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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 July 2, 2022.
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/785dde83bdede843afb0ae65f514f127-lear-20220702_g1.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
(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 classTrading symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 LEANew 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 filerxAccelerated 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 July 27, 2022, the number of shares outstanding of the registrant's common stock was 59,372,976 shares.


Table of Contents
LEAR CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JULY 2, 2022
INDEX


 Page No.

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, 2021.
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

LEAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
July 2,
 2022(1)
December 31,
2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$828.0 $1,318.3 
Accounts receivable3,369.7 3,041.5 
Inventories1,612.8 1,571.9 
Other874.9 833.5 
Total current assets6,685.4 6,765.2 
LONG-TERM ASSETS:
Property, plant and equipment, net2,778.7 2,720.1 
Goodwill1,651.9 1,657.9 
Other2,229.4 2,209.2 
Total long-term assets6,660.0 6,587.2 
Total assets$13,345.4 $13,352.4 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and drafts$3,110.7 $2,952.4 
Accrued liabilities1,916.2 1,806.7 
Current portion of long-term debt0.7 0.8 
Total current liabilities5,027.6 4,759.9 
LONG-TERM LIABILITIES:
Long-term debt2,595.2 2,595.2 
Other1,174.7 1,188.9 
Total long-term liabilities3,769.9 3,784.1 
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; 64,571,405 shares issued as of July 2, 2022 and December 31, 2021
0.6 0.6 
Additional paid-in capital1,008.0 1,019.4 
Common stock held in treasury, 5,163,195 and 4,945,847 shares as of July 2, 2022 and December 31, 2021, respectively, at cost
(710.9)(679.2)
Retained earnings5,097.1 5,072.8 
Accumulated other comprehensive loss(954.2)(770.2)
Lear Corporation stockholders' equity4,440.6 4,643.4 
Noncontrolling interests107.3 165.0 
Equity4,547.9 4,808.4 
Total liabilities and equity$13,345.4 $13,352.4 
 (1)     Unaudited
The accompanying notes are an integral part of these condensed consolidated balance sheets.
4

LEAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; in millions, except share and per share data)
 Three Months EndedSix Months Ended
 July 2,
2022
July 3,
2021
July 2,
2022
July 3,
2021
Net sales$5,071.0 $4,760.7 $10,279.4 $10,115.1 
Cost of sales4,731.1 4,359.3 9,618.0 9,220.9 
Selling, general and administrative expenses171.2 170.8 348.5 339.7 
Amortization of intangible assets24.6 25.1 40.3 41.6 
Interest expense24.9 22.3 49.8 44.6 
Other (income) expense, net14.4 (46.1)41.7 (39.8)
Consolidated income before provision for income taxes and equity in net income of affiliates104.8 229.3 181.1 508.1 
Provision for income taxes23.5 39.3 43.9 98.2 
Equity in net income of affiliates(4.3)(4.9)(15.0)(10.8)
Consolidated net income85.6 194.9 152.2 420.7 
Less: Net income attributable to noncontrolling interests17.1 19.7 34.3 41.8 
Net income attributable to Lear$68.5 $175.2 $117.9 $378.9 
Basic net income per share attributable to Lear (Note 15)
$1.14 $2.91 $1.97 $6.28 
Diluted net income per share attributable to Lear (Note 15)
$1.14 $2.89 $1.96 $6.25 
Cash dividends declared per share$0.77 $0.25 $1.54 $0.50 
Average common shares outstanding59,899,061 60,292,000 59,915,636 60,302,398 
Average diluted shares outstanding60,095,641 60,611,505 60,153,625 60,585,907 
Consolidated comprehensive income (loss) (Condensed Consolidated Statements of Equity)$(112.8)$259.4 $(38.8)$398.8 
Less: Comprehensive income attributable to noncontrolling interests10.3 21.6 27.3 42.6 
Comprehensive income (loss) attributable to Lear$(123.1)$237.8 $(66.1)$356.2 
The accompanying notes are an integral part of these condensed consolidated statements.
5

LEAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended July 2, 2022
Common StockAdditional Paid-In CapitalCommon Stock Held in TreasuryRetained EarningsAccumulated Other Comprehensive Loss, Net of TaxLear Corporation Stockholders' Equity
Balance at April 2, 2022$0.6 $1,000.4 $(663.8)$5,075.4 $(762.6)$4,650.0 
Comprehensive income (loss):
Net income— — — 68.5 — 68.5 
Other comprehensive loss— — — — (191.6)(191.6)
Total comprehensive income (loss)— — — 68.5 (191.6)(123.1)
Stock-based compensation— 11.4 — — — 11.4 
Net issuance of 22,160 shares held in treasury in settlement of stock-based compensation
— (3.8)3.1 (0.2)— (0.9)
Repurchase of 380,220 shares of common stock at average price of $131.92 per share
— — (50.2)— — (50.2)
Dividends declared to Lear Corporation stockholders— — — (46.6)— (46.6)
Dividends declared to noncontrolling interest holders— — — — —  
Balance at July 2, 2022$0.6 $1,008.0 $(710.9)$5,097.1 $(954.2)$4,440.6 

Six Months Ended July 2, 2022
Common StockAdditional Paid-In CapitalCommon Stock Held in TreasuryRetained EarningsAccumulated Other Comprehensive Loss, Net of TaxLear Corporation Stockholders' Equity
Balance at January 1, 2022$0.6 $1,019.4 $(679.2)$5,072.8 $(770.2)$4,643.4 
Comprehensive income (loss):
Net income— — — 117.9 — 117.9 
Other comprehensive loss— — — — (184.0)(184.0)
Total comprehensive income (loss)— — — 117.9 (184.0)(66.1)
Stock-based compensation— 25.3 — — — 25.3 
Net issuance of 162,872 shares held in treasury in settlement of stock-based compensation
— (36.7)18.5 (0.2)— (18.4)
Repurchase of 380,220 shares of common stock at average price of $131.92 per share
— — (50.2)— — (50.2)
Dividends declared to Lear Corporation stockholders— — — (93.4)— (93.4)
Dividends declared to noncontrolling interest holders— — — — — — 
Change in noncontrolling interests— — — — —  
Balance at July 2, 2022$0.6 $1,008.0 $(710.9)$5,097.1 $(954.2)$4,440.6 
The accompanying notes are an integral part of these condensed consolidated statements.
6

LEAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended July 2, 2022
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at April 2, 2022$4,650.0 $175.9 $4,825.9 
Comprehensive income (loss):
Net income68.5 17.1 85.6 
Other comprehensive loss(191.6)(6.8)(198.4)
Total comprehensive income (loss)(123.1)10.3 (112.8)
Stock-based compensation11.4 — 11.4 
Net issuance of 22,160 shares held in treasury in settlement of stock-based compensation
(0.9)— (0.9)
Repurchase of 380,220 shares of common stock at average price of $131.92 per share
(50.2)— (50.2)
Dividends declared to Lear Corporation stockholders(46.6)— (46.6)
Dividends declared to noncontrolling interest holders (78.9)(78.9)
Balance at July 2, 2022$4,440.6 $107.3 $4,547.9 
Six Months Ended July 2, 2022
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at January 1, 2022$4,643.4 $165.0 $4,808.4 
Comprehensive income (loss):
Net income117.9 34.3 152.2 
Other comprehensive loss(184.0)(7.0)(191.0)
Total comprehensive income (loss)(66.1)27.3 (38.8)
Stock-based compensation25.3 — 25.3 
Net issuance of 162,872 shares held in treasury in settlement of stock-based compensation
(18.4)— (18.4)
Repurchase of 380,220 shares of common stock at average price of $131.92 per share
(50.2)— (50.2)
Dividends declared to Lear Corporation stockholders(93.4)— (93.4)
Dividends declared to noncontrolling interest holders— (85.6)(85.6)
Change in noncontrolling interests 0.6 0.6 
Balance at July 2, 2022$4,440.6 $107.3 $4,547.9 
The accompanying notes are an integral part of these condensed consolidated statements.

7

LEAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended July 3, 2021
Common StockAdditional Paid-In CapitalCommon Stock Held in TreasuryRetained EarningsAccumulated Other Comprehensive Loss, Net of TaxLear Corporation Stockholders' Equity
Balance at April 3, 2021$0.6 $964.3 $(589.6)$4,995.2 $(790.4)$4,580.1 
Comprehensive income:
Net income— — — 175.2 — 175.2 
Other comprehensive income— — — — 62.6 62.6 
Total comprehensive income— — — 175.2 62.6 237.8 
Stock-based compensation— 12.2 — — — 12.2 
Net issuance of 17,688 shares held in treasury in settlement of stock-based compensation
— (2.9)2.2 — — (0.7)
Repurchase of 169,814 shares of common stock at average price of $183.56 per share
— — (31.2)— — (31.2)
Dividends declared to Lear Corporation stockholders— — — (15.3)— (15.3)
Dividends declared to noncontrolling interest holders— — — — — — 
Balance at July 3, 2021$0.6 $973.6 $(618.6)$5,155.1 $(727.8)$4,782.9 

Six Months Ended July 3, 2021
Common StockAdditional Paid-In CapitalCommon Stock Held in TreasuryRetained EarningsAccumulated Other Comprehensive Loss, Net of TaxLear Corporation Stockholders' Equity
Balance at January 1, 2021$0.6 $963.6 $(598.6)$4,806.8 $(705.1)$4,467.3 
Comprehensive income (loss):
Net income— — — 378.9 — 378.9 
Other comprehensive income (loss)— — — — (22.7)(22.7)
Total comprehensive income (loss)— — — 378.9 (22.7)356.2 
Stock-based compensation— 29.9 — — — 29.9 
Net issuance of 95,859 shares held in treasury in settlement of stock-based compensation
— (19.9)11.2 — — (8.7)
Repurchase of 169,814 shares of common stock at average price of $183.56 per share
— — (31.2)— — (31.2)
Dividends declared to Lear Corporation stockholders— — — (30.6)— (30.6)
Dividends declared to noncontrolling interest holders— — — — — — 
Balance at July 3, 2021$0.6 $973.6 $(618.6)$5,155.1 $(727.8)$4,782.9 
The accompanying notes are an integral part of these condensed consolidated statements.


8

LEAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended July 3, 2021
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at April 3, 2021$4,580.1 $168.6 $4,748.7 
Comprehensive income:
Net income175.2 19.7 194.9 
Other comprehensive income62.6 1.9 64.5 
Total comprehensive income237.8 21.6 259.4 
Stock-based compensation12.2 — 12.2 
Net issuance of 17,688 shares held in treasury in settlement of stock-based compensation
(0.7)— (0.7)
Repurchase of 169,814 shares of common stock at average price of $183.56 per share
(31.2)— (31.2)
Dividends declared to Lear Corporation stockholders(15.3)— (15.3)
Dividends declared to noncontrolling interest holders— (81.0)(81.0)
Balance at July 3, 2021$4,782.9 $109.2 $4,892.1 
Six Months Ended July 3, 2021
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at January 1, 2021$4,467.3 $147.6 $4,614.9 
Comprehensive income (loss):
Net income378.9 41.8 420.7 
Other comprehensive income (loss)(22.7)0.8 (21.9)
Total comprehensive income (loss)356.2 42.6 398.8 
Stock-based compensation29.9 — 29.9 
Net issuance of 95,859 shares held in treasury in settlement of stock-based compensation
(8.7)— (8.7)
Repurchase of 169,814 shares of common stock at average price of $183.56 per share
(31.2)— (31.2)
Dividends declared to Lear Corporation stockholders(30.6)— (30.6)
Dividends declared to noncontrolling interest holders— (81.0)(81.0)
Balance at July 3, 2021$4,782.9 $109.2 $4,892.1 
The accompanying notes are an integral part of these condensed consolidated statements.

9

LEAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Six Months Ended
July 2,
2022
July 3,
2021
Cash Flows from Operating Activities:
Consolidated net income$152.2 $420.7 
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization295.0 291.0 
Net change in recoverable customer engineering, development and tooling(74.3)(79.8)
Net change in working capital items (see below)(178.4)(136.4)
Other, net37.6 12.1 
Net cash provided by operating activities232.1 507.6 
Cash Flows from Investing Activities:
Additions to property, plant and equipment(302.5)(252.9)
Acquisition of Kongsberg ICS, net of cash acquired(184.2) 
Other, net1.8 (30.3)
Net cash used in investing activities(484.9)(283.2)
Cash Flows from Financing Activities:
Term loan repayments (9.4)
Repurchase of common stock(50.2)(29.2)
Dividends paid to Lear Corporation stockholders(93.5)(30.8)
Dividends paid to noncontrolling interests(52.5)(52.8)
Other, net(25.3)(10.1)
Net cash used in financing activities(221.5)(132.3)
Effect of foreign currency translation(16.1)(1.9)
Net Change in Cash, Cash Equivalents and Restricted Cash(490.4)90.2 
Cash, Cash Equivalents and Restricted Cash as of Beginning of Period1,321.3 1,314.5 
Cash, Cash Equivalents and Restricted Cash as of End of Period$830.9 $1,404.7 
Changes in Working Capital Items:
Accounts receivable$(469.2)$283.7 
Inventories(75.7)(199.6)
Accounts payable289.2 (232.6)
Accrued liabilities and other77.3 12.1 
Net change in working capital items$(178.4)$(136.4)
Supplementary Disclosure:
Cash paid for interest$39.6 $45.3 
Cash paid for income taxes, net of refunds received$111.6 $82.5 
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.
(2) Current Operating Environment
Due to the overall global economic conditions in 2020, largely as a result of the COVID-19 pandemic, the automotive industry experienced a decline in global customer sales and production volumes. Production disruptions continued in 2021 and are continuing in 2022, again largely due to the ongoing impact of the COVID-19 pandemic, particularly through supply shortages and, to a lesser extent, the resurgence of the virus in China with corresponding 'stay at home' government orders, as well as the Russia-Ukraine conflict. The most significant supply shortage relates to semiconductor chips, which is impacting global vehicle production and resulting in reductions and cancellations of planned production. In addition, the Company is experiencing increased costs related to labor inefficiencies and shortages, which are likely to continue for a period of time. Increases in certain commodity costs, as well as transportation, logistics and utility costs, are also impacting, and will continue to impact, the Company's operating results for the foreseeable future. Further resurgences of the COVID-19 virus or its variants in other regions, including corresponding "stay at home" or similar government orders impacting industry production, could also impact the Company's financial results.
In March 2022, as the Company's customers began to suspend their Russian operations as a result of Russia's invasion of Ukraine, the Company similarly suspended its Russian operations. Although the Company's net sales and total assets in Russia represent less than 1% of consolidated net sales and total assets, the Russia-Ukraine conflict and sanctions imposed on Russia globally have resulted in economic and supply chain disruptions affecting the overall industry, the ultimate financial impact of which cannot be reasonably estimated. Further, although the Company does not have operations in Ukraine, the Ukrainian operations of certain of the Company's suppliers and suppliers of its customers have been and will continue to be disrupted by the Russia-Ukraine conflict.
The accompanying condensed consolidated financial statements reflect estimates and assumptions made by management as of July 2, 2022, and for the six months then ended. Such estimates and assumptions affect, among other things, the Company's goodwill; long-lived asset and indefinite-lived intangible asset valuations; inventory valuations; valuations of deferred income taxes and income tax contingencies; and credit losses related to the Company's financial instruments. Events and circumstances arising after July 2, 2022, including those resulting from the impact of the COVID-19 pandemic, will be reflected in management's estimates and assumptions in future periods.
(3) Acquisition of Kongsberg ICS
On February 28, 2022, the Company completed the acquisition of substantially all of Kongsberg Automotive's Interior Comfort Systems business unit ("Kongsberg ICS"). Kongsberg ICS specializes in comfort seating solutions, including massage, lumbar, seat heat and ventilation, with annual sales of approximately $300 million, of which approximately 20% are intercompany.
The acquisition of Kongsberg ICS was 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 July 2, 2022. The operating results and cash flows of Kongsberg ICS are included in the condensed consolidated financial statements from the date of acquisition in the Company's Seating segment.

11

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The preliminary purchase price and related allocation are shown below (in millions):
April 2,
2022
AdjustmentsJuly 2,
2022
Preliminary purchase price, net of acquired cash (1)
$184.2 $3.6 $187.8 
Property, plant and equipment121.8  121.8 
Other assets purchased and liabilities assumed, net28.0 (0.5)27.5 
Goodwill23.3 4.1 27.4 
Intangible assets11.1 11.1 
Preliminary purchase price allocation$184.2 $3.6 $187.8 
(1) Preliminary purchase price reflects cash paid of $184.2 million plus amounts due to seller of $3.6 million
Goodwill recognized in this transaction is primarily attributable to the assembled workforce and expected synergies related to future growth.
Intangible assets consist of amounts recognized for the fair value of developed technology based on an independent appraisal. It is currently estimated that the developed technology will have a weighted average useful life of approximately seventeen years.
The purchase price and related allocation are preliminary and may be revised as a result of further adjustments made to the purchase price, additional information obtained regarding liabilities assumed, including, but not limited to, certain tax attributes and contingent liabilities, and revisions of provisional estimates of fair values resulting from the completion of independent appraisals and valuations of property, plant and equipment and intangible assets.
The Company incurred transaction costs of $9.3 million in the six months ended July 2, 2022, which have been expensed as incurred and are recorded in selling, general and administrative expenses.
The pro-forma effects of this acquisition do not materially impact the Company's reported results for any period presented.
For further information related to acquired assets measured at fair value, see Note 19, "Financial Instruments."
(4) Restructuring
Restructuring costs include employee termination benefits, asset impairment charges and contract termination costs, as well as other incremental costs resulting from the restructuring actions. Employee termination benefits are recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. Other 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 when restructuring actions are approved, communicated and/or implemented.
In the first six months of 2022, the Company recorded charges of $71.7 million in connection with its restructuring actions. These charges consist of $54.4 million recorded as cost of sales and $17.3 million recorded as selling, general and administrative expenses. The restructuring charges consist of employee termination costs of $57.4 million, asset impairment charges of $7.5 million and contract termination costs of $1.9 million, as well as other related costs of $4.9 million. Employee termination benefits were recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. Asset impairment charges relate to the disposal of buildings, leasehold improvements and/or machinery and equipment with carrying values of $1.1 million in excess of related estimated fair values and the impairment of right-of-use assets of $6.4 million.
The Company expects to incur approximately $43 million of additional restructuring costs related to activities initiated as of July 2, 2022, 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.
12

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A summary of 2022 activity is shown below (in millions):
 Accrual at
January 1, 2022
2022UtilizationAccrual at
 July 2, 2022
ChargesCashNon-cash
Employee termination benefits$126.1 $57.4 $(40.5)$(1.0)$142.0 
Asset impairment charges 7.5  (7.5) 
Contract termination costs3.3 1.9 (0.7) 4.5 
Other related costs 4.9 (4.9)  
Total$129.4 $71.7 $(46.1)$(8.5)$146.5 
(5) Inventories
Inventories are stated at the lower of cost or net realizable value. 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):
July 2,
2022
December 31,
2021
Raw materials$1,260.3 $1,171.0 
Work-in-process125.5 119.9 
Finished goods390.7 453.4 
Reserves(163.7)(172.4)
Inventories$1,612.8 $1,571.9 
(6) Pre-Production Costs Related to Long-Term Supply Agreements
The Company incurs pre-production engineering and development ("E&D") and tooling costs related to the products produced for its customers under long-term supply agreements. The Company expenses all pre-production E&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 Company does not have a non-cancelable right to use the tooling.
During the first six months of 2022 and 2021, the Company capitalized $133.9 million and $140.1 million, respectively, of pre-production E&D costs for which reimbursement is contractually guaranteed by the customer. During the first six months of 2022 and 2021, the Company also capitalized $104.5 million and $77.2 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 Company has a non-cancelable right to use the tooling. These amounts are included in other current and long-term assets in the accompanying condensed consolidated balance sheets.
During the first six months of 2022 and 2021, the Company collected $167.5 million and $147.7 million, respectively, of cash related to E&D and tooling costs.
The classification of recoverable customer E&D and tooling costs related to long-term supply agreements included in the accompanying condensed consolidated balance sheets is shown below (in millions):
July 2,
2022
December 31,
2021
Current$243.2 $207.4 
Long-term165.2 143.5 
Recoverable customer E&D and tooling$408.4 $350.9 
13

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(7) Long-Lived Assets
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Costs associated with the repair and maintenance of the Company's property, plant and equipment are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency or safety of the Company's property, plant and equipment are capitalized and depreciated over the remaining useful life of the related asset. Depreciable property is depreciated over the estimated useful lives of the assets, using principally the straight-line method.
A summary of property, plant and equipment is shown below (in millions):
July 2,
2022
December 31,
2021
Land$103.3 $108.7 
Buildings and improvements834.9 850.3 
Machinery and equipment4,623.8 4,497.7 
Construction in progress383.3 345.6 
Total property, plant and equipment5,945.3 5,802.3 
Less – accumulated depreciation(3,166.6)(3,082.2)
Property, plant and equipment, net$2,778.7 $2,720.1 
Depreciation expense was $127.0 million and $125.1 million in the three months ended July 2, 2022 and July 3, 2021, respectively, and $254.7 million and $249.4 million in the six months ended July 2, 2022 and July 3, 2021, respectively.
The Company monitors its long-lived assets for impairment indicators on an ongoing basis in accordance with GAAP. If impairment indicators exist, the Company performs the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. The Company will continue to assess the impact of significant industry and other events on the realization of its long-lived assets.
In the first half of 2022 and 2021, the Company recognized fixed asset impairment charges of $1.1 million and $