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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 October 3, 2020.

 

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

 

(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

(Address of principal executive offices)

(248) 447-1500

(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      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      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

 

 

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  

As of October 27, 2020, the number of shares outstanding of the registrant’s common stock was 60,038,784 shares.

 

 

 

 


Table of Contents

LEAR CORPORATION

 

FORM 10-Q

 

For the Quarter Ended October 3, 2020

 

Index

 

 

 

Page No.

Part I – Financial Information

 

 

Item 1 – Condensed Consolidated Financial Statements

 

 

Introduction to the Condensed Consolidated Financial Statements

 

3

Condensed Consolidated Balance Sheets - October 3, 2020 (Unaudited) and December 31, 2019

 

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and Nine Months Ended October 3, 2020 and September 28, 2019

 

5

Condensed Consolidated Statements of Equity (Unaudited) - Three and Nine Months Ended October 3, 2020 and September 28, 2019

 

6

Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended October 3, 2020 and September 28, 2019

 

10

Notes to the Condensed Consolidated Financial Statements

 

11

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

33

Item 3 – Quantitative and Qualitative Disclosures about Market Risk (included in Item 2)

 

 

Item 4 – Controls and Procedures

 

48

Part II – Other Information

 

 

Item 1 – Legal Proceedings

 

49

Item 1A – Risk Factors

 

49

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

 

51

Item 6 – Exhibits

 

52

Signatures

 

53

 

 

 

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, 2019.

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)

 

 

 

October 3,

2020 (1)

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,250.4

 

 

$

1,487.7

 

Accounts receivable

 

 

3,386.8

 

 

 

2,982.6

 

Inventories

 

 

1,265.6

 

 

 

1,258.2

 

Other

 

 

695.7

 

 

 

678.2

 

Total current assets

 

 

6,598.5

 

 

 

6,406.7

 

LONG-TERM ASSETS:

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

2,627.3

 

 

 

2,704.2

 

Goodwill

 

 

1,629.0

 

 

 

1,614.3

 

Other

 

 

2,039.9

 

 

 

1,955.5

 

Total long-term assets

 

 

6,296.2

 

 

 

6,274.0

 

Total assets

 

$

12,894.7

 

 

$

12,680.7

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

4.4

 

 

$

19.2

 

Accounts payable and drafts

 

 

2,943.4

 

 

 

2,821.7

 

Accrued liabilities

 

 

2,087.8

 

 

 

1,811.2

 

Current portion of long-term debt

 

 

18.9

 

 

 

14.1

 

Total current liabilities

 

 

5,054.5

 

 

 

4,666.2

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

Long-term debt

 

 

2,299.8

 

 

 

2,293.7

 

Other

 

 

1,145.0

 

 

 

1,101.3

 

Total long-term liabilities

 

 

3,444.8

 

 

 

3,395.0

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

119.3

 

 

 

118.4

 

 

 

 

 

 

 

 

 

 

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 October 3, 2020 and December 31, 2019

 

 

0.6

 

 

 

0.6

 

Additional paid-in capital

 

 

957.5

 

 

 

969.1

 

Common stock held in treasury, 4,577,977 and 4,127,806 shares as of October 3, 2020 and December 31, 2019, respectively, at cost

 

 

(606.3

)

 

 

(563.1

)

Retained earnings

 

 

4,620.7

 

 

 

4,715.8

 

Accumulated other comprehensive loss

 

 

(839.7

)

 

 

(772.7

)

Lear Corporation stockholders’ equity

 

 

4,132.8

 

 

 

4,349.7

 

Noncontrolling interests

 

 

143.3

 

 

 

151.4

 

Equity

 

 

4,276.1

 

 

 

4,501.1

 

Total liabilities and equity

 

$

12,894.7

 

 

$

12,680.7

 

 

(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 (LOSS)

(Unaudited; in millions, except share and per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 3,

2020

 

 

September 28,

2019

 

 

October 3,

2020

 

 

September 28,

2019

 

Net sales

 

$

4,900.1

 

 

$

4,825.0

 

 

$

11,802.3

 

 

$

14,992.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

4,457.3

 

 

 

4,365.7

 

 

 

11,152.7

 

 

 

13,582.0

 

Selling, general and administrative expenses

 

 

147.7

 

 

 

141.9

 

 

 

442.3

 

 

 

447.3

 

Amortization of intangible assets

 

 

16.3

 

 

 

16.7

 

 

 

49.4

 

 

 

45.3

 

Interest expense

 

 

26.5

 

 

 

24.0

 

 

 

78.1

 

 

 

69.4

 

Other expense, net

 

 

17.1

 

 

 

9.7

 

 

 

54.4

 

 

 

27.9

 

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

 

 

235.2

 

 

 

267.0

 

 

 

25.4

 

 

 

820.8

 

Provision for income taxes

 

 

44.6

 

 

 

33.5

 

 

 

30.1

 

 

 

149.9

 

Equity in net income of affiliates

 

 

(6.5

)

 

 

(5.1

)

 

 

(15.9

)

 

 

(15.8

)

Consolidated net income

 

 

197.1

 

 

 

238.6

 

 

 

11.2

 

 

 

686.7

 

Less: Net income attributable to noncontrolling interests

 

 

22.7

 

 

 

22.7

 

 

 

54.3

 

 

 

59.1

 

Net income (loss) attributable to Lear

 

$

174.4

 

 

$

215.9

 

 

$

(43.1

)

 

$

627.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share available to Lear common stockholders (Note 14)

 

$

2.90

 

 

$

3.59

 

 

$

(0.72

)

 

$

10.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share available to Lear common stockholders (Note 14)

 

$

2.89

 

 

$

3.58

 

 

$

(0.72

)

 

$

10.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

-

 

 

$

0.75

 

 

$

0.77

 

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding

 

 

60,159,356

 

 

 

61,133,723

 

 

 

60,260,886

 

 

 

62,042,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average diluted shares outstanding

 

 

60,330,941

 

 

 

61,330,086

 

 

 

60,260,886

 

 

 

62,262,903

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated comprehensive income (loss)

(Condensed Consolidated Statements of Equity)

 

$

290.7

 

 

$

96.1

 

 

$

(49.2

)

 

$

552.7

 

Less: Comprehensive income attributable to noncontrolling interests

 

 

33.0

 

 

 

11.3

 

 

 

60.9

 

 

 

48.6

 

Comprehensive income (loss) attributable to Lear

 

$

257.7

 

 

$

84.8

 

 

$

(110.1

)

 

$

504.1

 

 

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 October 3, 2020

 

 

 

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 July 4, 2020

 

$

0.6

 

 

$

955.6

 

 

$

(612.6

)

 

$

4,447.1

 

 

$

(923.0

)

 

$

3,867.7

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

174.4

 

 

 

-

 

 

 

174.4

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

83.3

 

 

 

83.3

 

Total comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

174.4

 

 

 

83.3

 

 

 

257.7

 

Stock-based compensation

 

 

-

 

 

 

9.1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9.1

 

Net issuance of 45,531 shares held in treasury in settlement of stock-based compensation

 

 

-

 

 

 

(7.2

)

 

 

6.3

 

 

 

(0.8

)

 

 

-

 

 

 

(1.7

)

Dividends declared to noncontrolling interest holders

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance at October 3, 2020

 

$

0.6

 

 

$

957.5

 

 

$

(606.3

)

 

$

4,620.7

 

 

$

(839.7

)

 

$

4,132.8

 

 

 

 

 

Nine Months Ended October 3, 2020

 

 

 

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, 2020

 

$

0.6

 

 

$

969.1

 

 

$

(563.1

)

 

$

4,715.8

 

 

$

(772.7

)

 

$

4,349.7

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(43.1

)

 

 

-

 

 

 

(43.1

)

Other comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(67.0

)

 

 

(67.0

)

Total comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(43.1

)

 

 

(67.0

)

 

 

(110.1

)

Adoption of accounting standard update 2016-13 (Note 18)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(0.8

)

 

 

-

 

 

 

(0.8

)

Stock-based compensation

 

 

-

 

 

 

25.5

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25.5

 

Net issuance of 190,978 shares held in treasury in settlement of stock-based compensation

 

 

-

 

 

 

(37.1

)

 

 

26.8

 

 

 

(3.3

)

 

 

-

 

 

 

(13.6

)

Repurchase of 641,149 shares of common stock at average price of $109.22 per share

 

 

-

 

 

 

-

 

 

 

(70.0

)

 

 

-

 

 

 

-

 

 

 

(70.0

)

Dividends declared to Lear Corporation stockholders

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(46.8

)

 

 

-

 

 

 

(46.8

)

Dividends declared to noncontrolling interest holders

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Redeemable noncontrolling interest adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1.1

)

 

 

-

 

 

 

(1.1

)

Balance at October 3, 2020

 

$

0.6

 

 

$

957.5

 

 

$

(606.3

)

 

$

4,620.7

 

 

$

(839.7

)

 

$

4,132.8

 

 

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 October 3, 2020

 

 

 

Lear

Corporation

Stockholders'

Equity

 

 

Non-

controlling

Interests

 

 

Equity

 

 

 

Redeemable

Non-

controlling

Interests

 

Balance at July 4, 2020

 

$

3,867.7

 

 

$

115.5

 

 

$

3,983.2

 

 

 

$

114.3

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

174.4

 

 

 

22.4

 

 

 

196.8

 

 

 

 

0.3

 

Other comprehensive income

 

 

83.3

 

 

 

5.6

 

 

 

88.9

 

 

 

 

4.7

 

Total comprehensive income

 

 

257.7

 

 

 

28.0

 

 

 

285.7

 

 

 

 

5.0

 

Stock-based compensation

 

 

9.1

 

 

 

-

 

 

 

9.1

 

 

 

 

-

 

Net issuance of 45,531 shares held in treasury in settlement of stock-based compensation

 

 

(1.7

)

 

 

-

 

 

 

(1.7

)

 

 

 

-

 

Dividends declared to noncontrolling interest holders

 

 

-

 

 

 

(0.2

)

 

 

(0.2

)

 

 

 

-

 

Balance at October 3, 2020

 

$

4,132.8

 

 

$

143.3

 

 

$

4,276.1

 

 

 

$

119.3

 

 

 

 

 

Nine Months Ended October 3, 2020

 

 

 

Lear

Corporation

Stockholders'

Equity

 

 

Non-

controlling

Interests

 

 

Equity

 

 

 

Redeemable

Non-

controlling

Interests

 

Balance at January 1, 2020

 

$

4,349.7

 

 

$

151.4