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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 30, 2023.
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/9bab698aa6767831cc061cfc4a80a745-learlogoa21.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 October 23, 2023, the number of shares outstanding of the registrant's common stock was 58,259,871 shares.


Table of Contents
LEAR CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2023
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, 2022.
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 30,
 2023(1)
December 31,
2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$979.7 $1,114.9 
Accounts receivable4,041.2 3,451.9 
Inventories1,788.3 1,573.6 
Other928.5 853.7 
Total current assets7,737.7 6,994.1 
LONG-TERM ASSETS:
Property, plant and equipment, net2,886.0 2,854.0 
Goodwill1,714.1 1,660.6 
Other2,275.9 2,254.3 
Total long-term assets6,876.0 6,768.9 
Total assets$14,613.7 $13,763.0 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings$26.7 $9.9 
Accounts payable and drafts3,556.5 3,206.1 
Accrued liabilities2,117.9 1,961.5 
Current portion of long-term debt0.3 10.8 
Total current liabilities5,701.4 5,188.3 
LONG-TERM LIABILITIES:
Long-term debt2,742.1 2,591.2 
Other1,186.9 1,153.2 
Total long-term liabilities3,929.0 3,744.4 
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; 64,571,405 shares issued as of September 30, 2023 and December 31, 2022
0.6 0.6 
Additional paid-in capital1,037.2 1,023.1 
Common stock held in treasury, 6,315,867 and 5,493,211 shares as of September 30, 2023 and December 31, 2022, respectively, at cost
(869.8)(753.9)
Retained earnings5,519.3 5,214.1 
Accumulated other comprehensive loss(828.5)(805.1)
Lear Corporation stockholders' equity4,858.8 4,678.8 
Noncontrolling interests124.5 151.5 
Equity4,983.3 4,830.3 
Total liabilities and equity$14,613.7 $13,763.0 
 (1)     Unaudited
The accompanying notes are an integral part of these condensed consolidated balance sheets.
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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 EndedNine Months Ended
 September 30,
2023
October 1,
2022
September 30,
2023
October 1,
2022
Net sales$5,781.0 $5,241.2 $17,625.7 $15,520.6 
Cost of sales5,362.8 4,864.3 16,320.5 14,482.3 
Selling, general and administrative expenses182.5 163.9 542.1 512.4 
Amortization of intangible assets15.5 15.2 47.4 55.5 
Interest expense25.7 24.8 76.1 74.6 
Other expense, net5.8 18.1 39.0 59.8 
Consolidated income before provision for income taxes and equity in net income of affiliates188.7 154.9 600.6 336.0 
Provision for income taxes47.0 41.7 134.1 85.6 
Equity in net income of affiliates(10.4)(6.0)(36.2)(21.0)
Consolidated net income152.1 119.2 502.7 271.4 
Less: Net income attributable to noncontrolling interests19.2 26.9 57.5 61.2 
Net income attributable to Lear$132.9 $92.3 $445.2 $210.2 
Basic net income per share attributable to Lear (Note 15)
$2.26 $1.55 $7.54 $3.52 
Diluted net income per share attributable to Lear (Note 15)
$2.25 $1.54 $7.50 $3.50 
Cash dividends declared per share$0.77 $0.77 $2.31 $2.31 
Average common shares outstanding58,766,586 59,551,765 59,072,189 59,794,788 
Average diluted shares outstanding59,075,638 59,785,860 59,333,590 60,031,484 
Consolidated comprehensive income (loss) (Condensed Consolidated Statements of Equity)$4.6 $(57.2)$472.8 $(96.0)
Less: Comprehensive income attributable to noncontrolling interests18.5 19.3 51.0 46.6 
Comprehensive income (loss) attributable to Lear$(13.9)$(76.5)$421.8 $(142.6)
The accompanying notes are an integral part of these condensed consolidated statements.
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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended September 30, 2023
Common StockAdditional Paid-In CapitalCommon Stock Held in TreasuryRetained EarningsAccumulated Other Comprehensive Loss, Net of TaxLear Corporation Stockholders' Equity
Balance at July 1, 2023$0.6 $1,027.1 $(797.8)$5,432.3 $(681.7)$4,980.5 
Comprehensive income (loss):
Net income— — — 132.9 — 132.9 
Other comprehensive loss— — — — (146.8)(146.8)
Total comprehensive income (loss)— — — 132.9 (146.8)(13.9)
Stock-based compensation— 16.1 — — — 16.1 
Net issuance of 27,590 shares held in treasury in settlement of stock-based compensation
— (6.0)3.7 0.1 — (2.2)
Repurchase of 521,552 shares of common stock at average price of $143.57 per share
— — (75.7)— — (75.7)
Dividends declared to Lear Corporation stockholders— — — (46.0)— (46.0)
Dividends declared to noncontrolling interest holders— — — — — — 
Balance at September 30, 2023$0.6 $1,037.2 $(869.8)$5,519.3 $(828.5)$4,858.8 
Nine Months Ended September 30, 2023
Common StockAdditional Paid-In CapitalCommon Stock Held in TreasuryRetained EarningsAccumulated Other Comprehensive Loss, Net of TaxLear Corporation Stockholders' Equity
Balance at January 1, 2023$0.6 $1,023.1 $(753.9)$5,214.1 $(805.1)$4,678.8 
Comprehensive income (loss):
Net income— — — 445.2 — 445.2 
Other comprehensive loss— — — — (23.4)(23.4)
Total comprehensive income (loss)— — — 445.2 (23.4)421.8 
Stock-based compensation— 51.2 — — — 51.2 
Net issuance of 168,428 shares held in treasury in settlement of stock-based compensation
— (37.1)23.3 (1.0)— (14.8)
Repurchase of 991,084 shares of common stock at average price of $139.22 per share
— — (139.2)— — (139.2)
Dividends declared to Lear Corporation stockholders— — — (139.0)— (139.0)
Dividends declared to noncontrolling interest holders— — — — — — 
Balance at September 30, 2023$0.6 $1,037.2 $(869.8)$5,519.3 $(828.5)$4,858.8 
The accompanying notes are an integral part of these condensed consolidated statements.
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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended September 30, 2023
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at July 1, 2023$4,980.5 $110.8 $5,091.3 
Comprehensive income (loss):
Net income132.9 19.2 152.1 
Other comprehensive loss(146.8)(0.7)(147.5)
Total comprehensive income (loss)(13.9)18.5 4.6 
Stock-based compensation16.1 — 16.1 
Net issuance of 27,590 shares held in treasury in settlement of stock-based compensation
(2.2)— (2.2)
Repurchase of 521,552 shares of common stock at average price of $143.57 per share
(75.7)— (75.7)
Dividends declared to Lear Corporation stockholders(46.0)— (46.0)
Dividends declared to noncontrolling interest holders— (4.8)(4.8)
Balance at September 30, 2023$4,858.8 $124.5 $4,983.3 
Nine Months Ended September 30, 2023
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at January 1, 2023$4,678.8 $151.5 $4,830.3 
Comprehensive income (loss):
Net income445.2 57.5 502.7 
Other comprehensive loss(23.4)(6.5)(29.9)
Total comprehensive income (loss)421.8 51.0 472.8 
Stock-based compensation51.2 — 51.2 
Net issuance of 168,428 shares held in treasury in settlement of stock-based compensation
(14.8)— (14.8)
Repurchase of 991,084 shares of common stock at average price of $139.22 per share
(139.2)— (139.2)
Dividends declared to Lear Corporation stockholders(139.0)— (139.0)
Dividends declared to noncontrolling interest holders (78.0)(78.0)
Balance at September 30, 2023$4,858.8 $124.5 $4,983.3 
The accompanying notes are an integral part of these condensed consolidated statements.


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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended October 1, 2022
Common StockAdditional Paid-In CapitalCommon Stock Held in TreasuryRetained EarningsAccumulated Other Comprehensive Loss, Net of TaxLear Corporation Stockholders' Equity
Balance at July 2, 2022$0.6 $1,008.0 $(710.9)$5,097.1 $(954.2)$4,440.6 
Comprehensive income (loss):
Net income— — — 92.3 — 92.3 
Other comprehensive loss— — — — (168.8)(168.8)
Total comprehensive income (loss)— — — 92.3 (168.8)(76.5)
Stock-based compensation— 12.8 — — — 12.8 
Net issuance of 27,990 shares held in treasury in settlement of stock-based compensation
— (6.0)3.8 — — (2.2)
Repurchase of 187,192 shares of common stock at average price of $133.65 per share
— — (25.0)— — (25.0)
Dividends declared to Lear Corporation stockholders— — — (46.4)— (46.4)
Dividends declared to noncontrolling interest holders— — — — — — 
Balance at October 1, 2022$0.6 $1,014.8 $(732.1)$5,143.0 $(1,123.0)$4,303.3 
Nine Months Ended October 1, 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— — — 210.2 — 210.2 
Other comprehensive loss— — — — (352.8)(352.8)
Total comprehensive income (loss)— — — 210.2 (352.8)(142.6)
Stock-based compensation— 38.1 — — — 38.1 
Net issuance of 190,862 shares held in treasury in settlement of stock-based compensation
— (42.7)22.3 (0.2)— (20.6)
Repurchase of 567,412 shares of common stock at average price of $132.49 per share
— — (75.2)— — (75.2)
Dividends declared to Lear Corporation stockholders— — — (139.8)— (139.8)
Dividends declared to noncontrolling interest holders— — — — — — 
Change in noncontrolling interests— — — — — — 
Balance at October 1, 2022$0.6 $1,014.8 $(732.1)$5,143.0 $(1,123.0)$4,303.3 
The accompanying notes are an integral part of these condensed consolidated statements.



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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in millions, except share and per share data)
Three Months Ended October 1, 2022
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at July 2, 2022$4,440.6 $107.3 $4,547.9 
Comprehensive income (loss):
Net income92.3 26.9 119.2 
Other comprehensive loss(168.8)(7.6)(176.4)
Total comprehensive income (loss)(76.5)19.3 (57.2)
Stock-based compensation12.8 — 12.8 
Net issuance of 27,990 shares held in treasury in settlement of stock-based compensation
(2.2)— (2.2)
Repurchase of 187,192 shares of common stock at average price of $133.65 per share
(25.0)— (25.0)
Dividends declared to Lear Corporation stockholders(46.4)— (46.4)
Dividends declared to noncontrolling interest holders— (2.0)(2.0)
Balance at October 1, 2022$4,303.3 $124.6 $4,427.9 
Nine Months Ended October 1, 2022
Lear Corporation Stockholders' EquityNon-controlling InterestsEquity
Balance at January 1, 2022$4,643.4 $165.0 $4,808.4 
Comprehensive income (loss):
Net income210.2 61.2 271.4 
Other comprehensive loss(352.8)(14.6)(367.4)
Total comprehensive income (loss)(142.6)46.6 (96.0)
Stock-based compensation38.1 — 38.1 
Net issuance of 190,862 shares held in treasury in settlement of stock-based compensation
(20.6)— (20.6)
Repurchase of 567,412 shares of common stock at average price of $132.49 per share
(75.2)— (75.2)
Dividends declared to Lear Corporation stockholders(139.8)— (139.8)
Dividends declared to noncontrolling interest holders— (87.6)(87.6)
Change in noncontrolling interests— 0.6 0.6 
Balance at October 1, 2022$4,303.3 $124.6 $4,427.9 
The accompanying notes are an integral part of these condensed consolidated statements.


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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Nine Months Ended
September 30,
2023
October 1,
2022
Cash Flows from Operating Activities:
Consolidated net income$502.7 $271.4 
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization450.3 434.3 
Net change in recoverable customer engineering, development and tooling(65.3)(84.1)
Net change in working capital items (see below)(254.0)(214.9)
Other, net45.9 77.5 
Net cash provided by operating activities679.6 484.2 
Cash Flows from Investing Activities:
Additions to property, plant and equipment(433.3)(442.9)
Acquisitions, net of cash acquired(174.5)(184.2)
Other, net4.7 10.4 
Net cash used in investing activities(603.1)(616.7)
Cash Flows from Financing Activities:
Short-term borrowings, net17.6 7.6 
Term loan borrowings150.0  
Repurchases of common stock(138.0)(75.2)
Dividends paid to Lear Corporation stockholders(137.3)(139.4)
Dividends paid to noncontrolling interests(73.8)(84.6)
Other, net(26.3)(21.6)
Net cash used in financing activities(207.8)(313.2)
Effect of foreign currency translation(2.9)(31.3)
Net Change in Cash, Cash Equivalents and Restricted Cash(134.2)(477.0)
Cash, Cash Equivalents and Restricted Cash as of Beginning of Period1,117.4 1,321.3 
Cash, Cash Equivalents and Restricted Cash as of End of Period$983.2 $844.3 
Changes in Working Capital Items:
Accounts receivable$(614.7)$(796.7)
Inventories(185.4)(111.7)
Accounts payable (including $15.4 million of cash paid in 2023 in conjunction with the acquisition of IGB to settle pre-existing accounts payable)
370.9 570.9 
Accrued liabilities and other175.2 122.6 
Net change in working capital items$(254.0)$(214.9)
Supplementary Disclosure:
Cash paid for interest$78.5 $64.8 
Cash paid for income taxes, net of refunds received$165.8 $156.6 
The accompanying notes are an integral part of these condensed consolidated statements.
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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
Since 2020, the automotive industry has experienced a decline in global production volumes. Although industry production has recovered modestly and is expected to return to 2019 pre-pandemic levels in 2023, industry production remains below 2017 peak levels. Further, the global economy, as well as the automotive industry, have been influenced directly and indirectly by macroeconomic events resulting in unfavorable conditions, including shortages of semiconductor chips and other components, elevated inflation levels, higher interest rates, and labor and energy shortages in certain markets. Beginning in the third quarter of 2023 and continuing into the fourth quarter, the automotive industry has also been impacted by labor strikes and related disruptions at certain of the Company's customers' facilities in the United States. These factors, amongst others, continue to impact consumer demand as well as the ability of automotive manufactures to produce vehicles to meet demand.
The accompanying condensed consolidated financial statements reflect estimates and assumptions made by management as of September 30, 2023, and for the nine months then ended. Such estimates and assumptions affect, among other things, the Company's goodwill; long-lived 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 September 30, 2023, will be reflected in management's estimates and assumptions in future periods.
(3) Acquisitions
I.G. Bauerhin
On April 26, 2023, the Company completed the acquisition of I.G. Bauerhin ("IGB"), a privately held supplier of automotive seat heating, ventilation, active cooling, steering wheel heating, seat sensors and electronic control modules, headquartered in Grundau-Rothenbergen, Germany. IGB has more than 4,600 employees at nine manufacturing plants in seven countries. The acquisition of IGB furthers the Company's comprehensive strategy to develop and integrate a complete portfolio of thermal comfort systems for automotive seating.
The acquisition of IGB 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 September 30, 2023. The operating results and cash flows of IGB are included in the accompanying condensed consolidated financial statements from the date of acquisition in the Company's Seating segment.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The preliminary purchase price and related allocation are shown below (in millions):
July 1,
2023
AdjustmentsSeptember 30,
2023
Preliminary purchase price, net of acquired cash$174.5 $ $174.5 
Property, plant and equipment49.7 (1.3)48.4 
Other assets purchased and liabilities assumed, net37.9 (2.2)35.7 
Goodwill69.9 5.1 75.0 
Intangible assets17.0 (1.6)15.4 
Preliminary purchase price allocation$174.5 $ $174.5 
Goodwill recognized 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 and customer-based assets which were both based on an independent appraisal. Developed technology assets have a weighted average useful life of approximately nine years. Customer-based assets include IGB's established relationships with its customers and the ability of these customers to generate future economic profits for the Company and have a weighted average useful life of approximately thirteen 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 $0.6 million and $1.2 million in the first nine months of 2023 and 2022, respectively. These costs were 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."
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"). 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 sheets. 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. For further information related to the acquisition of Kongsberg ICS, see Note 4, "Acquisition of Kongsberg ICS," to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
(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.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A summary of the changes in the Company's restructuring reserves is shown below (in millions):
Balance at January 1, 2023$82.9 
Provision for employee termination benefits73.1 
Payments, utilizations and foreign currency(50.8)
Balance at September 30, 2023$105.2 
Charges recorded in connection with the Company's restructuring actions are shown below (in millions):
Nine Months Ended
September 30,
2023
October 1,
2022
Employee termination benefits$73.1 $69.1 
Asset impairments
Property, plant and equipment2.8 1.7 
Right-of-use assets9.6 6.4 
Contract termination costs2.5 2.4 
Other related costs8.3 9.4 
$96.3 $89.0 
Restructuring charges by income statement line item are shown below (in millions):
Nine Months Ended
September 30,
2023
October 1,
2022
Cost of sales$85.9 $69.8 
Selling, general and administrative expenses10.4 19.2 
$96.3 $89.0 
Restructuring charges by operating segment are shown below (in millions):
Three Months EndedNine Months Ended
September 30,
2023
October 1,
2022
September 30,
2023
October 1,
2022
Seating$28.5 $12.0 $65.4 $46.8 
E-Systems19.7 5.2 29.7 37.1 
Other 0.1 1.2 5.1 
$48.2 $17.3 $96.3 $89.0 
The Company expects to incur approximately $20 million and approximately $3 million of additional restructuring costs in its Seating and E-Systems segments, respectively, related to activities initiated as of September 30, 2023, and expects that the components of such costs will be consistent with its historical experience.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(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):
September 30,
2023
December 31,
2022
Raw materials$1,290.4 $1,216.8 
Work-in-process145.8 126.6 
Finished goods512.8 391.9 
Reserves(160.7)(161.7)
Inventories$1,788.3 $1,573.6 
(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 nine months of 2023 and 2022, the Company capitalized $215.5 million and $181.4 million, respectively, of pre-production E&D costs for which reimbursement is contractually guaranteed by the customer. During the first nine months of 2023 and 2022, the Company also capitalized $121.3 million and $128.0 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 nine months of 2023 and 2022, the Company collected $273.5 million and $245.5 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):
September 30,
2023
December 31,
2022
Current$235.7 $175.7 
Long-term161.2 161.3 
Recoverable customer E&D and tooling$396.9 $337.0 
(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.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A summary of property, plant and equipment is shown below (in millions):
September 30,
2023
December 31,
2022
Land$106.3 $104.6 
Buildings and improvements899.8 868.6 
Machinery and equipment5,117.2 4,871.5 
Construction in progress407.3 378.0 
Total property, plant and equipment6,530.6 6,222.7 
Less – accumulated depreciation(3,644.6)(3,368.7)
Property, plant and equipment, net$2,886.0 $2,854.0 
Depreciation expense was $136.4 million and $124.1 million in the three months ended September 30, 2023 and October 1, 2022, respectively, and $402.9 million and $378.8 million in the nine months ended September 30, 2023 and October 1, 2022, 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. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. Fair value estimates of long-lived assets are based on independent appraisals or discounted cash flows, giving consideration to the highest and best use of the assets. Key assumptions used in the appraisals are based on a combination of market and cost approaches, as appropriate.
In the first nine months of 2023 and 2022, the Company recognized property, plant and equipment impairment charges of $2.8 million and $1.7 million, respectively, in conjunction with its restructuring actions (Note 4, "Restructuring"). In the first nine months of 2023 and 2022, the Company recognized additional property, plant and equipment impairment charges of $2.6 million and $5.7 million, respectively. The impairment charges are included in cost of sales in the accompanying condensed consolidated statements of comprehensive income (loss).
Definite-Lived Intangible Assets
In the nine months ended September 30, 2023, the Company recognized impairment charges of $1.9 million related to certain intangible assets of its E-Systems segment resulting from a change in the intended use of such assets. The impairment charges are included in amortization of intangible assets in the accompanying condensed consolidated statement of comprehensive income (loss).
(8) Goodwill and Indefinite-Lived Intangible Assets
Goodwill
A summary of the changes in the carrying amount of goodwill, by operating segment, in the nine months ended September 30, 2023, is shown below (in millions):
SeatingE-SystemsTotal
Balance at January 1, 2023$1,261.1 $399.5 $1,660.6 
Acquisition75.0  75.0 
Foreign currency translation and other(15.4)(6.1)(21.5)
Balance at September 30, 2023$1,320.7 $393.4 $1,714.1 
Goodwill is not amortized but is tested for impairment on at least an annual basis. Impairment testing is required more often than annually if an event or circumstance indicates that an impairment is more likely than not to have occurred. In conducting its annual impairment testing, the Company may first perform a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount. If not, no further goodwill impairment testing is required. If it is more likely than not that a reporting unit's fair value is less than its carrying amount, or if the Company elects not to perform a qualitative assessment of a reporting unit, the Company then compares the fair value of the reporting unit to the related net book
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
value. If the net book value of a reporting unit exceeds its fair value, an impairment loss is measured and recognized. The annual goodwill impairment assessment is completed as of the first day of the Company's fourth quarter.
There was no impairment of goodwill in the first nine months of 2023 and 2022. The Company will, however, continue to assess the impact of significant industry and other events on its recorded goodwill.
For further information related to the acquisition, see Note 3, "Acquisitions."
Indefinite-Lived Intangible Assets
In the nine months ended October 1, 2022, the Company recognized an impairment charge of $8.9 million related to an intangible asset of its E-Systems segment resulting from a change in the intended use of such asset. The impairment charge is included in amortization of intangible assets in the accompanying condensed consolidated statement of comprehensive income (loss).
(9) Debt
Short-Term Borrowings
The Company utilizes uncommitted lines of credit as needed for its short-term working capital fluctuations. As of September 30, 2023 and December 31, 2022, the Company had lines of credit from banks totaling $272.4 million and $298.2 million, respectively. As of September 30, 2023 and December 31, 2022, the Company had short-term debt balances outstanding related to draws on the lines of credit of $26.7 million and $9.9 million, respectively.
Long-Term Debt
A summary of long-term debt, net of unamortized debt issuance costs and unamortized original issue premium (discount), and the related weighted average interest rates is shown below (in millions):
September 30, 2023
Debt InstrumentLong-Term DebtUnamortized Debt Issuance CostsUnamortized Original Issue Premium (Discount)Long-Term
Debt, Net
Weighted
Average
Interest
Rate
Delayed-Draw Term Loan Facility (the "Term Loan")$150.0 $(0.6)$ $149.4 6.635%
3.8% Senior Notes due 2027 (the "2027 Notes")
550.0 (1.8)(1.5)546.7 3.885%
4.25% Senior Notes due 2029 (the "2029 Notes")
375.0 (1.7)(0.7)372.6 4.288%
3.5% Senior Notes due 2030 (the "2030 Notes")
350.0 (1.8)(0.5)347.7 3.525%
2.6% Senior Notes due 2032 (the "2032 Notes")
350.0 (2.6)(0.6)346.8 2.624%
5.25% Senior Notes due 2049 (the "2049 Notes")
625.0 (5.7)12.8 632.1 5.103%
3.55% Senior Notes due 2052 (the "2052 Notes")
350.0 (3.7)(0.5)345.8 3.558%
Other1.3 — — 1.3 N/A
$2,751.3 $(17.9)$9.0 $2,742.4 
Less — Current portion(0.3)
Long-term debt$2,742.1 
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December 31, 2022
Debt InstrumentLong-Term DebtUnamortized Debt Issuance CostsUnamortized Original Issue Premium (Discount)Long-Term
Debt, Net
Weighted
Average
Interest
Rate
2027 Notes$550.0 $(2.1)$(1.8)$546.1 3.885%
2029 Notes375.0 (2.0)(0.7)372.3 4.288%
2030 Notes350.0 (2.0)(0.6)347.4 3.525%
2032 Notes350.0 (2.8)(0.7)346.5 2.624%
2049 Notes625.0 (6.0)13.2 632.2 5.103%
2052 Notes350.0 (3.8)(0.5)345.7 3.558%
Other11.8 — — 11.8 N/A
$2,611.8 $(18.7)$8.9 2,602.0 
Less — Current portion(10.8)
Long-term debt$2,591.2 
Senior Notes
The issuance, maturity and interest payment dates of the Company's senior unsecured 2027 Notes, 2029 Notes, 2030 Notes, 2032 Notes, 2049 Notes and 2052 Notes (collectively, the "Notes") are shown below:
NoteIssuance Date(s)Maturity DateInterest Payment Dates
2027 NotesAugust 2017September 15, 2027March 15 and September 15
2029 NotesMay 2019May 15, 2029May 15 and November 15
2030 NotesFebruary 2020May 30, 2030May 30 and November 30
2032 NotesNovember 2021January 15, 2032January 15 and July 15
2049 NotesMay 2019 and February 2020May 15, 2049May 15 and November 15
2052 NotesNovember 2021January 15, 2052January 15 and July 15
Subject to certain exceptions, the indentures governing the Notes contain certain restrictive covenants that, among other things, limit the ability of the Company to: (i) create or permit certain liens and (ii) consolidate, merge or sell all or substantially all of the Company's assets. The indentures governing the Notes also provide for customary events of default.
As of September 30, 2023, the Company was in compliance with all covenants under the indentures governing the Notes.
Credit Agreement
The Company's $2.0 billion amended and restated unsecured revolving credit agreement (the "Credit Agreement") expires on October 28, 2026. On June 14, 2023, the Company amended the Credit Agreement to implement the transition from the London Interbank Offered Rate to the Secured Overnight Financing Rate ("SOFR") in accordance with the existing terms of the Credit Agreement, adopting SOFR as the reference rate for certain U.S. dollar-denominated borrowings.
As of September 30, 2023 and December 31, 2022, there were no borrowings outstanding under the Credit Agreement.
Advances under the Credit Agreement generally bear interest based on (i) Term Benchmark, Central Bank Rate and Risk Free Rate ("RFR") (in each case, as defined in the Credit Agreement) or (ii) Alternate Base Rate ("ABR") and Canadian Prime Rate (in each case, as defined in the Credit Agreement). As of September 30, 2023, the ranges and rates are as follows:
Term Benchmark, Central Bank Rate
and RFR Loans
ABR and Canadian Prime Rate Loans
Rate as ofRate as of
MinimumMaximumSeptember 30, 2023MinimumMaximumSeptember 30, 2023
Credit Agreement0.925 %1.450 %1.125 %0.000 %0.450 %0.125 %
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A facility fee, which ranges from 0.075% to 0.20% of the total amount committed under the Credit Agreement, is payable quarterly.
The Credit Agreement contains various customary representations, warranties and covenants by the Company, including, without limitation, (i) covenants regarding maximum leverage, (ii) limitations on fundamental changes involving the Company or its subsidiaries and (iii) limitations on indebtedness and liens.
As of September 30, 2023, the Company was in compliance with all covenants under the Credit Agreement.
Term Loan
On May 1, 2023, the Company borrowed $150 million under its Term Loan to finance, in part, the acquisition of IGB (Note 3, "Acquisitions"). The Term Loan matures on May 1, 2026, three years after the funding date. Advances under the Term Loan generally bear interest based on the Daily or Term SOFR (as defined in the Term Loan agreement) plus a margin determined in accordance with a pricing grid that ranges from 1.00% to 1.525%.
The Term Loan contains the same covenants as the Credit Agreement. As of September 30, 2023, the Company was in compliance with all covenants under the Term Loan.
Other Long-Term Debt
As of September 30, 2023, other long-term debt, including the current portion, consists of amounts outstanding under finance lease agreements. As of December 31, 2022, other long-term debt, including the current portion, consists of amounts outstanding under an unsecured working capital loan and a finance lease agreement.
For further information related to the Company's debt, see Note 7, "Debt," to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
(10) Leases
The Company has operating leases for production, office and warehouse facilities, manufacturing and office equipment and vehicles. Operating lease assets and obligations included in the accompanying condensed consolidated balance sheets are shown below (in millions):
September 30,
2023
December 31, 2022
Right-of-use assets under operating leases:
Other long-term assets$731.9 $701.8 
Lease obligations under operating leases:
Accrued liabilities$149.2 $136.8 
Other long-term liabilities620.7 595.1 
$769.9 $731.9 
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Maturities of lease obligations as of September 30, 2023, are shown below (in millions):
September 30, 2023
2023 (1)
$46.4 
2024170.5 
2025146.8 
2026123.7 
2027102.2 
Thereafter290.7 
Total undiscounted cash flows880.3 
Less: Imputed interest(110.4)
Lease obligations under operating leases$769.9 
(1) For the remaining three months
Cash flow information related to operating leases is shown below (in millions):
Nine Months Ended
September 30,
2023
October 1,
2022
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations$152.4 $166.6 
Operating cash flows:
Cash paid related to operating lease obligations$137.0 $121.5 
In addition to the right-of-use assets obtained in exchange for operating lease obligations shown above, in the nine months ended September 30, 2023, the Company acquired $14.3 million of right-of-use assets and related lease obligations in conjunction with its acquisition of IGB (Note 3, "Acquisitions").
Lease expense included in the accompanying condensed consolidated statements of comprehensive income (loss) is shown below (in millions):
Three Months EndedNine Months Ended
September 30,
2023
October 1,
2022
September 30,
2023
October 1,
2022
Operating lease expense$46.5 $40.5 $136.0 $122.8 
Short-term lease expense5.2 5.7 15.4 16.5 
Variable lease expense2.3 2.1 7.3 6.2 
Total lease expense$54.0 $48.3 $158.7 $145.5 
In the nine months ended September 30, 2023 and October 1, 2022, the Company recognized impairment charges of $9.6 million and $6.4 million, respectively, related to its right-of-use assets in conjunction with its restructuring actions (see Note 4, "Restructuring"). In the three and nine months ended October 1, 2022, the Company recognized additional right-of-use asset impairment charges of $7.0 million related to its Russian operations. The impairment charges are included in cost of sales in the accompanying condensed consolidated statements of comprehensive income (loss).
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(Continued)
The weighted average lease term and discount rate for operating leases are shown below:
September 30,
2023
Weighted average remaining lease termSeven years
Weighted average discount rate3.9 %
The Company is party to finance lease agreements, which are not material to the accompanying condensed consolidated financial statements (Note 9, "Debt").
For further information related to the Company's leases, see Note 8, "Leases," to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
(11) Pension and Other Postretirement Benefit Plans
The Company sponsors defined benefit pension plans covering certain eligible employees in the United States and certain foreign countries. The Company also sponsors postretirement benefit plans (primarily for the continuation of medical benefits) covering certain eligible retirees in the United States and Canada.
Net Periodic Pension and Other Postretirement Benefit (Credit) Cost
The components of the Company's net periodic pension benefit (credit) cost are shown below (in millions):
 Three Months EndedNine Months Ended
 September 30, 2023October 1, 2022September 30, 2023October 1, 2022
 U.S.ForeignU.S.ForeignU.S.ForeignU.S.Foreign
Service cost$ $0.8 $ $1.0 $ $2.4 $ $3.1 
Interest cost5.2 4.3 3.9 2.8 15.6 12.6 11.6 8.6 
Expected return on plan assets(5.0)(4.1)(6.0)(4.3)(15.2)(12.2)(17.9)(13.1)
Amortization of actuarial loss0.2 0.4 0.5 1.0 0.7 1.4 1.5 3.1 
Settlement (gain) loss    (0.1) 0.4  
Net periodic benefit (credit) cost$0.4 $1.4 $(1.6)$0.5 $1.0 $4.2 $(4.4)$1.7 
The components of the Company's net periodic other postretirement benefit (credit) cost are shown below (in millions):
Three Months EndedNine Months Ended
 September 30, 2023October 1, 2022September 30, 2023October 1, 2022
 U.S.ForeignU.S.ForeignU.S.ForeignU.S.Foreign
Interest cost$0.3 $0.2 $0.3 $0.1 $1.1