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Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________ 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2019.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission file number: 001-11311
 https://cdn.kscope.io/d45ce88be2dde4ad5f8bee8729cd423b-learlogoa18.jpg
(Exact name of registrant as specified in its charter) 
_______________________________________  
Delaware
 
13-3386776
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

21557 Telegraph Road, Southfield, MI 48033                  (248) 447-1500
(Address of principal executive offices)             (Registrant’s telephone number, including area code)
_______________________________________  
Securities registered pursuant to Section 12(b) of the Act:    
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, par value $0.01
LEA
New York Stock Exchange
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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
 
Accelerated filer
Non-accelerated filer
 
 
Smaller reporting company
Emerging growth company
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
As of October 22, 2019, the number of shares outstanding of the registrant’s common stock was 60,469,982 shares.
 


Table of Contents
LEAR CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 28, 2019

INDEX

 
Page No.
 
 
Item 3 – Quantitative and Qualitative Disclosures about Market Risk (included in Item 2)
 
 

2

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

PART I — FINANCIAL INFORMATION

ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTRODUCTION TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We have prepared the unaudited condensed consolidated financial statements of Lear Corporation and subsidiaries 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 ("GAAP") have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, for the year ended December 31, 2018.
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, cash flows and financial position for the interim periods presented. These results are not necessarily indicative of a full year’s results of operations.


3

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)

 
September 28,
2019 (1)
December 31,
2018
ASSETS
 
 
CURRENT ASSETS:
 
 
Cash and cash equivalents
$
1,300.9

$
1,493.2

Accounts receivable
3,320.7

2,880.3

Inventories
1,294.1

1,196.8

Other
702.3

710.2

Total current assets
6,618.0

6,280.5

LONG-TERM ASSETS:
 
 
Property, plant and equipment, net
2,599.7

2,598.1

Goodwill
1,600.4

1,405.3

Other
1,935.2

1,316.8

Total long-term assets
6,135.3

5,320.2

Total assets
$
12,753.3

$
11,600.7

 
 
 
LIABILITIES AND EQUITY
 
 
CURRENT LIABILITIES:
 
 
Short-term borrowings
$
18.7

$
9.9

Accounts payable and drafts
2,986.8

2,862.8

Accrued liabilities
1,885.2

1,615.0

Current portion of long-term debt
17.1

12.9

Total current liabilities
4,907.8

4,500.6

LONG-TERM LIABILITIES:
 
 
Long-term debt
2,297.6

1,941.0

Other
1,026.3

640.4

Total long-term liabilities
3,323.9

2,581.4

 
 
 
Redeemable noncontrolling interest
146.5

158.1

 
 
 
EQUITY:
 
 
Preferred stock, 100,000,000 shares authorized (including 10,896,250 Series A convertible preferred stock authorized); no shares outstanding


Common stock, $0.01 par value, 300,000,000 shares authorized; 64,563,291 shares issued as of September 28, 2019 and December 31, 2018
0.6

0.6

Additional paid-in capital
963.1

1,017.4

Common stock held in treasury, 3,919,021 and 1,623,678 shares as of September 28, 2019 and December 31, 2018, respectively, at cost
(539.0
)
(225.1
)
Retained earnings
4,608.4

4,113.6

Accumulated other comprehensive loss
(829.3
)
(705.8
)
Lear Corporation stockholders’ equity
4,203.8

4,200.7

Noncontrolling interests
171.3

159.9

Equity
4,375.1

4,360.6

Total liabilities and equity
$
12,753.3

$
11,600.7

 (1)  
Unaudited.
The accompanying notes are an integral part of these condensed consolidated balance sheets.

4

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in millions, except share and per share data)

 
Three Months Ended
 
Nine Months Ended
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net sales
$
4,825.0

 
$
4,891.6

 
$
14,992.7

 
$
16,206.1

 
 
 
 
 
 
 
 
Cost of sales
4,365.7

 
4,365.3

 
13,582.0

 
14,410.3

Selling, general and administrative expenses
141.9

 
150.3

 
447.3

 
462.5

Amortization of intangible assets
16.7

 
12.7

 
45.3

 
38.9

Interest expense
24.0

 
21.2

 
69.4

 
62.8

Other expense, net
9.7

 
13.2

 
27.9

 
11.3

Consolidated income before provision for income taxes and equity in net income of affiliates
267.0

 
328.9

 
820.8

 
1,220.3

Provision for income taxes
33.5

 
57.6

 
149.9

 
233.0

Equity in net income of affiliates
(5.1
)
 
(3.4
)
 
(15.8
)
 
(16.6
)
Consolidated net income
238.6

 
274.7

 
686.7

 
1,003.9

Less: Net income attributable to noncontrolling interests
22.7

 
22.2

 
59.1

 
66.3

Net income attributable to Lear
$
215.9

 
$
252.5

 
$
627.6

 
$
937.6

 
 
 
 
 
 
 
 
Basic net income per share available to Lear common stockholders (Note 15)
$
3.59

 
$
3.83

 
$
10.27

 
$
13.90

 
 
 
 
 
 
 
 
Diluted net income per share available to Lear common stockholders (Note 15)
$
3.58

 
$
3.80

 
$
10.23

 
$
13.80

 
 
 
 
 
 
 
 
Cash dividends declared per share
$
0.75

 
$
0.70

 
$
2.25

 
$
2.10

 
 
 
 
 
 
 
 
Average common shares outstanding
61,133,723

 
65,372,829

 
62,042,156

 
66,256,800

 
 
 
 
 
 
 
 
Average diluted shares outstanding
61,330,086

 
65,868,660

 
62,262,903

 
66,709,928

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated comprehensive income (Condensed Consolidated Statements of Equity)
$
96.1

 
$
236.1

 
$
552.7

 
$
845.5

Less: Comprehensive income attributable to noncontrolling interests
11.3

 
11.8

 
48.6

 
50.4

Comprehensive income attributable to Lear
$
84.8

 
$
224.3

 
$
504.1

 
$
795.1

The accompanying notes are an integral part of these condensed consolidated statements.

5

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)

 
Three Months Ended September 28, 2019
 
Common Stock
Additional Paid-In Capital
Common Stock Held in Treasury
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Lear Corporation Stockholders' Equity
Balance at June 29, 2019
$
0.6

$
965.3

$
(466.6
)
$
4,435.3

$
(698.2
)
$
4,236.4

Comprehensive income (loss):
 
 
 
 
 
 
Net income



215.9


215.9

Other comprehensive loss




(131.1
)
(131.1
)
Total comprehensive income (loss)



215.9

(131.1
)
84.8

Stock-based compensation

1.7




1.7

Net issuance of 23,786 shares held in treasury in settlement of stock-based compensation

(3.9
)
3.5

(0.7
)

(1.1
)
Repurchase of 616,635 shares of common stock at average price of $123.06 per share


(75.9
)


(75.9
)
Dividends declared to Lear Corporation stockholders



(45.7
)

(45.7
)
Dividends declared to non-controlling interest holders






Changes in noncontrolling interests






Redeemable non-controlling interest adjustment



3.6


3.6

Balance at September 28, 2019
$
0.6

$
963.1

$
(539.0
)
$
4,608.4

$
(829.3
)
$
4,203.8

 
Nine Months Ended September 28, 2019
 
Common Stock
Additional Paid-In Capital
Common Stock Held in Treasury
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Lear Corporation Stockholders' Equity
Balance at January 1, 2019
$
0.6

$
1,017.4

$
(225.1
)
$
4,113.6

$
(705.8
)
$
4,200.7

Comprehensive income (loss):
 
 
 
 
 
 
Net income



627.6


627.6

Other comprehensive loss




(123.5
)
(123.5
)
Total comprehensive income (loss)



627.6

(123.5
)
504.1

Stock-based compensation

16.0




16.0

Net issuance of 308,538 shares held in treasury in settlement of stock-based compensation

(70.3
)
41.5

(1.9
)

(30.7
)
Repurchase of 2,603,881 shares of common stock at average price of $136.48 per share


(355.4
)


(355.4
)
Dividends declared to Lear Corporation stockholders



(140.3
)

(140.3
)
Dividends declared to non-controlling interest holders






Acquisition of outstanding noncontrolling interest






Changes in noncontrolling interests






Redeemable non-controlling interest adjustment



9.4


9.4

Balance at September 28, 2019
$
0.6

$
963.1

$
(539.0
)
$
4,608.4

$
(829.3
)
$
4,203.8

The accompanying notes are an integral part of these condensed consolidated statements.

6

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)
(Unaudited; in millions, except share and per share data)

 
Three Months Ended September 28, 2019
 
Lear Corporation Stockholders' Equity
Non-controlling Interests
Equity
 
 
Redeemable Non-controlling Interests
Balance at June 29, 2019
$
4,236.4

$
163.1

$
4,399.5

 
 
$
155.0

Comprehensive income (loss):
 
 
 
 
 
 
Net income
215.9

22.0

237.9

 
 
0.7

Other comprehensive loss
(131.1
)
(5.8
)
(136.9
)
 
 
(5.6
)
Total comprehensive income (loss)
84.8

16.2

101.0

 
 
(4.9
)
Stock-based compensation
1.7


1.7

 
 

Net issuance of 23,786 shares held in treasury in settlement of stock-based compensation
(1.1
)

(1.1
)
 
 

Repurchase of 616,635 shares of common stock at average price of $123.06 per share
(75.9
)

(75.9
)
 
 

Dividends declared to Lear Corporation stockholders
(45.7
)

(45.7
)
 
 

Dividends declared to non-controlling interest holders

(2.4
)
(2.4
)
 
 

Changes in noncontrolling interests

(5.6
)
(5.6
)
 
 

Redeemable non-controlling interest adjustment
3.6


3.6

 
 
(3.6
)
Balance at September 28, 2019
$
4,203.8

$
171.3

$
4,375.1

 
 
$
146.5

 
Nine Months Ended September 28, 2019
 
Lear Corporation Stockholders' Equity
Non-controlling Interests
Equity
 
 
Redeemable Non-controlling Interests
Balance at January 1, 2019
$
4,200.7

$
159.9

$
4,360.6

 
 
$
158.1

Comprehensive income (loss):
 
 
 
 
 
 
Net income
627.6

56.1

683.7

 
 
3.0

Other comprehensive loss
(123.5
)
(5.3
)
(128.8
)
 
 
(5.2
)
Total comprehensive income (loss)
504.1

50.8

554.9

 
 
(2.2
)
Stock-based compensation
16.0


16.0

 
 

Net issuance of 308,538 shares held in treasury in settlement of stock-based compensation
(30.7
)

(30.7
)
 
 

Repurchase of 2,603,881 shares of common stock at average price of $136.48 per share
(355.4
)

(355.4
)
 
 

Dividends declared to Lear Corporation stockholders
(140.3
)

(140.3
)
 
 

Dividends declared to non-controlling interest holders

(33.6
)
(33.6
)
 
 

Acquisition of outstanding noncontrolling interest

(0.2
)
(0.2
)
 
 

Changes in noncontrolling interests

(5.6
)
(5.6
)
 
 

Redeemable non-controlling interest adjustment
9.4


9.4

 
 
(9.4
)
Balance at September 28, 2019
$
4,203.8

$
171.3

$
4,375.1

 
 
$
146.5

The accompanying notes are an integral part of these condensed consolidated statements.

7

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)
(Unaudited; in millions, except share and per share data)

 
Three Months Ended September 29, 2018
 
Common Stock
Additional Paid-In Capital
Common Stock Held in Treasury
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Lear Corporation Stockholders' Equity
Balance at June 30, 2018
$
0.7

$
1,166.8

$
(989.9
)
$
4,750.0

$
(627.7
)
$
4,299.9

Comprehensive income (loss):
 
 
 
 
 
 
Net income



252.5


252.5

Other comprehensive loss




(28.2
)
(28.2
)
Total comprehensive income (loss)



252.5

(28.2
)
224.3

Stock-based compensation

13.6




13.6

Net issuance of 23,416 shares held in treasury in settlement of stock-based compensation

(4.4
)
3.2



(1.2
)
Repurchase of 1,149,839 shares of common stock at average price of $169.60 per share


(195.0
)


(195.0
)
Dividends declared to Lear Corporation stockholders



(46.4
)

(46.4
)
Dividends declared to non-controlling interest holders






Redeemable non-controlling interest adjustment



(2.3
)

(2.3
)
Balance at September 29, 2018
$
0.7

$
1,176.0

$
(1,181.7
)
$
4,953.8

$
(655.9
)
$
4,292.9

 
Nine Months Ended September 29, 2018
 
Common Stock
Additional Paid-In Capital
Common Stock Held in Treasury
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Lear Corporation Stockholders' Equity
Balance at January 1, 2018
$
0.7

$
1,215.4

$
(724.1
)
$
4,171.9

$
(513.4
)
$
4,150.5

Comprehensive income (loss):
 
 
 
 
 
 
Net income



937.6


937.6

Other comprehensive loss




(142.5
)
(142.5
)
Total comprehensive income (loss)



937.6

(142.5
)
795.1

Stock-based compensation

40.7




40.7

Net issuance of 368,332 shares held in treasury in settlement of stock-based compensation

(80.1
)
33.1



(47.0
)
Repurchase of 2,697,188 shares of common stock at average price of $181.93 per share


(490.7
)


(490.7
)
Dividends declared to Lear Corporation stockholders



(141.1
)

(141.1
)
Dividends declared to non-controlling interest holders






Adoption of ASU 2016-16



2.3


2.3

Affiliate transaction






Acquisition of outstanding non-controlling interest






Redeemable non-controlling interest adjustment



(16.9
)

(16.9
)
Balance at September 29, 2018
$
0.7

$
1,176.0

$
(1,181.7
)
$
4,953.8

$
(655.9
)
$
4,292.9

The accompanying notes are an integral part of these condensed consolidated statements.




8

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)
(Unaudited; in millions, except share and per share data)

 
Three Months Ended September 29, 2018
 
Lear Corporation Stockholders' Equity
Non-controlling Interests
Equity
 
 
Redeemable Non-controlling Interests
Balance at June 30, 2018
$
4,299.9

$
127.5

$
4,427.4

 
 
$
167.5

Comprehensive income (loss):
 
 
 
 
 
 
Net income
252.5

19.7

272.2

 
 
2.5

Other comprehensive loss
(28.2
)
(4.3
)
(32.5
)
 
 
(6.1
)
Total comprehensive income (loss)
224.3

15.4

239.7

 
 
(3.6
)
Stock-based compensation
13.6


13.6

 
 

Net issuance of 23,416 shares held in treasury in settlement of stock-based compensation
(1.2
)

(1.2
)
 
 

Repurchase of 1,149,839 shares of common stock at average price of $169.60 per share
(195.0
)

(195.0
)
 
 

Dividends declared to Lear Corporation stockholders
(46.4
)

(46.4
)
 
 

Dividends declared to non-controlling interest holders

(0.1
)
(0.1
)
 
 
(4.6
)
Redeemable non-controlling interest adjustment
(2.3
)

(2.3
)
 
 
2.3

Balance at September 29, 2018
$
4,292.9

$
142.8

$
4,435.7

 
 
$
161.6

 
Nine Months Ended September 29, 2018
 
Lear Corporation Stockholders' Equity
Non-controlling Interests
Equity
 
 
Redeemable Non-controlling Interests
Balance at January 1, 2018
$
4,150.5

$
142.1

$
4,292.6

 
 
$
153.4

Comprehensive income (loss):
 
 
 
 
 
 
Net income
937.6

56.5

994.1

 
 
9.8

Other comprehensive loss
(142.5
)
(6.7
)
(149.2
)
 
 
(9.2
)
Total comprehensive income (loss)
795.1

49.8

844.9

 
 
0.6

Stock-based compensation
40.7


40.7

 
 

Net issuance of 368,332 shares held in treasury in settlement of stock-based compensation
(47.0
)

(47.0
)
 
 

Repurchase of 2,697,188 shares of common stock at average price of $181.93 per share
(490.7
)

(490.7
)
 
 

Dividends declared to Lear Corporation stockholders
(141.1
)

(141.1
)
 
 

Dividends declared to non-controlling interest holders

(59.7
)
(59.7
)
 
 
(9.3
)
Adoption of ASU 2016-16
2.3


2.3

 
 

Affiliate transaction

14.0

14.0

 
 

Acquisition of outstanding non-controlling interest

(3.4
)
(3.4
)
 
 

Redeemable non-controlling interest adjustment
(16.9
)

(16.9
)
 
 
16.9

Balance at September 29, 2018
$
4,292.9

$
142.8

$
4,435.7

 
 
$
161.6

The accompanying notes are an integral part of these condensed consolidated statements.


9

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)

 
Nine Months Ended
 
September 28,
2019
September 29,
2018
Cash Flows from Operating Activities:
 
 
Consolidated net income
$
686.7

$
1,003.9

Adjustments to reconcile consolidated net income to net cash provided by operating activities:
 
 
Depreciation and amortization
380.4

361.8

Net change in recoverable customer engineering, development and tooling
(73.4
)
(8.5
)
Loss on extinguishment of debt
10.6


Net change in working capital items (see below)
(162.0
)
(328.8
)
Other, net
(43.0
)
(6.8
)
Net cash provided by operating activities
799.3

1,021.6

Cash Flows from Investing Activities:
 
 
Additions to property, plant and equipment
(410.1
)
(492.7
)
Acquisition, net of acquired cash
(321.7
)

Other, net
(7.5
)
(18.5
)
Net cash used in investing activities
(739.3
)
(511.2
)
Cash Flows from Financing Activities:
 
 
Credit agreement repayments
(3.1
)
(4.7
)
Short-term borrowings, net
9.5

5.6

Proceeds from the issuance of senior notes
693.3


Repurchase of senior notes
(333.7
)

Payment of debt issuance and other financing costs
(6.5
)

Repurchase of common stock
(359.7
)
(488.1
)
Dividends paid to Lear Corporation stockholders
(141.1
)
(142.1
)
Dividends paid to noncontrolling interests
(33.6
)
(64.3
)
Other, net
(61.6
)
(59.6
)
Net cash used in financing activities
(236.5
)
(753.2
)
Effect of foreign currency translation
(20.0
)
(32.7
)
Net Change in Cash, Cash Equivalents and Restricted Cash
(196.5
)
(275.5
)
Cash, Cash Equivalents and Restricted Cash as of Beginning of Period
1,519.8

1,500.4

Cash, Cash Equivalents and Restricted Cash as of End of Period
$
1,323.3

$
1,224.9

 
 
 
Changes in Working Capital Items:
 
 
Accounts receivable
$
(513.5
)
$
(173.1
)
Inventories
(123.5
)
(117.5
)
Accounts payable
208.8

(33.2
)
Accrued liabilities and other
266.2

(5.0
)
Net change in working capital items
$
(162.0
)
$
(328.8
)
 
 
 
Supplementary Disclosure:
 
 
Cash paid for interest
$
85.2

$
93.7

Cash paid for income taxes, net of refunds received
$
133.7

$
225.1

The accompanying notes are an integral part of these condensed consolidated statements.

10

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1) Basis of Presentation
Lear Corporation ("Lear," and together with its consolidated subsidiaries, the "Company") and its affiliates design and manufacture automotive seating and electrical distribution systems and related components. The Company’s main customers are automotive original equipment manufacturers. The Company operates facilities worldwide.
The accompanying condensed consolidated financial statements include the accounts of Lear, a Delaware corporation, and the wholly owned and less than wholly owned subsidiaries controlled by Lear. In addition, Lear consolidates all entities, including variable interest entities, in which it has a controlling financial interest. Investments in affiliates in which Lear does not have control but does have the ability to exercise significant influence over operating and financial policies are accounted for under the equity method.
The Company’s annual financial results are reported on a calendar year basis, and quarterly interim results are reported using a thirteen week reporting calendar.
Certain amounts in the prior period’s financial statements have been reclassified to conform to the presentation used in the quarter ended September 28, 2019.

(2) Acquisition
On April 17, 2019, the Company completed the acquisition of Xevo Inc. (“Xevo”), a Seattle-based, global leader in connected car software, by acquiring all of Xevo's outstanding shares for $321.7 million, net of cash acquired. Xevo is a supplier of software solutions for the cloud, cars and mobile devices that are deployed in millions of vehicles worldwide with annual sales of approximately $75 million in 2018.
The acquisition of Xevo has been accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in the accompanying condensed consolidated balance sheet as of September 28, 2019. The operating results and cash flows of Xevo are included in the accompanying condensed consolidated financial statements from the date of acquisition and in the Company's E-Systems segment.
The Company incurred transaction costs of $1.7 million in the nine months ended September 28, 2019, which have been expensed as incurred and are recorded in selling, general and administrative expenses.
The purchase price and preliminary allocation are shown below (in millions):
 
 
June 29,
2019
Adjustments
September 28,
2019
Net purchase price
 
$
320.9

$
0.8

$
321.7

 
 
 
 
 
Other assets purchased and liabilities assumed, net
 
$
1.2

$
7.7

$
8.9

Goodwill
 
197.5

22.1

219.6

Intangible assets
 
122.2

(29.0
)
93.2

Preliminary purchase price allocation
 
$
320.9

$
0.8

$
321.7


Goodwill recognized in this transaction is primarily attributable to expected synergies related to future growth and commercialization opportunities and is not deductible for tax purposes.
Intangible assets consist primarily of provisional amounts recognized for the fair value of licensing agreements and developed technology and are based on independent appraisals. Licensing agreements represent the fair values of the underlying licensing agreements with Xevo customers with estimated useful lives of approximately five years. Developed technology represents the fair value of Xevo's technology with an estimated useful life of approximately five years. Adjustments to the preliminary purchase price allocation in the third quarter of 2019 reflect changes in certain assumptions related to the valuation of developed technology.
The purchase price and related allocation are preliminary and will be revised as a result of additional information regarding the assets acquired and liabilities assumed, including, but not limited to, certain tax attributes, contingent liabilities and revisions of provisional estimates of fair values resulting from the completion of independent appraisals and valuations of intangible assets.
The pro-forma effects of this acquisition do not materially impact the Company's reported results for any period presented.

11

Table of Contents
LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

For further information related to acquired assets measured at fair value, see Note 19, "Financial Instruments."

(3) Restructuring
Restructuring costs include employee termination benefits, fixed asset impairment charges and contract termination costs, as well as other incremental costs resulting from the restructuring actions. These incremental costs principally include equipment and personnel relocation costs. In addition to restructuring costs, the Company incurs incremental manufacturing inefficiency costs at the operating locations impacted by the restructuring actions during the related restructuring implementation period. Restructuring costs are recognized in the Company’s condensed consolidated financial statements in accordance with GAAP. Generally, charges are recorded as restructuring actions are approved and/or implemented.
In the first nine months of 2019, the Company recorded charges of $122.9 million in connection with its restructuring actions. These charges consist of $108.8 million recorded as cost of sales, $10.1 million recorded as selling, general and administrative expenses and $4.0 million recorded as other expense, net. The restructuring charges consist of employee termination costs of $105.0 million, fixed asset impairment charges of $4.0 million and contract termination costs of $2.4 million, as well as other related costs of $11.5 million. Employee termination benefits were recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. Fixed asset impairment charges relate to the disposal of buildings, leasehold improvements and/or machinery and equipment with carrying values of $4.0 million in excess of related estimated fair values.
The Company expects to incur approximately $67 million of additional restructuring costs related to activities initiated as of September 28, 2019, and expects that the components of such costs will be consistent with its historical experience. Any future restructuring actions will depend upon market conditions, customer actions and other factors.
A summary of 2019 activity is shown below (in millions):
 
Accrual as of
 
2019
 
Utilization
 
Accrual as of
 
January 1, 2019
 
Charges
 
Cash
 
Non-cash
 
September 28, 2019
Employee termination benefits
$
103.3

 
$
105.0

 
$
(91.3
)
 
$

 
$
117.0

Asset impairment charges

 
4.0

 

 
(4.0
)
 

Contract termination costs
5.4

 
2.4

 
(3.2
)
 

 
4.6

Other related costs

 
11.5

 
(11.5
)
 

 

Total
$
108.7

 
$
122.9

 
$