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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

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.

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.

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.

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.

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