10.7 10.7 470 Social assistance- except child day ca 0.0 0.0 13.4 13.4 471 Performing arts companies 0.0 0.3 1.5 1.8 472 Spectator sports 0.0 0.8 1.0 1.9 473 Independent artists- writers- and per 0,0 0.8 0.3 l. l 474 Promoters of performing arts and spo 0.0 0.3 0.3 0.5 475 Museums- historical sites- zoos- and 0.0 0.0 0.4 0.4 *Dollars v~0~02, Page # 1 Report IM020 Employment Impact IMPACT NAME: employ749 MULTIPLIER: Type Il Cov~ight mo 20o~ LearCorplowaCity. iap Industry Direct* Indirect* Induced* Total* 476 Fitness and recreational sports center 0.0 2.2 4.6 6.7 477 Bowling centers 0.0 0.0 0.4 04 478 Other amusement- gambling- and recr 0.0 0.3 5.9 6. I 479 Hotels and motels- including casino h 0.0 5.5 3.6 9.1 480 Other accommodations 0.0 0.0 0.5 0.5 481 Food services and drinking places 0.0 13.2 55.0 681 482 Car washes 0.0 0.1 1.0 1.2 483 Automotive repair and maintenance- 0.0 13.9 10.6 24.6 484 Electronic equipment repair and mai 0.0 2.4 0.4 2.9 485 Commercial machinery repair and ma 0.0 5.7 0.4 6.2 486 Household goods repair and mainten 0~0 0.6 0.3 0.9 487 Pemonal care services 0.0 0.0 3.9 3.9 488 Death care services 0.0 0.0 1.1 1.1 489 Drycleaning and laundry services 0.0 0.3 1.2 1.5 490 Other personal services 0.0 0.0 0.7 0.8 491 Religious organizations 0.0 0.0 0.3 0.3 492 Omntmaking and giving and social a 0.0 0.0 3.0 3.0 493 Civic- social- professional and simila 0.0 3.7 7.5 11.1 494 Private households 0.0 0.0 11.2 11.2 496 Other Federal Government enterprise 0.0 0.3 0.6 0.8 497 State and local government passenger 0.0 0.6 0.8 1.3 499 Other State and local government cnte 0.0 1.9 4.2 6.0 749.0 430.7 420.0 1,599.7 *Dollars ,~.:~0,o2, Page # 1 Report IM020 Output Impact J .. .,2oo5 LearCorplowaCity. iap CopyfighlMIG 2005 IMPACT NAME: sales156 MULTIPLIER: Type II Industry Direct* Indirect* Induced* Total* Deflator 1 Oilseed fanning 0 449 5,698 6,147 1.00 2 Grain fanning 0 1,895 14,362 16,257 1.00 3 Vegetable and melon fanning 0 26 1,038 1,064 1.00 4 Tree nut fanning 0 0 2 2 1.00 5 Fruit farming 0 4 876 880 1.00 6 Greenhouse and nursery production 0 659 8,780 9,440 1.00 10 All other crop farming 0 7,179 15,804 22,983 1.00 11 Cattle ranching and fanning 0 62,459 139,654 202,113 1.00 12 Poultry and egg production 0 903 21,321 22,224 1.00 13 Animal production- except cattle and 0 22,816 33,636 56,452 1.00 18 Agriculture and forestry support activ 0 1,256 4,242 5,498 1.00 24 Stone mining and quarrying 0 123 184 307 1.00 25 Sand- gravel- clay- and refractory mi 0 14,842 12 14,854 1.00 30 Power generation and supply 0 320,460 202,770 523,230 1.00 31 Natural gas distribution 0 48,609 29,692 78,301 1.00 42 Maintenance and repair of farm and 0 4,002 64,325 68,326 1.00 43 Maintenance and repair of nonresiden 0 404,514 124,969 529,483 1.00 45 Other malmanance and repair constm 0 15,794 24,330 40,124 1.00 47 Other animal food manufacturing 0 527 2,034 2,561 1.00 48 Flour milling 0 66 3,305 3,371 1.00 54 Fats and oils refining and blending 0 24 345 369 1.00 61 Fruit and vegetable canning and dryi 0 24 458 482 1.00 62 Fluid milk manufacturing 0 4,643 104,637 109,280 1.00 64 Cheese manufacturing 0 8,322 126,572 134,893 1.00 67 Animal- except poultry- slaughtering 0 103,724 50,679 154,404 1.00 68 Meat processed from carcasses 0 23,356 I8,821 42,177 1.00 69 Rendering and meat bypmduct proce 0 20,143 75 20,218 1.00 73 Bread and bakery product- except fr 0 8,097 107,127 115,224 1.00 85 Soft drink and ice manufacturing 0 36 982 1,017 1.00 86 Breweries 0 35 1,105 1,140 1.00 97 Textile and fabric finishing mills 0 75,285 1,818 77,103 1.00 101 Textile bag and canvas mills 0 68 210 278 1.00 107 Cut and sew apparel manufacturing 0 784 2,690 3,475 1.00 110 Footwear manufacturing 0 0 3,420 3,420 1.00 112 Sawmills 0 14,891 2,781 17,672 1.00 116 Engineered wood member and truss m 0 9,359 4,634 13,993 1.00 117 Wood windows and door manufactur 0 5,791 3,894 9,685 1.00 120 Wood container and pallet manufactu 0 98,883 5,555 104,438 1.00 122 Prefabricated wood building manufac 0 620 96 715 1.00 123 Miscellaneous wood product manufac 0 8,854 3,576 12,430 1.00 126 Paperboard container manufacturing 0 20,965 1,093 22.058 1.00 129 Coated and laminated paper and pack 0 88,990 14,818 103,808 1.00 13I Die-cut paper office supplies manufa 0 57 13 70 1.00 136 Mainfold business forms printing 0 18,301 9,409 27,710 1.00 139 Commercial printing 0 162,756 110,691 273,446 1.00 143 Asphalt paving mixture and block ma 0 3,528 4,232 7,760 1.00 158 Fertilizer- mixing only- manufacturin 0 165 641 806 1.00 160 Pharmaceutical and medicine manufa 0 231 43,513 43,744 1.00 161 Paint and coating manufacturing 0 521 27 547 1.00 166 Toilet preparation manufacturing 0 22,323 154,191 176,514 1.00 173 Plastics pipe- fittings- and profile sh 0 35,063 2,981 38,045 1.00 177 Plastics plumbing fixtures and all othe 0 2,557,565 144,180 2,701,745 1.00 178 Foam product manufactuting 0 238,181 I7,837 256,018 1.00 181 Other robber product manufscturing 0 4,740 81 4,821 1.00 183 Vitxeous china and earthenware artic 0 13 16 30 1.00 192 Ready-mix concrete manufacturing 0 270 291 561 1.00 195 Other concrete product manufacturin 0 266 164 430 1.00 199 Cut stone and stone product manufac 0 0 0 0 1.00 206 Rolled steel shape manufacturing 0 1,406,513 954 1,407,467 1.00 221 Ferrous metal foundaries 0 239,557 I50 239,708 1.00 '2001 Dollars - if results are deflated and aggregated, then deflators displayed are set to 1.0 (results have been deflated) ......... Page # 1 Report IMOIO OUtput Impact , n .,2oo5 LearCorpIowaCity.iap Copy~tvao 2co5 IMPACTNAME: sales156 MULTIPLIER: Type II Industry Direct* Indirect* Induced* Total* Deflator 222 Aluminum foundries 0 757,983 324 758,307 1.00 233 Fabricated structural metal manufact 0 3,336 95 3,430 1.00 234 Plate work manufacturing 0 8,486 50 8,536 1.00 235 Metal window and door manufanturi 0 1,425 56 1,481 1.00 237 Ornamental and architectural metal 0 1,975 60 2,035 1.00 238 Power boiler and heat exchanger man 0 11,263 77 11,340 1.00 242 Spring and wire product manufacturi 0 57,945 2,076 60,021 1.00 243 Machine shops 0 1,892,099 11,737 1,903,836 1.00 244 Turned' product and screw- nut- and 0 343,524 761 344,285 1.00 246 Metal coating and nonprecious engra 0 11,809 198 12,008 1.00 247 Electroplaling- anodizing- and colori 0 33,312 478 33,790 1.00 248 Metal valve manufacturing 0 242,833 4,602 247,435 1.00 255 Miscellaneous fabricated metal produ 0 4,319 135 4,454 1.00 257 Farm machinery and equipment menu 0 4,275 1,114 5,389 1.00 259 Construction machinery manufacturi 0 34,754 2,474 37,227 1.00 266 Printing machinery and equipment m 0 4,589 925 5,514 1.00 27l Optical instrument and lens manufact 0 1,832 443 2,275 1.00 273 Other commemial and service indust 0 64,631 2,543 67,174 1.00 280 Metal culling machine tool manufact 0 28,717 365 29,083 1.00 292 Conveyor and conveying equipment 0 13,582 662 14,244 1.00 311 Semiconductors and related device m 0 745 5 749 1.00 313 Eleclromedical apparatus manufactur 0 44 4,254 4,299 1.00 314 Search- detection- and navigation in 0 1,028 270 1,298 1.00 319 Analytical laboratory instrument man 0 396 365 761 1.00 322 Software reproducing 0 2,244 651 2,895 1.00 327 Electric housewares and household f 0 3 39 42 1.00 333 Electric power and specialty transfo 0 4,144 591 4,734 1.00 336 Relay and industrial canttol manufac 0 7,954 124 8,077 1.00 347 Track trailer manufacturing 0 332 21 353 1.00 349 Travel ~'ailer and camper manufactur 0 2,151 18,645 20,796 1.00 350 Motor vehicle parrs manufacturing 156,000,000 2,471,552 46,343 158,517,888 1.00 362 Wood kitchen cabinet and countertop 0 7,078 8,689 15,768 1.00 364 Nonupholstered wood household fum 0 58 5,753 5,811 1.00 371 Showcases- partitions- shelving- and 0 1,664 110 1,774 1.00 375 Surgical and medical instrument man 0 759 14,596 15,355 1.00 376 Surgical appliance and supplies menu 0 1,719 6,328 8,048 1.00 378 Ophthalmic goods manufacturing 0 1,938 7,064 9,001 1.00 379 Dental laboratories 0 68 10,461 10,529 1.00 380 Jewelry and silverware manufacturin 0 8 236 244 1.00 381 Sporting and athletic goods manufact 0 3 26 29 1.00 382 Doll- toy- and game manufacturing 0 0 2 2 1.00 384 Sign manufacturing 0 2,243 1,375 3,618 1.00 386 Musical instrument manufacturing 0 0 I I 1.00 387 Broom- brush- and mop manufactmi 0 46,243 10,134 56,377 1.00 389 Bullons- pins- and all other miscell 0 1,277 864 2,142 1.00 390 Wholesale trade 0 7,932,998 1,183,480 9,116,478 1.00 391 Air transportntion 0 24,112 35,729 59,842 1.00 392 Rail transportation 0 217,723 29,345 247,068 1.00 394 Track Pransportation 0 1,951,944 317,509 2,269,453 1.00 395 Transit and ground passenger transpo 0 19370 25,485 44,655 1.00 396 Pipeline transportation 0 17,943 17,306 35,249 1.00 398 Postal service 0 228,909 123,221 352,130 1.00 399 Couriers and messengers 0 133,598 36,830 170,429 1.00 400 Warehousing and storage 0 256,848 16,872 273,720 1.00 401 Motor vehicle and parts dealers 0 48,439 733,231 781,669 1.00 402 Furniture and home fumishings store 0 9,810 212,470 222,280 1.00 403 Electronics and appliance stores 0 37,651 131,905 169,556 1.00 404 Building material and garden supply 0 71,975 342,983 414,958 1.00 405 Food and beverage stores 0 104,640 740,130 844,77l 1.00 406 Health and pemonal care stores 0 42,069 170,462 212.531 1.00 '2001 Dollars - if results are deflated and aggregated, then deflators displayed are set to 1.0 (results have been deflated) v,,~ ..... Page # I Report IMOIO Output Impact Ja.. 25,2oo5 LearCorplowaCity.iap Co.eni~t~n~ 2co~ IMPACT NAME: sales156 MULTIPLIER: Type 1I Industry Direct* Indirect* Induced* Total* Deflator 407 Gasoline stations 0 19,523 265,578 285,101 1.00 408 Clothing and clothing accessories sto 0 21,856 326.521 348,377 I 00 409 Sporting goods- hobby- book and mns 0 32,771 169,784 202,555 1.00 410 General memhandise stores 0 48,168 582,249 630,416 1.00 411 Miscellaneous store retailers 0 49,658 342,437 392,096 1.00 412 Nonstore retailers 0 20,756 321,633 342,389 1.00 413 Newpaper publishers 0 160,398 106,559 266,957 1.00 414 Periodical publishers 0 11,996 13,446 25,442 1.00 415 Book publishers 0 936 9,084 10,020 1.00 417 Software publishers 0 3,378 4,041 7,419 1.00 418 Motion picture and video industries 0 58,533 64,243 122,776 1.00 419 Sound recording industries 0 1,126 12,370 13,495 1.00 420 Radio and television broadcasting 0 125,748 92,180 217,928 1.00 422 Telecommunications 0 809,231 429,052 1,238,283 1.00 423 Information services 0 13,701 3,350 17,051 1.00 424 Data processing services 0 219,124 23,525 242,650 1.00 425 Nondepository credit intermediation a 0 380,263 183,734 563,997 1 00 426 Securilies- commodity contracts- inv 0 222,070 204,638 426,709 1.00 427 Insurance carriers 0 148,614 599,698 748,312 1.00 428 Insurance agencies- brokerages- and r 0 41,496 163,385 204,881 1.00 429 Ftmds- trusts- and other financial veh 0 356 66,762 67,118 1.00 430 Monetary authorities and depository c 0 772,042 1,133,083 1,905,125 1.00 431 Real estate 0 652,302 1,688,218 2,340,521 1.00 432 Automotive equipment rental and lea 0 45,887 41,515 87,403 1.00 433 Video tape and disc rental 0 485 30,536 31,022 1.00 434 Machinery and equipment rental and 0 130,356 24,297 154,653 1.00 435 General and consumer goods rental ex 0 80,325 44,082 124,407 1.00 436 Lessors of nonfinancial intangible ass 0 1,510,069 ll3,755 1,623,824 1.00 437 Legal services 0 101,390 169,168 270,557 1.00 438 Accotmting and bookkeeping service 0 301,519 93,956 395,475 1.00 439 Architectural and engineering service 0 1,144,914 65,192 1,210,105 1.00 440 Specialized design services 0 49,077 31,279 80,355 1 441 Custom computer programming servi 0 32,129 3,396 35,525 1.00 442 Computer systems design services 0 53,867 11,488 65,355 1.00 443 Other computer minted services- inclu 0 25,588 4,413 30,000 1.00 444 Management consulting services 0 267,697 83,683 351,380 1.00 445 Environmental and other technical co 0 9,098 4,585 13,684 1.00 446 Scientific research and development s 0 819,075 28,515 847,590 1.00 447 Advertising and related services 0 41,313 25,592 66,905 1.00 448 Photographic services 0 2,628 22,858 25,487 1.00 449 Veterinary services 0 5,454 69,606 75,060 1.00 450 All other miscellaneous professional 0 586,399 21,955 608,353 1.00 451 Management of companies and anterp 0 486,472 45,233 531,704 1.00 452 Office administrative services 0 98,423 62,342 160,765 1.00 454 Employment services 0 126,362 70,864 197,226 1.00 455 Business support services 0 149,191 83,049 232,240 1.00 456 Travel arrangement and reservation s 0 12,852 31,038 43,890 1.00 457 Investigation and security services 0 34,917 22,411 57,328 1.00 458 Services to buildings and dwellings 0 98,386 103,503 201,889 1 459 Other support services 0 11,172 5,863 17,035 1.00 460 Waste management and remediation s 0 199,880 66,990 266,870 1.00 461 Elementary and secondary schools 0 0 72,480 72,480 1.00 462 Colleges- universities- and junior col 0 491 1,354 1,845 1.00 463 Other educational services 0 70,406 59,905 130,311 1.00 464 Home health care services 0 0 87,294 87,294 1.00 465 Offices of physicians- dentists- and o 0 0 1,739,667 1,739,667 1.00 466 Other ambulatory health care services 0 385 521,344 521,729 1.00 467 Hospitals 0 0 1,025,225 1,025,225 1.00 468 Nursing and residential care facilities 0 0 641,781 641,781 1.00 469 Child day care services 0 0 211,404 211,404 1.00 *2001 Dollars - if results are deflated and aggregated, then deflators displayed are set to 1.0 (results have been deflated) .... ~o,o2~ Page # I Report IMOIO Output Impact , .. 25,2oo5 LearCorplowaCity.iap Copy~shmm ~cos IMPACTNAME: sales156 MULTIPLIER: Type II Industry Direct* Indirect* Induced* To,al* Deflator 470 Social assistance- except child day ca 0 35 243,313 243,348 1 00 471 Performing arts companies 0 3,719 17,184 20,904 1.00 472 Spectator sports 0 8,365 10,663 19,028 1.00 473 Independent artists- writers- and per 0 54,071 19,912 73,983 1.00 474 Promoters of performing arts and spo 0 4,512 4,976 9,488 1.00 475 Museums- historical sites- zoos- and 0 0 19,199 19,199 1.00 476 Fitness and recreational sports center 0 20,744 43,391 64,135 1 477 Bowling centers 0 7 7,713 7,721 1.00 478 Other amusement- gambling- and recr 0 10,211 216,531 226,742 1.00 479 Hotels and motels- including casino h 0 240,031 157,234 397,265 1.00 480 Other accommodations 0 1,536 50,704 52,240 1.00 481 Food services and drinking places 0 432,299 1,803,511 2,235,810 1.00 482 Car washes 0 2,806 21,460 24,267 1.00 483 Automotive repair and maintenance- 0 1,362,707 1,041,272 2,403,979 1.00 484 Electronic equipment repair and mai 0 272,284 46,747 319,031 1.00 485 Commercial machine~ repair and ma 0 369,842 28,363 398,206 1.00 486 Household goods repair and mainten 0 59,025 30,036 89,061 1.00 487 Personal care services 0 0 169,866 169,866 1.00 488 Death care services 0 0 81,618 81,618 1.00 489 Drycleamng and laundry services 0 8,893 31,621 40,514 1.00 490 Other personal services 0 3,138 66,681 69,820 1.00 491 Religious organizations 0 0 40,426 40,426 1.00 492 Grantmaking and giving and social a 0 0 73,956 73,956 1.00 493 Civic- social- professional and simila 0 80,115 162,592 242,707 1.00 494 Private households 0 0 101,290 101,290 1.00 496 Other Federal Govemment enterprise 0 17,185 39,709 56,894 1.00 497 State and local government passenger 0 21,143 28,321 49,463 1.00 499 Other State and local government ente 0 267,421 588,259 855,680 1.00 509 Owner-occupied dwellings 0 0 3,931,808 3,931,808 1.00 Total 156,000,000 36,814,038 27,550,415 220,364,446 *2001 Dollars - if results are deflated and aggregated, then deflators displayed are set to 1.0 (results have been deflated) w.:~..,o~. Page # I Report IMOIO Output Impact Janu LearCorplowaCity.iap Co0m~t ~aG 2~s 1MPACT NAME: sales280 MULTI]?LIER: Type Industry 'Direct* Indirect* Induced* Total* Deflator i Oilseed farming 0 806 10,227 11,033 1.00 2 Grain farming 0 3,401 25,778 29,179 1.00 3 Vegetable and melon farming 0 47 1,864 1,911 1.00 4 Tree nut farming 0 0 4 4 1.00 5 Fruit fanning 0 8 1,571 1,579 1.00 6 Greenhouse and nursery production 0 1,183 15,760 16,943 1.00 10 All other crop farming 0 12,886 28,365 41,251 1.00 11 Cattle ranching and farming 0 112,105 250,661 362,767 1.00 12 Poult~ and egg production 0 1,621 38,269 39,889 1.00 13 Animal production- except cattle and 0 40,951 60,372 101,324 1.00 18 Agriculture and forestD' support activ 0 2,255 7,614 9,869 1.00 24 Stone mining and quarrying 0 220 330 550 1.00 25 Sand- gravel- clay- and refractory mi 0 26,640 22 26,662 1.00 30 Power generation and supply 0 575,184 363,946 939,131 1.00 31 Natural gas distribution 0 87,246 53,294 140,540 1.00 42 Maintenance and repair of farm and 0 7,182 115,455 122,637 1.00 43 Maintenance and repair of nonresiden 0 726,050 224,304 950,354 1.00 45 Other maintenance and repair constru 0 28,348 43,670 72,018 1.00 47 Other animal food manufacturing 0 946 3,651 4,597 1.00 48 Flour milling 0 119 5,933 6,051 1.00 54 Fats and oils refining and blending 0 43 619 662 1.00 61 Fruit and vegetable canning and dryi 0 42 822 865 1.00 62 Fluid milk manufacturing 0 8,333 187,810 196,143 1.00 64 Cheese manufacturing 0 14,937 227,180 242,116 1.00 67 Animal- except poult~- slaughtering 0 186,172 90,963 277,135 1.00 68 Meat processed from carcasses 0 41,921 33,781 75,703 1.00 69 Rendering and meat byproduct pmce 0 36,155 134 36,289 1.00 73 Bread and bakery product- except fr 0 14,533 192,279 206,812 1.00 85 Soft drink and ice manufacturing 0 64 1,762 1,826 1.00 86 Breweries 0 63 1,984 2,047 1.00 97 Textile and fabric finishing mills 0 135,127 3,263 138,389 1.00 101 Textile bag and canvas mills 0 123 377 500 1.00 107 Cut and sew apparel manufacturing 0 1,408 4,829 6,237 1.00 110 Footwear manufacturing 0 0 6,I38 6,138 1.00 112 Sawmills 0 26,727 4,992 31,720 1.00 116 Engineered wood member and truss m 0 16,798 8,317 25,115 1.00 117 Wood windows and door manufactur 0 10,394 6,989 I7,384 1.00 120 Wood container and pallet manufactu 0 177,482 9,971 187,453 1.00 122 Prefabricated wood building manufac 0 1,112 172 1,284 1.00 123 Miscellaneous wood product manufac 0 15,892 6,418 22,310 1.00 126 Paperboasd container manufacturing 0 37,630 1,962 39,591 1.00 129 Coated and laminated paper and pack 0 159,725 26,597 186,322 1.00 131 Die-cut paper office supplies manufa 0 103 23 126 1.00 136 Manifold business forms printing 0 32,848 16,888 49,737 1.00 139 Commemial printing 0 292,126 198,675 490,801 1.00 143 Asphalt paving mixture and block ma 0 6,332 7,597 13,929 1.00 158 Fertilizer- mixing only- manufacturin 0 296 1,151 1,447 1.00 160 Phan'aaceutical and medicine manufa 0 414 78,I 00 78,514 1.00 161 Paint and coating manufacturing 0 935 48 982 1.00 166 Toilet preparation manufacturing 0 40,067 276,753 316,820 1.00 173 Plastics pipe- fittings- and profile sh 0 62,934 5,351 68,285 1.00 177 Plastics plumbing fixtures and all o/he 0 4,590,501 258,785 4,849,286 1.00 178 Foam product manufacturing 0 427,504 32,016 459,520 1.00 181 Other robber product manufacturing 0 8,508 145 8,652 1.00 183 Vitreous china and earthenware attic 0 24 29 54 1.00 192 Ready-mix concrete manufacturing 0 485 522 1,007 1.00 195 Other concrete product manufactur/n 0 477 295 772 1.00 199 Cut stone and stone product manufac 0 0 0 0 1.00 206 Roiled steel shape manufacturing 0 2,524,511 1,712 2,526,223 1.00 221 Ferrous metal foundarias 0 429,975 270 430,245 1.00 *2001 Dollars - if results are deflated and aggregated, then deflators displayed are set to 1.0 (results have been deflated) ........ ~, Page # I Report IM010 Output Impact LearCorplowaCity.iap Covy~zh~m 20o~ IMPACT NAME: sales280 MULTIPLIER: Type 1I Industry Direct* Indirect* Induced* Total* Deflator 222 Aluminum foundries 0 1,360,482 582 1,361,064 1.00 233 Fabricated structural metal manufact 0 5,987 170 6,157 1.00 234 Plate work manufacturing 0 I5,232 89 15,321 1.00 235 Metal window and door manufacturi 0 2,558 100 2,658 1.00 237 Ornamental and architectural metal 0 3,544 107 3,652 1.00 238 Power boiler and heat exchanger man 0 20,215 139 20,354 1.00 242 Spring and wire product manufacturi 0 104,005 3,726 107,730 1.00 243 Machine shops 0 3,396,075 21,067 3,417,142 1.00 244 Turned product and screw- nut- and 0 616,582 1,365 617,947 1.00 246 Metal coating and nonprecious engsa ' 0 21,196 356 21,552 1.00 247 Eleetmplaring- anodizing- and colori 0 59,790 859 60,649 1.00 248 Metal valve manufacturing 0 435,854 8,260 444,114 1.00 255 Miscellaneous fabricated metal produ 0 7,752 243 7,995 1.00 257 Farm machinery and equipment manu 0 7,673 2,000 9,673 1.00 259 Constmclion machinery manufacturi 0 62,378 4,440 66,818 1.00 266 Printing machinery and equipment m 0 8,237 1,660 9,897 1.00 271 Optical instrument and lens manufact 0 3,288 795 4,083 1.00 273 Other commemial and service indust 0 116,005 4,564 120,569 1.00 280 Metal cutting machine tool manufaet 0 51,544 655 52,199 1.00 292 Conveyor and conveying equipment 0 24,378 1,188 25,566 1.00 311 Semiconductors and related device m 0 1,337 8 1,345 1.00 313 Electromedical apparatus manufactur 0 80 7,636 7,715 1.00 314 Search- detection- and navigation in 0 1,845 485 2,330 1.00 319 Analytical laboratory insmunent man 0 710 656 1,366 1.00 322 Software reproducing 0 4,029 1,168 5,197 1.00 327 Electric housewams and household f 0 5 71 76 1.00 333 Electric power and specialty transfo 0 7,437 1,060 8,498 1.00 336 Relay and industrial control manufac 0 14,276 222 14,498 1.00 347 Track trailer manufacturing 0 596 37 633 1 349 Travel trailer and camper manufactur 0 3,862 33,465 37,326 1.00 350 Motor vehicle parts manufacturing 280,000,000 4,436,128 83,179 284,519,296 1.00 362 Wood kitchen cabinet and countertop 0 12,705 15,596 28,301 1.00 364 Nonupholstemd wood housellold rum 0 104 10,326 10,430 1.00 371 Showcases-partitions-shelving-and 0 2,986 197 3,183 1.00 375 Surgical and medical inshnunant man 0 1,362 26,197 27,560 1.00 376 Surgical appliance and supplies manu 0 3,086 11,359 14,444 1.00 378 Ophthalmic goods manufacturing 0 3,478 12,678 16,156 1.00 379 Dental laboratories 0 121 18,776 18,898 1.00 380 Jewelry and silverware manufacturin 0 15 423 438 1.00 381 Sporting and athletic goods manufact 0 6 47 53 1.00 382 Doll- toy- and game manufacturing 0 0 4 4 1.00 384 Sign manufacturing 0 4,025 2,468 6,494 1.00 386 Musical instrument manufacturing 0 0 1 I 1.00 387 Broom- brush- and mop manufaeturi 0 83,000 18,189 I01,I 89 1.00 389 Buttons- pins- and alt other miscall 0 2,293 1,551 3,844 1.00 390 Wholesale trade 0 14,238,715 2,124,196 16,362,9t0 1.00 391 Air transportation 0 43,278 64,130 107,408 1.00 392 Rail transportation 0 390,785 52,671 443,456 1.00 394 Truck transportation 0 3,503,490 569,888 4,073,378 1.00 395 Transit and ground passenger transpo 0 34,408 45,741 80,149 1 396 Pipeline transportation 0 32,205 31,063 63,268 1.00 398 Postal service 0 410,863 221,165 632,028 1.00 399 Couriers and messengers 0 239,792 66,106 305,898 1.00 400 Warehousing and storage 0 461,009 30,283 491,292 1.00 401 Motor vehicle and parts dealers 0 86,942 1,316,055 1,402,996 1.00 402 Fumiture and home furnishings store 0 17,607 381,356 398,964 1.00 403 Electronics and appliance stores 0 67,579 236,752 304,331 1.00 404 Building material and garden supply 0 129,186 615,611 744,796 1.00 405 Food and beverage stores 0 187,816 1,328,439 1,516,255 1 00 406 Health and personal care stores 0 75,508 305,958 381,467 1.00 *2001 Dollars - if results are deflated anal aggregated, then deflators displayed are set to 1.0 (results have been deflated ~.~.:,_o..~ Page # I Report IM010 Output Impact J .. 25,2oo5 LearCorpIowaCity.iap CopyfightMIG 2005 IMPACTNAME: sales280 MULTIPLIER: Type II Industry Direct* Indirect* Induced* Total* Deflator 407 Gasoline stations 0 35,041 476,679 511,719 1.00 408 Clothing and clothing accessories sro 0 39,228 586,063 625,291 1.00 409 Sporting goods- hobby- book and taus 0 58,819 304,740 363,560 1.00 410 General merchandise stores 0 86,455 1,045,062 1,131,517 1.00 411 Miscellaneous store retailers 0 89,131 614,631 703,761 1.00 412 Nonstore retailers 0 37,254 577,290 614,544 1.00 413 Newpaper publishers 0 287,894 191,259 479,153 1.00 414 Periodical publishers 0 21,532 24,133 45,665 1.00 415 Book publishem 0 1,679 16,305 17,984 1.00 417 Software publishers 0 6,063 7,253 13,316 1.00 418 Motion picture and video industries 0 105,059 115,308 220,367 1.00 419 Sound recording industries 0 2,020 22,202 24,223 1.00 420 Radio and television broadcasting 0 225,702 165,450 391,153 1.00 422 Telecommunications 0 1,452,467 770,093 2,222,559 1.00 423 Information services 0 24,591 6,013 30,605 1.00 424 Data processing services 0 393,300 42,225 435,525 1.00 425 Nondeposimry credit intermediation a 0 682,523 329,780 1,012,303 1.00 426 Securities- commodiW contracts- inv 0 398,588 367,299 765,887 1.00 427 Insurance carders 0 266,743 1,076,380 1,343,123 1.00 428 Insurance agencies- brokerages- and r 0 74,480 293,255 367,734 1.00 429 Funds- trusts- and other financial veh 0 638 119,830 120,468 1.00 430 Monetasy authorities and depository c 0 1,385,716 2,033,739 3,419,455 1.00 431 Real estate 0 1,170,799 3,030,136 4,200,934 1.00 432 Automotive equipment rental and lea 0 82,362 74,515 156,877 1.00 433 Video tape and disc rental 0 871 54,809 55,680 l 434 Machinery end equipment rental and 0 233,973 43,610 277,583 1.00 435 General and consumer goods rental ex 0 144,172 79,122 223,295 1.00 436 Lessors of nonfinancial intangible ass 0 2,710,380 204,175 2,914,555 1.00 437 Legal services 0 181,981 303,635 485,616 1.00 438 Accounting and bookkeeping service 0 541,188 168,639 709,827 1.00 439 Architectural and engineering service 0 2,054,973 117,011 2,171,984 1.00 440 Specialized design services 0 88,086 56,141 144,228 1.00 441 Custom computer programming servi 0 57,668 6,095 63,763 1.00 442 Computer systems design s~wices 0 96,685 20,619 117,304 1 443 Other computer related services- inclu 0 45,927 7,920 53,847 1.00 444 Management consulting services 0 480,482 150,200 630,682 1.00 445 Environmental and other tectmical co 0 16,330 8,230 24,560 1.00 446 Scientific research and development s 0 1,470,134 51,181 1,521,315 1.00 447 Advertising and related services 0 74,152 45,934 120,086 1.00 448 Photographic services 0 4,717 41,028 45,745 1.00 449 Veterinary services 0 9,790 124,933 134,723 1.00 450 All other miscellaneous professional 0 1,052,510 39,406 1,091,916 1.00 451 Management of companies and enterp 0 873,154 81,187 954,341 1.00 452 Office administrative services 0 176,657 111,896 288,553 1.00 454 Employment services 0 226,804 127,191 353,995 1 455 Business support services 0 267,779 149,062 416,842 1.00 456 Travel arrangement and reservation s 0 23,068 55,710 78,778 1.00 457 Investigation and securit3, services 0 62,672 40226 102,897 1.00 458 Services to buildings and dwellings 0 176,591 185,774 362,365 1.00 459 Other support services 0 20,052 10,524 30,576 1.00 460 Waste management and remediation s 0 358,758 120,239 478,997 1.00 461 Elementary and secondary schools 0 0 130,092 130,092 1.00 462 Colleges- universities- and junior col 0 881 2,430 3,311 1.00 463 Other educational services 0 126,369 107,522 233,891 1.00 464 Home health care services 0 0 156,682 156,682 1.00 465 Offices of physicians- dentists- and o 0 0 3,122,479 3,122,480 1.00 466 Other ambulatory health care services 0 690 935,746 936,437 1.00 467 Hospitals 0 0 1,840,147 1,840,147 1.00 468 Nursing and residential care facilities 0 0 1,151,914 1,151,914 1 00 469 Child day care services 0 0 379,444 379,444 1.00 '2001 Dollars - if results are deflated and aggregated, then deflators displayed are set to 1.0 (results have been deflated) .......... Page # I Report IM010 Output Impact LearCorplowaCity. iap Copy~gh~}dm ~0o~ IMPACT NAME: sales280 MULTIPLIER: Type 11 Industry Direct* Indirect* Induced* Total* Deflator 470 Social assistance- except child day ca 0 63 436,715 436,778 1.00 471 Performing arts companies 0 6,676 30,843 37,519 1.00 472 Spectator sports 0 15,014 19,139 34,153 1.00 473 Independent artists- writers- and per 0 97,050 35,740 132,790 1.00 474 Promoters of performing arts and spo 0 8,098 8,932 17,030 1.00 475 Museums- historical sites- zoos- and 0 0 34,460 34,460 1.00 476 Fitness and recreational sports center 0 37,232 77,881 115,114 1.00 477 Bowling centers 0 13 13,845 13,858 1.00 478 Other amusement- gambling- and mcr 0 18,327 388,645 406,972 1.00 479 Hotels and motels- including casino h 0 430,824 282,215 713,039 1.00 480 Other accommodations 0 2,757 91,008 93,765 1.00 481 Food services and drinking places 0 775,922 3,237,071 4,012,993 1.00 482 Car washes 0 5,037 38,519 43,556 1.00 483 Automotive repair and maintenance- 0 2,445,884 1,868,950 4,314,834 1.00 484 Electronic equipment repair and mai 0 488,715 83,905 572,621 1.00 485 Commercial machinery repair and ma 0 663,820 50,909 714,728 1.00 486 Household goods repair and mainten 0 105,943 53,910 159,853 1.00 487 Personal care services 0 0 304,887 304,887 1.00 488 Death care services 0 0 146,495 146,495 1.00 489 Drycleaning and laundry serrates 0 15,962 56,755 72,717 1.00 490 Other personal services 0 5,633 119,684 125,317 1.00 491 Religious organizations 0 0 72,559 72,559 1.00 492 Grantmaking and giving and social a 0 0 132,741 132,741 1.00 493 Civic- social- professional and simile 0 143,796 291,831 435,627 1.00 494 Private households 0 0 181,803 181,803 1.00 496 Other Federal Government enterprise 0 30,845 71,272 102,117 1.00 497 State and local government passenger 0 37,948 50,832 88,780 1.00 499 Other Slate and local government ante 0 479,987 1,055,849 1,535,836 1.00 509 Owner-occupied dwellings 0 0 7,057,091 7,057,091 1.00 Total 280,000,000 66,076,488 49,449,463 395,525,939 *2001 Dollars - if results are deflated and aggregated, then deflators displayed are set to 1.0 (results have been deflated) ....... Page # I Report IM010 Lear Corporation Iowa City Plant 2004 Charitable Donations Organization Amount United Way of Johnson County 3,850.00 Mothers Against Drunk Driving 100.00 Wal-Mart 125.00 Iowa Special Olympics 100.00 Regina After Prom Party 25.00 Georgia Gent 25.00 CCA Post Prom Party 50.00 Knights of Columbus 125.00 Coral Ridge Mall 500.00 Highland Jr./Sr. Post Prom 25.00 Forbes Motorsports 300.00 Iowa Menonite School 25.00 Iowa City Babe Ruth League 100.00 American Cancer Society 150.00 Ducks Unlimited 400.00 Hawkeye Area Council 1,300.00 University of Iowa 1,976.00 Iowa City Community Theater 150.00 Pilot Club of Iowa City 100.00 Muscular Dystraphy Association 1,100.00 Cinema Entertainment Group 1,061.00 Coral¥ille Parks & Rec. Department 459.00 Iowa City Girls Softball 175.00 Johnson County Free 400.00 Lukon Company 4,778.39 Cedar Rapids Kernels 550.00 Iowa City Parks & Rec Department 240.00 Yaba 50.00 Total Charitable Donation $ 18,239.39 [,.~' UNITED STATES ENVIRONMENTAL PROTECTION AGENCY ~ ..o~e°~ REGION VII 901 NORTH 5TH STREET KANSAS CITY, KANSAS 66101 13 2001 CERTIFIED MAIL RETURN RECEIPT REO UESTED Article No. 7001 0360 0001 4935 3576 Mr. Williams Murray Lear Corporation 2500 Highway 6 East Iowa City, Iowa 52240 Dear Mr. Murray: RE: Lear Corporation Iowa City, Iowa RCRA ID No. IAD006537237 Letter of Warning On June 26, 2001, a representative of the U. S. Environmental Protection Agency (EPA) inspected your facility. The inspection was conducted under the authority of Section 3007 of the Resource Conservation and Recovery Act (RCRA). A copy of that inspection report is enclosed. I have reviewed the inspection report and determined that violations of RCRA were documented. Enclosed is a list of violations. Please carefully read this list and correct these violations. While you are not required to submit anything at this time, you are responsible for correcting these violations. Please note that your correction of these violations does not prevent EPA from pursuing appropriate enforcement actions, including penalties, for violations discovered as a result of the inspection. I Would like to remind you that your facility is responsible for maintaining compliance with all applicable hazardous waste regulations. If there are any questions regarding this matter, please contact me at (913) 551-7633. Sincerely, Brian Mitchell RCRA Enforcement and State Programs Branch Air, RCRA, and Toxics Division Enclosures 2 cc: Chief, Land Quality Bureau Iowa Department of Natural Resources RECYCLE'~ THOMAS J. VILSACK, GOVERNOR DEPARTMENT OF NATURAL RESOURCES SALLY J, PEDER$ON, ET, GOVERNOR JEFFREY R. VONK, DIRECTOR 10 June 2003 Bill Murray, Environmental Coordinator Lear Corporation 2500 Highway 6 East Iowa City, Iowa 52240 RE: NOTICE OF VIOLATION Air Quality Compliance Evaluation Facility No. 52-01-003 Title V No. 01-TV-019-M001 Dear Mr. Murray: Kurt Levetzow of this field office conducted an air quality compliance evaluation of your facility on 5/23/03. Not all of the permitted sources were operating at the time of the inspection. We will evaluate those sources on future inspections. For those sources we did evaluate we believe you will find the enclosed report self-explanatory. Mr. Levetzow noted record-keeping violations on various sources at the plant. Please respond in writing by 30 J~ne 2003 stating your intentions to comply. Mr. Levetzow will conduct a follow-up inspection in the near future to ensure compliance. If you have any questions or would like further explanation of any part of this report, please contact Mr. Levetzow at this office. Sincerely, i~D SERVICES & COMPLIANCE BUREAU Field Office Supervisor DO Encl. Inspection Report xc: IDNR AQ Bureau, 7900 Hickman Road, Suite 1, Urbandale, IA 50322 File Environmental Services Division, Field Office #6, 1004 W. Madison, Washington, Iowa 52353 Tel 319-653-2135 Fax 319-653-2856 WALLACE STATE OFFICE BUILDING / DES MOINES, IOWA 50319 515-281-5918 TDD 515-242-5967 FAX 515-281-6794 www.state,ia, us/dnr , .. STATE OF IOWA THOMAS J, VILSACK, GOVERNOR DEPARTMENT OF NATURAL RESOURCEt~ SALLY J, PEDER$ON, LT. GOVERNOR JEFFREY R. VONK, DIRECTOR CERTIFIED MAIL November 5, 2003 ATTN: William Murray ,i NOV Lear Corporation i l ,2500 Hwy #6 East = . Iowa City, IA 52240 . !:..' - ' RE: Notice of Violation 567 lAC 22.1(1) Facility Number: 52-01-003 Dear Murray: This notice is to inform you that your facility has been in violation of 567 lAC 22.1(1) [Permits required for new or existing stationary sources] for not obtaining a construction permit prior to installing 7 plastic pellet silos. The Department of Natural Resources (DNR) received your application for the silos on September 9, 2003. Your construction permit application indicates that the silos were installed between 1980 and 1994. DNR rule 567 lAC 22.1(1) requires that no equipment or control equipment be constructed without first obtaining a construction permit. On October 13, 2003 the DNR requested additional information concerning the emissions from the silos. The letter provided Lear with some options regarding the emissions from the silos. A deadline of November 1, 2003 was given for the submittal of this information. To date no additional information has been submitted to the DNR. The application for construction permits for the silos was denied November 4, 2003. Please be reminded these silos continue to operate out of compliance. Please submit a compliance plan outlining how Lear plans to return compliance within 15 days of receipt of this letter. When planning future projects, please remember that your facility is required to have a construction permit issued to you prior to initiating new construction. You may also be required to have a permit before making certain modifications and for existing emissions sources. This notice does not preclude th6 DNR from taking further enforcement action regarding this violation. If you have any qUestions regarding the construction permit applications please contact Cory Detter at 515- 281-4842. If you have any questions regarding this letter feel free to contact me at 515-281-4899. 7900 Hickman Road, Suite 1 / Urbandale, Iowa 50322 .... Repod Smoking Vehicles 1-866.TAILPIPE 515-242-5100 FAX 515-242-5094 HTTP://www.state.ia.us/dnr7900 Hickman Road, Suite 1 / Urbandale, Iowa 50322 .... Report Smoking Vehicles 1-866-TAILPIPE 515-242-5100 FAX 515-242-5094 HTTP://www.state.ia.us/dnr Sincerely, Dennis Thielen Environmental Specialist Compliance Assistance Section - Air Quality. Bureau i ............ ','¢,~:'~ :~ ~'!, c: Field Office 6 Michelle Kochheiser - IDNR - AQB Mike Bronoski - EPA Region 7 -'---- STATE OF IOWA Fields of Opportunities THOMAS J. VILSACK~ GOVERNOR DEPARTMENT OF NATURAL RESOURCES SALLY J. PEDER$ON, LT. GOVERNOR JEFFREY R. VONK, D RECTOR January 7, 2005 Mr. William Murray, Environmental Coordinator Certified Mail Lear Corporation Notice of Violation 2500 Highway #6 East Iowa City, IA 52240 RE: Compliance Testing Plant # 52-01-003 Dear Mr. Murray: The test report, received December 15, 2004, for the testing conducted November 18, 2004, has been reviewed. Production data included in the report indicate s that the booth was operated at an average of 2.1 g/sec sprayed. This is roughly 10% of its rated capacity. Permit 03-A-1258-S1 requires that testing be done with the process operating at its maximum continuous rate. The two options available are re-testing at a higher throughput or seeking an operating limit. If the permitting option is selected Lear Corporation must also address the significantly lower than permitted airflows for the booth. If you have any questions about the details of the permitting process, please call 1-877- AIR IOWA. Please inform the Department of which option will be taken by February 1,2005. Neither issuance of this notice nor any of the provisions it contains preclude the Department from taking additional action in this matter. If you have any questions please call me at (515) 242-6001 or email me at mark.stone~dm'.state.ia, us. Sincerely, Mark Stone Air Quality Bureau c: Field Office 6 File # 52-01-003 M. Bronoski, USEPA Region VII 7900 Hickman Road, Suite 1 / Urbandale, Iowa 50322 .... Report Smoking Vehicles 1-888-END-SMOG 515-242-5100 FAX 515-242-5094 http://www,iowacleanair.com/ oo3 UNITED STATES SECURITIES Et (Mark One) [] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the lransihon period from _ to Commission file number: 1-11311 LEAR CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-3386776 (State or other jurisdiction of incorporation or organization) (I.R.~ Employer Identification No 21557 Telegraph Road, Southfield, MI 48034 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (248) 447-1500 Se. curities registered pursuant to Section 120>) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $.01 per share New York Stock Exchange Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~__ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained/to the best ofregistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K Indicate by check mark whether the registrant is an accelerated filer (as described in Rule 12b~2 of the Act). Yes ~__ No As of June 28, 2003, the aggregate market value of the registmnt's Common Stock, par value $.01 per share, held by non- affiliates of the registrant was $2,971,916,857. The closing price of the Common Stock on June 28, 2003 as reported on the New York Stock Exchhnge was $44.90 per share. As of February 27, 2004, the number of shares outstanding of the eg~strant s Common Stock was 68,437,074 shares. DOCUMENTS INCORPORATED BY REFERENCE Certain sections of the registrant's Notice of Annual Meeting of Stockholders and Proxy Statement for its Annual Meeting of Sto.ckholders to be held on May 13, 2004, as described in the Cross-Reference Sheet and a Table of Contents included herewith, UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) ' OF THE SECURITIES EXCHANGE ACT OF 1934 For ~he quarterly period ended October 2, 2004. OR / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __ to Commission ~e number: 1-11311 LEAR CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-3386776 (State or other jurisdiction of (LR.S. Employer Identification No.) incorporation or organization) 21557 Telegraph Road, Southfield, M1 48034 (Address of principal executive offices) (Zip code) (248) 447-1500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes /X/ No / / As of November 5, 2004, the number of shares outstanding of the registrant's Common Stock, par value $0.01 per share, was 67,329,583. LEAR CORPORATION FORM 10-Q FOR THE QUARTER ENDED OCTOBER 2, 2004 INDEX Page No. Part I - Financial Information Item 1 - Consolidated Financial Statements Introduction to the Consolidated Financial Statements 3 Consolidated Balance Sheets - October 2, 2004 (Unaudited) and December 31, 2003 4 Consolidated Statements of Income (Unaudited) - Three and Nine Months Ended October 2, 2004 and September 27, 2003 5 Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended October 2, 2004 and September 27, 2003 6 Notes to the Consolidated Financial Statements 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3 - Quantitative and Qualitative Disclosures about Market Risk (included in Item 2) Item 4 - Controls and Procedures 39 Part II - Other Information Item 1 - Legal Proceedings 40 Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 41 Item 6 - Exhibits and Reports on Form 8-K 41 Signatures 43 LEAR CORPORATION PART I -- FINANCIAL INFORNIATION ITEM 1 -- CONSOLIDATED FINANCIAL STATEMENTS INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS We have prepared the condensed consolidated financial statements of Lear Corporation and subsidiaries, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. We believe that thc disclosures are adequate to make the information presented not misleading when read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2003. The financial information presented reflects all adjustments (consisting of normal recurring adjustments) which are, in our opinion, necessary for a fair presentation of the results of operations and cash flows and statements of financial position for the interim, periods presented. These results are not necessarily indicative of a full year's results of operations. LEAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share data) October 2, December 31, 2004 2003 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 501.6 $ 169.3 Accounts receivable 2,516.2 2,200.3 Inventories 683.8 550.2 Recoverable customer engineering and tooling 171.1 169.0 Other 324.9 286.6 Total current assets 4,197.6 3.375.4 LONG- TERM ASSETS: Property, plant and equipment, net 1,930.4 1,817.8 Goodwill, net 2,968.1 2,940.1 Other 480.4 437.7 Total long-term assets 5,378.9 5,195.6 $ 9.576.5 $ 8.571.0 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings $ 24.1 $ 17.1 Accounts payable and drafts 2,614.4 2,444.1 Accrued liabilities 1,250.7 1,116.9 Current portion of long-term debt 612.6 4.0 Total current liabilities 4,501.8 3,582.1 LONG- TERM LIABILITIES: Long-term debt 1,854.1 2,057.2 Other 708.0 674.2 Total long-term liabilities 2,562.1 2,731.4 STOCKHOLDERS' EQUITY: Common stock, $0.01 par value, 150,000,000 shares authorized; 73,040,228 shares issued as of October 2, 2004 and 72,453,683 shares issued as of December 31, 2003 0.7 0.7 Additional paid-in capital 1,054.9 1,027.7 Common stock held in treasury, 4,831,245 shares as of October 2, 2004 and 4,291,302 shares as of December 31, 2003, at cost (157.1) (110.8) Retained earnings 1,700.9 1,441.8 Accumulated other comprehensive loss (86.8) (101.9) Total stockholders' equity 2,512.6 2,257.5 $ 9.576.5 $ 8.571.~0 The accompanying notes are an integral part of these consolidated balance sheets. LEAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited; in millions, except per share data) Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Net sales $ 3,897.8 $ 3,491.5 $12,673.9 $11,491.4 Cost of sales 3,577.6 3,187.8 11,635.2 10,525.9 Selling, general and administrative expenses 161.1 140.6 487.5 428.8 Interesf expense 43.3 44.0 121.6 144.7 Other expense, net 10.0 13.4 38.9 40.6 Income before provision for income taxes 105.8 105.7 390.7 351.4 Provision for income taxes 14.1 29.6 91.5 103.3 Net income 5; 91.7 $ 76.1 5; 299.2 $ 248.1 Basic net income per share $ 1.34 $ 1.13 $ 4.37 5; 3.74 Diluted net income per share $ 1.32 $ 1.10 $ 4.26 5; 3.65 The accompanying notes are an integral part of these consolidated statements. LEAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in millions) Nine Months Ended October 2, September 27, 2004 2003 Cash Flows from Operating Activities: Net income $ 299.2 $ 248.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 258.4 234.7 Net change in recoverable customer engineering and tooling (5.3) (40.5) Net change in working capital items (61.4) 80.3 Other, net 23.5 27.9 Net cash provided by operating activities before net change in sold accounts receivable 514.4 550.5 Net change in sold accounts receivable (70.4) (190.9) Net cash provided by operating activities 444.0 359.6 Cash Flows from Investing Activities: Additions to property, plant and equipment (283.7) (214~2) Cost of acquisitions, net of cash acquired (97.5) (12.4) Other, net 34.0 31.5 Net cash used in investing activities (347.2) (195.1) Cash Flows from Financing Activities: Issuance of senior notes 399.2 Long-term debt repayments, net (51.5) (126.1) Short-term debt repayments, net (37.0) (28.4) Dividends paid (54.6) Proceeds from exercise of stock options 20.1 42.5 Repurchase of common stock (50.6) (1.1) Increase (decrease) in drafts 3.6 (33.5) Net cash provided by (used in) financing activities 229.2 (146.6) Effect of foreign currency translation 6.3 (7.1) Net Increase in Cash and Cash Equivalents 332.3 10.8 Cash and Cash Equivalents as of Beginning of Period 169.3 91.7 Cash and Cash Equivalents as of End of Period $ 501.6 $ 102.5 Changes in Working Capital: Accounts receivable $ (222.0) $ (454.5) Inventories (89.7) (4.3) Accounts payable 160.2 365.1 Accrued liabilities and other 90.1 174.0 Net change in working capital items 5; (61.4~ $ 80.3 Supplementary Disclosure: Cash paid for interest $ 93.5 $ 103.8 Cash paid for income taxes $ 100.1 $ 140.5 The accompanying notes are an integral part of these consolidated statements. LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The consolidated financial statements include the accounts of Lear Corporation ("Lear" or the "Parent"), a Delaware corporation, and the wholly-owned and majority-owned subsidiaries controlled by Lear (collectively, the "Company"). Investments in affiliates, other than wholly-owned and majority-owned subsidiaries controlled by Lear, in which Lear owns a 20% or greater interest are accounted for under the equity method. The Company and its affiliates design and manufacture interior systems and components for automobiles and light trucks. The Company's main customers are automotive original equipment manufacturers. The Company operates facilities worldwide. Certain amounts in the prior period's financial statements have been reclassified to conform to the presentation used in the quarter ended October 2, 2004. (2) Stock-Based Compensation On January 1, 2003, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," under which compensation cost for grams of stock appreciation rights, restricted stock, restricted units, performance shares, performance units (collectively, "Incentive Units") and stock options is determined on the basis of the fair value of the Incentive Units and stock options as of the grant date. SFAS No. 123 has been applied prospectively to all employee awards granted after January 1, 2003, as permitted under the provisions of SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." The pro forma effect on net income and net income per share, as if the fair value recognition provisions had been applied to all outstanding and unvested awards granted prior to January 1, 2003, is shown below (in millions, except per share data): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Net income, as reported $ 91.7 $ 76.1 $ 299.2 $ 248.1 Add: Stock-based employee compensation expense included in reported net income, net of tax 2.4 1.6 7.3 3.2 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net o f tax (4.5) (5.8) (15.9) (16.8) Net income, pro forma $ 89.6 $ 71.9 $ 290.6 $ 234.5 Net income per share: Basic - as reported $ 1.34 $ 1.13 $ 4.37 $ 3.74 Basic-proforma $ 1.31 $ 1.07 $ 4.24 $ 3.54 Diluted- as reported $ 1.32 $ 1.10 $ 4.26 $ 3.65 Diluted-pro forma $ 1.29 $ 1.04 $ 4.14 $ 3.45 (3) Facility Actions The Company continually evaluates alternatives to align its business with the changing needs of its customers and to lower the operating costs of the Company. This may include the realignment of its existing manufacturing capacity, facility closures or similar actions. In addition to these actions undertaken in the normal course of business, the Company initiated significant actions affecting two of its U.S. seating facilities in December 2003. As a result of these actions, the Company recorded charges of $25.5 million for employee termination benefits and asset impairments in 2003. These actions were completed in the second quarter of 2004. Of the total costs associated with these facility actions, approximately $33 million related to employee termination benefits and asset impairment charges. (4) Acquisition On July 5, 2004, the Company completed its acquisition of the parent of GHW Grote & Hartmann GmbH ("Grote & Hartmann") for consideration of $160.2 million, including assumed debt of $86.3 million, subject to adjustment. This amount excludes the cost of LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) integration, as well as other costs related to the transaction. Grote & Hartmann is based in Wuppertal, Germany and manufactures terminals and connectors, as well as junction boxes and machinery to produce wire harnesses, primarily for the automotive industry. The Grote & Hartmann acquisition was accounted for as a purchase, and accordingly, the assets purchased and liabilities assumed are included in the consolidated balance sheet as of October 2, 2004. The operating results of Grote & Hartmann are included in the consolidated financial statements since the date of acquisition. The purchase price and related allocation are shown below (in millions): Consideration paid to former owner $ 73.9 Debt assumed 86.3 Fees and expenses 3.2 Cost of acquisition 5; 163.4 Property, plant and equipment $ 102.4 Net working capital 36.3 Restructuring accrual (16.8) Other assets purchased and liabilities assumed, net (22.8) Goodwill 26.0 Intangible assets 38.3 Total cost allocation $ 163.4 The purchase price and related allocation are preliminary and may be revised as a result of adjustments made to the purchase price, obtaining additional information regarding liabilities assumed, including contingent liabilities, and revisions of preliminary estimates of fair values made at the date of purchase. Additionally, at the time of the acquisition, the Company began to formulate plans for the restructuring of certain acquired operations. The Company is continuing to finalize these restructuring plans, which include potential plant closings and the termination or relocation of employees. Intangible assets include amounts recognized for the fair value of customer contracts, customer relationships and technology acquired. These intangible assets have a weighted average useful life of approximately fifteen years. The pro forma effects of this acquisition would not materially impact the Company's reported results for any period presented. (5) Inventories Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. A summary of inventories is shown below (in millions): October 2, December 31, 2004 ~2003 Raw materials $ 521.7 $ 399.1 Work-in-process 46.0 37.6 Finished goods 116.1 113.5 Inventories $ 683.8 $ 550.2 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (6) Property, Plant and Equipment Property, plant and equipment is stated at cost. Depreciable property is depreciated over the estimated useful lives of the assets, principally using thc straight-line method. A summary of property, plant and equipment is shown below (in millions): October 2, December 31, 2004 2003 Land $ 135.1 $ 124.6 Buildings and improvements 706.3 673.7 Machinery and equipment 2,731.8 2,501.5 Construction in progress 44.4 61.3 Total property, plant and equipment 3,617.6 3,361.1 Less - accumulated depreciation (1,687.2) (1,543.3) Net property, plant and equipment $ 1.930.4 $ 1.817.8 Depreciation expense was $86.8 million and $82.6 million in the three months ended October 2, 2004 and September 27, 2003, respectively, and $256.9 million and $234.7 million in the nine months ended October 2, 2004 and September 27, 2003, respectively, (7) Goodwill A summary of the changes in the carrying amount of goodwill, by reportable operating segment, for the nine months ended October 2, 2004, is shown below (in millions): Electronic and Seating Interior Electrical Total Balance as of December 31, 2003 $1,023.4 $1,022.9 $ 893.8 $2,940.1 Acquisition 26.0 26.0 Foreign currency translation and other 9.4 (7.1) (0.3) 2.0 Balance as of October 2, 2004 $1.~032.~8 $1.~015.8 $ 919.5~ $2.968.~1 (8) Long-Term Debt A summary of long-term debt and the related weighted average interest rates, including the effect of hedging activities described in Note 17, "Financial Instruments," and the amortization of debt discount, is shown below (in millions): October 272004 December 31~ 2003 Weighted Weighted Long-Term Average Long-Term Average Debt Instrument Debt Interest Rate Debt Interest Rate 5.75% Senior Notes, due August 2014 $ 399.2 5.635% $ Zero-coupon Convertible Senior Notes, due February 2022 283.0 4.75% 273.2 4.75% 8.125% Euro-denominated Senior Notes, due April 2008 308.2 8.125% 313.8 8.125% 8.11% Senior Notes, due May 2009 800.0 7.40% 800.0 7.18% 7.96% Senior Notes, due May 2005 600.0 6.51% 600.0 6.36% Other 76.3 4.45% 74.2 4.34% 2,466.7 2,061.2 Current portion (612.6) (4.0) Long-term debt $1.854.~1 $2.057.~2 o On August 3, 2004, the Company issued $400 million aggregate principal amount of unsecured 5.75 ¼ senior notes due 2014, yielding gross proceeds of $399.2 million. The notes are unsecured and rank equally with the Company's other unsecured senior indebtedness, including the Company's other senior notes. The offering of the notes was not registered under the Securities Act of 1933, as amended (the "Securities Act"). Under the terms of a registration rights agreement entered into in connection with the LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) issuance of the notes, the Company is required to complete an exchange offer o£ the notes for substantially identical notes registered under the Securities Act. The Company would be required to pay additional interest on the notes in the event the exchange offer is not completed by a specified date and under certain other circumstances. On August 26, 2004, the Company amended its outstanding zero-coupon convertible senior notes to require the settlement of any repurchase obligation with respect to the convertible senior notes for cash. As of October 2, 2004, the Company's primary credit facility consisted of a $1.7 billion amended and restated credit £acility, which matures on March 26, 2006. The Company's $250 million revolving credit facility matured on May 4, 2004. As of October 2, 2004 and December 31, 2003, there were no amounts outstanding under the Company's primary credit facility. The Company's primary credit facility contains numerous covenants relating to the maintenance of certain financial ratios and to the management and operation of the Company. The covenants include, among other restrictions, limitations on indebtedness, guarantees, mergers, acquisitions, fundamental corporate changes, asset sales, investments, loans and advances, liens, dividends and other stock payments, transactions with affiliates and optional payments and modification of debt instruments. The Company's senior notes also contain covenants restricting the ability of the Company and its subsidiaries to incur liens and to enter into sale and leaseback transactions and restricting the ability of the Company to consolidate with, to merge with or into, or to sell or otherwise dispose of all or substantially all of its assets to any person. As of October 2, 2004, the Company was in compliance with all covenants and other requirements set forth in its primary credit facility and senior notes. The Company's obligations under its primary credit facility and senior notes are guaranteed, on a joint and several basis, by certain of its significant subsidiaries, all of which are directly or indirectly 100%-owned by Lear. See Note 19, "Supplemental Guarantor Condensed Consolidating Financial Statements." (9) Pension and Other Postretirement Benefit Plans Net Periodic Benefit Cost The components of the Company's net periodic benefit cost are shown below (in millions): Pension Other Postretirement Three Months Ended Three Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Service cost $ 8.9 $ 8.4 $ 3.6 $ 3.7 Interest cost 6.9 7.1 3.3 3.1 Expected return on plan assets (4.6) (4.4) Amortization of actuarial loss 0.7 0.7 1.0 0.7 Amortization of transition (asset) obligation (0.1) 0.1 0.3 0.5 Amortization of prior service cost 0.8 1.0 (0.7) (0.1) Net periodic benefit cost $ 12.6 $ 12.9 $ 7.5 $ 7.9 10 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Pension Other Postrefirement Nine Months Ended Nine Months Ended ' October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Service cost $ 30.2 $ 25.2 $ 10.8 $ 11.1 Interest cost 25.8 21.3 9.5 9.3 Expected retum on plan assets (18.8) (13.2) AmortiZation of actuarial loss 2.3 2.1 3.0 2.1 Amortization of transition (asset) obligation (0.3) 0.3 0.9 1.5 Amortization of prior service cost 3.5 3.0 (2.1) (0.3) Special termination benefits · .. 0.1 0.2 Curtailment gain (7.7) Net periodic benefit cost $ 42.8 $ 38.7 $ 14.6 $ 23.7 Contributions Employer contributions to the Company's domestic and foreign pension plans for the three and nine months ended October 2, 2004, were approximately $12.9 million and $28.0 million, respectively. The Company expects to contribute an additional $10 to $12 million, in aggregate, to its domestic and foreign pension portfolios in the last three months of 2004. New Legislation On December 8, 2003, the Medicare Prescription Drag, Improvement and Modernization Act of 2003 (the "Act") was enacted. The Act introduced a prescription drag benefit under Medicare (Medicare Part D), as well as a federal subsidy to sponsors of certain other postretirement benefit plans that provide prescription drag benefits at least actuarially equivalent to Medicare Part D. In May 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drag, Improvement and Modernization Act of 2003," which provides the applicable accounting guidance related to the federal subsidy. In accordance with the transition provisions of FSP 106-2, the effects of the Act are reflected in the measurement of the postretirement benefit obligation and net periodic postretirement benefit cost as of and for the three and nine months ended October 2, 2004. The effects of adoption were not significant. (10) Other Expense, Net Other expense includes state and local non-income taxes, foreign exchange gains and losses, minority interests in consolidated subsidiaries, equity in net income of affiliates, gains and losses on the sales of fixed assets and other miscellaneous income and expense. A summary of other expense is shown below (in millions): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Other expense $ 11.6 $ 16.4 $ 44.1 $ 47.4 Other income (1.6) (3.0) (5.2) (6.8) Other expense, net $ 10.0 $ 13.4 $ 38.9 $ 40.6 (11) Provision for Income Taxes The provision for income taxes was $14.1 million, representing an effective tax rate of 13.3%, and $29.6 million, representing an effective tax rate of 28.0%, in the three months ended October 2, 2004 and September 27, 2003, respectively. The provision for income taxes was $91.5 million, representing an effective tax rate of 23.4%, and $103.3 million, representing an effective tax rate of 29.4%, in the nine months ended October 2, 2004 and September 27, 2003, respectively. The tax provision for the three months and nine months ended October 2, 2004, includes the benefit from a favorable tax settlement related to prior years' tax return matters, which reduced the effective tax rate by 14.5% and 3.9%, respectively. Excluding the impact of this settlement, the effective tax rates for the three and nine months ended October 2, 2004 and September 27, 2004, approximated the U.S. federal statutory income tax rate of 35% adjusted for income taxes on foreign eamings, losses and remittances, valuation adjustments, research and development credits and other items. 11 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) On October 22, 2004, the American Jobs Creation Act of 2004 (the "Act") was signed into law. The Act contains a one-time foreign dividend repatriation provision, which provides for a special deduction with respect to certain qualifying dividends from foreign subsidiaries for a limited period. The Company anticipates that its review of the Act will be completed as related guidance is issued and analysis of certain provisions of the Act is completed. (12) Net Income Per Share Basic net income per share is computed using the weighted average common shares outstanding during the period. Diluted net income per share is computed using thc average share price during the period when calculating the dilutive effect of common stock equivalents. A summary of shares outstanding is shown below: . Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Weighted average common shares outstanding 68,327,106 67,068,415 68,506,459 66,301,793 Dilutive effect of common stock equivalents 1.375.770 1.930.169 1,684.196 1,756,233 Diluted shares outstanding 69.702.87t5 68.998.58~4 70.190.65~5 68.058.02t5 Certain options were not included in the computation of diluted shares outstanding, as inclusion would have resulted in antidilution. A summary of these options and their exercise prices is shown below: Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Antidilutive options outstanding 16,000 552,000 552,000 Exercise price $55.33 $54.22 $54.22 The 4,813,056 shares issuable upon conversion of the Company's outstanding zero-coupon convertible senior notes are not included in the computation of diluted shares outstanding, as none of the contingent conversion events set forth in the notes has occurred. In October 2004, the FASB ratified the final consensus of the Emerging Issues Task Force ("EITF") on EITF 04-08, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," which states that the impact of contingently convertible instruments that are convertible into common stock upon the achievement of a specified market price of the issuer's shares, such as the Company's outstanding zero-coupon convertible senior notes, should be included in diluted net income per share computations regardless of whether the market price trigger has been met. The provisions will be effective for reporting periods ending after December 15, 2004, and all prior period net income per share amounts presented will be restated to conform to the new provisions. The effect of EITF 04-08 on the calculation of basic and diluted net income per share will be to adjust net income by adding back after-tax interest expense and to increase total shares outstanding by the number of shares that would be issuable upon conversion. The pro forma effects of this new accounting pronouncement are shown below (in millions, except per share data): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Netincome, as reported $ 91.7 $ 76.1 $ 299.2 $ 248.1 Add: After-tax interest expense on convertible debt 2.3 2.2 7.0 6.6 Net income, for diluted net income per share $ 94.0 $ 78.3 $ 306.2 $ 254.7 Diluted shares outstanding, as reported 69,702,876 68,998,584 70,190,655 68,058,026 Add: Shares issuable upon conversion of convertible debt 4,813,056 4,813,056 4,813,056 4,813,056 Diluted shares outstanding, pro forma 74.515.93~2 73.811.64~0 75.003.71~1 72.871.08~2 Diluted net income per share, pro forma $ 1.26 $ 1.06 $ 4.08 $ 3.50 For further information related to the zero-coupon convertible senior notes, see Note 8, "Long-Term Debt," to the consolidated 12 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. (13) Comprehensive Income Comprehensive income is defined as all changes in a company's net assets except changes resulting from transactions with stockholders. It differs from net income in that certain items currently recorded in equity would be a part of comprehensive income. A summary of comprehensive income is shown below (in millions): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Netincome $ 91.7 $ 76.1 $ 299.2 $ 248.1 Other comprehensive income (loss): Derivative instruments and hedging activities 1.8 1.2 11.5 9.6 Foreign currency translation adjustment 21.9 (0.8) 3.6 54.5 Other comprehensive income 23.7 0.4 15.1 64.1 Comprehensive income $ 115.4 $ 76.5 $ 314.3 $ 312.2 (14) Pre-Production Costs Related to Long-Term Supply Agreements The Company incurs pre-production engineering, research and development ("ER&D") and tooling costs related to the products produced for its customers under long-term supply agreements. The Company expenses all pre-production ER&D costs for which reimbursement is not contractually guaranteed by the customer. In addition, the Company expenses all pre-production tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer or for which the customer has not provided a non-cancelable right to use the tooling. During the first nine months of 2004 and 2003, the Company capitalized $168.3 million and $128.8 million, respectively, of pre-production ER&D costs for which reimbursement is contractually guaranteed by the customer. In addition, during the first nine months of 2004 and 2003, the Company capitalized $289.0 million and $245.2 million, respectively, of pre-production tooling costs related to customer-owned tools for which reimbursement is contractually guaranteed by the customer or for which the customer has provided a non-cancelable right to use the tooling. These amounts are included in recoverable customer engineering and tooling and other long-term assets in the consolidated balance sheets. During the nine months ended October 2, 2004 and September 27, 2003, the Company collected $474.1 million and $315.7 million, respectively, of cash related to the reimbursement of ER&D and tooling costs. During the first nine months of 2004 and 2003, the Company capitalized $24.3 million and $33.9 million, respectively, of Company-owned tooling. These amounts are included in property, plant and equipment, net, in the consolidated balance sheets. The classification of capitalized pre-production ER&D and tooling costs related to long-term supply agreements is shown below (in millions): October 2, December 31, 2004 2003 Current $ 171.1 $ 169.0 Long-term 232.8 233.5 Recoverable customer engineering and tooling $ 403.9 $ 402.5 Gains and losses related to ER&D and tooling projects are reviewed on an aggregated program basis. Net gains on projects are deferred and recognized over the life of the long-term supply agreement. Net losses on projects are recognized as costs are incurred. (15) Legal and Other Contingencies As of October 2, 2004 and December 31, 2003, the Company had recorded reserves for pending legal disputes, including commercial disputes and other matters, of $25.5 million and $40.9 million, respectively. Such reserves reflect amounts recognized in accordance with accounting principles generally accepted in the United States and typically exclude the cost of legal representation. 13 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Commercial Disputes The Company is involved from time to time in legal proceedings or claims relating to commercial or contractual disputes, including disputes with its suppliers. The Company will continue to vigorously defend itself against these claims. Based on present information, including the Company's assessment of the merits of the particular claims, the Company does not expect that these legal proceedings or claims, either individually or in thc aggregate, will have a material adverse effect on its business, consolidated financial position or results of operations, although the outcomes of these matters are inherently uncertain. On January 29, 2002, Seton Company, one of the Company's leather suppliers, filed a suit alleging that the Company had breached a purported agreement to purchase leather from Seton for scats for thc life of the General Motors GMT 800 program. This suit presently is pending in the U.S. District Court for the Eastern District of Michigan. Scton seeks compensatory and exemplary damages on bre~ch of contract and promissory estoppel claims and has submitted a report alleging up to approximately $75 million in damages. Thc Company has filed a counterclaim and believes that it has meritorious defenses to Seton's liability and damages claims. The Company intends to vigorously contest the lawsuit. As of thc date of this Report, discovery is continuing, and the trial .is scheduled for the first quarter of 2005. Product Liability Matters In the event that use of the Company's products results in, or is alleged to result in, bodily injury and/or property damage or other losses, the Company may be subject to product liability lawsuits and other claims~ In addition, thc Company is a party to warranty- sharing and other agreements with its customers relating to its products. These customers may pursue claims against thc Company for contribution of all or a portion of the amounts sought in connection with product liability and warranty claims. The Company can provide no assurances that it will not experience material claims in thc future or that it will not incur significant costs to defend such claims. In addition, if any of thc Company's products are, or are alleged to be, defective, the Company may be required or requested by its customers to participate in a recall or other corrective action involving such products. Certain of the Company's customers have asserted claims against the Company for costs related to recalls involving the Company's products. In certain instances, the allegedly defective products were supplied by Tier 2 suppliers against whom thc Company has sought or will seek contribution. The Company believes that the overall net impact of these claims is not likely to be material, although no assurances can bc given in this regard. Thc Company carries insurance for certain legal matters, including product liability claims, but such coverage may be limited. The Company does not maintain insurance for recall matters, as such insurance is not generally available. The Company records product warranty liabilities based on its individual customer agreements. Product warranty liabilities are recorded for known warranty issues when amounts related to such issues are probable and reasonably estimable. In certain product liability and warranty matters, the Company may seek recoveries from its suppliers that supply materials or services included within the Company's products that arc associated with thc related claims. A summary of the changes in product warranty liabilities for the nine months ended October 2, 2004, is shown below (in millions): Balance as of December 31, 2003 $ 39.7 Expense, net 7.2 Settlements and other 0.1 Balance as of October 2, 2004 5; 47.0 Environmental Matters The Company is subject to local, state, federal and foreign laws, regulations and ordinances which govern activities or operations that may have adverse environmental effects and which impose liability for the costs of cleaning up certain damages resulting from past spills, disposal or other releases of hazardous wastes and environmental compliance. The Company's policy is to comply with all applicable environmental laws and to maintain an environmental management program based on ISO 14001 to ensure compliance. However, the Company currently is, has been and in the future may become the subject of formal or informal enforcement actions or procedures. The Company has been named as a potentially responsible party at several third-party landfill sites and is engaged in the cleanup of hazardous waste at certain sites owned, leased or operated by the Company, including several properties acquired in the 1999 acquisition of UT Automotive, Inc. ("UT Automotive"). Certain present and former properties of UT Automotive are subject to environmental liabilities which may be significant. The Company obtained agreements and indemnities with respect to certain environmental liabilities from United Technologies Corporation ("UTC") in connection with the acquisition of UT Automotive. UTC manages and directly funds these environmental liabilities pursuant to its agreements and indemnities with the Company. 14 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of October 2, 2004 and December 31, 2003, the Company had recorded reserves for environmental matters of $6.7 million and $4.8 million, respectively. While the Company does not believe that the environmental liabilities associated with its current and former properties will have a material adverse effect on its business, consolidated financial position or results of future operations, no assurances can be given in this regard. One of the Company's subsidiaries and certain predecessor companies were named as defendants in an action filed by three plaintiffs in August 2001 in the Circuit Court of Lowndes County, Mississippi asserting claims stemming from alleged environmental contamination caused by an automobile parts manufacturing plant located in Columbus, Mississippi. The plant was acquired by the Company as part of the UT Automotive acquisition in May 1999 and sold almost immediately thereafter, in June 1999, to Johnson Electric Holdings Limited ('!Johnson Electric"). In December 2002, approximately 61 additional Cases were filed by approximately 1,000 plaintiffs in the: same court against the Company and other defendants relating to similar claims., In September 2003, the Company was dismissed as a party to these cases. In the first half of 2004, the Company was named again as a defendant in these same 61 cases and was also named in five new actions filed by approximately 150 individual plaintiffs related to alleged environmental contamination from the same facility. The plaintiffs in these actions are persons who allegedly were either residents and/or owned property near the facility or worked at the facility. Each of these complaints seeks compensatory and punitive damages. To date, there has been limited discovery in these cases and the probability of liability and the amount of damages in the event of liability are unknown. UTC, the former owner of UT Automotive, and Johnson Electric have each sought indemnification from the Company under the respective acquisition agreements, and the Company has claimed indemnification from them under the same agreements. To date, no company admits to, or has been found to have, an obligation to fully defend and indemnify any other. The Company intends to vigorously defend against these claims and believes that it will eventually be indemnified by either UTC or Johnson Electric for resulting losses, if any. Other Matters The Company is involved in certain other legal actions and claims arising in the ordinary course of business, including, without limitation, intellectual property matters, personal injury claims and employment matters. Although the outcome of any legal matter cannot be predicted with certainty, the Company does not believe that any of these other legal proceedings or matters in which it is currently involved, either individually or in the aggregate, will have a material adverse effect, on its business, consolidated financial position or results of operations. In January 2004, the U.S. Securities and Exchange Commission ("SEC") commenced an informal inquiry into the Company's September 2002 amendment of its 2001 Form 10-K. The amendment was filed to report the Company's employment of relatives of certain of its directors and officers and certain related-party transactions. The SEC has advised the Company that the inquiry should not be construed as an indication by the Commission or its staff that any violations of law have occurred or as an adverse reflection upon any person or security. The Company is cooperating with the SEC's inquiry. 06) Segment Reporting The Company has three reportable operating segments: seating, interior and electronic and electrical. The seating segment includes seat systems and components thereof. The interior segment includes flooring and acoustic systems, door panels, instrument panels and cockpit systems, overhead systems and other interior products. The electronic and electrical segment includes electronic products and electrical distribution systems, primarily wire harnesses and junction boxes; interior control and entertainment systems; and wireless systems. The Other category includes the corporate headquarters, geographic headquarters, the technology centers and the elimination of intercompany activities, none of which meets the requirements of being classified as an operating segment. The Company evaluates the performance of its operating segments based primarily on revenues from external customers, income before interest, other expense and income taxes and cash flow, being defined as income before interest, other expense and income taxes less capital expenditures plus depreciation and amortization. A summary of revenues from external customers and other financial information by reportable operating segment is shown below (in millions): 15 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Three Months Ended October 2:2004 Electronic and Seating Interior Electrical Other Consolidated Revenues from external customers $2,592.7 $ 665.0 $ 640.1 $ $3,897.8 Income before interest, other expense and income taxes 167.3 8.2 41.3 (57.7) 159.1 Depreciation and amortization 30.6 27.2 25.0 5.5 88.3 Capital expenditures 40.8 18.4 25.1 6.8 91.1 Total assets 4,288.4 2,413.7 2,563.3 311,1 9,576.5 Three Months Ended September: 27? 2003 Electronic and Seating Interior Electrical Other Consolidated Revenues from external customers $2,340.4 $ 655.5 $ 495.6 $ $3,491.5 Income before interest, other expense and income taxes 157.7 14.3 43.8 (52.7) 163.1 Depreciation and amortization 30.6 28.0 16.6 7.4 82.6 Capital expenditures 24.2 21.0 21.0 10.7 76.9 Total assets 3,650.0 2,502.9 2,045.3 155.2 8,353.4 Nine Months Ended October 2~ 2004 Electronic and Seating Interior Electrical Other Consolidated Revenues from external customers $8,488.5 $2,221.4 $1,964.0 $ $12,673.9 Income before interest, other expense and income taxes 504.1 56.8 158.7 ( 168.4) 551.2 Depreciation and amortization 98.0 81.2 62.2 17.0 258.4 Capital expenditures 141.1 64.9 70.6 7.1 283.7 Total assets 4,288.4 2,413.7 2,563.3 31 I. 1 9,576.5 Nine Months Ended September 27? 2003 Electronic and Seating Interior Electrical Other Consolidated Revenues from external customers $7,861.9 $2,048.1 $1,581.4 $ $11,491.4 Income before interest, other expense and income taxes 473.4 66.2 146.6 (149.5) 536.7 Depreciation and amortization 96.0 80.3 50.6 7.8 234.7 Capital expenditures 54.9 78.7 65.1 15.5 214.2 Total assets 3,650.0 2,502.9 2,045.3 155.2 8,353.4 In 2004, the Company changed its allocation of goodwill. Goodwill, previously reflected in "Other," has been allocated to the reportable operating segments. Total assets by reportable operating segment as of September 27, 2003, reflect this change. A reconciliation of consolidated income before interest, other expense and income taxes to consolidated income before provision for income taxes is shown below (in millions): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Income before interest, other expense and income taxes $ 159.1 $ 163.1 $ 551.2 $ 536.7 Interest expense 43.3 44.0 121.6 144.7 Other expen se, net 10.0 13.4 38.9 40.6 Income before provision for income taxes $ 105.8 $ 105.7 $ 390.7 $ 351.4 16 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (17) Financial Instruments From time to time, certain of the Company's European subsidiaries factor their accounts receivable with financial institutions. Such receivables are factored without recourse to the Company and are not included in accounts receivable in the consolidated balance sheets. As of October 2, 2004, there were no factored accounts receivable. As of December 31, 2003, thc amount of factored receivables was $70.6 million. Asset-backed Securitization Agreement Under an asset-backed securitization facility ("ABS facility"), the Company and several of its U.S. subsidiaries sell certain accounts receivable to a wholly-owned, consolidated, bankruptcy-remote special purpose corporation (Lear ASC Corporation). In turn, Lear ASC Corporation transfers undivided interests in up to $200 million of the receivables to bank-sponsored commercial-paper conduits. In October 2004, the ABS facility was amended to extend the termination date to November 1, 2005. As of Octuber 2, 2004 'and December 31, 2003, accounts receivable totaling $542.4 million and $671.1 million, respectively, had been transferred to Lear ASC Corporation, but no undivided interests in the receivables were transferred to the conduits. As such, these amounts are included in accounts receivable in the consolidated balance sheets. A discount on the sale of receivables of $0.4 million and $0.5 million was recognized in the three months ended October 2, 2004 and September 27, 2003, respectively, and $1.3 million and $2.0 million was recognized in the nine months ended October 2, 2004 and September 27, 2003, respectively. This discount is reflected in other expense, net in the accompanying consolidated statements of income. The Company retains a subordinated ownership interest in the pool of receivables sold to Lear ASC Corporation. The Company continues to service the transferred receivables for an annual servicing fee. The conduit investors and Lear ASC Corporation have no recourse to the Company or its subsidiaries related to the sold receivables. The Company retains a risk of repayment to the extent of its subordinated ownership interest in the pool of sold receivables. The following table summarizes certain cash flows received from and paid to Lear ASC Corporation (in millions): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Repayments ofsecuritizations $ $ (23.1) $ $ (138.5) Proceeds from collections reinvested in securitizations 1,041.0 1,092.1 3,627.5 3,472.9 Servicing fees received 1.3 1.2 4.1 3.9 Derivative Instruments and Hedging Activities Forward foreign exchange, futures and option contracts -- The Company uses forward foreign exchange, futures and option contracts to reduce the effect of fluctuations in foreign exchange rates on short-term, foreign currency denominated intercompany transactions and other known foreign currency exposures. Gains and losses on the derivative instruments are intended to offset gains and losses on the hedged transaction in an effort to reduce the earnings volatility resulting from fluctuations in foreign exchange rates. The principal currencies hedged by the Company include the Mexican peso, Canadian dollar and the Euro. Forward foreign exchange and futures contracts are accounted for as fair value hedges when the hedged item is a recognized asset or liability or an unrecognized firm commitment. As of October 2, 2004, contracts designated as fair value hedges with $1.2 billion of notional amount were outstanding with maturities of less than six months. As of October 2, 2004, the fair market value of these contracts was approximately $2.2 million. Forward foreign exchange, futures and option contracts are accounted for as cash flow hedges when the hedged item is a forecasted transaction or the variability of cash flows to be paid or received relates to a recognized asset or liability. As of October 2, 2004, contracts designated as cash flow hedges with $834.7 million of notional amount were outstanding with maturities of less than fifteen months. As of October 2, 2004, the fair market value of these contracts was approximately negative $1.4 million. Interest rate swap contracts -- The Company uses interest rate swap contracts to manage its exposure to fluctuations in interest rates. Interest rate swap contracts which fix the interest payments of certain variable rate debt instruments or fix the market rate component of anticipated fixed rate debt instruments am accounted for as cash flow hedges. Interest rate swap contracts which hedge the change in fair market value of certain fixed rate debt instruments are accounted for as fair value hedges. As of October 2, 2004, contracts representing $600 million of notional amount were outstanding with maturity dates of May 2005 through May 2009. All of these contracts are designated as fair value hedges and modify the fixed rate characteristics of the Company's outstanding long-term debt with fixed coupons and maturities of 7.96% in May 2005 and 8.11% in May 2009. These contracts effectively convert the fixed 17 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) coupon liabilities into variable rate obligations with coupons of six-month LIBOR plus weighted average spreads of 6.08% and 4.58%, respectively. The effective cost of these contracts is six-month LIBOR plus 2.67% and 3.81%, respectively, including the impact of swap contract restructuring. The fair market value of all outstanding interest rate swap agreements is subject to changes in value due to changes in interest rates. As of October 2, 2004, the fair market value of all outstanding interest rate swap agreements was approximately negative $9.4 million. As of October 2, 2004 and December 31, 2003, net gains of approximately $3.9 million and net losses of approximately $13.7 million, respectively, related to derivative instruments and hedging activities were recorded in accumulated other comprehensive loss. Net losses of $1.3 million and $7.5 million in the three months ended October 2, 2004 and September 27, 2003, respectively, and $4.8 million and $20.1 million in the nine months ended October 2, 2004 and September 27, 2003, respectively, related to the Company's ~hedging activities were reclassified from accumulated other comprehensive loss into earnings. As of October 2, 2004, all cash flow .hedges were scheduled to mature within fifteen months, all fair value hedges of the Company's fixed rate debt instruments were scheduled to mature within five years, and all fair value hedges of the Company's foreign exchange exposure were scheduled to mature within six months. During the twelve month period ended October 1, 2005, the Company expects to reclassify into earnings net gains of approximately $4.5 million recorded in accumulated other comprehensive loss. Such gains will be reclassified at the time the underlying hedged transactions are realized. During the three and nine months ended October 2, 2004 and September 27, 2003, amounts recognized in the consolidated statements of income related to changes in the fair market value of cash flow and fair value hedges excluded from the effectiveness assessments and the ineffective portion of changes in the fair market value of cash flow and fair value hedges were not material. Non-U.S. dollar financing transactions -- The Company has designated its 8.125% Euro-denominated senior notes (Note 8) as a net investment hedge of long-term investments in its Euro-functionai subsidiaries. As of October 2, 2004, the amount recorded in cumulative translation adjustment related to the effective portion of the net investment hedge of foreign operations was approximately negative $85.4 million. (18) Accounting Pronouncements Pensions and Other Postretirement Benefits The FASB issued a revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement retains the original pension and other postretirement benefits disclosures of SFAS No. 132 and requires additional disclosures for both annual and interim periods. Additional annual reporting requirements related to plan assets, accumulated benefit obligations and expected plan contributions are effective for fiscal years ending after December 15, 2003, for domestic plans, and for fiscal years ending after June 15, 2004, for foreign plans. Additional annual reporting requirements related to estimated future benefit payments are effective for fiscal years ending after June 15, 2004, for both domestic and foreign plans. Additional interim reporting requirements related to the components of net periodic benefit cost, contributions paid and significant changes in assumptions are effective for interim periods beginning after December 15, 2003, for both domestic and foreign plans. All interim disclosures required by this statement have been reflected in Note 9, "Pension and Other Postretirement Benefit Plans." Variable Interest Entities The FASB issued Interpretation ("FIN") No. 46 (revised December 2003), "Consolidation of Variable Interest Entities," the provisions of which apply immediately to any variable interest entity created after January 31, 2003, apply no later than the first period ending after December 15, 2003, to special purpose corporations, and apply in the first interim period ending after March 15, 2004, to any variable interest entity created prior to February 1, 2003. This interpretation requires the consolidation of a variable interest entity by its primary beneficiary and may require the consolidation of a portion of a variable interest entity's assets or liabilities under certain circumstances. The Company adopted the requirements of FIN No. 46 as of April 3, 2004. Such requirements related primarily to the Company's investments in affiliates. The effects of adoption were not significant. 18 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (19) Supplemental Guarantor Condensed Consolidating Financial Statements October 27 2004 Non- Parent Guarantors guarantors Eliminations Consolidated (Unaudited; in millions) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 384.1 $ 1.6 $ 115.9 $ -- $ 501.6 Accounts receivable 58.4 366.6 2,091.2 -- 2,516.2 Inventories 19.7 209.2 454.9 -- 683.8 Recoverable customer engineering and tooling 33.9 96.7 40.5 -- 171.1 Other 86.7 _ 80,7 157.5 -- 324,9 Total current assets .' ~82Ag 754.8 2.860.0 -- 4.197.6 LONG-TERM ASSETS: Property, plant and equipment, net 163.3 738.0 1,029.1 -- 1,930.4 Goodwill, net 100.3 1,906.7 96 l. 1 -- 2,968.1 Investments in subsidiaries 3,668~9 2,351.2 -- (6,020.1) -- Other 109.0 65.7 305.7 -- 480.4 Total long-term assets 4.041.5 5.061.6 2295.9 (6.020. D 5.378.9 $ 46243 $ 5.__~816.4 $ 5.155.9 $ (60201__~ $ 9.576.5 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings $ -- $ -- $ 24.1 $ -- $ 24.1 Accounts payable and drafts 215.8 779.1 1,619.5 2,614.4 Accrued liabilities 170.3 360.4 720.0 -- 1,250.7 Current portion of long-term debt 603.9 2.0 6.7 -- 612.6 Total current liabilities 990.0 1.141.5 2.370.3 -- 4.501.8 LONG-TERM LIABILITIES: Long-term debt 1,819.1 12.1 22.9 -- 1,854.1 Intercompany accounts, net (952.5) 1,711.4 (758.9) -- -- Other 255.1 183.9 269.0 708.0 Total long4erm liabilities 1.121.7 1.907.4 (4(i7,Q) -- 2.562.1 STOCKHOLDERS' EQUITY 2,512.6 2.767.5 3.252.6 (6,020.1) 2.512.6 ~ 4.624.~3 $ 5~816.4 $ 5.155.~9 $ (6.020.1~ $ 9.576.~5 19 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (19) Supplemental Guarantor Condensed Consolidating Financial Statements - (continued) December 31~ 2003 Non- Parent Guarantors guarantors Eliminations Consolidated (In millions) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 40.9 $ 9.7 $ 118.7 $ -- $ 169.3 Accounts receivable 17.9 331.0 1,851A -- 2,200.3 Inventories 10.2 188.0 352.0 -- 550.2 Recoverable customer engineering and tooling (11.1) 86.5 93.6 -- 169.0 Other ~ 97.21 57.8 131.5 -- 286.6 Total current assets 155.2 673,0 2,547.2 -- ),375.4 LONG- TERM ASSETS: Property, plant and equipment, net 127.4 765.8 924.6 -- 1,817.8 Goodwill, net 100.2 1,906.7 933.2 2,940. l Investments in subsidiaries 3,320.4 2,071.9 -- (5,392.3) -- Other 96,9 71),4 270.4 -- 437,7 Total long-term assets 3.644.9 4.814.8 2.128.2 (5.392.3) 5.195.6 $ 3.800.~1 ~g 5.487.8 $ 4.675.~4 ~g (5 392.3~ $ 8 571.~0 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings $ 0.3 $ 0.1 $ 16.7 $ $ 17.1 Accounts payable and drafts 128.7 749.1 1,566.3 -- 2,444.1 Accrued liabilities 148.3 379.9 588.7 -- 1,116.9 Current portion of long-term debt -- 1,6 2,4 -- 4,0 Total current liabilities 277.3 1.130.7 2,174.1 -- 3,5 ~2,1 LoNG-TERM LIABILITIES: Long-term debt 2,027.0 12.8 17.4 -- 2,057.2 Intercompany accounts, net (1,024.8) 1,496.8 (472.0) -- -- Other 263. I 180.6 230.5 -- 674,2 Total long-term liabilities 1.265.3 1,690.2 (224.1) 2.731.4 STOCKHOLDERS'EQUITY 2,257.5 2.666.9 2,725.4 (5,392.3) 2.257.5 $ 3.800.~1 5; 5.487.8 $ 4.675.~4 $ (5.392.3~ 5; 8.571.~0 20 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (19) Supplemental Guarantor Condensed Consolidating Financial Statements - (continued) For the Three Months Ended October 2:2004 Non- Parent Guarantors guarantors Eliminations Consolidated (Unaudited; in millions) Ne[sales $ 282.3 $ 1,658.6 $ 2,584.6 $ (627.7) $ 3,897.8 Cost of sales 299.3 1,509.9 2,396.1 (627.7) 3,577.6 Selling, general and administrative expenses 38.6 38.6 83.9 -- 161. I Interest expense 8.3 26.5 8.5 -- 43.3 Intercompany (income) expense, net (82.5) 80.3 2.2 -- -- Other expense, net 1,6 6,$ 1,6 -- 10,0 Income (loss) before provision (credi0 for income taxes and equity in net income of subsidiaries 17.0 (3.5) 92.3 -- 105.8 Provision (credi0 for income taxes (14.1) 7.6 20.6 14.1 Equity in net income of subsidiaries (60.6) (24.6~ -- 85.2 Net income ~ 91.7 5; 13.5 5; 71.7 5; (85.2) 5; 91.7 For the Three Months Ended September 27~ 2003 Non- Parent Guarantors guarantors Eliminations Consolidated * (Unaudited; in millions) Netsales $ 231.0 $ 1,738.0 $ 2,064.4 $ (541.9) $ 3,491.5 Cost of sales 236.1 1,561.6 1,932.0 (541.9) 3,187.8 Selling, general and administrative expenses 31.5 52.2 56.9 -- [40.6 Interest expense 16.1 20.1 7.8 -- 44.0 Intercompany (income) expense, net (128.9) 82.8 46.1 -- Other (income) expense, net (1.4) $,9 ~,9 -- 1),4 Income before provision (credit) for income taxes and equity in net income of subsidiaries 77.6 12.4 15.7 -- 105.7 Provision (credit) for income taxes 11.0 21.9 (3.3) -- 29.6 Equity in net income of subsidiaries (9.5) (11.3) -- 20.8 -- Net income $ 76.1 5; 1.8 $ 19.0 $ (20.8) 5; 76.1 2l LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (19) Supplemental Guarantor Condensed Consolidating Financial Statements -(continued) For the Nine Months Ended October 2~ 2004 Non- Parent Guarantors guarantors Eliminations Consolidated (Unaudited; in millions) Net sales $ 794.6 $ 5,707~2 $ 8,157.6 $ (1,985.5) $12,673.9 Cost of sales 866.0 5,184.5 7,570.2 (1,985.5) 11,635.2 Selling, general and administrative expenses 119.7 143.5 224.3 -- 487.5 Interest expense 10.8 84.1 26.7 -- 121.6 Intercompany (income) expense, net (254.3) 269.0 (14.7) -- Other (income) expense, net (16,0) 17,6 37,3 -- _ 38.9 Income before provision (credit) for income taxes and equity in net income of subsidiaries 68.4 8.5 313.8 -- 390.7 Provision (credit) for income taxes (14.3) 32.7 73.1 -- 91.5 Equity in net income of subsidiaries (216.5) (128.8) -- 345.3 -- Netincome $ 299.2 ~g 104.6 ~; 240.7 $ (345.3~ ~ 2992 For the Nine Months Ended September 27~ 2003 Non- Parent Guarantors guarantors Eliminations Consolidated (Unaudited; in millions) Net sales $ 769.9 $ 5,764.5 $ 6,735.6 $ (1,778.6) $11,491.4 Cost of sales 774.7 5,198.9 6,330.9 (1,778.6) 10,525.9 Selling, general and administrative expenses 98.0 142.9 187.9 -- 428.8 Interest expense 54.0 50.5 40.2 -- 144.7 Intercompany (income) expense, net (322.3) 258.9 63.4 -- Other expense, net 1.4 28.4 10.8 41).6 Income before provision (credit) for income taxes and equity in net income of subsidiaries 164.1 84.9 102.4 351.4 Provision (credit) for income taxes 27.5 91.6 (15.8) --- 103.3 Equity in net income of subsidiaries (111.5) (79.1) -- 190.6 -- Netincome $ 248.1 $ 72.4 $ 118.2 5; (190.6~ $ 248.1 22 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (19) Supplemental Guarantor Condensed Consolidating Financial Statements - (continued) For the Nine Months Ended October 272004 Non- Parent Guarantors guarantors Eliminations Consolidated (Unaudited; in millions) Net cash provided by operating activities $ 144.7 $ 11.7 $ 287.6 $ -- $ 444.0 Cash Flows from Investing Activities: Additions to property, plant and equipment (54.5) (93.6) (135.6) -- (283.7) Cost of acquisitions, net of cash acquired (12.3) (3.3) (81.9) -- (97.5) Other, net ~,4 11.0 14.6 _ Net cash used in investing activities (58.4) (85.9) (202.9) .. (347.2) Cash Flows from Finallcin~ Activities: · lssuance of senior notes 399.2 -- -- -- 399.2 Long-term debt repayments, net (7.5) -- (44.0) -- (51.5) Short-term debt repayments, net (0.3) (0.1) (36.6) -- (37.0) Dividends paid (54.6) -- -- -- (54.6) Proceeds from exercise of stock options 20.1 -- -- -- 20.1 Repurchase of common stock (50.6) -- -- -- (50.6) Increase in drafts 8.1 (4.6) 0.I -- 3.6 Change in intercompany accounts (57.5) 70.2 (12.7) -- -- Net cash provided by financing activities 256.9 65.5 (93,2) -- 229.2 Effect of foreign currency translation -- 0.6 5,7 -- 6,;t Net Change in Cash and Cash Equivalents 343.2 (8.1) (2.8) 332.3 Cash and Cash Equivalents as of Beginning of Period 40.9 9.7 118.7 169.3 Cash and Cash Equivalents as of End of Period g 384.1 $ 1.6 $ I 15.9 For the Nine Months Ended September 27~ 2003 Non- Parent Guarantors guarantors Eliminations Consolidated (Unaudited; in millions) Net cash provided by operating activities $ 252.7 $ 118.9 $ (12.0) $ -- $ 359.6 Cash Flows from Investing Activities: Additions to property, plant and equipment (20.3) (72.3) (121.6) (214.2) Cost of acquisitions, net of cash acquired (1.8) (10.6) (12.4) Other, net -- 9,(~ ~ 1,9 -- ;11 ,~ Net cash used in investing activities (22.1) (62.7) (110.33 -- (195.1) Cash Flows from Financing Activities: Long-term debt repayments, net ( 121.9) 2.2 (6.4) ( 126.1 ) Short-term debt repayments, net (4.5) -- (23.9) -- (28.4) Proceeds from exercise of stock options 42.5 -- -- -- 42.5 Repurchase of common stock ( 1.1 ) -- (1.1) Decrease in drat~s (27.5) 7.7 (13.7) -- (33.5) Change in intercompany accounts (118.2) (4,5,2) 1 ~3,4 -- -- Net cash used in financing activities (230.7) (35.3) 119.4 -- (146.6) Effect of foreign currency translation -- (16.8) 9.7 (7.1) Net Change in Cash and Cash Equivalents (0.1) 4.1 6.8 10.8 Cash and Cash Equivalents as of Beginning of Period 0.5 3.0 88.2 -- 91.7 Cash and Cash Equivalents as of End of Period 5; 0.4 $ 7.1 5; 95.0 $~ $ 102.5 23 LEAR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (19) Supplemental Guarantor Condensed Consolidating Financial Statements - (continued) Basis of Presentation - Certain of the Company's 100%-owned subsidiaries (the "Guarantors") have unconditionally fully guaranteed, on a joint and several basis, the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all of the Company's obligations under the primary credit facility and the indentures governing the Company's senior notes, including the Company's obligations to pay principal, premium, if any, and interest with respect to the senior notes. The senior notes consist of $600 million aggregate principal amount of 7.96% senior notes due May 15, 2005, $800 million aggregate principal amount of 8.11% senior notes due May 15, 2009, Euro 250 million aggregate principal amount of 8.125% senior notes due 2008, $640 million aggregate principal amount at maturity of zero-coupon convertible senior notes due 2022 and $400 million aggregate principal amount of 5.75% senior notes due August 1, 2014. The Guarantors under the indentures are currently Lear Operations Corporation, Lear Seating Holdings Corp. #50, Lear Corporation EEDS and Interiors, Lear Technologies, L.L.C., Lear Midwest Automotive, Limited Partnership, Lear Automotive (EEDS) Spain S.L. and Lear Corporation Mexico, S.A. de C.V. In lieu of providing separate tlnaudited financial statements for the Guarantors, the Company has included the unaudited supplemental guarantor condensed consolidating financial statements above. Management does not believe that separate financial statements of the Guarantors are material to investors. Therefore, separate financial statements and other disclosures concerning the Guarantors are not presented. Distributions -- There are no significant restrictions on the ability of the Guarantors to make distributions to the Company. Selling, General and Administrative Expenses -- The Parent allocated $32.3 million and $24.1 million in the three months ended October 2, 2004 and September 27, 2003, respectively, and $76.0 million and $70.0 million in the nine months ended October 2, 2004 and September 27, 2003, respectively, of corporate selling, general and administrative expenses to its operating subsidiaries. The allocations were based on various factors, which estimate usage of particular corporate functions, and in certain instances, other relevant factors, such as the revenues or the number of employees of the Company's subsidiaries. Long-term debt of the Parent and the Guarantors -- A summary of long-term debt of the Parent and the Guarantors on a combined basis is shown below (in millions): October 2, December 31, 2004 2003 Senior notes $ 2,390.4 $ 1,987.0 Other long-term debt 46.7 54.4 2,437.1 2,041.4 Less -- current portion (605.9) (1.6) $ 1.831.2 $ 2.039.8 The obligations of foreign subsidiary borrowers under the primary credit facility are guaranteed by the Parent. For more information on the above indebtedness, see Note 8, "Long-Term Debt." 24 LEAR CORPORATION ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EXECUTIVE OVERVIEW We are one of the world's largest automotive interior systems suppliers based on net sales. Our net sales have grown from $9.1 billion for the year ended December 31, 1998, to $15.7 billion for the year ended December 31, 2003, a compourrd annual growth rate of 12%. The major sources of this growth have been new program awards and the completion of the acquisition of UT Automotive, Inc. ("UT Automotive") in May 1999. We supply every major automotive manufacturer in the world, including General Motors, Ford, DaimlerChrysler, BMW, Fiat, PSA, Volkswagen, Renault-Nissan, Toyota, Subaru, Porsche and Hyundai. We have capabilities in all five principal segments of the automotive interior market: seat systems; flooring and acoustic systems; door panels; instrument panels and cockpit systems; and overhead systems. We are also one of the leading~ global suppliers of automotive electronic products and electrical distribution systems. As a result &these capabilities, wecan offer our customers fully- integrated automotive interiors, including electronic products and electrical distribution systems. In 2002, we were awarded the first- ever total interior integrator program by General Motors for the 2006 Buick Lucerne and Cadillac DTS models. As a total interior integrator, we work closely with the customer on the design and are responsible for the engineering, component/module sourcing, manufacturing and delivery of the automotive interiors for these two full-size passenger cars. Demand for our products is directly related to automotive vehicle production. Automotive sales and production can be affected by general economic conditions, labor relations issues, regulatory requirements, trade agreements and other factors. Our operating results are also significantly impacted by what is referred to in this section as "vehicle production volume and mix"; that is, overall industry production, the commercial success o£the vehicle platforms for which we supply products as well as our relative profitability on these platforms. In addition, our two largest customers, General Motors and Ford and their respective affiliates, together accounted for approximately 59% of our net sales in 2003. Excluding Opel, Saab, Volvo, Jaguar and Land Rover, which are affiliates of General Motors or Ford, General Motors and Ford accounted for approximately 47% of our net sales in 2003. A significant loss of business with respect to any vehicle model for which we are a significant supplier could materially and negatively affect our operating results. Automotive industry conditions in North America and Europe continue to be Challenging. In North America, the industry is characterized by significant overcapacity, fierce competition and significant pension and healthcare liabilities for the domestic automakers. In addition, the domestic automakers have recently announced production cuts which impact several of our key platforms. In Europe, the market structure is highly fragmented with significant overcapacity and several of our key platforms have experienced production declines. Historically, the majority of our sales have been derived from the U.S.-based automotive manufacturers in North America, as well as automotive manufacturers in Western Europe. As discussed below, our ability to increase sales in the future will depend, in part, on our ability to increase our penetration of Asian automotive manufacturers worldwide and leverage our existing European customer base across all product lines. Our customers require us to reduce costs and, at the same time, assume greater responsibility for the design, development, engineering and integration of interior products. We seek to enhance our profitability by investing in technology, design capabilities and new product initiatives that respond to the needs of our customers and consumers. Our profitability is also dependent on our ability to achieve product cost reductions, including cost reductions from our suppliers. Finally, we continually evaluate alternatives to align our business with the changing needs of our customers and to lower the operating costs of our Company. This may include the realignment of our existing manufacturing capacity, facility closures or similar actions. Increases in certain raw material or commodity costs, such as steel, resins and diesel fuel, have negatively impacted our operating results in the first nine months of 2004, and we expect them to have a significant impact on our profitability in the remainder of 2004 and in 2005. We have developed strategies to mitigate the impact, which include aggressive cost reduction actions, the selective in- sourcing of components where we have available capacity, the continued consolidation of our supply base and the acceleration of low- cost country sourcing and engineering. In addition, the sharing of increased raw material costs has been, or will be, the subject of negotiations with our suppliers and our customers. While we believe that our mitigation efforts will offset a substantial portion of the financial impact o£increased commodity costs, no assurances can be given that the magnitude and duration of these cost increases will not have a material impact on our future operating results. See "-- Forward-Looking Statements." In evaluating our financial condition and operating performance, we focus primarily on profitable sales growth and cash flows, as well as return on invested capital on a consolidated basis. In addition to maintaining and expanding our business with our existing customers in our more established markets, we have increased our emphasis on expanding our business in Eastern European and Asian 25 LEAR CORPORATION markets and with Asian automotive manufacturers worldwide. The Eastern European and Asian markets present growth opportunities, as automotive manufacturers expand production in these markets to meet increasing demand. We currently have twelve joint ventures in China and several other joint ventures dedicated to serving Asian automotive manufacturers. We will continue to seek ways to expand our business in Eastern European and Asian markets and with Asian automotive manufacturers worldwide. Our success in generating cash flow will depend, in part, on our ability to efficiently manage working capital. Working capital can be significantly impacted by the timing of cash flows from sales and purchases. In this regard, changes in customer payment terms are expected to have a negative impact on our reported cash flows through 2005. In addition, our cash flow is dependent on our ability to efficiently manage our capital spending. We can strengthen our balance sheet by promoting a flexible cost structure and efficiently utilizing our asset base. Return on invested capital is a measure of the efficiency with which assets are deployed to increase earnings. Improvements in our return on invested capital will depend on our ability to maintain an appropriate asset base for our business and to increase productivity and operating efficiency. For further information related to other factors that have had, or may in the future have, a significant impact on our business, financial condition or results of operations, see "-- Forward-Looking Statements" and Item 7, %- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2003. RESULTS OF OPERATIONS A summary of our operating results as a percentage of net sales is shown below (dollar amounts in millions): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Net sales Seating $ 2,592.7 66.5% $ 2,340.4 67.0% $ 8,488.5 67.0% $ 7,861.9 68.4% Interiors 665.0 17.1 655.5 18.8 2,221.4 17.5 2,048.1 17.8 Electronic and electrical 640.1 16.4 495.6 14.2 1,964.0 15.5 1,581.4 13.8 Net sales 3,897.8 100.0 3,491.5 100.0 12,673.9 100.0 11,491.4 100.0 Gross profit 320.2 8.2 303.7 8.7 1,038.7 8.2 965.5 8.4 Selling, general and administrative expenses 161.1 4.1 140.6 4.0 487.5 3.8 428.8 3.7 Interest expense 43.3 1.1 44.0 1.3 121.6 1.0 144.7 1.3 Other expense, net I0.0 0.2 13.4 0.4 38.9 0.3 40.6 0.3 Provision for income taxes 14.1 0.4 29.6 0.8 91.5 0.7 103.3 0.9 Net income $ 91.7 2.4% $ 76.1 2.2% $ 299.2 2.4% $ 248.1 2.2% Three Months Ended October 2, 2004 vs. Three Months Ended September 27, 2003 Net sales in the third quarter of 2004 were $3.9 billion as compared to $3.5 billion in the third quarter of 2003, an increase of $406 million or 12%. New business, net of selling price reductions, net foreign exchange rate fluctuations and the net impact of our acquisitions and divestitures increased net sales by $283 million, $142 million and $103 million, respectively. These increases were partially offset by the impact of unfavorable vehicle production mix, which negatively impacted net sales by $140 million. Gross profit and gross margin were $320 million and 8.2% in the quarter ended October 2, 2004, as compared to $304 million and 8.7% in the quarter ended September 27, 2003. The benefit from our productivity initiatives and other efficiencies and new business contributed $105 million and $24 million, respectively, to the increase in gross profit. Gross profit also benefited from the impact of our recent terminals and connectors acquisition and net foreign exchange rote fluctuations. Gross profit was negatively affected by the impact of selling price reductions, which, collectively with the impact of vehicle production volume and mix, reduced gross profit by $104 million. To a lesser extent, gross profit was also negatively affected by increased raw material costs. Selling, general and administrative expenses, including research and development, were $161 million in the three months ended October 2, 2004, as compared to $141 million in the three months ended September 27, 2003. As a percentage of net sales, selling, general and administrative expenses were 4.1% and 4.0% in the third quarters of 2004 and 2003, respectively. Our terminals and connectors acquisition, our incremental investment in new programs and net foreign exchange rate fluctuations contributed $10 26 LEAR CORPORATION million, $6 million and $4 million, respectively, to the increase in selling, general and administrative expenses in the third quarter of 2004. Interest expense was $43 million in the third quarter of 2004 as compared to $44 million in the third quarter of 2003. The favorable impact of our interest rate hedging activities was offset by the impact of our issuance of $400 million aggregate principal amount of unsecured 5.75% senior notes due 2014 and the financing of our terminals and connectors acquisition. Other expense, which includes state and local non-income taxes, foreign exchange gains and losses, minority interests in consolidated subsidiaries, equity in net income of affiliates, gains and losses on the sales of fixed assets and other miscellaneous income and expense, was $10 million and $13 million in the quarters ended October 2, 2004 and September 27, 2003, respectively. A :decrease in foreign exchange losses was partially offset by a decrease in equity in net income of affiliates. The provision for income taxes was $14 million, representing an effective tax rate of 13.3%, in the current quarter as compared to $30 million, representing an effective tax rate of 28.0%, in the same quarter a year ago. The current quarter tax provision includes the benefit from a favorable tax settlement related to prior years' tax return matters, which reduced the effective tax rate by 14.5%. Excluding the impact of this settlement, the effective tax rate for the third quarter of 2004 and 2003 approximated the U.S. federal statutory income tax rate of 35% adjusted for income taxes on foreign earnings, losses and remittances, valuation adjustments, reseamh and development credits and other items. Net income in the third quarter of 2004 was $92 million, or $1.32 per diluted share, as compared to $76 million, or $1.I0 per diluted share, in the third quarter of 2003. The improvement was primarily the result of the impact of the favorable tax settlement described above. Reportable Operating Segments The financial information presented below is for our three reportable operating segments for the periods presented. These segments are: seating, which includes seat systems and the components thereof; interior, which includes flooring and acoustic systems, door panels, instrument panels and cockpit systems, overhead systems and other interior products; and electronic and electrical, which includes electronic products and electrical distribution systems, primarily wire harnesses and junction boxes; interior control and entertainment systems; and wireless systems. Financial measures regarding each segment's income before interest, other expense and income taxes and income before interest, other expense and income taxes divided by net sales ("margin") are not measures of performance under accounting principles generally accepted in the United States ("GAAP"). Such measures are presented because we evaluate the performance of our reportable operating segments, in part, based on income before interest, other expense and income taxes. These measures should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other income statement or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. In addition, these measures, as we determine them, may not be comparable to related or similarly titled measures reported by other companies. For a reconciliation of consolidated income before interest, other expense and income taxes to income before provision for income taxes, see Note 16, "Segment Reporting." Seating A summary of financial measures for our seating segment is shown below (dollar amounts in millions): Three months ended October 2, September 27, 2004 2003 Net sales $ 2,592.7 $ 2,340.4 Income before interest, other expense and income taxes 167.3 157.7 Margin 6.5% 6.7% Seating net sales were $2.6 billion in the third quarter of 2004 as compared to $2.3 billion in the third quarter of 2003, an increase of $252 million or 10.8%. New business, net of selling price reductions, net foreign exchange rate fluctuations and the impact of a seating acquisition in Korea, favorably impacted net sales by $198 million, $95 million and $29 million, respectively. These increases were partially offset by the impact of vehicle production volume and mix, which reduced net sales by $70 million. Income before interest, other expense and income taxes and the related margin on net sales were $167 million and 6.5% in the three months ended October 2, 2004, as compared to $158 million and 6.7% in the three months ended September 27, 2003. The benefit of our productivity initiatives and other efficiencies contributed $71 million to the increase. Income before interest, other expense and 27 LEAR CORPORATION income taxes also benefited from new business. The increase was largely offset by the impact of selling price reductions, unfavorable vehicle production volume and mix and increased raw material costs. Interior A summary of financial measures for our interior segment is shown below (dollar amounts in millions): Three months ended October 2, September 27, 2004 2003 Net sales $ 665.0 $ 655.5 Income before interest, other expense and income taxes 8.2 14.3 Margin 1.2% 2.2% Interior net sales were $665 million in the third quarter of 2004 as compared to $656 million in the third quarter of 2003, an increase of $10 million or 1%. New business, net of selling price reductions, and net foreign exchange rate fluctuations favorably impacted net sales by $44 million and $18 million, respectively. These increases were partially offset by the impact of vehicle production volume and mix and our divestitures, which decreased net sales by $43 million and $9 million, respectively, lncome before interest, other expense and income taxes and the related margin on net sales were $8 million and 1.2% in the three months ended October 2, 2004, as compared to $14 million and 2.2% in the three months ended September 27, 2003. The declines in income before interest, other expense and income taxes and the related margin were primarily the result of selling price reductions, unfavorable vehicle production volume and mix and increased raw material costs, partially offset by the impact of productivity initiatives and other efficiencies, as well as new business. Electronic and Electrical A summary of financial measures for our electronic and electrical segment is shown below (dollar amounts in millions): Three months ended October 2, September 27, 2004 2003 Net ~ales $ 640.1 $ 495.6 Income before interest, other expense and income taxes 41.3 43.8 Margin 6.5% 8.8% Electronic and electrical net sales were $640 million in the third quarter of 2004 as compared to $496 million in the third quarter of 2003, an increase of $145 million or 29%. The impact of our recent terminals and connectors acquisition, new business, net of selling price reductions, and net foreign exchange rate fluctuations favorably impacted net sales by $83 million, $41 million and $29 million, respectively. Income before interest, other expense and income taxes and the related margin on net sales were $41 million and 6.5% in the three months ended October 2, 2004, as compared to $44 million and 8.8% in the three months ended September 27, 2003. Income before interest, other expense and income taxes benefited from the impact of vehicle production volume and mix and new business. The increase was more than offset by the impact of selling price reductions and increased raw material costs. The decline in the related margin on net sales was primarily due to the impact of selling price reductions. Nine Months Ended October 2, 2004 vs. Nine Months Ended September 27, 2003 Net sales in the first nine months of 2004 were $12.7 billion as compared to $11.5 billion in the first nine months of 2003, an increase of $1.2 billion or 10%. New business, net of selling price reductions, net foreign exchange rate fluctuations and the impact of vehicle production volume increased net sales by $679 million, $573 million and $248 million, respectively. Net sales also benefited from the net impact of our acquisitions and divestitures, which contributed $110 million to the increase. These increases were partially offset by the impact of unfavorable vehicle production mix, which negatively impacted net sales by $427 million. Gross profit and gross margin were $1,039 million and 8.2% in the nine months ended October 2, 2004, as compared to $966 million and 8.4% in the nine months ended September 27, 2003. The benefit from our productivity initiatives and other efficiencies, net of costs associated with facility closures and similar actions, and new business contributed $198 million and $74 million, respectively, to the increase in gross profit. Gross profit also benefited from the impact of net foreign exchange rate fluctuations and our recent terminals and connectors acquisition. Gross profit was negatively affected by the net impact of customer and supplier commercial settlements, including selling price reductions, which, collectively with the impact of vehicle production volume and mix, reduced gross profit by $209 million. To a lesser extent, gross profit was also negatively affected by increased raw material costs. 28 LEAR CORPORATION Selling, general and administrative expenses, including research and development, were $488 million in the nine months ended October 2, 2004, as compared to $429 million in the nine months ended September 27, 2003. As a percentage of net sales, selling, general and administrative expenses were 3.8% and 3.7% in the first nine months of 2004 and 2003, respectively. Our incremental investment in new programs, net foreign exchange rate fluctuations and the impact of our terminals and connectors acquisition contributed $29 million, $17 million and $10 million, respectively, to the increase in selling, general and administrative expenses in the first nine months of 2004. Interest expense was $122 million in the first nine months of 2004 as compared to $145 million in the first nine months of 2003. Our interest rate hedging activities and our reduced average debt balances outstanding during the periods favorably impacted interest expense by $19 million and $5 million, respectively. Other expense, which includes state and local non-income taxes, f6reign exchange gains and losses, minority interests in consolidated subsidiaries, equity in net income of affiliates, gains and losses on the sales of fixed assets and other miscellaneous income and expense, was $39 million in the nine months ended October 2, 2004, as compared to $41 million in the nine months ended September 27, 2003. An increase in state and local non-income taxes was offset by a decrease in losses on the sales of fixed assets. The provision for income taxes was $92 million, representing an effective tax rate of 23.4%, in the current period as compared to $103 million, representing an effective tax rate of 29.4%, in the same period a year ago. The current period tax provision includes the benefit from a favorable tax settlement related to prior years' tax return matters, which reduced the effective tax rate by 3.9%. Excluding the impact of this settlement, the effective tax rate for the first nine months of 2004 and 2003 approximated the U.S. federal statutory income tax rate of 35% adjusted for income taxes on foreign earnings, losses and remittances, valuation adjustments, reseamh and development credits and other items. Net income in the first nine months of 2004 was $299 million, or $4.26 per diluted share, as compared to $248 million, or $3.65 per diluted share, in the first nine months of 2003. The improvement includes the impact of the favorable tax settlement described above. Reportable Opera*ing Segments The financial information presented below is for our three reportable operating segments for the periods presented. These segments are: seating, which includes seat systems and the components thereof; interior, which includes flooring and acoustic systems, door panels, instrument panels and cockpit systems, overhead systems and other interior products; and electronic and electrical, which includes electronic products and electrical distribution systems, primarily wire harnesses and junction boxes; interior control and entertainment systems; and wkeless systems. Financial measures regarding each segment's income before interest, other expense and income taxes and income before interest, other expense and income taxes divided by net sales ("margin") are not measures of performance under accounting principles generally accepted in the United States ("GAAP"). Such measures are presented because we evaluate the performance of our reportable operating segments, in part, based on income before interest, other expense and income taxes. These measures should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other income statement or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. In addition, these measures, as we determine them, may not be comparable to related or similarly titled measures reported by other companies. For a reconciliation of consolidated income before interest, other expense and income taxes to income before provision for income taxes, see Note 16, "Segment Reporting." Seating A summary of financial measures for our seating segment is shown below (dollar amounts in millions): Nine months ended October 2, September 27, 2004 2003 Net sales $ 8,488.5 $ 7,861.9 Income before interest, other expense and income taxes 504.1 473.4 Margin 5.9% 6.0% Seating net sales were $8.5 billion in the first nine months of 2004 as compared to $7.9 billion in the first nine months of 2003, an increase of $627 million or 8%. Net foreign exchange rate fluctuations, new business, net of selling price reductions, and the impact of a seating acquisition in Korea, favorably impacted net sales by $406 million, $329 million and $66 million, respectively. These 29 LEAR CORPORATION increases were partially offset by the impact of vehicle production volume and mix, which reduced net sales by $171 million. Income before interest, other expense and income taxes and the related margin on net sales were $504 million and 5.9% in the nine months ended October 2, 2004, as compared to $473 million and 6.0% in the nine months ended September 27, 2003. The benefit of our productivity initiatives and other efficiencies, net of costs associated with facility closures and similar actions, and net foreign exchange rate fluctuations contributed $104 million and $11 million, respectively, to the increase. Income before interest, other expense and income taxes also benefited from new business. The increase was partially offset by the net impact of customer and supplier commercial settlements, including selling price reductions, unfavorable vehicle production volume and mix and increased raw material costs. Interior A summary of financial measures for our interior segment is shown below (dollar amounts in millions): .~ Nine months ended O.etober 2, September 27, 2004 2003 Net sales $2,221.4 $2,048.1 Income before interest, other expense and income taxes 56.8 66.2 Margin 2.6% 3.2% Interior net sales were $2.2 billion in the first nine months of 2004 as compared to $2.0 billion in the first nine months of 2003, an increase of $173 million or 8%. New business, net of selling price reductions, and net foreign exchange rate fluctuations favorably impacted net sales by $148 million and $71 million, respectively. These increases were partially offset by the impact of our divestitures and vehicle production volume and mix, which decreased net sales by $35 million and $10 million, respectively. Income before interest, other expense and income taxes and the related margin on net sales were $57 million and 2.6% in the nine months ended October 2, 2004, as compared to $66 million and 3.2% in the nine months ended September 27, 2003. The declines in income before interest, other expense and income taxes and the related margin were primarily the result of selling price reductions, unfavorable vehicle production volume and mix and increased raw material costs, partially offset by the impact of productivity initiatives and other efficiencies, as well as new business. Electronic and Electrical A summary of financial measures for our electronic and electrical segment is shown below (dollar amounts in millions): Nine months ended October 2, September 27, 2004 2003 Net sales $1,964.0 $1,581.4 Income before interest, other expense and income taxes 158.7 146.6 Margin 8.1% 9.3% Electronic and electrical net sales were $2.0 billion in the first nine months of 2004 as compared to $1.6 billion in the first nine months of 2003, an increase of $383 million or 24%. New business, net of selling price reductions, net foreign exchange rate fluctuations and the impact of our recent terminals and connectors acquisition favorably impacted net sales by $202 million, $96 million and $83 million, respectively. Income before interest, other expense and income taxes and the related margin on net sales were $159 million and 8.1% in the nine months ended October 2, 2004, as compared to $147 million and 9.3% in the nine months ended September 27, 2003. The benefit of our productivity initiatives and other efficiencies, net of costs associated with facility closures and similar actions, contributed $10 million to the increase. Income before interest, other expense and income taxes also benefited from the impact of vehicle production volume and mix and new business. The increase was partially offset by the impact of selling price reductions and increased raw material costs. The decline in the related margin on net sales was primarily due to the impact of selling price reductions, partially offset by the benefit of our productivity initiatives and other efficiencies. Facility Actions We continually evaluate alternatives to align our business with the changing needs of our customers and to lower the operating costs of our Company. This may include the realignment of our existing manufacturing capacity, facility closures or similar actions. In addition to these actions undertaken in the normal course of business, we initiated significant actions affecting two of our U.S. seating facilities in December 2003. As a result of these actions, we recorded charges of $26 million for employee termination 30 LEAR CORPORATION benefits and asset impairments in 2003. These actions were completed in the second quarter of 2004. Of the total costs associated with these facility actions, approximately $33 million related to employee termination benefits and asset impairment charges. Acquisition On July 5, 2004, we completed the acquisition of the parent of GHW Grote & Hartmann GmbH ("Grote & Hartmann") for consideration of $160 million, including assumed debt of $86 million, subject to adjustment. This amount excludes the cost of integration, as well as other costs related to the transaction. Grote & Hartmann is based in Wuppertal, Germany and manufactures terminals and connectors, as well as junction boxes and machinery to produce wire harnesses, primarily for the automotive industry. Grote & Hartmann had 2003 sales of approximately $275 million. The Grote & Hartmann acquisition was accounted for as a purchase, and accordingly, the assets purchased and liabilities assumed are included in the consolidated balance sheet as of October 2, 2004. The operating results of Grote & Hartmann are included in the consolidated financial statements since the date of acquisition? See "~ Forward-Looking Statements." LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs are to fund capital expenditures, service indebtedness and support working capital requirements. Our principal sources of liquidity are cash flows from operating activities and borrowing availability under our primary credit facility. A substantial portion of our operating income is generated by our subsidiaries. As a result, we are dependent on the earnings and cash flows of and the dividends, distributions or advances from our subsidiaries to provide the funds necessary to meet our obligations. There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Lear. Cash Flow Cash flows from operating activities generated $444 million of cash during the first nine months of 2004 as compared to $360 million of cash during the first nine months of 2003. The net change in sold accounts receivable, which resulted in a $121 million improvement in operating cash flows between periods, and a $51 million increase in net income were partially offset by the net change in working capital and the net change in recoverable customer engineering and tooling, which collectively resulted in a $107 million decrease in operating cash flows between periods. Increases in accounts receivable and accounts payable were a use of $222 million and a source of $160 million of cash, respectively, in the first nine months of 2004, reflecting our increased sales and the timing of payments received from our customers and made to our suppliers. Increases in inventories were a use of $90 million of cash reflecting our increased sales and the timing of our new product launches. Other current assets and accrued liabilities were a source of $90 million of cash in the first nine months of 2004, primarily as a result of the timing of commercial settlements, domestic and foreign tax payments and payroll-related payments. Cash flows used in investing activities were $347 million in the first nine months of 2004 as compared to $195 million in the first nine months of 2003. This increase is primarily due to cash paid related to the acquisition of Grote & Hartmann of $74 million, as well as a $70 million increase in capital expenditures between periods. In the first nine months of 2004, our financing activities were a source of $229 million of cash as'compared to a use of $147 million in the first nine months of 2003, primarily as a result of our issuance of $400 million aggregate principal amount of 5.75% senior notes due 2014. We expect to use the net proceeds of this offering for general corporate purposes, including, without limitation, the repayment or repurchase of a portion of our 7.96% senior notes due 2005. Net repayments of our short-term and long- term debt were $89 million in the first nine months of 2004 as compared to $155 million in the first nine months of 2003. These changes were partially offset by dividend payments of $55 million and the repurchase of common stock of $51 million in the first nine months of 2004. Capitalization In addition to cash provided by operating activities, we utilize a combination of a committed credit facility and long-term notes to fund our capital expenditures and working capital requirements. For the nine months ended October 2, 2004 and September 27, 2003, our average outstanding long-term debt balance was $2.2 billion and $2.1 billion, respectively. Thc weighted average long-term interest rate, including rates under our committed credit facility and the effect of hedging activities, was 6.2% and 6.7% for the respective periods. We utilize uncommitted lines of credit as needed for our short-term working capital requirements. For the nine months ended October 2, 2004 and September 27, 2003, our average outstanding unsecured short-term debt balance was $14 million and $42 31 LEAR CORPORATION million, respectively. The weighted average interest rate, including the effect of hedging activities, was 2.6% and 4.2% for the respective periods. Primary Credit Facility As of October 2, 2004, our primary credit facility consisted ora $1.7 billion amended and restated credit facility, which matures on March 26, 2006. Our $250 million revolving credit facility matured on May 4, 2004. As of October 2, 2004, we had no borrowings outstanding under our primary credit facility and $45 million committed under outstanding letters of credit, resulting in more than $1.6 billion of unused availability under our primary credit facility. Our primary credit facility contains operating and financial covenants that, among other things, could limit our ability to obtain additional sources of capital. As of October 2, 2004, we were in compliance with all covenants and other requirements set forth in our primary credit facility. Our obligations under the primary credit facility are guaranteed by certain of our significant subsidiaries and are secured by the pledge of all or a portion of the capital stock of certain of our significant subsidiaries. The guarantees and stock pledges may be released, at our option, when and if certain conditions are satisfied, including credit ratings on our senior long-term unsecured debt at or above BBB- from Standard & Poor's Ratings Services and at or above Baa3 from Moody's Investors Service. This condition was satisfied in May 2004, when Moody's Investors Service raised its credit rating of our senior unsecured debt to Baa3. As of the date of this Report, we have not sought to release the guarantees and stock pledges. Senior Notes As of October 2, 2004, we had $2.5 billion of debt, including short-term borrowings, consisting primarily of $399 million of 5.75% senior notes due 2014, $283 million accreted value of zero-coupon senior notes due 2022, Euro 250 million (approximately $308 million based on the exchange rate in effect as of October 2, 2004) of 8.125% senior notes due 2008, $600 million of 7.96% senior notes due 2005 and $800 million of 8.11% senior notes due 2009. On August 3, 2004, we issued $400 million aggregate principal amount of unsecured 5.75% senior notes, which mature in 2014, yielding gross proceeds of $399.2 million. We expect to use the net proceeds of this offering for general corporate purposes, including, without limitation, the repayment or repurchase of a portion of our 7.96% senior notes due 2005. The notes are unsecured and rank equally with our other unsecured senior indebtedness, including our other senior notes. The offering of the notes was not registered under the Securities Act of 1933, as amended (the "Securities Act"). Under the terms of a registration rights agreement entered into in connection with the issuance of the notes, we are required to complete an exchange offer of the notes for substantially identical notes registered under the Securities Act. We would be required to pay additional interest on the notes in the event the exchange offer is not completed by a specified date and under certain other circumstances. On August 26 2004, we amended our outstanding zero-coupon convertible senior notes to require the settlement of any repurchase obligation with respect to the convertible senior notes for cash. All of our senior notes contain covenants restricting our ability to incur liens and to enter into sale and leaseback transactions and restricting our ability to consolidate with, to merge with or into, or to sell or otherwise dispose of all or substantially all of our assets to, any person. As of October 2, 2004, we were in compliance with all covenants and other requirements set forth in our senior notes. All of our senior notes are guaranteed by the same subsidiaries that guarantee our primary credit facility. In the event that any such subsidiary ceases to be a guarantor under the primary credit facility, such subsidiary will be releasedas a guarantor of the senior notes. Pursuant to our primary credit facility, we currently have the right to release the guarantees thereunder. Upon such a release, the obligations under all of our senior notes would be effectively subordinated to the liabilities of all of our subsidiaries. Scheduled cash interest payments on our outstanding senior notes are $56 million in the last three months of 2004, $136 million in 2005, $113 million in 2006 and 2007, $100 million in 2008 and $55 million in 2009. Off-Balance Sheet Arrangements Asset-Backed Securitization Facility We have in place an ABS facility, which provides for maximum purchases of adjusted accounts receivable of $200 million. As of October 2, 2004 and December 31, 2003, there were no accounts receivable sold under the facility. The level of funding utilized 32 LEAR CORPORATION under this facility is based on the credit ratings of our major customers, the level of aggregate accounts receivable in a specific month and our funding requirements. In October 2004, the ABS facility was amended to extend the termination date to November 1, 2005. Guarantees and Commitments We guarantee the residual value of certain of our leased assets. As of October 2, 2004, these guarantees totaled $27 million. In addition, we guarantee 39% of certain &the debt of Total Interior Systems - America, L.L.C., a joint venture in which we own a 39% interest. As of October 2, 2004, the debt balance of Total Interior Systems - America, L.L.C. covered by our guarantees was $10 million. Accounts Receivable Factoring From time to time, certain of our European subsidiaries factor their accounts receivable with financial institutions. Such receivables are factored without recourse to us and are excluded from accounts receivable in our consolidated balance ;sheets. As of October 2, 2004, there were no factored accounts receivable. As of December 31, 2003, the amount of factored receivables was $71 million. We cannot provide any assurances that these factoring facilities will be available or utilized in the future. * ... Credit Ratings (t) The credit ratings of our senior unsecured debt as of the date of this Report are shown below: Standard & Poor's Moody's Fitch Ratings Services Investors Service Ratings Credit rating of senior unsecured debt BBB- Baa3 BBB-' Ratings outlook Stable Stable Stable (1) The credit ratings above are not recommendations to buy, sell or hold our securities and are subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. In May 200,1, Moody's Investors Service raised its credit rating of our senior unsecured debt to Baa3 and moved the ratings outlook to stable. The credit ratings by the three ratings agencies are "investment grade." Dividends A summary of 2004 dividend activity is shown below: Dividend Amount Declaration Date Record Date Payment Date__ (per share) $0.20 February 3, 2004 February 18, 2004 March 8, 2004 $0.20 May 13, 2004 May 28, 2004 June 14, 2004 $0.20 August 12, 2004 August 27, 2004 September 13, 2004 We expect to pay quarterly cash dividends in the future, although such payment is dependent upon our financial condition, results of operations, capital requirements, alternative uses of capital and other factors. Also, we are subject to the restrictions on the payment of dividends contained in our primary credit facility and in certain other contractual obligations. See "-- Forward-Looking Statements." Common Stock Repurchase Program In May 2002, the Board of Directors approved a common stock repurchase program that permits the discretionary repurchase of up to 3.3 million shares of our outstanding common stock over an initial period of 24 months, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003. In May 2004, the program was extended until May 2006, as disclosed in our Quarterly Report on Form 10-Q for the quarter ended April 3, 2004. During the first nine months of 2004, we repurchased 934,900 shares of our outstanding common stock at an average purchase price of $54.17 per share, excluding commissions of $0.03 to $0.04 per share. As of October 2, 2004, 2,333,300 shares of common stock were available for repurchase under the common stock repurchase program. During October 2004, we repurchased 899,400 shares of our outstanding common stock at an average purchase price of $52.31 per share, excluding commissions of $0.03 per share. On November 11, 2004, we announced that our Board of Directors approved a 33 LEAR CORPORATION common stock repurchase program which pernaits the discretionary repurchase of up to 5,000,000 shares of our common stock through November 15, 2006. The new stock repurchase program replaces the program described above. The extent to which we will repurchase our common stock and the timing of such repurchases will depend upon prevailing market conditions, alternative uses of capital and other factors. See "~ Forward-Looking Statements." Also, we are subject to the restrictions on common stock repurchases contained in our primary credit facility and in certain other contractual obligations. Adequacy of Liquidity Sources We believe that cash flows from operations and availability under our primary credit facility will be sufficient to meet our long- term debt maturities, projected capital expenditures and anticipated working capital requirements for the foreseeable future. However, our cash flows from operations, borrowing availability and overall liquidity are subject to risks and uncertainties. Please see "- Executive Overview," "-- Forward-Looking Statements" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2003. Market Rate Sensitivity ' '. - In the normal course of business, we are exposed to market risk associated with fluctuations in foreign exchange rates and interest rates. We manage these risks through the use of derivative financial instruments in accordance with management's guidelines. We enter into all hedging transactions for periods consistent with the underlying exposures. We do not enter into derivative instruments for trading purposes. Foreign Exchange Operating results may be impacted by our buying, selling and financing in currencies other than the functional ,currency of our operating companies ("transactional exposure"). We mitigate this risk by entering into forward foreign exchange, futures and option contracts. The foreign exchange contracts are executed with banks that we believe are creditworthy. Gains and losses related to foreign exchange contracts are deferred and included in the measurement of the foreign currency transaction subject to the hedge. Gains and losses incurred related to foreign exchange contracts are generally offset by the direct effects of currency movements on the underlying transactions. Our most significant foreign currency transactional exposures relate to the Mexican peso, the Canadian dollar and the Euro. We have performed a quantitative analysis of our overall currency rate exposure as of October 2, 2004. The potential earnings benefit related to transactional exposures from a hypothetical 10% strengthening of the U.S. dollar relative to all other currencies for a twelve- month period is approximately $5 million. The potential earnings benefit related to transactional exposures from a similar strengthening of the Euro relative to all other currencies for a twelve-month period is approximately $5 million. As of October 2, 2004, foreign exchange contracts representing $2 billion of notional amount were outstanding with maturities of less than 15 months. The fair market value of these foreign exchange contracts as of October 2, 2004, was approximately $1 million. A 10% change in the value of the U.S. dollar relative to all other currencies would result in a $4 million change in the aggregated fair market value of these contracts. A 10% change in the value of the Euro relative to all other currencies would result in a $6 million change in the aggregated fair market value of these contracts. There are certain shortcomings inherent to the sensitivity analysis presented. The analysis assumes that all currencies would uniformly strengthen or weaken relative to the U.S. dollar or Euro. In reality, some currencies may strengthen while others may weaken causing the earnings impact to increase or decrease depending on the currency and the direction of the rate movement. In addition to the transactional exposure described above, our operating results are impacted by the translation of our foreign operating income into U.S. dollars ("translation exposure"). We do not enter into foreign currency contracts to mitigate this exposure. Interest Rates We use a combination of fixed and variable rate debt and interest rate swap contracts to manage our exposure to interest rate movements. Our exposure to variable interest rates on outstanding floating rate debt instruments indexed to U.S. or European Monetary Union short-term money market rates is partially managed by the use of interest rate swap contracts to convert variable rate debt to fixed rate debt, matching effective and maturity dates to specific debt instruments. We also utilize interest rate swap contracts to convert certain fixed rate debt obligations to a floating rate basis. All of our interest rate swap contracts are executed with banks that we believe are creditworthy and are denominated in currencies that match the underlying debt instrument. Net interest payments or receipts from interest rate swap contracts are recorded as adjustments to interest expense in our consolidated statements of income 34 LEAR CORPORATION on an accrual basis. As of October 2, 2004, there were no contracts outstanding which convert variable rate debt to fixed rate debt, only contracts which convert fixed rate debt to floating rate debt. We have performed a quantitative analysis of our overall interest rate exposure as of October 2, 2004. This analysis assumes an instantaneous 100 basis point parallel shift in interest rates at all points of the yield curve. The potential adverse earnings impact from this hypothetical increase for a twelve-month period is approximately $6 million. As of October 2, 2004, interest rate swap contracts representing $600 million of notional amount were outstanding with maturity dates of May 2005 through May 2009. All of these contracts are designated as fair value hedges and modify the fixed rate characteristics of our outstanding long-term debt. The fair market value of these interest rate swap contracts is subject to changes in value due to changes in interest rates. The fair market value of these contracts as of October 2, 2004, was approximately negative $9 million. A i100 basis~point parallel shift in interest rates would result in a $13 million change in the aggregated fair market value of these contracts. Commodity Prices · We have commodity price risk with respect to purchases of certain raw materials. In certain instances, we have used financial instruments to mitigate this risk. Increases in certain raw material or commodity costs, such as steel, resins and diesel fuel, have negatively impacted our operating results in the first nine months of 2004, and we expect them to have a significant impact on our profitability in the remainder of 2004 and in 2005. We have developed strategies to mitigate the impact, which include aggressive cost reduction actions, the selective in-sourcing of components where we have available capacity, the continued consolidation of our supply base and the acceleration of low-cost country sourcing and engineering. In addition, the sharing of increased raw material costs has been, or will be, the subject of negotiations with our suppliers and our customers. While we believe that our mitigation efforts will offset a substantial portion of the financial impact of increased commodity costs, no assurances can be given that the magnitude and duration of these cost increases will not have a material impact on our future operating results. See "-- Forward- Looking Statements." OTHER MATTERS Environmental Matters We are subject to local, state, federal and foreign laws, regulations and ordinances which govern activities or operations that may have adverse environmental effects and which impose liability for the costs of cleaning up certain damages resulting from past spills, disposal or other releases of hazardous wastes and environmental compliance. Our policy is to comply with all applicable environmental laws and to maintain an environmental management program based on ISO 14001 to ensure compliance. However, we currently are, have been and in the future may become the subject of formal or informal enforcement actions or procedures. We have been named as a potentially responsible party at several third-party landfill sites and are engaged in the cleanup of hazardous waste at certain sites owned, leased or operated by us, including several properties acquired in our 1999 acquisition of UT Automotive. Certain present and former properties of UT Automotive are subject to environmental liabilities which may be significant. We obtained agreements and indemnities with respect to certain environmental liabilities from United Technologies Corporation ("UTC") in connection with our acquisition of UT Automotive. UTC manages and directly funds these environmental liabilities pursuant to its agreements and indemnities with us. While we do not believe that the environmental liabilities associated with our current and former properties will have a material adverse effect on our business, consolidated financial position or results of future operations, no assurances can be given in this regard. For further information related to environmental matters, see Part II -- Item 1, "Legal Proceedings." The forward-looking statements above are subject to risks and uncertainties, see "-- Forward-Looking Statements." Significant Accounting Policies and Critical Accounting Estimates Certain of our accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are subject to an inherent degree of uncertainty. These estimates and assumptions are based on our historical experience, terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers and information available from other outside sources, as appropriate. Actual results in these areas could differ from our estimates. For a discussion of our significant accounting policies and critical accounting estimates, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Significant Accounting Policies and Critical Accounting Estimates," and Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements 35 LEAR CORPORATION included in our Annual Report on Form 10-K for the year ended December 31, 2003. There have been no significant changes in our significant accounting policies or critical accounting estimates during the first nine months of 2004. Revenue Recognition and Sales Commitments We recognize revenues as our products are shipped to our customers. We enter into agreements with our customers to produce products at the beginning of a vehicle's life. Although such agreements do not provide for minimum quantities, once we enter into such agreements, fulfillment of our customers' purchasing requirements is our obligation for the entire production life of the vehicle, with terms of up to ten years. These agreements generally may be terminated by our customer (but not by us) at any time. Historically, terminations of these agreements have been minimal. In certain limited instances, we may be committed under existing agreements to supply products to our customers at selling prices which are not sufficient to cover the direct cost to produce such products. In such situations, we recognize losses as they are incurred. Amounts billed to customers related to shipping and handling are included in net sales in our consolidated statements of income. Shipping and handling costs are included in cost of sales in our consolidated statements of income. In prior years, we recorded loss contract accruals in purchase accounting in conjunction with the UT Automotive acquisition and the Delphi acquisition. These loss contract accruals were not recorded in the historical operating results of UT Automotive or Delphi. The losses included in the accrual have not been, and will not be, included in our operating results since the respective acquisition dates. Further, our future operating results will benefit from accruing these contract losses in the related purchase price allocations. A summary of the remaining loss contract accrual activity related to the UT Automotive and Delphi acquisitions is shown below (in millions): Accrual as of Accrual as of December 31~ Adjustments/ October 2, 2003 Utilized 2004 UT Automotive $ 1.9 $ (1.2) $ 0.7 Delphi 13.0 (11.9) 1.1 During the first nine months of 2003, we utilized $1.8 million and $4.5 million of the loss contract accruals related to the UT Automotive and Delphi acqu!sitions, respectively. Recently Issued Accounting Pronouncements Pensions and Other Postretirernent Benefits The Financial Accounting Standards Board ("FASB") issued a revised Statement of Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures about Pensions and Other Postretirement BenefitS." This statement retains the original pension and other postretirement benefits disclosures of SFAS No. 132 and requires additional disclosures for both annual and interim periods. Additional annual reporting requirements related to plan assets, accumulated benefit obligations and expected plan contributions are effective for fiscal years ending after December 15, 2003, for domestic plans, and for fiscal years ending after June 15, 2004, for foreign plans. Additional annual reporting requirements related to estimated future benefit payments are effective for fiscal years ending after June 15, 2004, for both domestic and foreign plans. Additional interim reporting requirements related to the components of net periodic benefit cost, contributions paid and significant changes in assumptions are effective for interim periods beginning after December 15, 2003, for both domestic and foreign plans. All interim disclosures required by this statement have been reflected in Note 9, "Pension and Other Postretirement Benefit Plans," to the consolidated financial statements included in this Report. On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") was enacted. The Act introduced a prescription drug benefit under Medicare (Medicare Part D), as well as a federal subsidy to sponsors of certain other postretirement benefit plans that provide prescription drug benefits at least actuarially equivalent to Medicare Part D. In May 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," which provides the applicable accounting guidance related to the federal subsidy. In accordance with the transition provisions of FSP 106-2, the effects of the Act are'reflected in the measurement of the postretirement benefit obligation and net periodic postretirement benefit cost as of and for the three and nine months ended October 2, 2004. The effects of adoption were not significant. 36 LEAR CORPORATION Variable Interest Entities The FASB issued Interpretation ("FIN") No. 46 (revised December 2003), "Consolidation of Variable Interest Entities," the provisions of which apply immediately to any variable interest entity created after January 31, 2003, apply no later than the first period ending after December 15, 2003, to special purpose corporations, and apply in the first interim period ending after March 15, 2004, to any variable interest entity created prior to February 1, 2003. This interpretation requires the consolidation of a variable interest entity by its primary beneficiary and may require the consolidation of a portion of a variable interest entity's assets or liabilities under certain circumstances. We adopted the requirements of FIN No. 46 as of April 3, 2004. Such requirements related primarily to our investments in affiliates. The effects of adoption were not significant. Contingently Convertible Debt The 4,813,056 shares issuable upon conversion of our outstanding zero-coupon convertible senior notes are not included in the computation of diluted shares outstanding, as none of the contingent conversion events set forth in the notes has occurred. In October 2004, the FASB ratified the final consensus of the Emerging Issues Task Force ("EITF") on EITF 04-08, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," which states that the impact of contingently convertible instruments that are convertible into common stock upon the achievement of a specified market price of the issuer's shares, such as our outstanding zero- coupon convertible senior notes, should be included in diluted net income per share computations regardless of whether the market price trigger has been met. The provisions will be effective for reporting periods ending after December 15, 2004, and all prior period net income per share amounts presented will be restated to conform to the new provisions. The effect of EITF 04-08 on the calculation of basic and diluted net income per share will be to adjust net income by adding back after-tax interest expense and to increase total shares outstanding by the number of shares that would be issuable upon conversion. The pro forma effects of this new accounting pronouncement are shown below (in millions, except per share data): Three Months Ended Nine Months Ended October 2, September 27, October 2, September 27, 2004 2003 2004 2003 Net income, as reported $ 91.7 $ 76.1 $ 299.2 $ 248.1 Add: After-tax interest expense on convertible debt 2.3 2.2 7.0 6.6 Net income, for diluted net income per share $ 94.0 $ 78.3 $ 306.2 $ 254.7 Diluted shares outstanding, as reported 69,702,876 68,998,584 70,190,655 68,058,026 Add: Shares issuable upon conversion of convertible debt 4.813.056 4,813,056 4,813~056 4.813.056 Diluted shares outstanding, pro forma 74-515.932 73.811.64~0 75.003.71~1 72_871.082 Diluted net income per share, pro forma $ 1.26 $ 1.06 $ 4.08 $ 3.50 For further information related to the zero-coupon convertible senior notes, see Note 8, "Long-Term Debt," to the consolidated financial statements included in our Annual Report on Form l 0-K for the year ended December 31, 2003. Outlook For the fourth quarter of 2004, net sales are expected to be approximately $4.1 billion, down about 3% from a year ago, reflecting lower production volumes in North America and unfavorable vehicle production mix in Europe. Net income per share is expected to be in the range orS1.70 to $1.80, reflecting the lower net sales, thc impact of higher commodity costs and the investment in structural cost reductions. Full year net income per share is expected to be in the range of $5.97 to $6.07. Our fourth quarter and full year 2004 net income per share guidance is based on an assumed 69.8 million and 70.0 million shares outstanding, respectively, and does not reflect the adoption of EITF 04-08, which will be adopted in the fourth quarter of 2004. The impact of the assumed conversion of the outstanding convertible senior notes is expected to reduce fourth quarter and full year 2004 net income per share by approximately $0.08 and $0.26 - $0.27, respectively. Our 2004 industry planning assumptions are now 15.8 million units for North America and 18.5 million units for Europe (16.1 million units for Western Europe). Full year capital spending is forecasted to be approximately $400 million. The fourth quarter and full year 2004 effective tax rate is expected to be in the 24% range. Finally, certain automakers in both North America and Europe have recently announced production cuts which impact several of our key platforms. While the exact impact of these production cuts, together with increased commodity costs, is uncertain, these factors will significantly affect our earnings in the remainder of 2004 and in 2005. 37 LEAR CORPORATION The foregoing constitute forward-looking statements that are subject to risks and uncertainties. For a description of certain factors that may cause our actual results to differ from those expressed in our forward-looking statements, see "-- Forward-Looking Statements," "~ Executive Overivew" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2003. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. The words "will," "may," "designed to," "outlook," "believe," "should," "anticipate," "plan," "expect," "intend," "estimate" and similar expressions identify these forward-looking statements. All statements contained or incorporated in this Report which address operating or financial performance, events or developments that we expect or anticipate may occur in the future, including statements related to business opportunities, awarded sales contiacts and net income per share growth or statements expressing views about future operating and financial results, are forward-looking statements. Because these forward-looking statements are subject to risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors, risks and uncertainties that may cause actual results to differ from those expressed in our forward-looking statements include, but are not limited to: · general economic conditions in the markets in which we operate, including changes in interest rates and fuel prices; · fluctuations in the production of vehicles for which we are a supplier; · labor disputes involving us or our significant customers or suppliers or that otherwise affect us; · our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions; · the impact and timing of program launch costs; · the costs and timing of facility closures or similar actions; · increases in our warranty or product liability costs; · risks associated with conducting business in foreign countries; · fluctuations in foreign exchange rates; · adverse changes in economic conditions or political instability in the jurisdictions in which we operate; · competitive conditions impacting our key customers; · mw material cost and availability; · our ability to successfully integrate the recently acquired terminals and connectors operations; · the outcome of legal or regulatory proceedings to which we are or may become a party; · tmanticipated changes in cash flow; and · other risks described from time to time in our other Securities and Exchange Commission filings. We do not assume any obligation to update any of these forward-looking statements. 38 LEAR CORPORATION ITEM 4 - CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures The Company has evaluated, under the supervision and with the participation of the Company's management, including the Company's Chairman and Chief Executive Officer along with the Company's Senior Vice President and Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Report. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. However, based on that evaluation, the Company's Chairman and Chief Executive Officer along with the Company's Senior Vice President and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this Report. (b) Changes in Internal Controls over Financial Reporting There was no change in the Company's internal controls over financial reporting that occurred during the fiscal quarter ended October 2, 2004, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 39 LEAR CORPORATION PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS Commercial Disputes We are involved from time to time in legal proceedings or claims relating to commercial or contractual disputes, including disputes with our suppliers. We will continue to vigorously defend ourselves against these claims. Based on present information, including our assessment of the merits of the particular claims, we do not expect that these legal proceedings or claims, either individually or in the aggregate, will have a material adverse effect on our business, consolidated financial position or results of operations, although the outcomes of these matters are inherently uncertain. On January 29, 2002, Seton Company,' 6ne of our leather suppliers, filed a suit alleging that we had breached a purported agreement to purchase leather from it for seats for the life of the General Motors GMT 800 program. This suit presently is pending in the U.S. District Court for the Eastern District of Michigan. Setoo seeks compensatory and exemplary damages on breach of contract and promissory estoppel claims and has submitted a report alleging up to approximately $75 million in damages. Lear has filed a counterclaim and believes that we have meritorious defenses to Seton's liability and damages claims. We intend to vigorously contest the lawsuit. As of the date of this Report, discovery is continuing, and the trial is scheduled for the first quarter of 2005. Product Liability Matters In the event that use of our products results in, or is alleged to result in, bodily injury and/or property damage or other losses, we may be subject to product liability lawsuits and other claims. In addition, we are a party to warranty-sharing and other agreements with our customers relating to our products. These customers may pursue claims against us for contribution of all or a portion of the amounts sought in connection with product liability and warranty claims. We can provide no assurances that we will not experience material claims in the future or that we will not incur significant costs to defend such claims. In addition, if any of our products are, or are alleged to be, defective, we may be required or requested by our customers to participate in a recall or other corrective action involving such products. Certain of our customers have asserted claims against us for costs related to recalls involving our products. In certain instances, the allegedly defective products were supplied by Tier 2 suppliers against whom we have sought or will seek contribution. We believe that the overall net impact of these claims is not likely to be material, although no assurances can be given in this regard. We carry insurance for certain legal matters, including product liability claims, but such coverage may be limited. The Company does not maintain insurance for recall matters, as such insurance is not generally available. Environmental Matters We are subject to local, state, federal and foreign laws, regulations and ordinances which govern activities or operations that may have adverse environmental effects and which impose liability for the costs of cleaning up certain damages resulting from past spills, disposal or other releases of hazardous wastes and environmental compliance. Our policy is to comply with all applicable environmental laws and to maintain an environmental management program based on ISO 14001 to ensure compliance. However, we currently are, have been and in the future may become the subject of formal or informal enforcement actions or procedures. We have been named as a potentially responsible party at several third-party landfill sites and are engaged in the cleanup of hazardous waste at certain sites owned, leased or operated by us, including several properties acquired in our 1999 acquisition of UT Automotive, Inc. ("UT Automotive"). Certain present and former properties of UT Automotive are subject to environmental liabilities which may be significant. We obtained agreements and indemnities with respect to certain environmental liabilities from United Technologies Corporation ("UTC") in connection with our acquisition of UT Automotive. UTC manages and directly funds these environmental liabilities pursuant to its agreements and indemnities with us. While we do not believe that the environmental liabilities associated with our current and former properties will have a material adverse effect on our business, consolidated financial position or results of future operations, no assurances can be given in this regard. One of our subsidiaries and certain predecessor companies were named as defendants in an action filed by three plaintiffs in August 2001 in the Circuit Court of Lowndes County, Mississippi asserting claims stemming from alleged environmental contamination caused by an automobile parts manufacturing plant located in Columbus, Mississippi. The plant was acquired by us as part of the UT Automotive acquisition in May 1999 and sold almost immediately thereafter, in June 1999, to Johnson Electric Holdings Limited ("Johnson Electric"). In December 2002, approximately 61 additional cases were filed by approximately 1,000 plaintiffs in the same court against us and other defendants relating to similar claims. In September 2003, we were dismissed as a party to these cases. In the first half of 2004, we were named again as a defendant in these same 61 cases and were also named in five new actions filed by approximately 150 individual plaintiffs related to alleged environmental contamination from the same facility. The plaintiffs in these actions are persons who allegedly were either residents and/or owned property near the facility or worked at the 4O LEAR CORPORATION facility. Each of these complaints seeks compensatory and punitive damages. To date, there has been limited discovery in these cases and the probability of liability and the amount of damages in the event of liability are unknown. UTC, the former owner of UT Automotive, and Johnson Electric have each sought indemnification from us under the respective acquisition agreements, and we have claimed indemnification from them under the same agreements. To date, no company admits to, or has been found to have, an obligation to fully defend and indemnify any other. We intend to vigorously defend against these claims and believe that we will eventually be indemnified by either UTC or Johnson Electric for resulting losses, if any. Other Matters We are involved in certain other legal actions and claims arising in the ordinary course of business, including, without limitation, intellectual property matters, personal injury claims and employment matters. Although the outcome of any legal matter cannot be predicted with certainty, we do not believe that any of these other legal proceedings or matters in which we are currently involved, either individually or in the aggregate, will have,a material adverse effect on our business, consolidated financial position or results of operations. See "-- Forward-Looking Statements." , · In January 2004, the U.S. Securities and Exchange Commission ("SEC") commenced an informal inquiry into our September 2002 amendment of our 2001 Form 10-K. The amendment was filed to report our employment of relatives of certain of our directors and officers and certain related-party transactions. The SEC has advised us that the inquiry should not be construed as an indication by the Commission or its staff that any violations of law have occurred or as an adverse reflection upon any person or security. We are cooperating with the SEC's inquiry. ITEM 2 - CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES As discussed in Part I - Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capitalization - Common Stock Repurchase Program," on November 11, 2004, the Board of Directors approved a new common stock repurchase program which replaced our prior program. A summary of the shares of our common stock repurchased under our prior program during the quarter ended October 2, 2004. is shown below: Total Number Average Total Number of Shares Maximum Number of Shares of Shares Price Paid Purchased as Part of Publicly that May Yet be Purchased Period Purchased per Share Announced Plans or Programs Under the Program July 4, 2004 through July 31, 2004 N/A 2,840,800 August 1, 2004 through August 28, 2004 507,500 $53.55* 507,500 2,333,300 August 29, 2004 through October 2, 2004 N/A 2~333~300 Total 507~500 $53.55 507~500 2,333~300 · Excludes commissions of $0.03 per share. ITEM 6 -EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 4.9 Supplemental Indenture No. 1 to Indenture dated February 20, 2002, by and among Lear Corporation as Issuer, the Guarantors party thereto from time to time and the Bank of New York as Trustee (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K dated August 26, 2004). 4.10 Indenture dated August 3, 2004, by and among Lear Corporation as Issuer, the Guarantors party thereto from time to time and the BNY Midwest Trust Company as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated August 3, 2004). · * 10.1 Purchase Agreement dated July 29, 2004, by and among Lear Corporation as Issuer, the Guarantors party thereto and the Purchasers (as defined therein). · * 10.2 Registration Rights Agreement dated August 3, 2004, by and among Lear Corporation as Issuer, the Guarantors 41 LEAR CORPORATION party thereto and the Initial Purchasers (as defined therein). ** 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. ** 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. ** 32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 32.2 Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** Filed herwith. (b) The following reports on Form 8-K were filed during the fiscal quarter ended October 2, 2004. On July 22, 2004, the Company filed a Current Report on Form 8-K dated July 22, 2004, under Item 9, Regulation FD Disclosure, and Item 12, Results of Operations and Financial Condition, reporting its financial results for the second quarter of 2004 and updating its eamings guidance for 2004. In addition, under Item 9, Regulation FD Disclosure, and Item 12, Results of Operations and Financial Condition, the Company filed the visual slides from the webcast of its second quarter 2004 earnings call conducted on July 22, 2004.* On July 29, 2004, the Company filed a Current Report on Form 8-K dated July 29, 2004, under Item 5, Other Events and Regulation FD Disclosure, announcing a private offering of $400 million of unsecured notes due August 2014. On August 3, 2004, the Company filed a Current Report on Form 8-K dated August 3, 2004, under Item 5, Other Events and Regulation FD Disclosure announcing the issuance of $400 million aggregate principal amount of unsecured 5.75% senior notes . due 2014 (the "Notes"). In addition, the Company filed the Indenture governing the Notes between Lear Corporation, certain subsidiary guarantors and BNY Midwest Trust Company, as trustee. On August 26, 2004, the Company filed a Current Report on Form 8-K dated August 26, 2004, under Item 1.01, Entry into a Material Definitive Agreement, reporting that it entered into an agreement to amend the Indenture governing the Zero-Coupon Convertible Senior Notes (the "Convertible Notes") due February 20, 2022. Under the amendment, th~ Company surrendered its right to pay the purchase price in common stock of the Convertible Notes if they are put to the Company, and will instead pay such mount, if required, in cash. In addition, the Company filed the agreement, Supplemental Indenture No. 1, between the Company, certain subsidiary guarantors and The Bank of New York, as trustee. * Pursuant to General Instmchon B of Form 8-K, the portion of the report submitted to the Securities and Exchange Commission under Item 7.01 (formerly Item 9), Regulation FD Disclosure, and Item 2.02 (formerly Item 12), Results of Operations and Financial Condition, is not deemed to be "filed" for purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and we are not subject to the liabilities of that section. We are not incorporating, and will not incorporate by reference, such portion of the report into filings under the Securities Act of 1933, as amended, or the Exchange Act. 42 LEAR CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LEAR CORPORATION Dated: November 10, 2004 By: /s/Robert E. Rossiter Robert E. Rossiter President and Chief Executive Officer By: /s/David C. Wajsgras David C. Wajsgras Senior Vice President and Chief Financial Officer By: /s/William C. Dircks William C. Dimks Vice President and Corporate Controller 43 LEAR CORPORATION INDEX TO EXHIBITS Exhibit Number 4.9 Supplemental Indenture No. I to Indenture dated February 20, 2002, by and among Lear Corporation as Issuer, the Guarantors party thereto from time to time and the Bank of New York as Trustee (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K dated August 26, 2004). 4.10 Indenture dated August 3, 2004, by and among Lear Corporation as Issuer, the Guarantors party thereto from time to time and the BNY Midwest Trust Company as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated August 3, 2004). ** 10.1 Purchase Agreement dated July 29, 2004, by and among Lear Corporation as Issuer, the Guarantors party thereto and the Purchasers (as defined therein). ** 10.2 Registration Rights Agreement dated August 3, 2004, by and among Lear Corporation as Issuer, the Guarantors party thereto and the Initial Purchasers (as defined therein). ** 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. ** 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. ** 32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 32.2 Certification by Chief Financial Officer pursuant to t8 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** Filed herewith. 44 I Medical Benefits Summary: UTA (Hourly) Benefits Through Benefits Through Coverage Categor)' Network Providers Coverage Cate~or~ Network Providers Deductible None Physical/Occupational/ $10 copayment per visit. Maximum Speech Therapy 60 outpatient treatment days per Coinsurance None. disability. Maximurn Out-of- $1,000 per individual and Laboratory and 100% of allowed charge. Pocket Expense $2,500 per family pet X-cay Services calendar year. Mental Health Services Physician Services Office Visits/Home $10 copayment per visit. Inpatient Facility $125 facility copayment per day Visits/Nursing Facility Visits Maximum 10 inpatient days per calendar year. Hospital Visits $t 0 copayment per visit. Outpatient Facility $50 facility copayment per day Surgical Procedures $10 copayment per surgery Maximum 20 outpatient days pet performed in an office selling, calendar year. $50 copayment per surgery performed in an outpatient setting. Inpatient Physician $35 physician copayment per visit. $200 copayment per surgery Maximum 10 inpatient visits per performed in an inpatient setting, calendar year. Maternity Care $200 copayment per pregnancy. Outpatient Physician $35 physician copayment per visit. Maximum 20 outpatient visits per Newborn Baby Care $10 copayment per visit, calendar year. Allergy Testing $10 copayment per. visit. Office $35 copayment per physician office visit. Maximum 20 Office visits pe~ Allergy Injections $3 copayment per injection, calendar year. Emergency Room Services $'25 copayment per visit. Substance Abuse Services Physician Services - Preventive Inpatient Facility $125 facility copayment per day. Routine Physicals $10 copayment per visit. Maximum 10 inpatient days pc~ calendar year. Well-Child Care $10 copayment per visit. Outpatient Facility $50 facility copayment per day Immunizations 100% of allowed charge. Maximum 20 outpatient days per calendar year. lltnspital Facility Services Inpatient $125 copayment per hospital day. Inpatient Physician $35 physician copayment per visit. Maximum 10 iopaticnt visits per Outpatient $100 facility copayment per outpatient calendar year. admission. Maternity $125 copayment per hospital day. Outpatient Physician $35 physician copayment per visit. Maximum 20 outpatient visits per Emergency $25 copayment per visit for initial calendar year. care only of an emergency. Follow up cate in emergency room Office $35 copayment per physician office not covered, visit. Maximum 20 office visits pea calendar year. Emergency Ambulance $50 copayment per ~ansport in an emergency. Vision Services $ t0 copayment per visit for one routine vision exam every 24 months. Service,~ ltorne Health Care $25 copayment per day. Must be may be provided by any licensed optometrist, approved by IDHC. ophthalmologist. Hardware (lense~, frames, contacts, etc.) not covered. Copayment Nursing Facility $50 copayment per day. apptics to thc out-of-pocket maximum Durable Medical 100% of allowed charge. Equipment Nonnetwork Providers Services rendered by nonnetwork providers in emergency situations or with a preauthor~zed referral shall be paid in accordance with the copayment and/or coinsurance amounts indicated for network services. Nonnet~ork provider reimbursement will be based upon the allowed charge for a given service, less any applicable copayment or coinsurance amount. PRESCRIPTION DRUG BENEFITS SUMMARY ] You pay the first $5.00 or $I0.00 for each new prescription or refill. The $5.00 or $10.00 copayment will be determined as follows: $5 C.payment S 10 Copayment I. Phan'nacist dispenses generic I. Patient requests brand name product. equivalent ora multiple source 2. Physician does not allow generic drug. substitution. 3. Single source drug. 4. Slate law/regulalions do nol permit generic substitution. 5. Pharmacist dispenses brand name product for a multiple ::ource drug. The balance of the charge is paid in full. The prescription must be ordered by a Participating Physician and purchased at a participating pharmacy. Definitions: Prescription Drugs - Legend drugs, biological and compounded prescriptions (any medicinal substance thc label of which under thc Federal Food, Drug, Cosmetic Act is required to bear thc legend "Caution: Federal law prohibits dispensing without prescription.") - Insulin (including disposable syringes and needles) Limilaliou.~: Purchases arc limited to a 34-day supply of each medications except for Certain specific maintenance drugs wl~ich may be dispensed in quantities up to a 100-day supply. Exclusions: - Oral Contraceptives - Contraceptive Devices - Infertility Drugs - Growlh I4ornlone - Therapeutic or Prosthetic Devices - Appliances or Supports - Drugs Prescribed for Cosmetic Purposes - Retin A for Wrinkled or Sundamaged Skin - Experimental Drugs or Approved Drugs for Experhnental Purposes - Nicotine Patches Prescribed for more than 120 patclles per calendar year LEAR CORPOI~X'I'ION Comparison of Benefits Effective 1/1/02 BENEFITS ASSURECARE JOHN DEERE HEALTHPLAN (HMO) kcccss to Providers An)' Provider may be used Open Access. any participating Provider may be seen. No ef~rral n¢ccssao' to sec a participating specialist. Deductible S200 Single ' ·None $400 Family None Coinsurance ;0*/,/20%* None Out of Pocket $ I 000 S ngl¢ $1,000 Single vlaximum $2,000 Family $2 500 Fan y Preventative Ben~fit~ $10 Copay Physical Exam Not Covered Well Baby Ca~e Not Covered $10 Copay Immunizations & injections Not Covered 100 % Paid Physician Benefits 80*/d20% after deductible $10 Copay Office Visits 80%t20% after deductible $ I 0 Copay Home Visits 80*/,,/20% after deductible $ I 0 Copay Hospital Visits Surgery $200 Copay per Procedure Inpatient 800/d20% after deductible 100% Paid (for certain Surgeries) S 50 Copay per Pro~cdurc " Outpatient Hospital Benefits g0*/d20% after deductible $125, Copay per Hospital Da)' inpatient 100% Paid (Ibr ccrtain surgeries) $100 Copay per Admission Outpatient X-Ray & Lab 80~/d20% after deductible 00% Paid Inpatient 100% Paid (for certain surgeries) 100% Paid Outpatient Durable Medical Equipmcat 80"/0/20% after deductible 100% Paid 80o/d20% after deductible $50 Copay per Transport Ambulance Emergency Room 80"/o/20% after deductible $50 Copay Accident g0"/d20% after deductible $50 Copay IIhlcss Mental I Icalth/Chcmical Dcpcndcncy ' $125 Copay per da:,' ( I 0 Days combined M ~-b'C D Inpatient Hospital 80"'/d20% al~cr deductible calendar year maximum) 5.35 Copay per visit (20 Days combined htpatient Physician 80"/d20% after deductible inpatient/outpatient/office visits calendar ycar maximnm.) Onlpaticnt Hospital g0"/,,F20% after deductible $50 Copay per day (20 days combined MH/CD calendar )ear maximum) Outpatient Physician 80"/d7.0"/. after deductible $35 Copay per visit (20 Days combined inpatient/outpatient/office visits calendar year maximum.} $35 Copay per visit (20 Days combined Physician Office 80~'/d'20% alter deductible inpatientYoutpaticnt/officc visits calendar year maximum.) ' 'l 80"/d"20"/. afler deductible $5 Copay {Generic Drug) Prescription Drugs $10 Copay {Name Brand Drug) (Express Scripts) 80%9-0"/° aRer deductible $ I 0 Copay Chiropractic C~re (Fr?quency Limits) Vision Check LNot Covered $10 Copay (Limit once every 2 years) Co-Insurance will apply to Usual, Reasonable Customary Charges (AssureCarc only) Please refer to Subscriber Agreement for detailed information on how benefits will be administered under each plan. The above document is only for comparison of benefits. CHIROPRACTIC BENEFIT SUMMARY Chiropractic Services $10 copayment per visit. Emergency Services $ I 0 copayment per visit. Services Include: Diathermy Office Calls Electric Stimulation Traction Hot/Cold Packs Ultrasound Manipulation Medical Supplies Massage X-ray and Lab Benefit Exclusions: · Acupressure, Acupuncture Arch Supports Cervical Pillow Chelation Therapy Colonic Therapy or Irrigations Magnetic Rcsonancc Imaging Computerized Axial Tomography Hair Analysis, Toxic Metal Analysis, Hand Held Doppler Heavy Metal Scr~ning, and :.. i Inertial Extcnsilizer Mineral Cellular Analysis Iris Analysis, Iridology Thermographic Procedures Kinesiology Remn's Lab or Ream's Test Living Cell Analysis Moire Contourographic Analysis, Nutritional Counseling Biosterometric Studies Nutritional Supplements Over-the-Counter Drugs or Oxygen Therapy Preparation Rolfing Sublingual or Oral Therapy. Benefits will be payable for chiropractic care provided by a Participating Doctor of Chiropracti, (D.C.) A Participating Doctor of Chiropractic means a provider duly licensed to practice in th~ state where he/she practices and who has entered into an agreement with HNH. .8 Employee Benefits: EmPloyee Benefits Amount or Plan Provisions Provided by the Total Cost (Premiums) Percentage of (Include deductibles, coinsurance %, office visit Business per Employee Costs Paid by the co-payments, annual out-of-pocket maximums, Business face amounts, company match, etc.) Employee Family Employ Family ee Single $40. 04 £ear Lear Depends on the plan, each person has Medical/Health pays per Pays pays a choice of two different plans. The Insurance $24.88 month $304.9 $991.27 HMO plan is out of pocket cost of per O per per $10. OO per visit. Please see attached month month month documents for more details.. Is Is Is Is Typically our employee pays 20% and Dental Insurance included included include include the company pays 80%. Please see in the in the d in the in the attached documents for more details. health health health health ins. ins. Ins. ins. none none all all $2 4,500 per employee Life Insurance none none all all $250. OO per week per employee Short Term and/or Long Term Disability Retirement plan none none all all $34. O0 per month per year worked Pension, 401(K) 401 k plan but currently no matching funds Holidays None None All All ]3 paid holidays per year Pd. vacation None None All All 1 week of vacation after one year 2 weeks after 3 years 3 weeks after 8 years 4 weeks after 15 years 5 weeks after 22 years Funeral leave None None All All Up to 3 days for family members Jury duty None None All All Full pay for jury duty minus jury pay Paternity leave One day paid Prescription drugs Part of Part of $5. O0 generic $] O. O0 name brand health health co/pay Vision check premium premium $10. O0 co-pay PeopleSoft Repor~ID: lrcpy028 PayrollRegister PageNo. 50 Location: 0044 IowaCity, IAPlant RunDate 12/16/2004 PayEnd:12/31/2004 On/0ff~cle RunTime 08:59:59 EmployeeName/ FormID < ............... EARNINGS ................ · < ......... T~ES ........ > < .......DEDNS ...... > Emplid/ Chec~/ Form# Type Hours Ea~ing$ Gross Type Tax Type ~o~t NetPay Dept/ B.U./C0./Pa~rp LocationTotals- IowaCity REG 8,384.00 195,015.43 330,351.58 OASDI 17,761.56 00-HPREM 7,119.00 209,380.78 H0L 4,192.00 114,155.39 OASDI-ER · 17,761.55 00-0LIFE 1,917.19 OT1 435.50. I3,850.36 MEDI 4,796.29 00-PAI 406~95 0TS 69.50 ~ 1,982.93 FWT 42,386.04 00-SLIFE 998.65 GUP 5,188.30 MEDI-ER 4,796.30 40-401K 23,291.20 MET 8,239.83 IASWT 16,874.00 40-401K-ER 6,242.79 AUT 350.00 IAUI-ER 58.52 00-CLIFE 77.40 MSP 190.83- 00-401KLN 1~ 762.82 00-UNWAY 107.42 00-HCARE 1,030.22 00-DCARE 461.68 45-BOND 175.00 00 - GAUTO 157 .48 00-CASP 50700 00-401CU 833.11 00-LPAC 10.42 13,081.00 338,591.41 104,434.26 45,395.70 SourceLegend:K=BatchFinalL=OnwlineFinalO=0n-line PeopleSoft ReportID! lrcpy028 PayrollRegister Pa~eNo. 48 Location: 0044 IowaCity,IAPlant Rui1Date 12/13/2004 PayEnd:12/15/2004 On/OffCycleCONFIRMED RunTime 09:01:51 EmployeeName/ FormID < ............... EAR~INGS ................ > < ......... TA~S ........ > < ....... DEDNS ...... > E~lid/ CheckDt/ Form# Type Hours Earnings Gross Type Tax Type Amount NetPay Dept/ B .U./CO. / PayGrp LocationTotals- IowaCity REG 11,528.00 309,170.82 333,061.32 OASDI 17,679.69 00-HPREM 7,119.00 212,659.23 OT1 603.50 18,683.93 OASDI-ER 17,679.89 00-OLIFE 1,917~19 OTS 23.50 682.00 MEDI 4,716.53 00-PAI 406.95 SEV 4,365.40 FWT 40,714.40 00-SLIFE 998.65 AUT 350.00 MEDI-ER 4,716.53 40-401K 24,976.71 DET 36.37 IASWT 16,427.00 40-401K-ER 6,458.75 MSP 190.83- IAUI-ER 52.05 00-CLIFE 77.40 00-401KLN 1,762.82 GR-1 679.05 00-IINWAY 107.42 00-HCARE 1,030.22 00-DCARE 461.68 45~BOND 175.00 O0-C~LwfO 157.48 00-OLTD 75.32 00-CASP 50.00 00-401CU 858.96 00-LPAC 10.42 12,155.00 333,097.69 101,986.29 47,323.02 SourceLegend:K=BatchFinalL=On-lineFinalO=On-line PeopleSoft ReportID: lrcpy028 PayrollRegister PageNo. 49 Location: 0044 IowaCity, IAPlant RuiiDate 11/22/2004 PayEnd:ll/30/2004 On/OffCycle RunTime 14:42:40 EmployeeName/ FormID < ............... EAR~INGS ................ > < .........TA~ES ........ > < ....... DEDNS ...... > Emplid/ CheckDt/ Form# Type Hours Earnings Gross Type Tax Type Amount NetPay Dept/ B .U./CO./PayGrp LocationTotals- IowaCity SEV 25,326.59 354,734.28 OASDI 19,422.59 00-HPREM 7,155.00 225,262.16 REG 9,432.00 249,825.68 OASDI-ER 19,422.59 00-OLIFE 1,917.19 HOL 2,096.00 57,021.52 MEDI 4,999.61 00-PAI 406.95 0T1 431.00 12,906.75 FWT 46,018.61 00-SLIFE 1,034.95 OTS 107.00 3,135.84 MEDI-ER 4,999.61 40-401K 25,413.48 RET 375.00 IASWT 17,639.00 40-401K-ER 6,578.30 VAC 749.12 IAUI-EE 89.47 00-CLIFE 77.40 TUT 2,400.00 00w401KLN 1,762.82 STD 2,019.46 GE-1 702.77 PAW 815.15 00-I/NWAY 107.42 AUT 350.00 00-HCARE 1,030.22 MSP 190.83- 00-DCARE 461.68 45-BOND 175.00 00-GAUTO 160.25 00-OLTD 75.32 00-CASP 50.00 00-401CU 851.44 00~LPAC 10.42 12,066.00 354,734.28 112,591.48 47,970.61 SourceLegend:K=BatchFinalL=0n-lineFinal0=0n-line PeopleSoft ReportID: lrcpy028 PayrollRegister PageNo. 49 Location! 0044 IowaCity,IAPlant RurdDate 11/05/2004 PayEnd:ll/15/2004 0n/0ffCycle Ru/TTime 14:19:23 EmployeeName/ FormID < ............... EARRINGS ................ > < .........TAXES ........ > < .......DEDNS ...... > Emplid/ CheckDt/ Form~ Type Hours Earnings Gross Type Tax Type Amount NetPay Dept/ B.U./CO./PayGrp LocationTotals- IowaCity REG 11,528.00 312,358.33 347,688.08 OASDI 19,724.22 00-HPREM 7,323.00 219,605.23 OT1 463.00 14,662.90 OASDI-ER 19,595.09 40-401K 26,520.32 SEV 20,507.68 MEDI 4,955.55 40-401K~ER 6,639.52 AUT 350.00 FWT 43,502.02 00-OLIFE 1,917.19 MSP 190.83- MEDI-ER 4,925.35 00-PAI 406.95 IA~WT 17,215.00 00-SLIFE 1,034.95 IAUI-ER 91.86 00-CLIFE 77.40 GR-1 679.05 00-UNWAY 107.42 00-HCARE 1,030.22 00-DCARE 461.68 45-BOND 175.00 00-GAUTO 194.52 08-OLTD 75.32 00-CASP 50.00 00-401CU 859.80 00-LPAC 10.42 11,991.00 347,688.08 110,009.09 49,325.58 SourceLegend:K=BatchFinalL=On-lineFinalO=On-line PeopleSoft KeportID: lrcpy028 PayrollRegister PageNo. 52 Location: 0044 IowaCity,IAPlant Ru/1Date 10/22/2004 PayEnd:10/31/2004 On/OffCycle RLknTime 17:08:28 EmployeeName/ FormID < ............... EAPagINGS ................ > < ......... TAXES ........ · < .......DEDNS ...... > Emplid/ CheckDt/ Form# Type Hours Earnings Gross Type Tax Type Amount NetPay Dept/ B.U~/CO./PayGrp LocationTotals- IowaCity REG 10,440.00 306,779.99 383,992.92 OASDI 22,038.55 00-HPREM 7,148.50 242,702.84 OT1 426.50 13,106.23 OASDI-ER 22,167.68 40-401K 25,366.40 SEV 56,440.44 MEDI 5,423.50 40-401K-ER 6,520.75 VAC 4,389.88 FWT 53,851.49 00-HC~LRE 1,063.50 OTS 7.00 197.21 MEDI-ER 5,453.70 00-UNWAY 109.42 3,000.00 IASWT 19,382.00 00-OLIFE 1,956.88 AUT 350.00 IAUI-ER 131.75 00-PAI 419.65 MSP 190.83- FUI-ER 32.61 00-SLIFE 1,036.65 00wCLIFE 71.10 00-401KLN 1,762.82 00-DCARE 461.68 GR-t 238.34 00-401CU ~54.34 45-BOND 175.00 00-GAUTO 194.52 00-OLTD 75.32 00-CASP 50.00 00-LPAC 10.42 10,873.50 383,992.92 128,481.28 47,115.29 SourceLegend:K=BatchFinalL=0n-lineFinalO=On-line PeopleSoft ReportID: lrcpy028 PayrollRegister PageNo. 52 Location: 0044 IowaCity, IAPlant RunDate 10/12/2004 PayEnd: 10/15/2004 On/0 f f Cyc 1 eCONF IPd~ED RunTime 09:00:38 Emp loyeeName / FormID < ............... EARNINGS ................ > < .........TAXES ........ > < .......DEDNS ...... > Emplid/ Check't/ Form~ Type Hours Earnings Gross Ty~e Tax Ty~e Amount NetPay Dept/ B.U./CO./PayGrp LocationTotals- IowaCity REG 11,888.00 315,581.43 356,894.52 OASDI 21,443.95 00-HPP~EM 7,279.50 221,251.42 OT1 834.00 25,818.04 OASDI-ER 21,443.95 40-401K 27,429.67 SEV 5,123.10 MEDI 5,232.54 40-401K-ER 7,050.35 TUT 2,400~00 FWT 47,697.54 00-HCARE 1,063.50 GUP 7,291.19 MEDI-ER 5,232.54 00-UNWAY 109.42 MET 12,037.36 IASWT 18,338.00 00-OLIFE 1,956.88 OTS 17.50 521.59 IAUI-ER 138.29 00-PAI 419.65 MEN 800.03 FUI-ER 45.45 09-SLIFE 1,036.65 AUT 350.00 00-CLIFE 80.10 MSP 190.83- 00-401KL~ 1,762.82 00-DCARE 524.18 GR-1 238.34 00-401CU 514.38 45-BOND 175.00 00-GAUTO 205.24 00-OLTD 75.32 00-CASP 50.00 08-LPAC 10.42 12,739.50 369,731.91 119,572.26 49,981.42 SourceLegend:K=BatchFinalL=On-lineFinal0=On-line LABOR DISTRIBUTION TO D__~EARNINGS PL03W3 LEAR CORP. EEDS AND INTERIORS PAGE 1,517 PERIOD END DATE 12-26~ SII2-IS-IOWA CITY RUN DATE 12-23-2004 LEVELS 0 - 2 REPORT SEQUENCE SI I2 L2 L3 L6 CHARGEABLE LEVELS 2 - 8 EMPLOYEE NO. TRANSACTION M-T-D Q-T-D Y-T-D M-T-D Q-T-D Y-T-[ EMPLOYEE NAME DESCRIPTION AMOUNT AMOUNT AMOUNT HOURS HOURS HOUR~ LOCATION ' ~" REG. EARNINGS 1,480,359.76 4,800,639 38 19,785 572.52 98,975.20 321,649.18 1,339,289.4~ I2 O.T. EARNINGS 113,877.01 331,677 69 1,626 236.11 12,963.20 39,433.58 187,482.1~ GRIEVANCE PAY 118.00 2,040 78 7 263.65 8.00 151.10 524.1£ MISC INCOME 3,800.32 9,787 12 45 382.79 248.00 648.00 3,053.9C JURY DUTY 598.18 1,308 90 3 524.73 44.50 92.50 252.5£ MILITARY LEAVE 622.00 1,741 60 5 697.52 .00 .00 BEREAVEMENT 1 760.56 4,582 40 27 722.13 120.00 304.00 1,868.6~ HOLIDAY PAY 290 186.00 290,176 48 1,196 056.86 19,496.00 19,496.00 81,563.4£ GROSS PAY ADJ 4 201.06 16,614 02 77 017.66 167.10 581.20 2,697.2~ SHIFT PREM 10 129.16 29,867 42 124 517.83 .00 .00 .0~ VACATION PAY 234 281.02 412,653 24 1,766 016.42 13,142.00 23,028.00 101,142.0£ TOTAL EARNINGS 2,139 933.07 5,901,089.03 24,665 008.22 145,164.00 405,383.56 1,717,873.25 -- FICA ~-~h~-~,w--162 202.82 447,151.09 1,869,430.99 -- FUI 124.58 137.39 40,852.96 -- SUI IA 1,287.05 4,009.04 585,851.95 TOTAL BENEFITS 163,614.45 451,297.52 2,496,135.90 LABOR DISTRIBUTION TO__EARNINGS PL03W3 LEAR CORP. EEDS AND INTERIORS PAGE 506 PERIOD END DATE 01-30~ SII2-IS-IOWA CITY RUN DATE 01-31-2005 LEVELS 0 - 2 REPORT SEQUENCE SI I2 L2.L3 L6 CHARGEABLE LEVELS 2 - 8 EMPLOYEE NO. TRANSACTION M-T-D Q-T-D Y-T-D M-T-D Q-T-D Y-T-£ EMPLOYEE NAME DESCRIPTION AMOUNT AMOUNT AMOUNT HOURS HOURS HOURS LOCATION · REG. EARNINGS 366,917.29 1,379,824 00 1,379 824 00 24,558.30 91,753.10 91,753.1¢ I2 ~" O.T. EARNINGS 16,587.02 69,289 10 69 289 10 2,091.80 7,640.70 7,640.7C GRIEVANCE PAY 940.52 1,167 92 1 167 92 68.00 84 00 84.0¢ MISC INCOME 1,477.60 4,322 32 4 322 32 96.00 288 00 288.0C JURY DUTY .00 111 60 [11 60 .00 8 00 8.0¢ MILITARY LEAVE 124.40 622 00 622 00 .00 00 BEREAVEMENT 1,094.48 4,931 44 4 931 44 72.00 328 00 328.0~ HOLIDAY PAY .00 220,140 18 220 140 18 .00 14,780 50 14,780.5{ GROSS PAY ADJ 878.44 4,295.47 4 295 47 24.30 176 00 176.0C SHIFT PREM 1,938.83 8,908.66 8 908 66 .00 00 .0C VACATION PAY 19,589.84 178,248.86 178 248 86 1,118.00 9,964 00 9,964.0( TOTAL EARNINGS 409,548.42 1,871,861.55 1,871 861 55 28,028.40 125,022 30 125,022.3f ~ FICA~~-~%~ 30,975.99 141,449.84 141 449 84 -- FUI 3,222.54 14,775.35 14 775 35 -- SUI IA 17,200.90 78,617.77 78,617 77 TOTAL BENEFITS 51,399.43 234,842.96 234,842 96 oAYF~]LL REGISTER - PRR402 LEAR CORP. EEDS AND INTERIORS DIVISION SI PAGE P.E.DATECHK DAT,~.--~ SII2-IS-IOWA CITY LOCATION I2 RUN DATE 01/ W K L ~--7~B~/i'-~K L Y 01/30/2005 02/04/~0053 SEM.I-MTHLY/MTHLY 00/00/0000 00/00/0000~"~'~ --[-LEVELS .... EMP NUMBER EMPLOYEE NAME ~% SOC SEC NO RATE/SALARY 3 4 5 TYPE ...... £HOURS ............ EARNINGS ................................. TA~XES ............................... DED/NET/CK AMT-. CHECK NUM FEDERAL STATE CITY/COUNTY TOTAL LOCATION - I2 REV .00 REG .00 REG .00 FIT .00 SIT .00 CNTY .00 TOT DE '.00 OT .00 OT .00 SS .00 SDI .00 CITY .00 NET Pt .00 0TH~'' .00 OTH .00 MED .00 SUI .00 TOT .00 TOT .00 TOT .00 TOT .00 TOT CURR 24,721.80 REG 366,917.29 REG 46,961.79 FIT 19,499.00 SIT .00 CNTY 29,176.11 TOT DE 2,116.60 0T 16,587.02 0T 25,104.64 SS .00 SDI .00 CITY 282,935.53 NET PI 1, 190.00 OTH 26,044.11 OTH 5,871.35 MED .00 SUI 177,982.63 CK AMq 28,028.40 TOT 409,548.42 TOT 77,937.78 TOT 19,499.00 TOT .00 TOT NET 24,721.80' REG 366,917.29 REG 46,961.79/ FIT 19,499.00/ SIT .00 CNTY 29,176.11 TOT DE 2,116.60 OT 16,587.02 OT 25,104.64b SS .00 SDI .00 CITY 282,935.~3 NET Pl 1, 190.00 OTH 26,044.11 OTH 5,871.35' MED .00 SUI 28,028.40 TOT 409,548.42 TOT 77,937.78 TOT 19,499.00 TOT .00 TOT MTD 24,721.80 REG 366,917.29 REG 46,961.79 FIT 19,499.00 SIT .00 CNTY 29,176.11 TOT D5 2,116.60 0T 16,587.02 0T 25,104.64 SS .00 SDI .00 CITY 282,935.53 NET PI 1,190.00 0TH 26,044.11 0TH 5,871.35 MED .00 SUI 28,028.40 TOT 409,548.42 TOT 77,937.78 TOT 19,499.00 TOT .00 TOT ~'/ QTD 92,225.90 REG 1,379,824.00 REG 208,734.96 FIT 87,182.00 SIT .00 CNTY 156,874.92 TOT DE 7,715.90 OT 69,289.10 0T 114,639.01 SS .00 SDI .00 CITY 1,277,619.83 NET PS 25,080.50 OTH 422,748.45 OTH 26,810.83 MED .00 SUI 125,022.30 TOT 1,871,861.55 TOT 350,184.80 TOT 87,182.00 TOT .00 TOT YTD 92,225.90 REG 1,379,824.00 REG 208,734.96 FIT 87,182.00 SIT .00 CNTY 156,874.92 TOT DE 7,715.90 OT 69,289.10 0T 114,639.01 SS .00 SDI .00 CITY 1,277,619/83 NET Pt 25,080.50 OTH 422,748.45 OTH 26,810.83 MED .00 SUI 125,022.30 TOT 1,871,861.55 TOT 350,184.80 TOT 87,182.00 TOT .00 TOT PAYROLL REGISTER - PRR402 LEAR CORP. EEDS AND INTERIORS DIVISION - SI PAGE 4615 P.E.DATE CRK DA~,E------~ SII2-IS-IOWA CITY LOCATION - I2 RUN DATE 12/26/20¢ WK~Y/BI-WKLY 12/26/2004 12/31~2~ SEMI-MTHLY/MTHLY 00/00/0000 00/00/U'0'~0 .... LEVELS .... EMP NUMBER EMPLOYEE NAME SOC SEC NO RATE/SALARY 3 4 5 TYPE ....... HOURS ............ EARNINGS ................................. TAXES ............................... DED/NET/CK AMT--~ CHECK NUM FEDERAL STATE CITY/COUNTY TOTAL LOCATION 'I2 ' ~ CURR ~12,465.10 REG 184,461.52 REG 45,013.75 FIT 18,463.00 SIT .00 CNTY 27,515.46 TOT DE 1,376.90-~OT 12,331.31 OT 24,021.35 SS .00 SDI .00 CITY 271,038.71 NET P~ ~2,308.00 OTH 194,877.37 0TH 5,617.93 MED .00 SUI 173,228.41 CK AMq 26,150.00 TOT 391,670.20 TOT 74,653.03 TOT 18,463.00 TOT .00 TOT NET 12,465.10 REG 184,461.52 REG 44,886.91/FIT 18,426.00/SIT .00 CNTY 28,423.18 TOT DE 1,376.90 OT 12,331.31 OT 23,973.36~ SS .00 SDI .00 CITY 269,580.~4 NET P~ 12,268.00 OTH 194,103.37 OTH 5,606.71~ MED .00 SUI ~/ 26,110.00 TOT 390,896.20 TOT 74,466.98 TOT 18,426.00 TOT .00 TOT . . MTD 99,363.80 REG 1,480,359.76 REG 258,012.83 FIT 103,735.00 SIT .00 CNTY 148,366.56 TOT DE 12,997.70 OT 113,877.01 0T 131,458.52 SS .00 SDI .00 CITY 1,467,615.86 NET P~ 32,802.50 OTH 545,696.30 0TH 30,744.30 MED .00 SUI ~ 145,164.00 TOT 2,139,933.07 TOT 420,215.65 TOT 103,735.00 TOT .00 TOT QTD 322,825.38 REG 4,800,639.38 REG 709,436.98 FIT 285,702.00 SIT .00 CNTY 426,998.17 TOT DE 39,637.68 OT 331 677.69 OT 362,397.04 SS .00 SDI .00 CITY 4,031,800.79 NET PS 42,920.50 OTH 768 771.96 OTH 84,754.05 MED .00 SUI 405,383.56 TOT 5,901 089.03 TOT 1,156,588.07 TOT 285,702.00 TOT .00 TOT YTD 1,344,129.94 REG 19,785 572.52 REG 2,977,577.34 FIT 1,200,735.00 SIT .00 CNTY 1,699,132.23 TOT DE 188,916.83 OT 1,626 236.11 OT 1,515,094.37 SS .00 SDI .00 CITY 16,918,252.66 NET PS 184,826.50 OTH 3,253 319.59 OTH 354,336.62 MED .00 SUI / 1,717,873.27 TOT 24,665 128.22 TOT 4,847,008.33 TOT 1,200,735.00 TOT .00 TOT *** TOTAL OUT OF CROSSFOOT = 4 *** LEAR CORPORATION 21557 Telegraph Road Southfield, Michigan 48034 OF ANNUAL MEETING OF STOCKHOLDERS Thursday, May 13, 2004 10:00'A.M., Eastern Time Dear Fellow Stockholder: On behalf of the Board of Directors, you are cordially invited to attend the 2004 Annual Meeting of Stockholders to be held on Thursday, May 13, 2004, at 10:00 a.m. (Eastern time) at Lear Corporation, 5200 Auto Club Drive, Dearborn, Michigan 48126. The purpose of the meeting is to: 1. elect three directors; 2. ratify the appointment of Ernst & Young LLP as our independent auditors for 2004; 3. consider a stockholder proposal, if presented at the meeting; and 4. conduct any other business properly before the meeting. Attendance and voting are limited to stockholders of record at the close of business on March 19, 2004. A list of stockholders entitled to vote at the meeting, and any postponements or adjournments of the meeting, will be available for examination between the hours of 9:00 a.m. and 5:00 p.m. at our offices during the ten days prior to the meeting and also at the meeting. Your vote is important. Whether you plan to attend the meeting or not,-please complete, sign and date the enclosed proxy card and return it in the envelope provided. If you attend the meeting and prefer to vote in person, you may do so. Thank you for your continued support of our company. ROBERT E. ROSSITER Chairman and Chief Executive Officer March 31, 2004 0-K ~IGE coMMISSION 20549 (Mark One) rffi ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002. FI TRANSITION REpoRT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition peri od f~om.__ to Commission t'fie number: 1-11311 LEAR CORPORATION (Exact name of registrant as specified in its charter) 13-3386776 Delaware (I.R.S. Employer ldentification No.) (State or other jurisdiction of incorporation or organization) 48086-5008 21557 Telegraph Road, Southfield, MI (zip code) (Address of principal executive offices) Registrant's telephone number, including area code: (248) 447-1500 Securities registered pursuant to Section 12(b) of the Act: Name of ea ch exchange on which registered Title of each class New York Stock Exchange Common Stock, par value $.01 per share Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such sh otter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~ No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registranes knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K __ Indicate by check mark whether the registrant is an accelerated filer (as described in Rule 12b-2 of the Act). Yes ~ No __ As of February 28, 2003, the aggregate market value of the registrant Common Stock, par value $.01 per share, held by non- affiliates of the registrant was $2,495,437,920. The closing price of the Common Stock on February 28, 2003 as reported on the New York Stock Exchange was $37.98 per share. As of February 28, 2003, the number of shares outstanding of the registrant's Common Stock was 65,808,214 shares. DOCUMENTS INCORPORATED BY REFERENCE Certain sections of the registrant's Notice of Annual Meeting of Stockholders and Proxy Statement for its Annual Meeting of Stockholders to be held on May 8, 2003, as described in the Cross-Reference Sheet and a Table of Contents included herewith, are incorporated by reference into part'III of this Report. MINUTES DRAFT PLANNING AND ZONING COMMISSION JANUARY 20, 2005 EMMA J. HARVAT HALL MEMBERS PRESENT: Ann Freerks, Beth Koppes, Dean Shannon, Don Anciaux, Jerry Hansen, Bob Brooks MEMBERS ABSENT: Benjamin Chait STAFF PRESENT: Bob Miklo OTHERS PRESENT: Larry Schnittjer, Bob Wilson, Evelyn Frey, Linda Huff, Klm Kirchner RECOMMENDATIONS TO COUNCIL: Recommended approval, by a vote of 5-1, (Brooks voting against) REZ004-00017/SUB04-00017, a rezoning from Low Density Single Family Residential (RS-5) zone to Planned Development Housing Overlay - Low Density Single-Family Residential (OPDH-5) zone and a preliminary plat of Village Green, Part XXIII and XXIV, an 83-1ot residential subdivision on 25.67-acres of property located on Wintergreen Drive subject to the following conditions: A minimum 7-foot setback for Lots 85 to 102 and Lots 111 to 130 The front yard area must be landscaped with shrubs and a fence as illustrated on the OPDH plan Lots 65 to 84 and 131 to 134 must be a mixture of models Al, A2 and B Identical combinations of zero-lot lines must not be repeated on adjacent lots The medial between driveways must be landscaped with a hedge as illustrated on the concept plan Where two driveways are located together, they will be tapered to minimize front yard paving The final landscaping plan be approved with the final ©PDH plan Landscaping on Outlots must be installed prior to the issuance of an occupancy permit for any of the lots. For individuals lots, landscaping be required when the occupancy permit is issued for that particular building or prior to. CALL TO ORDER: Anciaux called the meeting to order at 7:32 pm. PUBLIC DISCUSSION OF ANY ITEM NOT ON THE AGENDA: There was none. REZONING/SUBDIViSION ITEM: REZ004-00017/SUB04-00017~, discussion of an application submitted by Third Street Partners for a rezoning from Low Density Single Family Residential (RS-5) zone to Planned Development Housing Overlay - Low Density Single-Family Residential (OPDH-5) zone and a preliminary plat of Village Green, Part XXIII and XXIV, an 83-1ot residential subdivision on 25.67-acres of property located on Wintergreen Drive. Miklo said Staff report had been given at the two previous meetings so he would provide a brief recap. The area to be rezoned included a large open space outlot for stormwater detention. It was a planned development overlay which represented an increase in density over what would normally be allowed in an RS-5 zone. Staff had estimated that if the same street layout were used, there would be approximately 25 more housing units in the proposed design than in a standard RS-5 subdivision with 60-foot / 8,000-square foot lots. Some increase in density had been approved in 1993 with an OPDH plan. With the proposed smaller, narrower lots there would be an increase of 17-additional units. The proposed plan would allow attached units, otherwise in a single-family zone attached units were not allowed. For the central lots a decrease in lot area of about 60% was proposed compared to the normally required 8,000 square-foot lot. For the adjacent zero-lot lines the reduction in lot area/lot width Planning and Zoning Commission Minutes January 20, 2005 Page 2 would be approximately 25%. MikJo said with this particular OPDH plan there were a lot of variances from the RS-5 zone being requested. Questions that should be considered when rewewing an OPDH plan included: Was the increase in density warranted by the design of the development? In this particular case was it better than the previously approved OPDH plan granted in 19937 Was it compatible with the intent of the RS-5 zone that applied to much of that part of Iowa City? Was it compatible with the Comprehensive Plan? Miklo said for the lots that had rear lanes or a private alley in the back, Staff felt it would be possible to reduce the lot width for those lots. Staff was concerned about the proposed 5-foot setback for those particular lots and recommended that it be a minimum of 7-feet and that it be landscaped between the house and the street. The applicant had submitted four basic building models and proposed that two of the models be required for Lots 65 -72 and all four models be permitted for the remainder of the narrow lots. Miklo said when looking at the overall plan, it should be a cohesive neighborhood. The intent / spirit of the RS-5 zone should be honored throughout the development. Staff questioned if the proposed models would be compatible with the overall character of the proposed development in that particular location and with the existing RS-5 neighborhood on Sterling Drive. Miklo said Staff recommended that if the Commission chose to approve the application that the following eight conditions be required as part of the approval: · A minimum 7-foot set back for Lots 85 to 102 and Lots 111 to 130 · The front yard area must be landscaped with shrubs and a fence as illustrated on the OPDH plan · Lots 65 to 84 and 131 to 134 must be a mixture of models Al, A2 and B. Miklo said Staff did not recommend the approval of proposed dwelling models C and D. It was a judgment call whether models C and D were compatible but Staff did not think they were compatible with what had been proposed or with the character of the zone. · Identical combinations of zero-lot lines must not be repeated on adjacent lots · The median between driveways must be landscaped with an evergreen hedge as illustrated on the concept plan · Where two driveways are located together they will be tapered to minimize front yard paving · The final landscaping plan be approved with the final OPDH Plan · Landscaping on common Outlots must be installed prior to the issuance of an occupancy permit for any of the lots (To address the concern about the lack of landscaping that had occurred on the Outlot.) · For individuals lots, landscaping be required when the occupancy permit is issued for that particular building or prior to. Anciaux asked if the requirement for evergreen landscaping in the median between the driveways would cause a sight problem. Miklo said near the street they would probably want to have it 2-feet or lower, there were evergreen species available that wouldn't grow taller than two feet. The intent was to help break up the mass of the concrete. The large amount of front-yard paving on the narrower lots was one of the things that made that model less compatible with the neighborhood. Shannon said it was his understanding that the developer would not build these homes. His concern was the restriction on a lot owner of not being able to build the model of home they chose if the same model was on the adjacent lot. Miklo said that was the case in most OPDH plans. People purchasing lots knew before hand what they were getting into when they bought into it. Miklo said if the builder wished to do a variation of the model that would be an option. It was a condition recommended by Staff but the Commission could modify or eliminate that particular recommendation. Staff's concern was that there could be an entire street with the same model. The underlying zone was an RS-5, typically in an RS-5 zone each house had some individuality or individual character. That was the point of trying to keep with the spirit of an RS-5 zone. On the overhead map Miklo indicated which lots met the RS-5 standards. On those lots any type of home could be built as long as they met the building codes and the standard set-back requirement that already applied. Miklo said no density increase, bonuses or any reduction in lot area was being given/received for those particular lots. Freerks suggested a compromise might be to have no more than two in a row. Planning and Zoning Commission Minutes January 20, 2005 Page 3 Anciaux asked if a home owner brought in a completely different plan or different fa~;ade could they do something different? Miklo said recommendation #3 said, "variations in the fa~;ade designs being approved at the time of final OPDH plan" which provided options for customizing a person's home. For some OPDH plans the Commission had seen exact drawings of what would be built. For OPDH's like the Peninsula, there was a code that listed a menu of how a building could be put together, but that particular code was probably stricter than what they were looking at. Miklo said that because these are zero-lot lines so individual homeowners would not have a choice anyway because a builder would be constructing these two joined units and homeowners would buy them after that. Public discussion was opened. Larry Schnittier, MMS Consultants, representing the developer. Schnittjer said for the units on the east side of the north-south street and on the south side of the east-west street, the concepts for those homes was to have considerable flexibility in the floor plan and somewhat flexibility in the footprint of what ever was to be built there. Given that the developer intended to sell the lots, the developer wouldn't want to have basically two sets of building plans that persons could chose from and then find a builder to build it. The developer's intent had been to set some parameters as to how the structures would be sited and less parameter on the architectural quality and character of the home including porches and facades. They didn't want to set floor plans and total structure design. Freerks said that was what was done in an OPDH. Schnittjer disagreed saying it could be interpreted that way but he felt there was enough flexibility in the OPDH plan to allow it to be something more flexible too. Freerks asked Schnittjer how he felt the bottom two plans went architecturally with the rest of the neighborhood. Schnittjer said they didn't view the lots that backed up to the railroad as being as much tied to the neighborhood as Staff did. That is why they wanted to pick additional styles that could be used in that space. They were adjacent to the neighborhood but were separated by the park and by the street. Miklo said the Commission was not looking at interior layout or approving a floor plan. They were looking at the fa(;ade and general footprint. Schnittjer said the illustration of the top home design was one of three that were very similar in footprint that he had selected to submit to show what could be built there. The other two designs didn't have the second story, the middle portion of the garage and various changes to them. Schnittjer said he'd like at least that much flexibility and a lot more. As long as the street side site plan was similar to what was illustrated the builder could use a totally different floor plan. His question was, Miklo had made the comment that these items had to be set out at the final OPDH Plan. The developer's intent had been that the final OPDH plan would have this same flexibility so when someone purchased a lot and wanted to obtain a building permit, the site plan/building permits would be just like normal lots. The building department would review the plans for conformance with the plans and issue the permit. Miklo said these were not normal lots where someone could buy a lot and build a house. These are zero-lot lines where two houses are joined so the decision on what to build is dictated by the adjacent lot. Regardless of what is shown on the OPDH plan individual consumers would not be able to choose their own house plan. This is the nature of zero-lot line developments. Freerks said what she was hearing was that the developer wanted the flexibility of an RS-8 zone but this was not an RS-8, it was an RS-5 within an ©PDH. There was some give and take there. The developer was gaining many additional lots and with that there were certain things such as minor restrictions and guidelines that needed to be included. Schnittjer said he didn't see the recommended conditions as being minor restrictions. Bob Wilson, 1838 Sterling Court, said he'd lived in his house for approximately 8 years. His lot adjoined the field that was being discussed. When he'd purchased his lot he knew it was in an industrial area and that there would Planning and Zoning Commission Minutes January 20, 2005 Page 4 be a certain amount of noise there. Since they'd resided there, a factory had been built which was considerably louder than anything else there. Wilson said the proposed white pine buffer might buffer the noise from the railroad, but the noise from the factory seemed to emanate from the top of the building. When standing in his backyard or in the field the noise was very very loud. Wilson said he couldn't image living any closer to the factory, which was approximately two football fields away. He wondered if just green space could be left at that end of the development as a tree buffer would not help. Evelyn Frey, 1855 Sterling Court, said the proposal of the zero-lot lines and of reducing the lot width and the 5-foot setback was completely foreign to the Village Green sub-development. To propose two rows of housing on an alley in their neighborhood took it from a village like neighborhood, as referenced in Karin Franklin's newspaper article, to row houses in Baltimore. On north Dover Street there was an example of this same zero-lot line concept. The lots were very very narrow with duplexes on them. There was an extensive amount of concrete on the lots. The advantage was their back windows looked out on a cemetery so they could see green trees. The residents of the proposed neighborhood would see a wall of buildings out their rear windows and the front would be very different from any other yard in that neighborhood. Frey said she felt for the people that would live across the street from those duplexes as they would just see a wall of buildings. It would feel like they were living in Baltimore, which was not appropriate in this neighborhood. Linda Huff, 1856 Sterling Court, said she echoed Frey's feelings about the neighborhood. She had resided in the neighborhood for 20 years, she was one of the longest term neighbors. They didn't intend to move and she would like to see the neighborhood continue on as they had since the initial development. In 1993 they had compromised to the original ©PDH-5. Where would those kids play? Currently the kids went to the pond, to the park or played in Huff's back yard. They'd had many baseball and football games in their back yard. Where would the kids for the proposed development play, there was a lot of concrete there. The traffic area - would the kids be playing in the street? Huff said she felt a lot of the neighbors would like to have the neighborhood stay as it was and continue to have greenery and play area for the children. Kim Kirchner, 2906 Sterling Drive, said she wished to reiterate what Frey had said. She'd read a statement at the first meeting and had continually spoken for having more single family units and less of what was illustrated on the map. She was concerned with the duplex styles that were being proposed and again wanted to advocate for more single-family units in the proposed development. Public hearing was closed. Motion: Shannon made a motion to approve REZ004-00017/SUB04-0001'~, a rezoning from Low Density Single Family Residential (RS-5) zone to Planned Development Housing Overlay - Low Density Single-Family Residential (OPDH-5) zone and a preliminary plat of Village Green, Part XXIII and XXIV, an 83-1ot residential subdivision on 25.67-acres of property located on Wintergreen Drive subject to the eight conditions including: A minimum 7-foot setback for Lots 85 to 102 and Lots 111 to 130 The front yard area must be landscaped with shrubs and a fence as illustrated on the OPDH plan Lots 65 to 84 and 131 to 134 must be a mixture of models Al, A2 and B Identical combinations of zero-lot lines must not be repeated on adjacent lots The medial between driveways must be landscaped with a hedge as illustrated on the concept plan Where two driveways are located together, they will be tapered to minimize front yard paving The final landscaping plan be approved with the final ©PDH plan Landscaping on Outlots must be installed prior to the issuance of an occupancy permit for any of the lots. For individuals lots, landscaping be required when the occupancy permit is issued for that particular building or prior to. Freerks seconded the motion. Hansen said he would be in favor of going with the conditions. The neighborhood didn't want to see a change in the neighborhood, the developer didn't want to see restrictions, the Comprehensive Plan called for diversification of housing, people said they didn't want sprawl so the Commission said infill would be more dense. Everyone had a side. Planning and Zoning Commission Minutes January 20, 2005 Page 5 Hansen said if the developer was unhappy with the conditions, he would suggest asking for an extension from the developer to see if some type of compromise could be reached. Freerks said she felt that they'd given that at the last two meetings. Hansen said he understood that but he'd heard a lot more opposition to it tonight. He didn't want to slam to door on the proposal but "if we put this up the developer is not going to like it and it is just going to lay there, just like the last one did from 1993." Hansen said he'd rather have something that could work for everyone. Miklo asked Schnittjer if there was any indication that the developer would be willing to defer. Schnittjer said he didn't think he could give that as the developer had not wanted to defer at the last meeting. Schnittjer said he didn't have any problem with the first and second conditions. He had some concerns about the third. He didn't have any real problem with the foudh as long as they were not tied to an interior architectural floor plan and also architectural detail on the outside. He understood some of it was needed but he didn't want to see everyone constructed identical either. Schnittjer said he didn't like to see an evergreen hedge on a driveway in Iowa, particularly at this time of year because of snow drifts and everything else that occurred with it. Schnittjer said when he had first seen the slide at the bottom, he'd thought it was probably a river rock median which would allow people to step out onto something other than mud when they exited their car. He personally had not gone to look at that particular structure. Schnittjer said driveways today were barely wide enough to park two vehicles and to be able to get out and stand on the concrete. It would be a lot worse if they were tapered. Miklo said there was some type of landscaping proposed to be there on the application plan, he asked Schnittjer if he knew what it would be. Schnittjer said he had not selected materials. It would be better in his judgment if it would be deciduous shrubs so the wind could blow through it to some degree and not pile snow up on the neighbor's driveway. Hansen said he thought that these were some of the things that there still was some talk to be had. If he had to vote on this tonight, he would vote with the conditions. The opposition he was hearing was telling him to turn it down and go back to square one. Schnittjer said from his discussions with Mr. Frantz, if the Commission felt they needed to turn it down, that was fine. They would look for a favorable vote, one with some modifications of the restrictions. If they couldn't do it, then the Commission needed to do what they had to do. Miklo said in terms of whether it was an evergreen hedge or some type of landscaping, that was not a real issue with Staff. He said thre was a lot of paving shown, and staff was now looking for a way of softening it so it would be more compatible with the RS-5. The Commission could opt to strike evergreen from the condition wording. Hansen said he felt the real issue was the design of the zero lot lines. Freerks said she felt that was the thing that was most important and key to making this a cohesive development. That was where she felt very strongly. Hansen said he did too, but their thoughts on this probably could be addressed by other designs. The developer didn't wish to be locked in to a design. Freerks questioned as to when these drawings had been given to City Staff. There had been an opportunity for the developer to give more than just these few and it hadn't been done. The Commission had raised this same concern when they discussed this in December. Schnittjer said they could have put together 16 plans but they had six lots. "Where did you draw the line on how much you put on for six lots?" Schnittjer said if Frantz was going to build these structures and had some idea of what he wanted to build that would be fine. But when they were lots for sale and people could hopefully build almost what they wanted, the developer had difficulty in being tied down. Freerks said these were more than a few restrictions, but the developer was gaining so much too. When there was an OPDH, there was a planned development and that was what she couldn't get away from. They were trying to plan something, so it was not just what-ever from whom-ever purchased a lot. In this case individual homeowners would not be purchasing lots and building themselves as these are zero-lot lines. Planning and Zoning Commission Minutes January 20,2005 Page 6 Miklo said there might be some middle ground where there was some language such as 'they will generally conform to the plans illustrated, variations may be approved by the Director of Planning at the time of building permit or some other way to make that condition a little more flexible. Schnittjer said it had been said that the City had given a lot. He felt the developer had given a lot too. The developer had almost 26-acres and 83-units, a little over three dwelling units per acre. The City and the neighborhood were getting an immense piece of open space that might not be the most desirable location because it was next to the railroad track and to Scott Boulevard. The drainage area was a necessity however the developer could extend the lot lines into that space and each lot owner would own a part of it and they'd tell the rest of the neighborhood to stay out. They didn't have to put it into an outlot. Parks and Recreation didn't want the outlot area so it was up to the developer to take care of it. Koppes and Freerks asked Miklo to give an example of wording that would make condition #3 more flexible for the developer but still have the approval process. Miklo suggested, "Lots 65-84 and 131-134 be a mixture of models similar to illustrations A-l, A-2 and B, and that variations of these models be approved by the Commission." Freerks and Hansen said they didn't see just any plan a home builder wanted to build as being part of an OPDH plan. Miklo said it was the Commission's charge to determine whether the proposed models would be compatible or not. They had to have a picture to determine that. Another way to determine that would be to allow them to come back before the Commission with some variations and not have to go through the whole re-zoning process. Brooks said he was at the point where he was very uncomfortable approving this. He was sensing too much disparity between what the developer thought they could do under an OPDH and what he thought they should do. The plan for the zero lot lines was one issue that bothered him. Brooks said he didn't know that just vaguely wording it was adequate. Things like what had been done in the Peninsula and other OPDH plans where there were very well defined guidelines. He was also troubled with the 5-foot or 7-foot setback on those lots. He said the difference between 5- and 7-feet was indistinguishable, most people were not going to know the difference. Because of the driveway configurations on the other side of the street, all of the on-street parking for practical purposes was going to be forced over in front of the homes that were basically sitting on the sidewalk. He agreed with a variety of housing types, but not a variety that was stuck in the middle of an RS-5 neighborhood that was sticking something completely foreign right in the middle. Freerks said she didn't have a problem so much with that. It was kind of scaled in a certain way until it got to the center portion. She thought the plans were adequate for what they had proposed to put there. She didn't wish to put the brakes on this, it was unfortunate that it hadn't been worked out ahead. Freerks said they'd had so much information given on this, Staff had worked on it, the developer had worked on it, neighbors had come in and given their opinions and expressed their concerns. When it went to Council and they saw a split decision or that it had been turned down, the Council usually wanted to pass something. It was her fear that everything would get thrown out the window as the Council was not always as informed about all the details. The Council dealt with the political aspects of items and that was what she saw as a problem because then there was information that was lost. Freerks said she reit it was the Commission's job to work through it and get something figured out. Brooks said the general ideas that were portrayed in the eight recommended requirements were probably good and valid if the Commission wanted to see this go forward. He was not totally convinced that they did. Brooks said the recommended requirements were good and they were general but they were not to the level that he would want to see to vote in favor of this application. Hansen said he was not sure that the Commission re-wording the condition regarding the zero lot lines was going to do anything to push this along. They might end up with a piece of property that just sat there. Freerks said she thought there was a big demand for this type of thing, she thought it would be an exciting development with the proposed changes and Staff's guidelines. It could be a very stable and inviting neighborhood. Planning and Zoning Commission Minutes January 20, 2005 Page 7 Hansen said one of the things the Commission was to consider was, was the proposal better than the original OPDH. At this point, he didn't know. Another concern was the traffic pattern. Hansen said traffic was one of those things where they never had a study before it was there and they never had a study after it was there to know if their opinion had been right yet it was something they were supposed to consider. Hansen said at this point he was not for this. Brooks said he wished he could say he was for it, but he didn't feel comfortable that this was the right combination of what everyone understood an OPDH was and how it was going to work. He sensed that the developer wanted to have more freedom to allow anything to happen than he interpreted an OPDH to allow. He was not comfortable with re-writing something yet this evening that would create a series if guidelines and expectations that he would be comfortable with and that they could move ahead on. Freerks said she was fine with Staff's recommended conditions with some minor modifications. Shannon said he was not wild about conditions #3, #4, and #5. He'd always said he was not comfortable looking at pictures and saying "this is a good house" "this is a bad house". One person's junk was someone else's gold. Shannon said as long as someone's home was not destroying the whole neighborhood, far be it for him or Staff to decide what someone else's home should look like. Shannon said it was his understanding that the developer wanted the Commission to vote this item up or down, not another deferral. That was why he was willing to go with the eight conditions even though he was not happy with all of them. It would go to the Council and they could make political decisions that the Commission could not. The Commission had already deferred this twice so send it on through and the developer would get his day in court. He didn't want to see this item fail if the Commission sat on it. He thought the developer who'd built all the homes north of this area had done a very nice job. Koppes said her opinion was that she wanted all eight conditions included with the Commission's recommendations. She was concerned that if the Commission voted without the conditions, then the Council could easily re-do it and approve it with no conditions. She wanted the Council to see the eight conditions. It was a pretty good development, and she understood the developer's frustrations on being limited, but it was an OPDH and he was getting a great increase in density. Anciaux said this was very complicated. He was probably going to vote for it with the eight conditions. If not that then he'd rather go back to the RS-5 on this property. Miklo asked if the Commissioners who were supportive of the eight conditions wanted to have the word evergreen removed from #5. Anciaux asked if there was a consensus to remove the word evergreen. There was a consensus. Hansen said he did not want to see a split decision either. He wanted to be fair to the developer and to be fair to the homeowners in the area. He felt if there was something better for the developer that they could all be happy with if they just put this item off and had more time to work on it. The motion passed on a vote of 5-1, Brooks voting against, to approve REZ004-00017/SUB04-00017 with the following conditions: A minimum 7-foot setback for Lots 85 to 102 and Lots 111 to 130 The front yard area must be landscaped with shrubs and a fence as illustrated on the OPDH plan Lots 65 to 84 and 131 to 134 must be a mixture of models Al, A2 and B Identical combinations of zero-lot lines must not be repeated on adjacent lots The medial between driveways must be landscaped with a hedge as illustrated on the concept plan Where two driveways are located together, they witl be tapered to minimize front yard paving The final landscaping plan be approved with the final OPDH plan Landscaping on Outlots must be installed prior to the issuance of an occupancy permit for any of the lots. For individuals lots, landscaping be required when the occupancy permit is issued for that particular building or prior to. Planning and Zoning Commission Minutes January 20, 2005 Page 8 OTHER ITEMS: There were none CONSIDERATION OF THE JANUARY 6, 2005 MEETING MINUTES: Motion: Koppes made a motion to approve the minutes as corrected. Brooks seconded the motion. The motion passed on a vote of 6-0. ADJOURNMENT: Motion: Hansen made a motion to adjourn the meeting at 8:20 pm. Koppes seconded the motion. The motion passed on a vote of 6-0. Elizabeth Koppes, Secretary Minutes submitted by Candy Barnhill s:lpcdlminuteslp&zl2005101-20-05.doc Planning and Zoning Commission Minutes January 20, 2005 Page 9 Iowa City Planning & Zoning Commission Attendance Record 2005 FORMAL MEETING Term Name Expires 1/6 1/20 2/3 2/17 3/3 3/17 4/7 4/21 5/5 5/19 6/2 6/16 7/7 7/21 8/4 8/18 9/1 9/15 10/6 10/20 11/3 11/17 12/1 12/15 D, Anciaux 05/06 X X B, Brooks 05/05 X X B. Chait 05/06 × O A. Freerks 05/08 X X J. Hansen 05/05 X X E. Koppes 05/07 O/E X D. Shannon 05/08 X X INFORMAL MEETING Term Name Expires 1/3 1/31 2/14 2/28 3/14 4/1 4/18 5/2 5/16 5/30 6/13 7/4 7/18 8/1 8/15 8/29 9/12 10/3 10/17 10/31 11/14 11/28 12/12 D. Anciaux 05/06 CW B. Brooks 05/05 CW B. Chait 05/06 CW A. Freerks 05/08 CW J. Hansen 05/05 CW E. Koppes 05/07 CW D. Shannon 05/08 CW Key: X - Present O = Absent O/E - Absent/Excused N/M- No Meeting ..... Not a Member CW = Cancelled due to Weather MINUTES DRAFT DEER TASK FORCE MEETING January 18, 2005 LOBBY CONFERENCE ROOM-CITY HALL MEMBERS PRESENT: Pat Farrant, Harold Goff, Marty Jones, Jan Ashman, Peter Jochimsen, Linda Dykstra, Alan Nagel MEMBERS ABSENT: Pete Sidwell STAFF PRESENT: Sue Dulek, Kathi Johansen OTHERS: Tim Thompson (IDNR) CALL TO ORDER Chairperson Farrant called the meeting to order at 5:50 pm RECOMMENDATIONS TO COUNCIL · None APPROVAL OF MINUTES A motion was made by Jones and seconded by Ashman to approve the minutes of the December 2, 2004 meeting with a minor editing change on page 2. MEMBERSHIP A vacancy remains open for the position of biologist/scientist. Task Force members were encouraged to continue to seek applicants for this position. SHARPSHOOTING Johansen reported the Wildlife Management Service Agreement was signed and submitted to the City of Iowa City by White Buffalo, Inc. Sites are being baited and White Buffalo, Inc. plan to be in Iowa City from approximately February 1 - 12, 2005. Nagle and Jones began discussion of the Southgate Development, Walnut Ridge and Camp Cardinal areas. Johansen was asked to contact White Buffalo to see if they would speak with landowners in these areas to discuss the possibility of sharpshooting in this area of town. BOWHUNTING It was agreed this item will be placed on the next agenda for discussion. OTHER METHODS OF DEER KILL Nagle provided deer management documentation from the Cities of Dubuque, Des Moines, Bettendorf, and Cedar Falls-Waterloo. Ashman commented that within a report previously received from the City of Coralville regarding bow and arrow hunting it mentions the count of arrows shot. Ashman suggested for discussion purposes it would be good to know the number of arrows recovered since they are extremely sharp. Nagel asked if the task force is going to consider other methods of deer control. Ashman responded that based on prior discussion we would not trap and shoot or trap and relocate. Ashman continued that the Task Force is interested in the aspect of contraception but it isn't ready yet and it would need to be conducted in an enclosed area. Farrant said at this time the two methods of deer management will be sharpshooting and bow and arrow hunting. A question was raised about the long-range annexation of property. Task force members questioned what area on the west side of town will be annexed. Nagel suggested the City think about annexing land with deer management in mind. Jones commented that we have taken part in creating the deer problem since we have displaced timber with row crop and pushed animals into any area available to them. Dulek suggested inviting a member from Planning and Community Development to attend a future meeting to discuss annexation plans. Johansen will follow-up on this. Ashman inquired if the DNR has tested for Chronic Wasting Disease. Thompson replied samples taken during hunting season were taken to Ames and all tested negative for the disease. Samples were also tested for Lyme Disease and the results were also negative. DEER REFLECTORS Misha Goodman, Animal Control, gave a presentation to task force members on the Streiter Deer Reflector System currently in place. Goodman said reflectors are currently installed on Dodge, Dubuque and Rochester. Goodman stressed the care and maintenance of the reflectors need to be maintained. Goodman explained the reflectors are made of plastic and are in a triangle shape. They are set at a certain height equal to the headlights of cars. These reflectors are attached to posts and need to be in an upright position at the correct angle. In the past the Engineering Department has provided assistance with proper height and angle. These reflectors act as an invisible fence to motorists but deer will see light as a result of vehicle headlights. If one reflector is down then essentially you have a "hole" in the fence. At this time some reflectors need to be replaced and we need to keep them clean. Ashman asked if Animal Control needed help in cleaning them. Goodman responded they would like to use a truck that has a sprayer attached so they can drive by and wash them off. The Equipment Department or Parks and Recreation may have a sprayer that can be used. In the past it was suggested that the City look into an "Adopt-A-Highway" program for the reflectors. Farrant commented that liability may be an issue. Goodman responded that Adopt-A-System has been used elsewhere. The organization adopting the system simply paid to have the reflectors maintained and in turn had their name printed on a sign. Goff asked how effective the reflectors are long term. Goodman said British Columbia folks have been using them for an extended period of time. Their statistics may be helpful. Nagel mentioned the reports he has read stated reflectors do not work after they are immediately installed. Nagel suggested we obtain more data. Goodman said people who live in the area where the reflectors are located would agree they do indeed work. Goodman also mentioned she no longer receives phone calls complaining of deer in these areas. Farrant and Ashman agreed data from the police reports need to be organized. The reflector posts are numbered and it was suggested this number be included on the deer/vehicle strike reports. Additional information to consider for reports would be to verify if headlights were on and the type of vehicle used in the accident. Goff suggested reviewing the number of accidents that occur during the day and evening hours. Goodman suggested having someone compile this information into a database. Goodman mentioned she has a volunteer who is a statistician that may be interested in this project. Jochimsen asked if we want to expand the system as Melrose has always been a problem. Ashman suggested compiling data, review costs, and consider plans for Melrose. EDUCATIONAL PROGRAM - LARRY STONE The program, Whitetail Deer; Treasure, Trophy or Trouble? is scheduled for Monday, March 28, 2005 at Parkview Church. This program is expected to be one hour in length and is set to begin at 7:00 p.m. Johansen will prepare a media release and advertise this program on the City's website. DISCUSSION OF HANDOUTS Johansen mentioned she has received several documents from Inara Powers of the Cedar Rapids Deer Task Force. Iowa City Task Force members eXpressed interest in receiving this documentation and it will be distributed to them in their next agenda packet. REVIEW 2004-2005 DEER MANAGEMENT PLAN It was agreed this item will be placed on the next agenda for discussion. COMMUNITY COMMENT None. OTHER The letter and references submitted by Mr. Gary Brown for consideration for sharpshooting services was reviewed. Task force members would like more detailed information. Johansen was asked to send a letter to Mr. Brown requesting a detailed resume. Further documentation on his experience, techniques, policies and procedures, selecting bait sites and weapon use will be needed. Thompson mentioned the USDA may be eligible to provide assistance to Iowa City for the deer management program. Johansen was asked to contact the USDA for further information. Thompson also commented due to the snow cover and the availability of a helicopter the DNR may have the aerial count done as early as next week. NEXT MEETING Tuesday, February 15, 2005 at 5:45 pm Lobby Conference Room ADJOURNMENT Motion to adjourn was made by Jones and seconded by Ashman. Meeting adjourned at 7:30 p.m. Minutes submitted by Kathi Johansen Deer Management Task Force Attendance Record 2005 1/18 2/15 J. Ashman X L. Dykstra X P. Farrant X H. Goff M. Jones X P. Sidwell A A. Nagel X P. Jochimsen X Key: X = Present A - Absent NM = No Meeting POLICE CITIZENS REVIEW BOARD ~ i IPll I MINUTES - February 8, 2005 CALL TO ORDER: Chair Loren Horton called the meeting to order at 7:05 p.m. MEMBERS PRESENT: Candy Barnhill, Beth Engel, Loren Horton, Greg Roth and Roger Williams MEMBERS ABSENT: None STAFF PRESENT: Legal Counsel Catherine Pugh (7:07) and Staff Kellie Tuttle OTHERS PRESENT: Captain Tom Widmer from the ICPD. CONSENT CALENDAR Motion by Enge[, seconded by Roth, to adopt the consent calendar. · Minutes of the meeting on 12/09/04 · ICPD Use of Force Report- November 2004 · ICPD Use of Force Report- December 2004 · ICPD Quarterly/Summary Report- IAIR/PCRB, 2004 · ICPD Department Memo 04-57 · ICPD General Order #91-04 (Report Form Development and Control) · ICPD General Order #95-01 (Emergency Operation of Police Vehicles) · ICPD General Order #01-06 (Juvenile Procedures) · ICPD General Order #01-08 (Criminal Intelligence) Horton wanted to point out to board members who may not have been around when it occurred, under Juvenile Procedures D(6), which is the age of consent from a juvenile, age of consent is currently fourteen. The Board had given a recommendation which was considered that the age be changed from tweleve. Motion carried, 5/0, to accept the consent calendar as amended removing ICPD General Order #01-01 (Racial Profiling) to be placed on the next agenda, the item was inadvertently left out of the packet. OLD BUSINESS Report of meetinq with Chief Winkelhake - Horton met with the Police Chief regarding the Board's concerns of extension requests and the timeliness, the good cause shown, and whether the complainant is notified of the extension requests. NEW BUSINESS Policy/Procedure for extension requests - Barnhill had requested at the December meeting that the Board discuss the procedure for granting extension requests. Barnhill stated she would like to develop a mechanism to prevent what had happened with a recent complaint, and suggested the Chief's report be due before or in sequence with a meeting so that if the Chief needed an extension he would be able to do so in a timely manner. The Board could discuss the request at their meeting and then get back to him. Horton explained that according to the City Code the Chief's report is due 90 days after the file date of the complaint and then the Board's report is due to the City Council 45 days after the filing of the Chief's report. Therefore the due dates of the reports can not be changed but the Board could adjust their meeting schedule or call a special meeting. Barnhill inquired whether the Board could deal with extension requests electronically or by phone. Pugh asked to be given a few minutes to research the meeting requirements. Horton explained that changing the ordinance to adjust the number of days would not address the issue because the process is put into motion by the date the complaint is filed. Bamhill wondered if the ordinance could be changed for this particular scenario to allow for an electronic vote. Engle stated she felt there was an implicit trust that is embedded and if the Chief asks for an extension, there must be a reason for it. Roth inquired if the Board could ask that an extension request be submitted so that it can be dealt with at a regular meeting or request the extension a certain number of days before the report deadline. Pugh responded that the SOP's don't allow the Board to meet PCRB - Page 2 DRAFT February 8, 2005 electronically or by phone; there has to be a quorum present to be considered a meeting; a special meeting can be called by the Chair or three members can request the Chair to call a meeting; there must also be 24-hour notice of the meeting place, time, and agenda to each member and the media. Tuttle stated media notification is the posting of the agenda on the Lobby bulletin board. Horton asked if the policy should be calling a special meeting if a regu;ar meeting did not meet the timeline. Barnhill disagreed and thought it needed to be much more definite so that if the Board did not grant the extension, the Police Department would be given ample time to finish writing the Chief's report. Roth stated that he did not believe that they would receive a report either way if it were not ready. Barnhill stated that there were issues with the last request that some board members felt there was not "good cause shown". Horton replied that in his discussion with the Chief there would be good cause shown from now on in his requests. Barnhill would like to table the discussion so that Horton can give his report regarding the meeting with the Chief in closed session since it dealt primarily with the complaint and then discuss it further at the March meeting if necessary. PUBLIC DISCUSSION None. BOARD INFORMATION Horton asked if the Police Citizens Academy had enough participants to proceed. Widmer responded that it did and that they had almost 25. Barnhill asked Widmer if arrest photos are black and white or color, if they were digital and could the camera be adjusted for light skin tone and dark skin tone. Widmer replied that Johnson County does the processing for ICPD. He thought the County did digital, but was unsure if they did any adjustments. Barnhill's concern was that if someone sustained an injury, would that injury show in the photo. Dark skin tones and light skin tones photograph very differently than one another and how would one identify a superficial injury (bruise, scrapes, etc.) Widmer replied that they the Iowa City Police Department has a policy when they note an injury that was caused by an officer or if the officer feels could become an issue, they bring them to the police department and take their own photos using ulterior light sources and expertise within the department. There are certain people who have been trained in photography. They also have 35mm, Polaroid, and digital capabilities. Widmer is assuming that at the County the camera is pretty much set and they snap the picture with the proper format. Barnhill also asked Widmer how many investigators are in the Police Department that can also investigate complaints filed with the Police Citizens Review Board. Widmer explained the current policy is that the Captain of Operations is in charge of investigations. The Chief will direct his letter to the Captain of Operations to conduct an investigation. That Captain has the option to assign it to himself, to the other Captain (Widmer), or to one of the four lieutenants. They then try to match them up with a Sergeant who can assist them so there are two people together on a complaint. The complaint is never assigned to a supervisor of an officer about whom the complaint has been filed. They always try to use a supervisor from another shift or from investigations. Barnhill asked Widmer if Incident Reports are filled out by all officers who are directly or in- directly involved. Widmer stated that every time a case number is filed there has to be a report filed. A coversheet with the basic information is filled out, but sometimes there will be supplemental reports filed from other officers. It is at the officer's discretion. If it was a minor incident, only one officer will sign off on the report and state the other officers that were present. Barnhill asked who decides what information is given to the Board with the Chief's report. Widmer explained that a complete report is given to the Chief and the Chief takes that report and reviews it and submits it along with all documentation or evidence to the legal PCRB - Page 3 DRAFT February 8, 2005 department where they request 30 days to review everything. What the Board receives however, the investigators have no control over. What the Chief submits to the Board is based on what is advised by the City Attorney's office. Barnhill confirmed with Pugh that if additional information was needed it would be after the level of review was set by the Board and the Board could request it. Barnhill asked Widmer if the Iowa Code and a departmental code says in the course of an arrest what an officer must do. Can a Police Chief counsel his staff and say you will try to do this when possible? Widmer stated that if the Code says you will do something, the department can make it more excessive/restrictive, but they can not make it less than what the Code states. Horton pointed out in the Use of Force Report for December there were sixteen incidents other than dispatching raccoons, etc. the same officer was in nine of the sixteen. Widmer explained that they do review the incident reports and track the officers, locality, workload and any patterns that may be occurring. Barnhill asked where the Chief's final report goes, if it is made public. Horton stated that it is never public, only the Board's final report is public after it goes to the City Council. STAFF INFORMATION Tuttle noted that the Finance department had supplied Citizens' Summarys of the 2006-2008 Proposed Financial Plan to all boards and commissions and that members were welcome to one. EXECUTIVE SESSION Motion by Williams, seconded by Barnhill, to adjourn into Executive Session based on Section 21.5(1)(a) of the Code of Iowa to review or discuss records which are required or authorized by state or federal law to be kept confidential or to be kept confidential as a condition for that government body's possession or continued receipt of federal funds, and 22.7(11) personal information in confidential personnel records of public bodies including but not limited to cities, boards of supervisors and school districts, and 22-7(5) police officer investigative reports, except where disclosure is authorized elsewhere in the Code; and 22.7(18) Communications not required by law, rule or procedure that are made to a government body or to any of its employees by identified persons outside of government, to the extent that the government body receiving those communications from such persons outside of government could reasonably believe that those persons would be discouraged from making them to that government body if they were available for general public examination. Motion carried, 5/0. Open session adjourned at 7:35 p.m. REGULAR SESSION Returned to open session at 8:32 p.m. Motion by Roth, seconded by Williams, to request a 45-day extension for PCRB Complaint #04-02. Motion carried, 5/0. Motion by Roth, seconded by Williams, to request a 30-day extension for PCRB Complaint #04-03. Motion carried, 5/0. MEETING SCHEDULE · March 8, 2005, 7:00 p.m., Lobby Conference Room · April 12, 2005, 7:00 p.m., Lobby Conference Room · May 10, 2005, 7:00 p.m., Lobby Conference Room · June 14, 2005, 7:00 p.m., Lobby Conference Room ADJOURNMENT Motion by Barnhill, seconded by Roth, to adjourn. Motion carried, 5/0. Meeting adjourned at 8:35 p.m. POLICE CITIZENS REVIEW BOARD ATTENDANCE RECORD YEAR 2005 (Meeti Date) TERM 1/11 2/8 3/8 4/12 5/10 6/14 7/12 8/9'~ 9/13 10/11 11/8 12/13 NAME EXP. Candy 9/1/07 NM X Barnhill Elizabeth 9/1/08 NM X Engel Loren 9/1/08 NM X Horton Greg Roth 9/1/05 NM X Roger 9/1/05 NM X Williams KEY: X = Present O = Absent O/E = Absent/Excused NM = No meeting .... Not a Member