Today's presenters are Matt Simoncini, President and CEO; and Jeff Vanneste, Chief Financial Officer. Also participating on the call are several other members of Lear's leadership team.Before we begin, I'd like to remind you that during the call, we will be making forward-looking statements that are subject to risks and uncertainties. Some of the factors that could impact our future results are described in the slide titled Investor Information at the beginning of the investor presentation materials and also on our SEC filings. In addition, we will be referring to certain non-GAAP financial measures. Additional information regarding these measures can be found in the slides labeled Non-GAAP Financial Information, also at the end of the presentation materials. Slide #3 shows the agenda for today's review. First, Matt Simoncini will provide a company overview. Next, Jeff Vanneste will cover our second quarter financial results and 2012 outlook, then Matt Simoncini will have some wrap-up comments. Following the formal presentation, we will be happy to take your questions. Now please turn to Slide #4, and I'll hand it over to Matt. Matthew J. Simoncini Great. Thanks, Ed. Great job with the forward-looking statements. We had a solid quarter of operating performance despite challenging industry conditions in Europe. Sales in the second quarter were $3.7 billion, unchanged from a year ago, reflecting lower production in Europe and a weaker euro, offset by higher production in other major markets. Excluding impact of foreign exchange, sales would have increased by 5%. Core operating earnings were $197 million, down from a year ago, reflecting higher costs associated with the backlog and infrastructure costs in emerging markets. While business conditions in Europe are challenging, our European operations remain solidly profitable in the second quarter. Our Electrical business continues its rapid growth and achieved record quarterly sales of $872 million in the second quarter. Adjusted margins improved to 6.8% as the business continues to benefit from greater scale and previous restructuring actions. We continue to return cash to shareholders through dividends and share repurchases. Since the beginning of last year, we've returned almost $500 million to shareholders through these programs.
At the same time, we continue to invest in strengthening our core businesses by expanding component capabilities in emerging markets. Since the beginning of 2010, we've added new component capacity in 11 low-cost countries or emerging markets. We estimate that we will invest approximately $300 million in these activities through the end of 2012.On May 31, we completed the acquisition of Guilford Mills. Guilford adds global fabric design and development resources, as well as technical expertise to our existing seat fabric and cover capabilities. We believe this will not only strengthen our current Seating business, but will provide additional growth opportunities. Slide #5 shows the continuing trend of sales growth and performance improvements in our EPMS segment. Several key drivers have enabled this business to increase sales, profits and margins since 2009. In 2009, EPMS segment was unprofitable. Over the past several years, we have invested over $430 million in restructuring actions and capital expenditures to improve our manufacturing footprint in this segment. We've also made incremental investments in high-powered technologies, rationalized certain non-core product lines and improved our overall competitiveness. As a result, our sales in this segment have been growing faster than the overall industry. The increased scale business provides operating leverage which, coupled with lower structural cost and improved footprint, have improve our margins. We're on track for record sales in 2012 and expect margins to increase to 6.5% to 7% compared with 5.9% last year. The positive momentum in this segment is expected to continue. And based on our existing backlog, we expect sales to grow to $4 billion to $5 billion over the next several years. Please turn to Slide #6, where I'll review our approach to capital allocation. Our primary focus is to provide our customers with outstanding customer service, quality and value so we can continue to deliver solid operating results and generate cash. As I mentioned earlier, we are making significant investments in expanding our component capabilities and manufacturing footprint in the emerging markets. We believe this strategy will improve the cost and quality of the products we provide to our customers, facilitate sales growth and deliver long-term value to our shareholders. Read the rest of this transcript for free on seekingalpha.com