(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

Three Months Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Net sales $ 4,825.0
$ 4,891.6
$ 14,992.7
$ 16,206.1

Cost of sales 4,365.7
4,365.3
13,582.0
14,410.3
Selling, general and administrative expenses 141.9
150.3
447.3
462.5
Amortization of intangible assets 16.7
12.7
45.3
38.9
Interest expense 24.0
21.2
69.4
62.8
Other expense, net 9.7
13.2
27.9
11.3
Consolidated income before provision for income taxes and equity in net income of affiliates 267.0
328.9
820.8
1,220.3
Provision for income taxes 33.5
57.6
149.9
233.0
Equity in net income of affiliates (5.1 ) (3.4 ) (15.8 ) (16.6 )
Consolidated net income 238.6
274.7
686.7
1,003.9
Less: Net income attributable to noncontrolling interests 22.7
22.2
59.1
66.3
Net income attributable to Lear $ 215.9
$ 252.5
$ 627.6
$ 937.6

Basic net income per share available to Lear common stockholders (Note 15) $ 3.59
$ 3.83
$ 10.27
$ 13.90

Diluted net income per share available to Lear common stockholders (Note 15) $ 3.58
$ 3.80
$ 10.23
$ 13.80

Cash dividends declared per share $ 0.75
$ 0.70
$ 2.25
$ 2.10

Average common shares outstanding 61,133,723
65,372,829
62,042,156
66,256,800

Average diluted shares outstanding 61,330,086
65,868,660
62,262,903
66,709,928

Consolidated comprehensive income (Condensed Consolidated Statements of Equity) $ 96.1
$ 236.1
$ 552.7
$ 845.5
Less: Comprehensive income attributable to noncontrolling interests 11.3
11.8
48.6
50.4
Comprehensive income attributable to Lear $ 84.8
$ 224.3
$ 504.1
$ 795.1

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

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

Three Months Ended September 28, 2019
Common Stock Additional Paid-In Capital Common Stock Held in Treasury Retained Earnings Accumulated Other Comprehensive Loss, Net of Tax Lear Corporation Stockholders' Equity
Balance at June 29, 2019 $ 0.6
$ 965.3
$ (466.6 ) $ 4,435.3
$ (698.2 ) $ 4,236.4
Comprehensive income (loss):
Net income —
—
—
215.9
—
215.9
Other comprehensive loss —
—
—
—
(131.1 ) (131.1 )
Total comprehensive income (loss) —
—
—
215.9
(131.1 ) 84.8
Stock-based compensation —
1.7
—
—
—
1.7
Net issuance of 23,786 shares held in treasury in settlement of stock-based compensation —
(3.9 ) 3.5
(0.7 ) —
(1.1 )
Repurchase of 616,635 shares of common stock at average price of $123.06 per share —
—
(75.9 ) —
—
(75.9 )
Dividends declared to Lear Corporation stockholders —
—
—
(45.7 ) —
(45.7 )
Dividends declared to non-controlling interest holders —
—
—
—
—
—
Changes in noncontrolling interests —
—
—
—
—
—
Redeemable non-controlling interest adjustment —
—
—
3.6
—
3.6
Balance at September 28, 2019 $ 0.6
$ 963.1
$ (539.0 ) $ 4,608.4
$ (829.3 ) $ 4,203.8

Nine Months Ended September 28, 2019
Common Stock Additional Paid-In Capital Common Stock Held in Treasury Retained Earnings Accumulated Other Comprehensive Loss, Net of Tax Lear Corporation Stockholders' Equity
Balance at January 1, 2019 $ 0.6
$ 1,017.4
$ (225.1 ) $ 4,113.6
$ (705.8 ) $ 4,200.7
Comprehensive income (loss):
Net income —
—
—
627.6
—
627.6
Other comprehensive loss —
—
—
—
(123.5 ) (123.5 )
Total comprehensive income (loss) —
—
—
627.6
(123.5 ) 504.1
Stock-based compensation —
16.0
—
—
—
16.0
Net issuance of 308,538 shares held in treasury in settlement of stock-based compensation —
(70.3 ) 41.5
(1.9 ) —
(30.7 )
Repurchase of 2,603,881 shares of common stock at average price of $136.48 per share —
—
(355.4 ) —
—
(355.4 )
Dividends declared to Lear Corporation stockholders —
—
—
(140.3 ) —
(140.3 )
Dividends declared to non-controlling interest holders —
—
—
—
—
—
Acquisition of outstanding noncontrolling interest —
—
—
—
—
—
Changes in noncontrolling interests —
—
—
—
—
—
Redeemable non-controlling interest adjustment —
—
—
9.4
—
9.4
Balance at September 28, 2019 $ 0.6
$ 963.1
$ (539.0 ) $ 4,608.4
$ (829.3 ) $ 4,203.8

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

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		$	4,501.1		$	118.4
Comprehensive income (loss):
Net income (loss)		(43.1	)		57.5			14.4			(3.2	)
Other comprehensive income (loss)		(67.0	)		3.6			(63.4	)		3.0
Total comprehensive income (loss)		(110.1	)		61.1			(49.0	)		(0.2	)
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		(13.6	)		-			(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		-			(69.2	)		(69.2	)		-
Redeemable noncontrolling interest adjustment		(1.1	)		-			(1.1	)		1.1
Balance at October 3, 2020	$	4,132.8		$	143.3		$	4,276.1		$	119.3

Three Months Ended September 28, 2019
Lear Corporation Stockholders' Equity Non-controlling Interests Equity Redeemable Non-controlling Interests
Balance at June 29, 2019 $ 4,236.4
$ 163.1
$ 4,399.5
$ 155.0
Comprehensive income (loss):
Net income 215.9
22.0
237.9
0.7
Other comprehensive loss (131.1 ) (5.8 ) (136.9 ) (5.6 )
Total comprehensive income (loss) 84.8
16.2
101.0
(4.9 )
Stock-based compensation 1.7
—
1.7
—
Net issuance of 23,786 shares held in treasury in settlement of stock-based compensation (1.1 ) —
(1.1 ) —
Repurchase of 616,635 shares of common stock at average price of $123.06 per share (75.9 ) —
(75.9 ) —
Dividends declared to Lear Corporation stockholders (45.7 ) —
(45.7 ) —
Dividends declared to non-controlling interest holders —
(2.4 ) (2.4 ) —
Changes in noncontrolling interests —
(5.6 ) (5.6 ) —
Redeemable non-controlling interest adjustment 3.6
—
3.6
(3.6 )
Balance at September 28, 2019 $ 4,203.8
$ 171.3
$ 4,375.1
$ 146.5

Nine Months Ended September 28, 2019
Lear Corporation Stockholders' Equity Non-controlling Interests Equity Redeemable Non-controlling Interests
Balance at January 1, 2019 $ 4,200.7
$ 159.9
$ 4,360.6
$ 158.1
Comprehensive income (loss):
Net income 627.6
56.1
683.7
3.0
Other comprehensive loss (123.5 ) (5.3 ) (128.8 ) (5.2 )
Total comprehensive income (loss) 504.1
50.8
554.9
(2.2 )
Stock-based compensation 16.0
—
16.0
—
Net issuance of 308,538 shares held in treasury in settlement of stock-based compensation (30.7 ) —
(30.7 ) —
Repurchase of 2,603,881 shares of common stock at average price of $136.48 per share (355.4 ) —
(355.4 ) —
Dividends declared to Lear Corporation stockholders (140.3 ) —
(140.3 ) —
Dividends declared to non-controlling interest holders —
(33.6 ) (33.6 ) —
Acquisition of outstanding noncontrolling interest —
(0.2 ) (0.2 ) —
Changes in noncontrolling interests —
(5.6 ) (5.6 ) —
Redeemable non-controlling interest adjustment 9.4
—
9.4
(9.4 )
Balance at September 28, 2019 $ 4,203.8
$ 171.3
$ 4,375.1
$ 146.5

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

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)

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

	Three Months Ended September 28, 2019
	Common Stock		Additional Paid-In Capital			Common Stock Held in Treasury			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Tax			Lear Corporation Stockholders' Equity
Balance at June 29, 2019	$	0.6	$	965.3		$	(466.6	)	$	4,435.3		$	(698.2	)	$	4,236.4
Comprehensive income (loss):
Net income		-		-			-			215.9			-			215.9
Other comprehensive loss		-		-			-			-			(131.1	)		(131.1	)
Total comprehensive income (loss)		-		-			-			215.9			(131.1	)		84.8
Stock-based compensation		-		1.7			-			-			-			1.7
Net issuance of 23,726 shares held in treasury in settlement of stock-based compensation		-		(3.9	)		3.5			(0.7	)		-			(1.1	)
Repurchase of 616,635 shares of common stock at average price of $123.06 per share		-		-			(75.9	)		-			-			(75.9	)
Dividends declared to Lear Corporation stockholders		-		-			-			(45.7	)		-			(45.7	)
Dividends declared to noncontrolling interest holders		-		-			-			-			-			-
Changes in noncontrolling interests		-		-			-			-			-			-
Redeemable noncontrolling interest adjustment		-		-			-			3.6			-			3.6
Balance at September 28, 2019	$	0.6	$	963.1		$	(539.0	)	$	4,608.4		$	(829.3	)	$	4,203.8

	Nine Months Ended September 28, 2019
	Common Stock		Additional Paid-In Capital			Common Stock Held in Treasury			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Tax			Lear Corporation Stockholders' Equity
Balance at January 1, 2019	$	0.6	$	1,017.4		$	(225.1	)	$	4,113.6		$	(705.8	)	$	4,200.7
Comprehensive income (loss):
Net income		-		-			-			627.6			-			627.6
Other comprehensive loss		-		-			-			-			(123.5	)		(123.5	)
Total comprehensive income (loss)		-		-			-			627.6			(123.5	)		504.1
Stock-based compensation		-		16.0			-			-			-			16.0
Net issuance of 308,538 shares held in treasury in settlement of stock-based compensation		-		(70.3	)		41.5			(1.9	)		-			(30.7	)
Repurchase of 2,603,881 shares of common stock at average price of $136.48 per share		-		-			(355.4	)		-			-			(355.4	)
Dividends declared to Lear Corporation stockholders		-		-			-			(140.3	)		-			(140.3	)
Dividends declared to noncontrolling interest holders		-		-			-			-			-			-
Changes in noncontrolling interests		-		-			-			-			-			-
Redeemable noncontrolling interest adjustment		-		-			-			9.4			-			9.4
Acquisition of outstanding noncontrolling interest		-		-			-			-			-			-
Balance at September 28, 2019	$	0.6	$	963.1		$	(539.0	)	$	4,608.4		$	(829.3	)	$	4,203.8

Three Months Ended September 29, 2018
Common Stock Additional Paid-In Capital Common Stock Held in Treasury Retained Earnings Accumulated Other Comprehensive Loss, Net of Tax Lear Corporation Stockholders' Equity
Balance at June 30, 2018 $ 0.7
$ 1,166.8
$ (989.9 ) $ 4,750.0
$ (627.7 ) $ 4,299.9
Comprehensive income (loss):
Net income —
—
—
252.5
—
252.5
Other comprehensive loss —
—
—
—
(28.2 ) (28.2 )
Total comprehensive income (loss) —
—
—
252.5
(28.2 ) 224.3
Stock-based compensation —
13.6
—
—
—
13.6
Net issuance of 23,416 shares held in treasury in settlement of stock-based compensation —
(4.4 ) 3.2
—
—
(1.2 )
Repurchase of 1,149,839 shares of common stock at average price of $169.60 per share —
—
(195.0 ) —
—
(195.0 )
Dividends declared to Lear Corporation stockholders —
—
—
(46.4 ) —
(46.4 )
Dividends declared to non-controlling interest holders —
—
—
—
—
—
Redeemable non-controlling interest adjustment —
—
—
(2.3 ) —
(2.3 )
Balance at September 29, 2018 $ 0.7
$ 1,176.0
$ (1,181.7 ) $ 4,953.8
$ (655.9 ) $ 4,292.9

Nine Months Ended September 29, 2018
Common Stock Additional Paid-In Capital Common Stock Held in Treasury Retained Earnings Accumulated Other Comprehensive Loss, Net of Tax Lear Corporation Stockholders' Equity
Balance at January 1, 2018 $ 0.7
$ 1,215.4
$ (724.1 ) $ 4,171.9
$ (513.4 ) $ 4,150.5
Comprehensive income (loss):
Net income —
—
—
937.6
—
937.6
Other comprehensive loss —
—
—
—
(142.5 ) (142.5 )
Total comprehensive income (loss) —
—
—
937.6
(142.5 ) 795.1
Stock-based compensation —
40.7
—
—
—
40.7
Net issuance of 368,332 shares held in treasury in settlement of stock-based compensation —
(80.1 ) 33.1
—
—
(47.0 )
Repurchase of 2,697,188 shares of common stock at average price of $181.93 per share —
—
(490.7 ) —
—
(490.7 )
Dividends declared to Lear Corporation stockholders —
—
—
(141.1 ) —
(141.1 )
Dividends declared to non-controlling interest holders —
—
—
—
—
—
Adoption of ASU 2016-16 —
—
—
2.3
—
2.3
Affiliate transaction —
—
—
—
—
—
Acquisition of outstanding non-controlling interest —
—
—
—
—
—
Redeemable non-controlling interest adjustment —
—
—
(16.9 ) —
(16.9 )
Balance at September 29, 2018 $ 0.7
$ 1,176.0
$ (1,181.7 ) $ 4,953.8
$ (655.9 ) $ 4,292.9

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

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)

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

	Three Months Ended September 28, 2019
	Lear Corporation Stockholders' Equity			Non- controlling Interests			Equity			Redeemable Non- controlling Interests
Balance at June 29, 2019	$	4,236.4		$	163.1		$	4,399.5		$	155.0
Comprehensive income (loss):
Net income		215.9			22.0			237.9			0.7
Other comprehensive loss		(131.1	)		(5.8	)		(136.9	)		(5.6	)
Total comprehensive income (loss)		84.8			16.2			101.0			(4.9	)
Stock-based compensation		1.7			-			1.7			-
Net issuance of 23,726 shares held in treasury in settlement of stock-based compensation		(1.1	)		-			(1.1	)		-
Repurchase of 616,635 shares of common stock at average price of $123.06 per share		(75.9	)		-			(75.9	)		-
Dividends declared to Lear Corporation stockholders		(45.7	)		-			(45.7	)		-
Dividends declared to noncontrolling interest holders		-			(2.4	)		(2.4	)		-
Changes in noncontrolling interests		-			(5.6	)		(5.6	)		-
Redeemable noncontrolling interest adjustment		3.6			-			3.6			(3.6	)
Balance at September 28, 2019	$	4,203.8		$	171.3		$	4,375.1		$	146.5

	Nine Months Ended September 28, 2019
	Lear Corporation Stockholders' Equity			Non- controlling Interests			Equity			Redeemable Non- controlling Interests
Balance at January 1, 2019	$	4,200.7		$	159.9		$	4,360.6		$	158.1
Comprehensive income (loss):
Net income		627.6			56.1			683.7			3.0
Other comprehensive loss		(123.5	)		(5.3	)		(128.8	)		(5.2	)
Total comprehensive income (loss)		504.1			50.8			554.9			(2.2	)
Stock-based compensation		16.0			-			16.0			-
Net issuance of 308,538 shares held in treasury in settlement of stock-based compensation		(30.7	)		-			(30.7	)		-
Repurchase of 2,603,881 shares of common stock at average price of $136.48 per share		(355.4	)		-			(355.4	)		-
Dividends declared to Lear Corporation stockholders		(140.3	)		-			(140.3	)		-
Dividends declared to noncontrolling interest holders		-			(33.6	)		(33.6	)		-
Changes in noncontrolling interests		-			(5.6	)		(5.6	)		-
Redeemable noncontrolling interest adjustment		9.4			-			9.4			(9.4	)
Acquisition of outstanding noncontrolling interest		-			(0.2	)		(0.2	)		-
Balance at September 28, 2019	$	4,203.8		$	171.3		$	4,375.1		$	146.5

Three Months Ended September 29, 2018
Lear Corporation Stockholders' Equity Non-controlling Interests Equity Redeemable Non-controlling Interests
Balance at June 30, 2018 $ 4,299.9
$ 127.5
$ 4,427.4
$ 167.5
Comprehensive income (loss):
Net income 252.5
19.7
272.2
2.5
Other comprehensive loss (28.2 ) (4.3 ) (32.5 ) (6.1 )
Total comprehensive income (loss) 224.3
15.4
239.7
(3.6 )
Stock-based compensation 13.6
—
13.6
—
Net issuance of 23,416 shares held in treasury in settlement of stock-based compensation (1.2 ) —
(1.2 ) —
Repurchase of 1,149,839 shares of common stock at average price of $169.60 per share (195.0 ) —
(195.0 ) —
Dividends declared to Lear Corporation stockholders (46.4 ) —
(46.4 ) —
Dividends declared to non-controlling interest holders —
(0.1 ) (0.1 ) (4.6 )
Redeemable non-controlling interest adjustment (2.3 ) —
(2.3 ) 2.3
Balance at September 29, 2018 $ 4,292.9
$ 142.8
$ 4,435.7
$ 161.6

Nine Months Ended September 29, 2018
Lear Corporation Stockholders' Equity Non-controlling Interests Equity Redeemable Non-controlling Interests
Balance at January 1, 2018 $ 4,150.5
$ 142.1
$ 4,292.6
$ 153.4
Comprehensive income (loss):
Net income 937.6
56.5
994.1
9.8
Other comprehensive loss (142.5 ) (6.7 ) (149.2 ) (9.2 )
Total comprehensive income (loss) 795.1
49.8
844.9
0.6
Stock-based compensation 40.7
—
40.7
—
Net issuance of 368,332 shares held in treasury in settlement of stock-based compensation (47.0 ) —
(47.0 ) —
Repurchase of 2,697,188 shares of common stock at average price of $181.93 per share (490.7 ) —
(490.7 ) —
Dividends declared to Lear Corporation stockholders (141.1 ) —
(141.1 ) —
Dividends declared to non-controlling interest holders —
(59.7 ) (59.7 ) (9.3 )
Adoption of ASU 2016-16 2.3
—
2.3
—
Affiliate transaction —
14.0
14.0
—
Acquisition of outstanding non-controlling interest —
(3.4 ) (3.4 ) —
Redeemable non-controlling interest adjustment (16.9 ) —
(16.9 ) 16.9
Balance at September 29, 2018 $ 4,292.9
$ 142.8
$ 4,435.7
$ 161.6

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

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

	Nine Months Ended
	October 3, 2020			September 28, 2019
Cash Flows from Operating Activities:
Consolidated net income	$	11.2		$	686.7
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		397.1			380.4
Net change in recoverable customer engineering, development and tooling		(63.4	)		(73.4	)
Net change in working capital items (see below)		(138.1	)		(162.0	)
Loss on extinguishment of debt		21.1			10.6
Other, net		34.4			(43.0	)
Net cash provided by operating activities		262.3			799.3
Cash Flows from Investing Activities:
Additions to property, plant and equipment		(285.3	)		(410.1	)
Acquisition, net of acquired cash		-			(321.7	)
Other, net		(11.8	)		(7.5	)
Net cash used in investing activities		(297.1	)		(739.3	)
Cash Flows from Financing Activities:
Revolving credit facility borrowings		1,000.0			-
Revolving credit facility repayments		(1,000.0	)		-
Proceeds from the issuance of senior notes		669.1			693.3
Redemption of senior notes		(667.1	)		(333.7	)
Term loan repayments		(9.4	)		(3.1	)
Short-term borrowings (repayments), net		(14.9	)		9.5
Payment of debt issuance and other financing costs		(6.9	)		(6.5	)
Repurchase of common stock		(70.0	)		(359.7	)
Dividends paid to Lear Corporation stockholders		(52.0	)		(141.1	)
Dividends paid to noncontrolling interests		(45.8	)		(33.6	)
Other, net		(14.8	)		(61.6	)
Net cash used in financing activities		(211.8	)		(236.5	)
Effect of foreign currency translation		(5.6	)		(20.0	)
Net Change in Cash, Cash Equivalents and Restricted Cash		(252.2	)		(196.5	)
Cash, Cash Equivalents and Restricted Cash as of Beginning of Period		1,510.4			1,519.8
Cash, Cash Equivalents and Restricted Cash as of End of Period	$	1,258.2		$	1,323.3

Changes in Working Capital Items:
Accounts receivable	$	(416.9	)	$	(513.5	)
Inventories		(13.6	)		(123.5	)
Accounts payable		124.0			208.8
Accrued liabilities and other		168.4			266.2
Net change in working capital items	$	(138.1	)	$	(162.0	)

Supplementary Disclosure:
Cash paid for interest	$	83.7		$	85.2
Cash paid for income taxes, net of refunds received	$	85.3		$	133.7

Nine Months Ended
September 28,
2019 September 29,
2018
Cash Flows from Operating Activities:
Consolidated net income $ 686.7
$ 1,003.9
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization 380.4
361.8
Net change in recoverable customer engineering, development and tooling (73.4 ) (8.5 )
Loss on extinguishment of debt 10.6
—
Net change in working capital items (see below) (162.0 ) (328.8 )
Other, net (43.0 ) (6.8 )
Net cash provided by operating activities 799.3
1,021.6
Cash Flows from Investing Activities:
Additions to property, plant and equipment (410.1 ) (492.7 )
Acquisition, net of acquired cash (321.7 ) —
Other, net (7.5 ) (18.5 )
Net cash used in investing activities (739.3 ) (511.2 )
Cash Flows from Financing Activities:
Credit agreement repayments (3.1 ) (4.7 )
Short-term borrowings, net 9.5
5.6
Proceeds from the issuance of senior notes 693.3
—
Repurchase of senior notes (333.7 ) —
Payment of debt issuance and other financing costs (6.5 ) —
Repurchase of common stock (359.7 ) (488.1 )
Dividends paid to Lear Corporation stockholders (141.1 ) (142.1 )
Dividends paid to noncontrolling interests (33.6 ) (64.3 )
Other, net (61.6 ) (59.6 )
Net cash used in financing activities (236.5 ) (753.2 )
Effect of foreign currency translation (20.0 ) (32.7 )
Net Change in Cash, Cash Equivalents and Restricted Cash (196.5 ) (275.5 )
Cash, Cash Equivalents and Restricted Cash as of Beginning of Period 1,519.8
1,500.4
Cash, Cash Equivalents and Restricted Cash as of End of Period $ 1,323.3
$ 1,224.9

Changes in Working Capital Items:
Accounts receivable $ (513.5 ) $ (173.1 )
Inventories (123.5 ) (117.5 )
Accounts payable 208.8
(33.2 )
Accrued liabilities and other 266.2
(5.0 )
Net change in working capital items $ (162.0 ) $ (328.8 )

Supplementary Disclosure:
Cash paid for interest $ 85.2
$ 93.7
Cash paid for income taxes, net of refunds received $ 133.7
$ 225.1

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

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

Lear Corporation ("Lear," and together with its consolidated subsidiaries, the "Company") and its affiliates design and manufacture automotive seating and electrical distribution systems and related components. The Company’s main customers are automotive original equipment manufacturers. The Company operates facilities worldwide.

The accompanying condensed consolidated financial statements include the accounts of Lear, a Delaware corporation, and the wholly owned and less than wholly owned subsidiaries controlled by Lear. In addition, Lear consolidates all entities, including variable interest entities, in which it has a controlling financial interest. Investments in affiliates in which Lear does not have control, but does have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method.

The Company’s annual financial results are reported on a calendar year basis, and quarterly interim results are reported using a thirteen week reporting calendar.

~~Certain amounts~~

(2) Impact of COVID-19 Pandemic

Unprecedented industry disruptions related to the COVID-19 pandemic impacted operations in every region of the world. The Company's operations in China were impacted first, with most plants in the ~~prior period’s financial statements~~country closed for several weeks during the first quarter. At the end of the first quarter, all of the Company's facilities in China were operating and capacity utilization was increasing. Beginning in mid-March, the Company's operations in Europe, North America, South America and Asia (outside of China) were impacted, with virtually all of its plants closed at the end of the first quarter and closures continuing throughout April and, in most cases, a portion of May. Although manufacturing resumed gradually, most of the Company's plants in its major markets were operating at pre-COVID-19 levels at the end of the second quarter and throughout the third quarter. The Company experienced significant inefficiencies and incremental costs related to the COVID-19 pandemic in the first half of the year, which diminished toward the end of the second quarter. In the third quarter, the Company experienced less significant but ongoing costs related to personal protective equipment, employee transportation and higher labor costs reflecting an increase in absenteeism.

Various government programs have been ~~reclassified~~enacted to ~~conform~~provide financial relief for businesses affected by the COVID-19 pandemic. In the first nine months of 2020, the Company recognized approximately $95 million of government assistance primarily related to the ~~presentation used in~~reimbursement of certain employee costs. The Company recognizes such assistance as a reduction of the ~~quarter ended September 28, 2019.~~

~~(2) Acquisition~~

~~On April 17, 2019,~~related costs as such costs are incurred and the Company ~~completed~~is reasonably assured to receive payment.

Although industry production has returned to pre-COVID-19 levels, partially due to the ~~acquisition~~customers' need to replenish inventory levels, it is likely that, for a period of ~~Xevo Inc. (“Xevo”), a Seattle-based,~~time, the global ~~leader in connected car software, by acquiring all of Xevo's outstanding shares~~automotive industry will experience lower demand for ~~$321.7 million, net of cash acquired. Xevo is a supplier of software solutions for the cloud, cars and mobile devices that are deployed in millions of~~new vehicles ~~worldwide with annual sales of approximately $75 million in 2018.~~

~~The acquisition of Xevo has been accounted for~~ as a ~~business combination,~~result of the global economic slowdown caused by the COVID-19 pandemic, as new vehicle sales are typically correlated with positive consumer confidence and ~~accordingly,~~low unemployment. Further, a resurgence of the ~~assets acquired and liabilities assumed are included~~virus with corresponding shelter-in-place orders impacting industry production later in 2020 or in 2021 could also impact the ~~accompanying condensed consolidated balance sheet as of September 28, 2019.~~ Company's financial results.

The ~~operating results and cash flows of Xevo are included in the~~ accompanying condensed consolidated financial statements reflect estimates and assumptions made by management as of October 3, 2020, and for the nine 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; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; and credit losses related to our financial instruments. Events and circumstances arising after October 3, 2020, including those resulting from the ~~date~~impact of ~~acquisition~~the COVID-19 pandemic, will be reflected in management's estimates and assumptions in future periods.

For more information related to goodwill, see Note 7, "Goodwill," herein and Note 2, "Summary of Significant Accounting Policies — Impairment of Goodwill and Intangible Assets," to the consolidated financial statements included in the Company's ~~E-Systems segment.~~

The Company incurred transaction costs of $1.7 million in the nine months ended September 28, 2019, which have been expensed as incurred and are recorded in selling, general and administrative expenses.

~~The purchase price and preliminary allocation are shown below (in millions):~~

June 29,
2019 Adjustments September 28,
2019
Net purchase price $ 320.9
$ 0.8
$ 321.7

Other assets purchased and liabilities assumed, net $ 1.2
$ 7.7
$ 8.9
Goodwill 197.5
22.1
219.6
Intangible assets 122.2
(29.0 ) 93.2
Preliminary purchase price allocation $ 320.9
$ 0.8
$ 321.7

~~Goodwill recognized in this transaction is primarily attributable to expected synergies related to future growth and commercialization opportunities and is not deductible for tax purposes.~~

~~Intangible assets consist primarily of provisional amounts recognized~~Annual Report on Form 10-K for the fair value of licensing agreements and developed technology and are based on independent appraisals. Licensing agreements represent the fair values of the underlying licensing agreements with Xevo customers with estimated useful lives of approximately five years. Developed technology represents the fair value of Xevo's technology with an estimated useful life of approximately five years. Adjustments to the preliminary purchase price allocation in the third quarter of 2019 reflect changes in certain assumptions related to the valuation of developed technology.

The purchase price and related allocation are preliminary and will be revised as a result of additional information regarding the assets acquired and liabilities assumed, including, but not limited to, certain tax attributes, contingent liabilities and revisions of provisional estimates of fair values resulting from the completion of independent appraisals and valuations of intangible assets.

~~The pro-forma effects of this acquisition do not materially impact the Company's reported results for any period presented.~~

~~Table of Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

year ended December 31, 2019. For ~~further~~more information related to ~~acquired assets measured at fair value,~~income taxes, see Note ~~19, "Financial Instruments.~~13, "Income Taxes,"

herein and Note 2, "Summary of Significant Accounting Policies — Income Taxes," to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

(3) Restructuring

Restructuring costs include employee termination benefits, ~~fixed~~ asset impairment charges and contract termination costs, as well as other incremental costs resulting from the restructuring actions. ~~These~~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 as restructuring actions are approved and/or implemented.

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

In the first nine months of ~~2019,~~2020, the Company recorded charges of ~~$122.9~~$119.3 million in connection with its restructuring actions. These charges consist of ~~$108.8~~$83.0 million recorded as cost of sales, ~~$10.1~~$23.4 million recorded as selling, general and administrative expenses and ~~$4.0~~$12.9 million recorded as other expense, net. The restructuring charges consist of employee termination costs of ~~$105.0~~$84.3 million, ~~fixed~~ asset impairment charges of ~~$4.0~~$14.5 million, ~~and~~ contract termination costs of ~~$2.4~~$0.9 million and a pension benefit plan settlement loss of $10.2 million, as well as other related costs of ~~$11.5~~$9.4 million. Employee termination benefits were recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. ~~Fixed asset~~Asset impairment charges relate to the disposal of buildings, leasehold improvements and/or machinery and equipment with carrying values of ~~$4.0~~$12.5 million in excess of related estimated fair ~~values.~~

values and the impairment of right-of-use assets of $2.0 million.

The Company expects to incur approximately $6730 million of additional restructuring costs related to activities initiated as of ~~September 28, 2019,~~October 3, 2020, and expects that the components of such costs will be consistent with its historical experience. Any future restructuring actions will depend upon market conditions, customer actions and other factors.

A summary of ~~2019~~2020 activity, excluding the pension benefit plan settlement loss of $10.2 million, is shown below (in millions):


	Accrual as of		2019		Utilization						Accrual as of		Accrual as of		2020		Utilization						Accrual as of
	January 1, 2019		Charges		Cash			Non-cash			September 28, 2019		January 1, 2020		Charges		Cash			Non-cash			October 3, 2020
Employee termination benefits	$	103.3	$	105.0	$	(91.3	)	$	—		$	117.0	$	152.8	$	84.3	$	(104.9	)	$	0		$	132.2
Asset impairment charges	—		4.0		—			(4.0		)	—			0		14.5		0			(14.5	)		0
Contract termination costs	5.4		2.4		(3.2		)	—			4.6			4.9		0.9		(1.0	)		0			4.8
Other related costs	—		11.5		(11.5		)	—			—			0		9.4		(9.4	)		0			0
Total	$	108.7	$	122.9	$	(106.0	)	$	(4.0	)	$	121.6	$	157.7	$	109.1	$	(115.3	)	$	(14.5	)	$	137.0

(4) 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 28, 2019			December 31, 2018			October 3, 2020			December 31, 2019
Raw materials	$	946.9		$	859.4		$	954.7		$	906.3
Work-in-process	110.5			104.6				110.4			107.0
Finished goods	363.3			346.0				364.9			380.4
Reserves	(126.6		)	(113.2		)		(164.4	)		(135.5	)
Inventories	$	1,294.1		$	1,196.8		$	1,265.6		$	1,258.2

(5) 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 ~~2019~~2020 and ~~2018,~~2019, the Company capitalized ~~$174.8~~$111.1 millionand ~~$167.6~~$174.8 million, respectively, of pre-production E&D costs for which reimbursement is contractually guaranteed by the customer. During the first nine months

~~Table~~ of ~~Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

of2020 and 2019, ~~and 2018,~~ the Company also capitalized $~~126.7~~130.2 million and ~~$121.1~~$126.7 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 ~~2019~~2020 and ~~2018,~~2019, the Company collected ~~$243.5~~$184.5 million and ~~$277.4~~$243.5 million, respectively, of cash related to E&D and tooling costs.

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The classification of recoverable customer E&D and tooling costs related to long-term supply agreements is shown below (in millions):


	September 28, 2019		December 31, 2018		October 3, 2020		December 31, 2019
Current	$	207.4	$	160.9	$	203.2	$	157.2
Long-term	98.5		80.4			135.6		113.8
Recoverable customer E&D and tooling	$	305.9	$	241.3	$	338.8	$	271.0

(6) Long-Term 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):


	September 28, 2019			December 31, 2018			October 3, 2020			December 31, 2019
Land	$	113.3		$	116.8		$	111.9		$	113.1
Buildings and improvements	811.8			809.3				838.1			831.3
Machinery and equipment	3,698.0			3,463.3				4,124.7			3,844.1
Construction in progress	367.8			389.3				271.5			382.4
Total property, plant and equipment	4,990.9			4,778.7				5,346.2			5,170.9
Less – accumulated depreciation	(2,391.2		)	(2,180.6		)		(2,718.9	)		(2,466.7	)
Property, plant and equipment, net	$	2,599.7		$	2,598.1		$	2,627.3		$	2,704.2

Depreciation expense was ~~$111.8~~$120.0 million and ~~$107.1~~$111.8 million in the three months ended October 3, 2020 and September 28, 2019, ~~and September 29, 2018,~~ respectively, and ~~$335.1~~$347.7 million and ~~$322.9~~$335.1 million in the nine months ended October 3, 2020 and September 28, 2019, ~~and September 29, 2018,~~ 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. ~~Except as discussed below, the Company does not believe that there were any indicators that would have resulted in long-lived asset impairment charges as~~

Table of ~~September 28, 2019. The Company will, however, continue to assess the impact of any significant industry events on the realization of its long-lived assets.~~

Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

In the first nine months of ~~2019~~2020 and ~~2018,~~2019, the Company recognized ~~fixed~~ asset impairment charges of ~~$4.0~~$12.5 million and ~~$2.8~~$4.0 million, respectively, in conjunction with its restructuring actions (Note 3, "Restructuring")~~, as well as~~. In the nine months ended October 3, 2020, the Company recognized additional ~~fixed~~ asset impairment charges of ~~$1.0 million in~~$3.4 million. The Company will continue to assess the ~~first nine months~~impact of ~~2018.~~

~~Table~~significant industry and other events on the realization of ~~Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

(7) its long-lived assets.

Investment in Affiliates

In July 2019, the Company deconsolidated Guangzhou Automobile Group Component Co., Ltd ("GACC") as it no longer controls this entity. As a result, the carrying values of the assets and liabilities of GACC are not reflected in the condensed consolidated balance ~~sheet~~sheets as of ~~September 28,~~October 3, 2020 and December 31, 2019. In addition, the Company recorded a gain of $4.0 million related to the excess of the estimated fair value over the carrying value of its interest in GACC immediately prior to deconsolidation. The gain is included in other expense, net in the accompanying condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 28, 2019.

~~(8)~~

(7) Goodwill

A summary of the changes in the carrying amount of goodwill, by operating segment, in the nine months ended ~~September 28, 2019,~~October 3, 2020, is shown below (in millions):

Seating E-Systems Total
Balance at January 1, 2019 $ 1,244.3
$ 161.0
$ 1,405.3
Acquisition —
219.6
219.6
Foreign currency translation and other (20.9 ) (3.6 ) (24.5 )
Balance at September 28, 2019 $ 1,223.4
$ 377.0
$ 1,600.4

	Seating		E-Systems		Total
Balance at January 1, 2020	$	1,235.4	$	378.9	$	1,614.3
Foreign currency translation and other		11.2		3.5		14.7
Balance at October 3, 2020	$	1,246.6	$	382.4	$	1,629.0

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 value. If the net book value of a reporting unit exceeds its fair value, an impairment loss is ~~measured and recognized.~~recognized in an amount equal to that excess, limited to the total amount of goodwill recorded. The Company conducts its annual impairment testing as of the first day of its fourth quarter.

During the first quarter of 2020,an interim goodwill impairment analysis related to one of the Company’s reporting units within its E-Systems operating segment was performed, largely due to industry disruptions resulting from the COVID-19 pandemic. The goodwill impairment analysis reflected the Company’s best estimates of the COVID-19 pandemic’s ultimate impact on industry conditions, including consumer demand, as well as economic recovery. The results of the quantitative analysis indicated that the fair value of the reporting unit exceeded the related carrying value. During the third quarter of 2020, the Company determined that it was not more likely than not that this reporting unit was impaired.

There was 0 impairment of goodwill in the first nine months of ~~2019~~2020 and ~~2018.~~2019. The Company will, however, continue to assess the impact of significant industry and other events ~~or circumstances~~ on its recorded goodwill.

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(~~(9)~~8) 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):

	October 3, 2020
			Unamortized			Unamortized						Weighted
	Long-Term		Debt			Original Issue			Long-Term			Average
Debt Instrument	Debt		Issuance Costs			Premium (Discount)			Debt, Net			Interest Rate
Credit Agreement — Term Loan Facility	$	225.0	$	(0.7	)	$	0		$	224.3		1.360%
3.8% Senior Notes due 2027 (the "2027 Notes")		750.0		(4.2	)		(3.7	)		742.1		3.885%
4.25% Senior Notes due 2029 (the "2029 Notes")		375.0		(2.7	)		(1.0	)		371.3		4.288%
3.5% Senior Notes due 2030 (the "2030 Notes")		350.0		(2.7	)		(0.7	)		346.6		3.525%
5.25% Senior Notes due 2049 (the "2049 Notes")		625.0		(6.3	)		14.3			633.0		5.103%
Other		1.4		-			-			1.4		N/A
	$	2,326.4	$	(16.6	)	$	8.9			2,318.7
Less — Current portion										(18.9	)
Long-term debt									$	2,299.8

	December 31, 2019
			Unamortized			Unamortized						Weighted
	Long-Term		Debt			Original Issue			Long-Term			Average
Debt Instrument	Debt		Issuance Costs			Discount			Debt, Net			Interest Rate
Credit Agreement — Term Loan Facility	$	234.4	$	(1.0	)	$	0		$	233.4		2.880%
5.25% Senior Notes due 2025 (the "2025 Notes")		650.0		(4.2	)		0			645.8		5.250%
2027 Notes		750.0		(4.7	)		(4.1	)		741.2		3.885%
2029 Notes		375.0		(2.9	)		(1.1	)		371.0		4.288%
2049 Notes issued 2019		325.0		(3.3	)		(5.3	)		316.4		5.363%
	$	2,334.4	$	(16.1	)	$	(10.5	)		2,307.8
Less — Current portion										(14.1	)
Long-term debt									$	2,293.7

September 28, 2019
Debt Instrument Long-Term Debt Unamortized Debt Issuance Costs Unamortized Original Issue Discount
Long-Term
Debt, Net
Weighted
Average
Interest
Rate
Credit Agreement — Term Loan Facility $ 239.0
$ (1.1 ) $ —
$ 237.9
3.20%
5.25% Senior Notes due 2025 (the "2025 Notes") 650.0
(4.4 ) —
645.6
5.25%
3.8% Senior Notes due 2027 (the "2027 Notes") 750.0
(4.8 ) (4.2 ) 741.0
3.885%
4.25% Senior Notes due 2029 (the "2029 Notes") 375.0
(3.0 ) (1.1 ) 370.9
4.288%
5.25% Senior Notes due 2049 (the "2049 Notes") 325.0
(3.4 ) (5.4 ) 316.2
5.363%
Other 3.1
—
—
3.1
N/A
$ 2,342.1
$ (16.7 ) $ (10.7 ) 2,314.7

Less — Current portion (17.1 )
Long-term debt $ 2,297.6

~~Table of Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

December 31, 2018
Debt Instrument Long-Term Debt Unamortized Debt Issuance Costs Unamortized Original Issue Discount
Long-Term
Debt, Net

Weighted
Average
Interest
Rate
Credit Agreement — Term Loan Facility $ 242.2
$ (1.5 ) $ —
$ 240.7
3.92%
5.375% Senior Notes due 2024 (the "2024 Notes") 325.0
(2.0 ) —
323.0
5.375%
2025 Notes 650.0
(5.0 ) —
645.0
5.25%
2027 Notes 750.0
(5.3 ) (4.6 ) 740.1
3.885%
Other 5.1
—
—
5.1
N/A
$ 1,972.3
$ (13.8 ) $ (4.6 ) 1,953.9

Less — Current portion (12.9 )
Long-term debt $ 1,941.0

Senior Notes

The issuance, ~~date,~~ maturity ~~date~~ and interest payment dates of the Company's senior unsecured ~~2025 Notes,~~ 2027 Notes, 2029 Notes, 2030 Notes and 2049 Notes (together, the "Notes") are as shown below:


Note		Issuance Date(s)
~~Note~~	~~Issuance Date~~		Maturity Date		Interest Payment Dates
~~2025 Notes~~	~~November 2014~~		~~January 15, 2025~~		~~January 15 and July 15~~
2027 Notes		August 2017		September 15, 2027		March 15 and September 15
2029 Notes		May 2019		May 15, 2029		May 15 and November 15
2030 Notes		February 2020		May 30, 2030		May 30 and November 30
2049 Notes		May 2019 and February 2020		May 15, 2049		May 15 and November 15

In ~~May 2019,~~February 2020, the Company issued ~~$375.0~~$350.0 million in aggregate principal amount at maturity of ~~2029~~2030 Notes and ~~$325.0~~an additional $300.0 million in aggregate principal amount at maturity of 2049 Notes. The ~~2029~~2030 Notes have a stated coupon rate of ~~4.25%~~3.5% and were ~~priced~~issued at ~~99.691%~~99.774% of par, resulting in a yield to maturity of ~~4.288%~~3.525%. The 2049 Notes have a stated coupon rate of 5.25% and were ~~priced~~issued at ~~98.32%~~106.626% of par, resulting in a yield to maturity of ~~5.363%~~4.821%.

The net proceeds from the offering were ~~$693.3~~$669.1 million after original issue discount. The proceeds were used to redeem the ~~$325.0~~$650.0 million in aggregate principal amount of ~~the 2024~~2025 Notes at a redemption price equal to ~~102.688%~~102.625% of the principal amount of such ~~2024~~2025 Notes, plus accrued ~~interest, as well as to finance the acquisition of Xevo (Note 2, “Acquisition”) and for general corporate purposes.~~

interest.

In connection with these transactions, the Company recognized a loss of ~~$10.6~~$21.1 million on the extinguishment of debt ~~in the nine months ended September 28, 2019,~~ and paid related issuance costs of ~~$6.5 million.~~

$5.9 million in the nine months ended October 3, 2020.

Covenants

Subject to certain exceptions, the indentures governing the Notes contain certain investment-grade style 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.

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

As of ~~September 28, 2019,~~October 3, 2020, the Company was in compliance with all covenants under the indentures governing the Notes.

Credit Agreement

The Company's unsecured credit agreement (the "Credit Agreement"), dated August 8, 2017, consists of a $1.75 billion revolving credit facility (the "Revolving Credit Facility") and a $250.0 million term loan facility (the "Term Loan Facility"). ~~The~~In February 2020, the Company entered into an agreement to extend the maturity date of the Revolving Credit Facility isby one year to August 8, ~~2023, and the~~2024. The maturity date of the Term Loan Facility isremains August 8, 2022.

In connection with the extension agreement, the Company paid related issuance costs of $1.0 million.

As of ~~September 28, 2019~~October 3, 2020 and December 31, ~~2018,~~2019, there were 0 borrowings outstanding under the Revolving Credit ~~Facility~~Facility. As of October 3, 2020 and ~~$239.0~~December 31, 2019, there were $225.0 million and ~~$242.2~~$234.4 million, respectively, of borrowings outstanding under the Term Loan Facility.

In March 2020, as a proactive measure in response to the COVID-19 pandemic, the Company borrowed $1.0 billion under the Revolving Credit Facility, which was repaid in full in September 2020.

In the first nine months of ~~2019,~~2020, the Company made required principal payments of ~~$3.1~~$9.4 million under the Term Loan Facility.

~~Table of Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

Advances under the Revolving Credit Facility and the Term Loan Facility generally bear interest based on (i) the Eurocurrency Rate (as defined in the Credit Agreement) or (ii) the Base Rate (as defined in the Credit Agreement) plus a margin, determined in accordance with a pricing grid. The range and the rate as of ~~September 28, 2019,~~October 3, 2020, are shown below (in percentages):

	Eurocurrency Rate									Base Rate
							Rate as of									Rate as of
	Minimum			Maximum			October 3, 2020			Minimum			Maximum			October 3, 2020
Revolving Credit Facility		1.00	%		1.60	%		1.10	%		0.00	%		0.60	%		0.10	%
Term Loan Facility		1.125	%		1.90	%		1.25	%		0.125	%		0.90	%		0.25	%

Eurocurrency Rate Base Rate
Rate as of Rate as of
Minimum Maximum September 28, 2019 Minimum Maximum September 28, 2019
Revolving Credit Facility 1.00 % 1.60 % 1.10 % 0.00 % 0.60 % 0.10 %
Term Loan Facility 1.125 % 1.90 % 1.25 % 0.125 % 0.90 % 0.25 %

A facility fee, which ranges from 0.125% to 0.30% of the total amount committed under the Revolving Credit Facility, is payable quarterly.

Covenants

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 28, 2019,~~October 3, 2020, the Company was in compliance with all covenants under the Credit Agreement.

Other

As of ~~September 28, 2019,~~October 3, 2020, other long-term debt consists of amounts outstanding undera finance ~~leases.~~

lease.

For further information related to the Company's debt, see Note 6, "Debt," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

~~(10) Leases~~

On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2016-02, "Leases," which requires lessees to record right-of-use assets and related lease obligations on the balance sheet, as well as disclose key information regarding leasing arrangements. Adoption of the standard resulted in the recognition of right-of-use assets of $438.1 million and related lease obligations of $445.8 million as of January 1, 2019. ~~The standard did not have a significant impact on the Company's operating results or cash flows.~~

~~Transition~~

As permitted by the transition guidance, the Company adopted the standard by applying the modified retrospective method without the restatement of comparative periods. Accordingly, the Company has provided disclosures required by prior lease guidance for comparative periods.

The Company elected the package of practical expedients, which permits a lessee to not reassess under the new standard its prior conclusions regarding lease identification, lease classification and initial direct costs. The Company did not elect the practical expedient which permits the use of hindsight when determining the lease term and assessing right-of-use assets for impairment.

As permitted by the transition guidance, the Company used the remaining lease term as of the date of adoption of the standard to estimate discount rates. As permitted by the standard, the Company elected, for all asset classes, the short-term lease exemption. A short-term lease is a lease that, at the commencement date, has a term of twelve months or less and does not include an option to purchase the underlying asset.

~~Accounting Policy~~

The Company determines if an arrangement contains a lease at inception. The Company elected the practical expedient, for all asset classes, to account for each lease component of a contract and its associated non-lease components as a single lease component, rather than allocating a standalone value to each component of a lease.

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LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

For purposes of calculating operating lease obligations under the standard, the Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual value guarantees or material restrictive covenants.

~~Operating lease expense is recognized on a straight-line basis over the lease terms.~~

~~Discount Rate~~

The discount rate used to measure a lease obligation should be the rate implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar term with similar payments.

(9) Leases

Right-of-Use Assets and Lease Obligations

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 sheet are shown below (in millions):


	September 28, 2019		October 3, 2020		December 31, 2019
Right-of-use assets under operating leases:
Other long-term assets	$	514.0	$	539.4	$	527.0
Lease obligations under operating leases:
Accrued liabilities	$	112.0	$	113.2	$	113.9
Other long-term liabilities	409.6			439.0		422.4
	$	521.6	$	552.2	$	536.3

Maturities of lease obligations as of ~~September 28, 2019,~~October 3, 2020, are shown below (in millions):

	October 3, 2020
2020⁽¹⁾	$	35.9
2021		129.6
2022		103.7
2023		81.6
2024		67.3
Thereafter		220.8
Total undiscounted cash flows		638.9
Less: Imputed interest		(86.7	)
Lease obligations under operating leases	$	552.2

September 28, 2019
2019⁽¹⁾
$ 35.3
2020 123.2
2021 101.1
2022 77.9
2023 60.1
Thereafter 207.9
Total undiscounted cash flows 605.5
Less: Imputed interest (83.9 )
Lease obligations under operating leases $ 521.6

⁽¹⁾	For the remaining three months

⁽¹⁾~~For the remaining three months~~

The Company ~~has~~ entered into 21 lease ~~contracts, of~~agreement which ~~one is expected to commence in the fourth quarter of 2019 with a lease term of approximately nine years, and the other~~ is expected to commence in the third quarter of 2021 with a lease term of approximately ten years. The aggregate right-of-use ~~assets~~asset and related lease ~~obligations~~obligation are expected to be approximately ~~$55~~$50 million.

~~Table of Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

Cash flow information related to operating leases is shown below (in millions):


	Nine Months Ended		Nine Months Ended
	September 28, 2019		October 3, 2020		September 28, 2019
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations	$	177.1
Right of use assets obtained in exchange for operating lease obligations			$	116.2	$	177.1
Operating cash flows:
Cash paid related to operating lease obligations	$	104.0	$	106.3	$	104.0

Lease expense included in the accompanying condensed consolidated statements of comprehensive income (loss) is shown below (in millions):


	Three Months Ended		Nine Months Ended		Three Months Ended				Nine Months Ended
	September 28, 2019		September 28, 2019		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019
Operating lease expense	$	36.9	$	104.4	$	38.6	$	36.9	$	110.2	$	104.4
Short-term lease expense	3.1		12.1			3.3		3.1		11.3		12.1
Variable lease expense	1.4		3.2			2.2		1.4		5.9		3.2
Total lease expense	$	41.4	$	119.7	$	44.1	$	41.4	$	127.4	$	119.7

~~The Company's short-term lease expense excludes leases with a duration of one month or less, as permitted by the standard.~~

Variable lease expense includes payments based on performance or usage, as well as changes to index and rate-based lease payments. Additionally, the Company evaluated its supply contracts with its customers and concluded that variable lease (income) expense in these arrangements is not material.

In the ~~three and~~ nine months ended ~~September 29, 2018,~~October 3, 2020, the Company ~~recorded rent expense~~recognized an impairment charge of ~~$41.3~~$2.0 million ~~and $122.6 million, respectively.~~

related to its right-of-use assets in conjunction with its restructuring actions (Note 3, "Restructuring").

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The weighted average lease term and discount rate for operating leases are shown below:

		October 3, 2020

	~~September 28, 2019~~
Weighted average remaining lease term (in years)	~~7.0~~	6.9
Weighted average discount rate	~~4.0~~	% 3.4%

The Company ~~has~~ entered into ~~certain~~a finance lease ~~agreements~~agreement which ~~are~~is not material to the ~~condensed~~ consolidated financial statements (Note 9,8 "Debt").

~~Table of Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

~~(11)~~

For further information related to the Company's leases, see Note 7, "Leases," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(10) Pension and Other Postretirement Benefit Plans

The Company sponsors defined benefit pension plans and other postretirement benefit plans (primarily for the continuation of medical benefits) for eligible employees in the United States and certain other countries.

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 Ended												Nine Months Ended												Three Months Ended												Nine Months Ended
	September 28, 2019						September 29, 2018						September 28, 2019						September 29, 2018						October 3, 2020						September 28, 2019						October 3, 2020						September 28, 2019
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Service cost	$	—		$	1.5		$	0.1		$	1.7		$	—		$	4.7		$	0.1		$	5.2		$	0.1		$	1.2		$	0		$	1.5		$	0.1		$	3.6		$	0		$	4.7
Interest cost	4.6			3.7			5.0			3.6			13.9			11.0			14.9			11.1				4.1			3.1			4.6			3.7			12.3			9.2			13.9			11.0
Expected return on plan assets	(5.0		)	(5.2		)	(7.0		)	(5.7		)	(15.1		)	(15.6		)	(20.8		)	(17.4		)		(5.4	)		(4.9	)		(5.0	)		(5.2	)		(16.0	)		(14.8	)		(15.1	)		(15.6	)
Amortization of actuarial loss	0.5			1.9			0.6			1.6			1.4			5.8			1.6			4.7				0.6			1.2			0.5			1.9			1.7			3.5			1.4			5.8
Curtailment loss	—			—			—			0.5			—			—			—			0.5
Settlement loss	—			—			—			—			0.1			—			0.2			—				0			10.2			0			0			0.3			10.2			0.1			0
Net periodic benefit (credit) cost	$	0.1		$	1.9		$	(1.3	)	$	1.7		$	0.3		$	5.9		$	(4.0	)	$	4.1		$	(0.6	)	$	10.8		$	0.1		$	1.9		$	(1.6	)	$	11.7		$	0.3		$	5.9

In March 2020, as a proactive measure in response to the ~~first nine months of 2019 and 2018,~~COVID-19 pandemic, the Company suspended its quarterly cash dividend. Prior to the suspension, the Company’s Board of Directors declared a cash dividend of $0.77 per share of common stock in the first quarter of 2020 and quarterly cash dividends of $0.75 ~~and $0.70~~ per share of common stock ~~respectively.~~in the first nine months of 2019. Dividends declared and paid are shown below (in millions):

	Nine Months Ended
	October 3, 2020		September 28, 2019
Dividends declared	$	46.8	$	140.3
Dividends paid		52.0		141.1

Nine Months Ended
September 28, 2019 September 29, 2018
Dividends declared $ 140.3
$ 141.1
Dividends paid 141.1
142.1

Dividends payable on common shares to be distributed under the Company’s stock-based compensation program ~~and common shares contemplated as part of the Company’s emergence from Chapter 11 bankruptcy proceedings~~ will be paid when such common shares are distributed.

Redeemable Noncontrolling Interest

In accordance with GAAP, the Company records redeemable noncontrolling interests at the greater of (1) the initial carrying amount adjusted for the noncontrolling interest holder’s share of total comprehensive income or loss and dividends ("noncontrolling interest carrying value") or (2) the redemption value as of and based on conditions existing as of the reporting date. Required redeemable noncontrolling interest adjustments are recorded as an increase to redeemable noncontrolling interests, with an offsetting adjustment to retained earnings. The redeemable noncontrolling interest is classified in mezzanine equity in the accompanying condensed consolidated balance sheets as of ~~September 28, 2019~~October 3, 2020 and December 31, ~~2018.~~

2019.

In the second quarter of 2020, the noncontrolling interest holder in Shanghai Lear STEC Automotive Parts Co., Ltd. exercised its option requiring the Company to purchase its 45% redeemable noncontrolling interest for RMB 626.0 million ($92.2 million at October 3, 2020) plus undistributed retained earnings of RMB 175.5 million ($25.8 million at October 3, 2020). The transaction is subject to regulatory approval and is expected to close in the fourth quarter of 2020. Approximately 50% of the purchase price and undistributed retained earnings is expected to be paid at closing, with remaining amounts paid in 2021.

For further information related to the redeemable noncontrolling interest adjustment, see Note ~~15,~~14, "Net Income (Loss) Per Share Attributable to Lear," herein, as well as Note 5, "Investments in Affiliates and Other Related Party Transactions," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

~~Noncontrolling Interests~~

~~In July 2019, the Company deconsolidated GACC as it no longer controls this entity (Note 7, "Investment in Affiliates").~~

In the first nine months of 2018, the Company gained control of an affiliate and acquired the outstanding non-controlling interest of another affiliate. For further information related to these affiliate transactions, see Note 5, "Investments in Affiliates and Other Related Party Transactions," to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

~~(17)~~2019.

(16) Legal and Other Contingencies

As of ~~September 28, 2019~~October 3, 2020 and December 31, ~~2018,~~2019, the Company had recorded reserves for pending legal disputes, including commercial disputes and other matters, of ~~$13.9~~$16.3 million and ~~$11.0~~$14.0 million, respectively. Such reserves reflect amounts recognized in accordance with GAAP and typically exclude the cost of legal representation. Product liability and warranty reserves are recorded separately from legal reserves, as described below.

~~Table of Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

Commercial Disputes

The Company is involved from time to time in legal proceedings and claims, including, without limitation, commercial or contractual disputes with its customers, suppliers and competitors. These disputes vary in nature and are usually resolved by negotiations between the parties.

Product Liability and Warranty Matters

In the event that use of the Company’s products results in, or is alleged to result in, bodily injury and/or property damage or other losses, the Company may be subject to product liability lawsuits and other claims. Such lawsuits generally seek compensatory damages, punitive damages and attorneys’ fees and costs. In addition, if any of the Company’s products are, or are alleged to be, defective, the Company may be required or requested by its customers to participate in a recall or other corrective action involving such products. Certain of the Company’s customers have asserted claims against the Company for costs related to recalls or other corrective actions involving its products. The Company can provide no assurances that it will not experience material claims in the future or that it will not incur significant costs to defend such claims.

Table of Contents

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

To a lesser extent, the Company is a party to agreements with certain of its customers, whereby these customers may pursue claims against the Company for contribution of all or a portion of the amounts sought in connection with product liability and warranty claims.

In certain instances, allegedly defective products may be supplied by Tier 2 suppliers. The Company may seek recovery from its suppliers of materials or services included within the Company’s products that are associated with product liability and warranty claims. The Company carries insurance for certain legal matters, including product liability claims, but such coverage may be limited. The Company does not maintain insurance for product warranty or recall matters. Future dispositions with respect to the Company’s product liability claims that were subject to compromise under the Chapter 11 bankruptcy proceedings will be satisfied out of a common stock and warrant reserve established for that purpose.

The Company records product warranty reserves when liability is probable and related amounts are reasonably estimable.

A summary of the changes in reserves for product liability and warranty claims for the nine months ended ~~September 28, 2019,~~October 3, 2020, is shown below (in millions):

Balance at January 1, 2020	$	32.0
Expense, net (including changes in estimates)		20.1
Settlements		(7.0	)
Foreign currency translation and other		(0.4	)
Balance at October 3, 2020	$	44.7

Balance at January 1, 2019 $ 28.5
Expense, net (including changes in estimates) 12.4
Settlements (11.2 )
Foreign currency translation and other 0.2
Balance at September 28, 2019 $ 29.9

Environmental Matters

The Company is subject to local, state, federal and foreign laws, regulations and ordinances which govern activities or operations that may have adverse environmental effects and which impose liability for clean-up costs resulting from past spills, disposals or other releases of hazardous wastes and environmental compliance. The Company’s policy is to comply with all applicable environmental laws and to maintain an environmental management program based on ISO 14001 to ensure compliance with this standard. However, the Company currently is, has been and in the future may become the subject of formal or informal enforcement actions or procedures.

As of ~~September 28, 2019~~October 3, 2020 and December 31, ~~2018,~~2019, the Company had recorded environmental reserves of ~~$9.3~~$8.8 million and ~~$9.0~~$9.3 million, respectively. The Company does not believe that the environmental liabilities associated with its current and former properties will have a material adverse impact on its business, financial condition, results of operations or cash flows; however, no assurances can be given in this regard.

Other Matters

The Company is involved from time to time in various other legal proceedings and claims, including, without limitation, intellectual property matters, tax claims and employment matters. Although the outcome of any legal matter cannot be predicted with certainty, the Company does not believe that any of the other legal proceedings or claims in which the Company is currently involved, either individually or in the aggregate, will have a material adverse impact on its business, financial condition, results of operations or cash flows. However, no assurances can be given in this regard.

~~Table of Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

Although the Company records reserves for legal disputes, product liability and warranty claims and environmental and other matters in accordance with GAAP, the ultimate outcomes of these matters are inherently uncertain. Actual results may differ significantly from current estimates.

~~(18)~~

(17) Segment Reporting

The Company has 2 reportable operating segments: Seating, which includes complete seat systems and all major seat components, including seat covers and surface materials such as leather and fabric, seat structures and mechanisms, seat foam and headrests, and E-Systems, which includes complete electrical distribution systems, as well as sophisticated electronic control modules, electrification products and connectivity products. Key components in the Company's electrical distribution portfolio include wire harnesses, terminals and connectors and junction boxes for both internal combustion engine and electrification architectures that require management of higher voltage and power. Key components in the Company's electronic control module portfolio include body control modules, wireless receiver and transmitter technology and lighting and audio control modules, as well as products specific to electrification and ~~software solutions for the cloud, cars~~connectivity trends. Electrification products include charging systems (onboard charging modules and ~~mobile devices.~~

cord set charging equipment), battery electronics (battery disconnect units, cell monitoring supervisory systems and integrated total battery control modules) and other power management modules, including converter and inverter systems. Connectivity products include gateway modules and communication modules to manage both wired and wireless networks and data in vehicles. The other category includes unallocated costs related to corporate headquarters, regional headquarters and the elimination of intercompany activities, none of which meets the requirements for being classified as an operating segment. Corporate and regional headquarters costs include

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LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

various support functions, such as information technology, advanced research and development, corporate finance, legal, executive administration and human resources, as well as advanced engineering expenses.

Each of the Company’s operating segments reports its results from operations and makes its requests for capital expenditures directly to the chief operating decision maker. The economic performance of each operating segment is driven primarily by automotive production volumes in the geographic regions in which it operates, as well as by the success of the vehicle platforms for which it supplies products. Also, each operating segment operates in the competitive Tier 1 automotive supplier environment and is continually working with its customers to manage costs and improve quality. The Company’s production processes generally make use of hourly labor, dedicated facilities, sequential manufacturing and assembly processes and commodity raw materials.

The Company evaluates the performance of its operating segments based primarily on (i) revenues from external customers, (ii) pretax income (loss) before equity in net income of affiliates, interest expense and other (income) expense ~~net,~~ ("segment earnings") and (iii) cash flows, being defined as segment earnings less capital expenditures plus depreciation and amortization.

A summary of revenues from external customers and other financial information by reportable operating segment is shown below (in millions):

	Three Months Ended October 3, 2020
	Seating		E-Systems		Other			Consolidated
Revenues from external customers	$	3,691.6	$	1,208.5	$	-		$	4,900.1
Segment earnings⁽¹⁾		250.7		86.0		(57.9	)		278.8
Depreciation and amortization		87.8		44.8		3.7			136.3
Capital expenditures		48.8		40.2		1.1			90.1
Total assets		7,574.2		3,232.4		2,088.1			12,894.7

	Three Months Ended September 28, 2019
	Seating		E-Systems		Other			Consolidated
Revenues from external customers	$	3,715.0	$	1,110.0	$	-		$	4,825.0
Segment earnings⁽¹⁾		281.5		74.3		(55.1	)		300.7
Depreciation and amortization		82.1		42.5		3.9			128.5
Capital expenditures		86.0		59.8		5.0			150.8
Total assets		7,575.3		3,078.8		2,099.2			12,753.3

	Nine Months Ended October 3, 2020
	Seating		E-Systems		Other			Consolidated
Revenues from external customers	$	8,813.1	$	2,989.2	$	-		$	11,802.3
Segment earnings⁽¹⁾		320.4		5.0		(167.5	)		157.9
Depreciation and amortization		255.1		130.5		11.5			397.1
Capital expenditures		162.0		119.0		4.3			285.3

	Nine Months Ended September 28, 2019
	Seating		E-Systems		Other			Consolidated
Revenues from external customers	$	11,468.1	$	3,524.6	$	-		$	14,992.7
Segment earnings⁽¹⁾		817.0		287.3		(186.2	)		918.1
Depreciation and amortization		248.4		120.2		11.8			380.4
Capital expenditures		246.2		151.4		12.5			410.1

Three Months Ended September 28, 2019
Seating E-Systems Other Consolidated
Revenues from external customers $ 3,715.0
$ 1,110.0
$ —
$ 4,825.0
Segment earnings ⁽¹⁾
281.5
74.3
(55.1 ) 300.7
Depreciation and amortization 82.1
42.5
3.9
128.5
Capital expenditures 86.0
59.8
5.0
150.8
Total assets 7,575.3
3,078.8
2,099.2
12,753.3

⁽¹⁾	See definition above

Three Months Ended September 29, 2018
Seating E-Systems Other Consolidated
Revenues from external customers $ 3,683.0
$ 1,208.6
$ —
$ 4,891.6
Segment earnings ⁽¹⁾
294.0
138.4
(69.1 ) 363.3
Depreciation and amortization 80.1
36.1
3.6
119.8
Capital expenditures 109.2
49.8
1.5
160.5
Total assets 7,311.2
2,578.8
2,119.4
12,009.4

For the three months ended October 3, 2020, segment earnings include restructuring charges of

Nine Months Ended September 28, 2019
Seating E-Systems Other Consolidated
Revenues from external customers $ 11,468.1
$ 3,524.6
$ —
$ 14,992.7
Segment earnings ⁽¹⁾
817.0
287.3
(186.2 ) 918.1
Depreciation and amortization 248.4
120.2
11.8
380.4
Capital expenditures 246.2
151.4
12.5
410.1

$33.6 million, $5.0 million and $0.3 million in the Seating and E-Systems segments and in the other category, respectively. For the nine months ended October 3, 2020, segment earnings include restructuring charges of

Nine Months Ended September 29, 2018
Seating E-Systems Other Consolidated
Revenues from external customers $ 12,287.6
$ 3,918.5
$ —
$ 16,206.1
Segment earnings ⁽¹⁾
981.8
504.3
(191.7 ) 1,294.4
Depreciation and amortization 241.5
109.6
10.7
361.8
Capital expenditures 335.2
150.4
7.1
492.7

⁽¹⁾~~See definition above~~

~~Table~~$59.3 million, $46.2 million and $0.9 million in the Seating and E-Systems segments and in the other category, respectively. The Company expects to incur approximately $23 million and $7 million of ~~Contents~~

~~LEAR CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

additional restructuring costs in the Seating and E-Systems segments, respectively, related to activities initiated as of October 3, 2020, and expects that the components of such costs will be consistent with its historical experience.

For the three months ended September 28, 2019, segment earnings include restructuring charges of~~$18.2~~ $18.2 million, $9.0 million and $0.7 million in the Seating and E-Systems segments and in the other category, respectively. For the nine months ended September 28, 2019, segment earnings include restructuring charges of $91.7 million, $26.2 million and $1.0 million in the Seating and E-Systems segments and in the other category, respectively. ~~The Company expects to incur approximately $44 million and approximately $23 million~~

Table of additional restructuring costs in the Seating and E-Systems segments, respectively, related to activities initiated as of September 28, 2019, and expects that the components of such costs will be consistent with its historical experience.Contents

For the three months ended September 29, 2018, segment earnings include restructuring charges of $17.3 million, $2.4 million and $0.1 million in the Seating and E-Systems segments and in the other category, respectively. For the nine months ended September 29, 2018, segment earnings include restructuring charges of $37.6 million, $7.9 million and $2.7 million in the Seating and E-Systems segments and in the other category, respectively.

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

For further information, see Note 3, "Restructuring."

A reconciliation of segment earnings to consolidated income before provision for income taxes and equity in net income of affiliates is shown below (in millions):


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019
Segment earnings	$	300.7	$	363.3	$	918.1	$	1,294.4	$	278.8	$	300.7	$	157.9	$	918.1
Interest expense	24.0		21.2		69.4		62.8			26.5		24.0		78.1		69.4
Other expense, net	9.7		13.2		27.9		11.3			17.1		9.7		54.4		27.9
Consolidated income before provision for income taxes and equity in net income of affiliates	$	267.0	$	328.9	$	820.8	$	1,220.3	$	235.2	$	267.0	$	25.4	$	820.8

~~(19)~~

(18) Financial Instruments

Debt Instruments

The carrying values of the Notes vary from their fair values. The fair values of the Notes were determined by reference to the quoted market prices of these securities (Level 2 input based on the GAAP fair value hierarchy). The carrying value of the Company’s Term Loan Facility approximates its fair value (Level 3 input based on the GAAP fair value hierarchy).

The estimated fair value, as well as the carrying value, of the Company's debt instruments are shown below (in millions):

September 28,
2019 December 31,
2018
Estimated aggregate fair value⁽¹⁾
$ 2,379.9
$ 1,921.6
Aggregate carrying value ^{(1) (2)}
2,339.0
1,967.2

October 3,

2020

December 31,

2019

Estimated aggregate fair value⁽¹⁾

2,454.4

2,384.6

Aggregate carrying value ^{(1) (2)}

2,325.0

2,334.4

⁽¹⁾ ~~Term Loan Facility and Notes (excludes "other" debt)~~

Includes Term Loan Facility and Notes (excludes "other" debt)

⁽²⁾ ~~Excludes the impact of unamortized original issue discount and debt issuance costs~~

Excludes the impact of unamortized debt issuance costs and unamortized original issue premium (discount)

Cash, Cash Equivalents and Restricted Cash

The Company has on deposit, cash that is legally restricted as to use or withdrawal.

A reconciliation of cash, cash equivalents and restricted cash reported on the accompanying condensed consolidated balance sheets to cash, cash equivalents and restricted cash reported on the accompanying condensed consolidated statements of cash flows is shown below (in millions):


	September 28, 2019		September 29, 2018		October 3, 2020		September 28, 2019
Balance sheet - cash and cash equivalents	$	1,300.9	$	1,198.6	$	1,250.4	$	1,300.9
Restricted cash included in other current assets	15.6		8.5			5.1		15.6
Restricted cash included in other long-term assets	6.8		17.8			2.7		6.8
Statement of cash flows - cash, cash equivalents and restricted cash	$	1,323.3	$	1,224.9	$	1,258.2	$	1,323.3

Accounts Receivable

On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, "Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," using a modified retrospective approach. The standard amends several aspects of the measurement of credit losses related to certain financial instruments, including the replacement of the existing incurred credit loss model and other models with the current expected credit losses ("CECL") model. The cumulative effect of adoption resulted in an increase of $0.8 million in the allowance for credit loss and a corresponding decrease in retained earnings as of January 1, 2020.

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LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The Company’s allowance for credit losses on financial assets measured at amortized cost, primarily accounts receivable, reflects management’s estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current conditions and forecasts that affect the collectability of the reported amount. Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, are recognized in earnings. The Company also considers geographic and segment specific risk factors in the development of expected credit losses. As of October 3, 2020 and December 31, 2019, accounts receivable are reflected net of reserves of $34.4 million and $36.0 million, respectively. Changes in expected credit losses were not significant in the first nine months of 2020.

Accounts Receivable Factoring

During the second quarter of 2020, the Company entered into an uncommitted factoring arrangement which provides for aggregate purchases of specified customer accounts in North America. The factoring arrangement results in true sales of the factored receivables, which are excluded from amounts reported in the consolidated balance sheets when the receivables are factored in accordance with ASC 860, "Transfers and Servicing." There were no receivables factored during the second or third quarters of 2020. The Company cannot provide any assurances that the factoring arrangement will be available or utilized in the future.

Marketable Equity Securities

Marketable equity securities, which the Company accounts for under the fair value option, are included in the accompanying condensed consolidated balance sheets as shown below (in millions):


	September 28, 2019		December 31, 2018		October 3, 2020		December 31, 2019
Current assets	$	16.1	$	4.8	$	8.9	$	17.1
Other long-term assets	39.5		42.5			41.9		42.1
	$	55.6	$	47.3	$	50.8	$	59.2

A summary of our operating results in millions of dollars and as a percentage of net sales is shown below:

	Three Months Ended										Nine Months Ended
	October 3, 2020					September 28, 2019					October 3, 2020					September 28, 2019
Net sales
Seating	$	3,691.6		75.3	%	$	3,715.0		77.0	%	$	8,813.1		74.7	%	$	11,468.1		76.5	%
E-Systems		1,208.5		24.7			1,110.0		23.0			2,989.2		25.3			3,524.6		23.5
Net sales		4,900.1		100.0			4,825.0		100.0			11,802.3		100.0			14,992.7		100.0
Cost of sales		4,457.3		91.0			4,365.7		90.5			11,152.7		94.5			13,582.0		90.6
Gross profit		442.8		9.0			459.3		9.5			649.6		5.5			1,410.7		9.4
Selling, general and administrative expenses		147.7		3.0			141.9		2.9			442.3		3.7			447.3		3.0
Amortization of intangible assets		16.3		0.3			16.7		0.3			49.4		0.4			45.3		0.3
Interest expense		26.5		0.5			24.0		0.5			78.1		0.7			69.4		0.4
Other expense, net		17.1		0.3			9.7		0.2			54.4		0.5			27.9		0.2
Provision for income taxes		44.6		0.9			33.5		0.7			30.1		0.2			149.9		1.0
Equity in net income of affiliates		(6.5	)	(0.1	)		(5.1	)	(0.1	)		(15.9	)	(0.1	)		(15.8	)	(0.1	)
Net income attributable to noncontrolling interests		22.7		0.5			22.7		0.5			54.3		0.5			59.1		0.4
Net income (loss) attributable to Lear	$	174.4		3.6	%	$	215.9		4.5	%	$	(43.1	)	(0.4	)%	$	627.6		4.2	%

Three Months Ended Nine Months Ended
September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018
Net sales
Seating $ 3,715.0
77.0 % $ 3,683.0
75.3 % $ 11,468.1
76.5 % $ 12,287.6
75.8 %
E-Systems 1,110.0
23.0
1,208.6
24.7
3,524.6
23.5
3,918.5
24.2
Net sales 4,825.0
100.0
4,891.6
100.0
14,992.7
100.0
16,206.1
100.0
Cost of sales 4,365.7
90.5
4,365.3
89.2
13,582.0
90.6
14,410.3
88.9
Gross profit 459.3
9.5
526.3
10.8
1,410.7
9.4
1,795.8
11.1
Selling, general and administrative expenses 141.9
2.9
150.3
3.1
447.3
3.0
462.5
2.9
Amortization of intangible assets 16.7
0.3
12.7
0.3
45.3
0.3
38.9
0.2
Interest expense 24.0
0.5
21.2
0.4
69.4
0.4
62.8
0.4
Other expense, net 9.7
0.2
13.2
0.3
27.9
0.2
11.3
0.1
Provision for income taxes 33.5
0.7
57.6
1.2
149.9
1.0
233.0
1.4
Equity in net income of affiliates (5.1 ) (0.1 ) (3.4 ) (0.1 ) (15.8 ) (0.1 ) (16.6 ) (0.1 )
Net income attributable to noncontrolling interests 22.7
0.5
22.2
0.4
59.1
0.4
66.3
0.4
Net income attributable to Lear $ 215.9
4.5 % $ 252.5
5.2 % $ 627.6
4.2 % $ 937.6
5.8 %

Three Months Ended October 3, 2020 vs. Three Months Ended September 28, 2019 ~~vs. Three Months Ended September 29, 2018~~

Net sales in the third quarter of ~~2019~~2020 were ~~$4.8~~$4.9 billion, as compared to ~~$4.9~~$4.8 billion in the third quarter of ~~2018, a decrease~~2019, an increase of ~~$67~~$75 million or 1%2%. ~~Lower~~The impact of new business globally increased net sales by $293 million. This increase was largely offset by lower production volumes on Lear platforms, primarily in ~~most regions and net foreign exchange rate fluctuations negatively impacted~~Europe, which reduced net sales by ~~$284 million and $108 million, respectively. These decreases were partially offset by the impact of new business in all regions which increased net sales by $326~~$210 million.

(in millions)	Cost of Sales
Third quarter 2019	$	4,365.7
Material cost		18.8
Labor and other		64.6
Depreciation		8.2
Third quarter 2020	$	4,457.3

(in millions) Cost of Sales
Third quarter 2018 $ 4,365
Material cost 21
Labor and other (25 )
Depreciation 5
Third quarter 2019 $ 4,366

Cost of sales in the third ~~quarters~~quarter of ~~2019 and 2018~~2020 was $4.5 billion, as compared to $4.4 ~~billion. Lower~~billion in the third quarter of 2019. The impact of new business globally was offset by lower production volumes on Lear platforms, primarily in ~~most regions and net foreign exchange rate fluctuations were offset by the impact of new business in all regions.~~

Europe.

Gross profit and gross margin were $443 million and 9.0% of net sales, respectively, in the third quarter of 2020, as compared to $459 million and 9.5% of net sales, respectively, in the third quarter of ~~2019, as compared to $526 million and 10.8% of net sales, respectively, in the third quarter of 2018.~~2019. Lower production volumes on Lear platforms and ~~net foreign exchange rate fluctuations, partially~~costs related to the COVID-19 pandemic, offset by the impact of new business, ~~negatively impacted~~reduced gross profit by ~~$46~~$35 million. ~~The impact of selling price reductions was partially offset by favorable~~Favorable operating performance, including the benefit of operational restructuring actions, ~~and~~was partially offset by the ~~acquisition~~impact of ~~Xevo.~~selling price reductions. These factors had a corresponding impact on gross margin.

Selling, general and administrative expenses, including engineering and development expenses, were $148 million in the third quarter of 2020, as compared to $142 million in the third quarter of ~~2019, as compared to $150 million in the third quarter of 2018.~~2019. As a percentage of net sales, selling, general and administrative expenses were 3.0% in the third quarter of 2020, as compared to 2.9% in the third quarter of ~~2019, as compared to 3.1%~~2019.

Amortization of intangible assets was $16 million in the third quarter of ~~2018. In the third quarter of 2019, selling, general and administrative expenses benefited from lower compensation-related costs, partially offset by expenses of our Xevo acquisition.~~

~~Amortization of intangible assets was~~2020, as compared to $17 million in the third quarter of ~~2019, as compared to $13~~2019.

Interest expense was $27 million in the third quarter of ~~2018, reflecting the acquisition of Xevo.~~

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~~LEAR CORPORATION~~

~~Interest expense was~~2020, as compared to $24 million in the third quarter of ~~2019, as compared to $21 million in the third quarter of 2018, reflecting our 2019 financing transactions related to the acquisition of Xevo.~~

2019.

Other expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, losses on the extinguishment of debt, gains and losses on the disposal of fixed assets, gains and losses on the consolidation and deconsolidation of affiliates, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was $17 million in the third quarter of 2020, as compared to $10 million in the third quarter of ~~2019, as compared to $13 million in~~2019. In the third quarter of ~~2018.~~2020, we recognized a pension settlement loss of $10 million. In the third quarter of 2019, we recognized a gain of $4 million related to the deconsolidation of an affiliate.

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LEAR CORPORATION

In the third quarter of 2020, the provision for income taxes was $45 million, representing an effective tax rate of 19.0% on pretax income before equity in net income of affiliates of $235 million. In the third quarter of 2019, the provision for income taxes was $34 million, representing an effective tax rate of 12.5% on pretax income before equity in net income of affiliates of $267 ~~million. In the third quarter of 2018, the provision for income taxes was $58 million, representing an effective tax rate of 17.5% on pretax income before equity in net income of affiliates of $329~~ million, for the reasons described below.

In the third quarters of ~~2019~~2020 and ~~2018,~~2019, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In the third quarter of 2020, we recognized tax benefits of $10 million related to the release of a valuation allowance on deferred tax assets and $5 million related to an increase in our research and development tax credits resulting from the completion of a research and development tax credit study, partially offset by net tax expense of $10 million related to restructuring charges and various other items. In the third quarter of 2019, we recognized tax benefits of $29 million related to an increase in our research and development tax credits for the years 2013 through 2018 and net tax benefits of $9 million related to restructuring and various other items. In addition, we recognized a gain of $4 million related to the deconsolidation of an affiliate, for which no tax expense was provided. In the third quarter of 2018, we recognized tax benefits of $7 million related to an adjustment to the 2017 provisional income tax expense, $7 million related to a tax rate change in a foreign subsidiary and $8 million related to restructuring charges and various other items.

Excluding these items, the effective tax rate for the third quarters of ~~2019~~2020 and ~~2018~~2019 approximated the U.S. federal statutory income tax rate of 21%, adjusted for income taxes on foreign earnings, losses and remittances, valuation allowances, tax credits, income tax incentives and other permanent items.

In the third quarters of 2020 and 2019, we measured our tax expense based on the estimated annual effective rate. For further information, see Note 13, "Income Taxes," to the condensed consolidated financial statements included in this Report.

Equity in net income of affiliates was $7 million in the third quarter of 2020, as compared to $5 million in the third quarter of ~~2019, as compared~~2019.

Net income attributable to $3Lear was $174 million, or $2.89 per diluted share, in the third quarter of ~~2018.~~

~~Net income attributable~~2020, as compared to ~~Lear was~~ $216 million, or $3.58 per diluted share, in the third quarter of ~~2019, as compared to $253 million, or $3.80 per diluted share, in the third quarter of 2018.~~2019. Net income and diluted net income per share decreased for the reasons described above. In addition, diluted net income per share was impacted by the decrease in average shares outstanding between periods.

Reportable Operating Segments

We have two reportable operating segments: Seating and E-Systems. For a description of our reportable operating segments, see "Executive Overview" above.

The financial information presented below is for our two reportable operating segments and our other category for the periods presented. The other category includes unallocated costs related to corporate headquarters, regional headquarters and the elimination of intercompany activities, none of which meets the requirements for being classified as an operating segment. Corporate and regional headquarters costs include various support functions, such as information technology, advanced research and development, corporate finance, legal, executive administration and human resources. Financial measures regarding each segment’s pretax income before equity in net income of affiliates, interest expense and other expense, net ("segment earnings") and segment earnings divided by net sales ("margin") are not measures of performance under accounting principles generally accepted in the United States ("GAAP"). Segment earnings and the related margin are used by management to evaluate the performance of our reportable operating segments. Segment earnings should not be considered in isolation or as a substitute for net income attributable to Lear, net cash provided by operating activities or other income statement or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. In addition, segment earnings, as we determine it, may not be comparable to related or similarly titled measures reported by other companies.

For a reconciliation of consolidated segment earnings to consolidated income before provision for income taxes and equity in net income of affiliates, see Note ~~18,~~17, "Segment Reporting," to the condensed consolidated financial statements included in this Report.

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~~LEAR CORPORATION~~

~~Seating~~

A summary of the financial measures for our Seating segment is shown below (dollar amounts in millions):

	Three Months Ended
	October 3, 2020			September 28, 2019
Net sales	$	3,691.6		$	3,715.0
Segment earnings ⁽¹⁾		250.7			281.5
Margin		6.8	%		7.6	%

⁽¹⁾	See definition above

Three Months Ended
September 28, 2019 September 29, 2018
Net sales $ 3,715.0
$ 3,683.0
Segment earnings ⁽¹⁾
281.5
294.0
Margin 7.6 % 8.0 %

⁽¹⁾~~See definition above~~

Seating net sales were $3.7 billion in the third quarters of 2020 and 2019, ~~and 2018, with third quarter 2019 net sales exceeding third quarter 2018 net sales by $32~~reflecting a decrease of $23 million or 1%. ~~The impact of new business increased net sales by $305 million. This increase was largely offset by lower~~Lower production volumes on Lear platforms ~~and net foreign exchange rate fluctuations, which~~ negatively impacted net sales by ~~$200 million and $77 million, respectively.~~

$189 million. This decrease was largely offset by the impact of new business, which increased net sales by $180 million.

Segment earnings, including restructuring costs, and the related margin on net sales were $251 million and 6.8% in the third quarter of 2020, as compared to $282 million and 7.6% in the third quarter of ~~2019, as compared to $294 million and 8.0% in the third quarter of 2018.~~2019. Lower production volumes on Lear platforms and ~~net foreign exchange rate fluctuations, partially~~costs

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LEAR CORPORATION

related to the COVID-19 pandemic, offset by the impact of new business, ~~negatively impacted~~reduced segment earnings by ~~$22~~$36 million. Favorable operating performance, including the benefit of operational restructuring actions, ~~of $55 million~~ was ~~largely~~partially offset by the impact of selling price reductions.

Segment earnings were also negatively impacted by higher restructuring costs.

E-Systems

A summary of financial measures for our E-Systems segment is shown below (dollar amounts in millions):

	Three Months Ended
	October 3, 2020			September 28, 2019
Net sales	$	1,208.5		$	1,110.0
Segment earnings⁽¹⁾		86.0			74.3
Margin		7.1	%		6.7	%

⁽¹⁾	See definition above

Three Months Ended
September 28, 2019 September 29, 2018
Net sales $ 1,110.0
$ 1,208.6
Segment earnings ⁽¹⁾
74.3
138.4
Margin 6.7 % 11.5 %

⁽¹⁾~~See definition above~~

E-Systems net sales were $1.2 billion in the third quarter of 2020, as compared to $1.1 billion in the third quarter of 2019, ~~as compared to $1.2 billion in the third quarter of 2018, reflecting a decrease~~an increase of $99 million or 8%9%. ~~Lower~~The impact of new business increased net sales by $113 million. This increase was partially offset by lower production volumes on Lear platforms, ~~and net foreign exchange rate fluctuations negatively impacted~~which reduced net sales by ~~$84 million and $31 million, respectively. These decreases were partially offset by the impact of new business and the acquisition of Xevo, which increased net sales by $51~~$21 million.

Segment earnings, including restructuring costs, and the related margin on net sales were $86 million and 7.1% in the third quarter of 2020, as compared to $74 million and 6.7% in the third quarter of ~~2019, as compared to $138 million and 11.5% in the third quarter~~2019. The impact of ~~2018. Lower~~new business was offset by lower production volumes on Lear platforms and ~~net foreign exchange rate fluctuations,~~costs related to the COVID-19 pandemic. Improved operating performance and lower restructuring costs was partially offset by the impact of ~~new business, negatively impacted segment earnings by $24 million. Selling~~selling price ~~reductions, partially offset by improved operating performance, also negatively impacted segment earnings.~~

reductions.

Other

A summary of financial measures for our other category, which is not an operating segment, is shown below (dollar amounts in millions):

	Three Months Ended
	October 3, 2020			September 28, 2019
Net sales	$	-		$	-
Segment earnings⁽¹⁾		(57.9	)		(55.1	)
Margin	N/A			N/A

⁽¹⁾	See definition above

Three Months Ended
September 28, 2019 September 29, 2018
Net sales $ —
$ —
Segment earnings ⁽¹⁾
(55.1 ) (69.1 )
Margin N/A
N/A

⁽¹⁾~~See definition above~~

Segment earnings related to our other category were ($58) million in the third quarter of 2020, as compared to ($55) million in the third quarter of ~~2019, as compared to $(69) million in the third quarter of 2018, primarily reflecting lower compensation-related costs in~~ 2019.

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Nine Months Ended October 3, 2020 vs. Nine Months Ended September 28, 2019 ~~vs. Nine Months Ended September 29, 2018~~

Net sales for the nine months ended October 3, 2020 were $11.8 billion, as compared to $15.0 billion for the nine months ended September 28, 2019, ~~were $15.0 billion, as compared to $16.2 billion for the nine months ended September 29, 2018,~~ a decrease of ~~$1.2~~$3.2 billion or 7%21%. Lower production volumes on Lear platforms ~~in all regions and net foreign exchange rate fluctuations~~globally, largely due to the COVID-19 pandemic, negatively impacted net sales by ~~$1,347 million and $605 million, respectively. These decreases were partially offset by the impact of new business in all regions, which increased net sales by $767 million.~~more than $3.2 billion.

(in millions)	Cost of Sales
First nine months of 2019	$	13,582.0
Material cost		(2,151.2	)
Labor and other		(291.1	)
Depreciation		13.0
First nine months of 2020	$	11,152.7

(in millions) Cost of Sales
First nine months of 2018 $ 14,410
Material cost (720 )
Labor and other (120 )
Depreciation 12
First nine months of 2019 $ 13,582

Cost of sales in the first nine months of ~~2019~~2020 were ~~$13.6~~$11.2 billion, as compared to ~~$14.4~~$13.6 billion in the first nine months of ~~2018.~~2019. Lower production volumes on Lear platforms ~~in all regions and net foreign exchange rate fluctuations, partially offset by~~globally, largely due to the ~~impact of new business in all regions,~~COVID-19 pandemic, reduced cost of sales by ~~$896 million.~~

more than $2.5 billion.

Gross profit and gross margin were $650 million and 5.5% of net sales, respectively, for the nine months ended October 3, 2020, as compared to $1.4 billion and 9.4% of net sales, respectively, for the nine months ended September 28, ~~2019, as compared to $1.8 billion and 11.1% of net sales, respectively, for the nine months ended September 29, 2018.~~2019. Lower production volumes on Lear platforms globally, largely due to the COVID-19 pandemic, and ~~net foreign exchange rate fluctuations, partially offset by~~costs related to the ~~impact of new business,~~COVID-19 pandemic negatively impacted gross profit by ~~$289~~$786 million. ~~The impact of selling price reductions and, to a lesser extent, higher restructuring costs was partially offset by favorable~~Favorable operating performance, including the benefit of operational restructuring ~~actions.~~actions, and lower restructuring costs was offset by the impact of selling price reductions. These factors had a corresponding impact on gross margin.

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Selling, general and administrative expenses, including engineering and development expenses, were $442 million in the first nine months of 2020, as compared to $447 million in the first nine months of ~~2019, as compared to $463 million in the first nine months of 2018.~~2019. As a percentage of net sales, selling, general and administrative expenses were 3.7% in the first nine months of 2020, as compared to 3.0% in the first nine months of 2019, ~~as compared to 2.9%~~reflecting the significant decrease in net sales in 2020.

Amortization of intangible assets was $49 million in the first nine months of 2018. In 2019, selling, general and administrative expenses benefited from lower compensation-related costs and the impact of net foreign exchange fluctuations, partially offset by expenses of our Xevo acquisition.

~~Amortization of intangible assets was~~2020, as compared to $45 million in the first nine months of ~~2019, as compared to $39~~2019.

Interest expense was $78 million in the first nine months of ~~2018, reflecting the acquisition of Xevo.~~

~~Interest expense was~~2020, as compared to $69 million in the first nine months of ~~2019, as compared to $63 million in the first nine months of 2018, reflecting our 2019 financing transactions related to the acquisition of Xevo.~~

2019.

Other expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, losses on the extinguishment of debt, gains and losses on the disposal of fixed assets, gains and losses on the consolidation and deconsolidation of affiliates, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was ~~expense of~~$54 million for the nine months ended October 3, 2020, as compared to $28 million for the nine months ended September 28, ~~2019, as compared to $11 million for~~2019. In the first nine months ~~ended September 29, 2018.~~of 2020, we recognized a loss of $21 million related to the extinguishment of debt and a pension settlement loss of $10 million. In the first nine months of 2019, we recognized a loss of $11 million related to the extinguishment of debt and a gain of $4 million related to the deconsolidation of an affiliate. In

For the ~~first~~ nine months ended October 3, 2020, the provision for income taxes was $30 million, representing an effective tax rate of ~~2018, we recognized a gain~~118.5% on pretax income before equity in net income of ~~$10 million related to obtaining control~~affiliates of ~~an affiliate.~~

$25 million. For the nine months ended September 28, 2019, the provision for income taxes was $150 million, representing an effective tax rate of 18.3% on pretax income before equity in net income of affiliates of $821 million. ~~For~~In the first nine months ~~ended September 29, 2018, the provision for income taxes was $233 million, representing an effective tax rate~~ of ~~19.1% on~~2020, pretax income before equity in net income of affiliates was significantly lower than in the first nine months of ~~$1,220 million,~~2019, primarily due to the COVID-19 pandemic, and as a result, relatively small changes in the provision for income taxes in 2020 can cause disproportionate changes in the ~~reasons described below.~~

effective tax rate as compared to 2019. The higher effective tax rate in the first nine months of 2020, as compared to the first nine months of 2019, was also due to the net discrete tax expense and lower tax benefit on our restructuring charges and various other items in 2020.

In the first nine months of ~~2019~~2020 and ~~2018,~~2019, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In the first nine months of 2020, we recognized tax benefits of $21 million related to a loss on the extinguishment of debt, restructuring charges and various other items and $5 million related to an increase in our research and development tax credits resulting from the completion of a research and development tax credit study, partially offset by net tax expense of $12 million related to a net increase in valuation allowances on deferred tax assets. In the first nine months of 2019, we recognized tax benefits of $29 million related to an increase in our research and development tax credits for the years 2013 through 2018, $18 million related to changes in the tax status of certain affiliates, $3 million related to share-based compensation and $36 million related to restructuring and various other items, partially offset by tax expense of $10 million related to the establishment of a valuation allowance on deferred tax assets of a foreign subsidiary. In addition, we recognized a gain of $4 million related to the deconsolidation of an affiliate, for which no tax expense was provided.

In the first nine months of ~~2018,~~2020 and 2019, we ~~recognized~~measured our tax ~~benefits of $36 million related~~expense based on the estimated annual effective rate. For further information, see Note 13, "Income Taxes," to the reversal of valuation allowances on the deferred tax assets of certain foreign subsidiaries, $11 million related to share-based compensation, $9 million related to an adjustment to the 2017 provisional income tax expense, $7 million related to a tax rate changecondensed consolidated financial statements included in ~~a foreign subsidiary and $11 million related to restructuring charges and various other items, offset by tax expense of $22 million~~

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related to an increase in foreign withholding tax on certain undistributed foreign earnings. In addition, we recognized a gain of $10 million related to obtaining control of an affiliate, for which no tax expense was provided.

Excluding these items, the effective tax rate for the first nine months of 2019 and 2018 approximated the U.S. federal statutory income tax rate of 21% adjusted for income taxes on foreign earnings, losses and remittances, valuation allowances, tax credits, income tax incentives and other permanent items.

this Report.

Equity in net income of affiliates was $16 million in the first nine months of ~~2019, as compared to $17 million in the first nine months of 2018.~~

2020 and 2019.

Net income (loss) attributable to Lear was ($43) million, or ($0.72) per diluted share, for the nine months ended October 3, 2020, as compared to $628 million, or $10.23 per diluted share, for the nine months ended September 28, ~~2019, as compared to $938 million, or $13.80 per diluted share, for the nine months ended September 29, 2018.~~2019. Net income (loss) and diluted net income (loss) per share decreased for the reasons described above. In addition, diluted net income (loss) per share was impacted by the decrease in average shares outstanding between periods.

Reportable Operating Segments

We have two reportable operating segments: Seating and E-Systems. For a description of our reportable operating segments, see "Executive Overview" and "Three Months Ended ~~September 28, 2019~~October 3, 2020 vs. Three Months Ended September ~~29, 2018 -~~28, 2019 — Reportable Operating Segments" above.

Seating

A summary of the financial measures for our Seating segment is shown below (dollar amounts in millions):

	Nine Months Ended
	October 3, 2020			September 28, 2019
Net sales	$	8,813.1		$	11,468.1
Segment earnings ⁽¹⁾		320.4			817.0
Margin		3.6	%		7.1	%

Nine Months Ended
September 28, 2019 September 29, 2018
Net sales $ 11,468.1
$ 12,287.6
Segment earnings ⁽¹⁾
817.0
981.8
Margin 7.1 % 8.0 %

⁽¹⁾	See definition above

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~~See definition above~~

Seating net sales were $8.8 billion for the nine months ended October 3, 2020, as compared to $11.5 billion for the nine months ended September 28, 2019, ~~as compared to $12.3 billion for the nine months ended September 29, 2018,~~ a decrease of ~~$820 million~~$2.7 billion or 7%23%. Lower production volumes on Lear platforms ~~and net foreign exchange rate fluctuations~~globally, largely due to the COVID-19 pandemic, negatively impacted net sales by ~~$1,005 million and $431 million, respectively. These decreases were partially offset by the impact of new business, which increased net sales by $600 million.~~

nearly $2.7 billion.

Segment earnings, including restructuring costs, and the related margin on net sales were $320 million and 3.6% for the nine months ended October 3, 2020, as compared to $817 million and 7.1% for the nine months ended September 28, ~~2019, as compared to $982 million and 8.0% for the nine months ended September 29, 2018.~~2019. Lower production volumes on Lear platforms globally, largely due to the COVID-19 pandemic, and ~~net foreign exchange rate fluctuations, partially offset by~~costs related to the ~~impact of new business,~~COVID-19 pandemic negatively impacted segment earnings by ~~$182~~$587 million. Favorable operating performance, including the benefit of operational restructuring actions, ~~of $188 million~~ was ~~largely~~partially offset by the impact of selling price ~~reductions and higher~~reductions. Segment earnings were also favorably impacted by lower restructuring costs.

E-Systems

A summary of financial measures for our E-Systems segment is shown below (dollar amounts in millions):

	Nine Months Ended
	October 3, 2020			September 28, 2019
Net sales	$	2,989.2		$	3,524.6
Segment earnings ⁽¹⁾		5.0			287.3
Margin		0.2	%		8.2	%

Nine Months Ended
September 28, 2019 September 29, 2018
Net sales $ 3,524.6
$ 3,918.5
Segment earnings ⁽¹⁾
287.3
504.3
Margin 8.2 % 12.9 %

⁽¹⁾	See definition above

⁽¹⁾~~See definition above~~

E-Systems net sales were $3.0 billion for the nine months ended October 3, 2020, as compared to $3.5 billion for the nine months ended September 28, 2019, ~~as compared to $3.9 billion for the nine months ended September 29, 2018,~~ a decrease of ~~$394~~$535 million or ~~10%~~15%. Lower production volumes on Lear platforms ~~and net foreign exchange rate fluctuations~~globally, largely due to the COVID-19 pandemic, negatively impacted net sales by ~~$342 million and $174 million, respectively. These decreases were partially offset by the impact of new business, which increased net sales by $167~~more than $600 million.

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Segment earnings, including restructuring costs, and the related margin on net sales were $5 million and 0.2% for the nine months ended October 3, 2020, as compared to $287 million and 8.2% for the nine months ended September 28, ~~2019, as compared to $504 million and 12.9% for the nine months ended September 29, 2018.~~2019. Lower production volumes on Lear platforms globally, largely due to the COVID-19 pandemic, and ~~net foreign exchange rate fluctuations, partially~~costs related to the COVID-19 pandemic negatively impacted segment earnings by $224 million. Improved operating performance was more than offset by the impact of ~~new business, negatively impacted segment earnings by $100 million. Selling~~selling price reductions ~~partially offset by improved operating performance, also negatively impacted segment earnings.~~

and, to a lesser extent, higher restructuring costs.

Other

A summary of financial measures for our other category, which is not an operating segment, is shown below (dollar amounts in millions):

	Nine Months Ended
	October 3, 2020			September 28, 2019
Net sales	$	-		$	-
Segment earnings⁽¹⁾		(167.5	)		(186.2	)
Margin	N/A			N/A

⁽¹⁾	See definition above

Nine Months Ended
September 28, 2019 September 29, 2018
Net sales $ —
$ —
Segment earnings ⁽¹⁾
(186.2 ) (191.7 )
Margin N/A
N/A

⁽¹⁾~~See definition above~~

Segment earnings related to our other category were ($168) million in the first nine months of 2020, as compared to ($186) million in the first nine months of 2019, ~~as compared to ($192) million in the first nine months of 2018,~~primarily reflecting lower compensation-related costs in ~~2019 and a favorable litigation settlement in 2018.~~

2020.

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are to fund general business requirements, including working capital requirements, capital expenditures, operational restructuring actions and debt service requirements. ~~In addition, we expect to continue to pay quarterly dividends and repurchase shares of our common stock pursuant to our authorized common stock share repurchase program.~~ Our principal sources of liquidity are cash flows from operating activities, borrowings under available credit facilities and our existing cash balance.

Adequacy of Liquidity Sources

As of October 3, 2020, we had $1.25 billion of cash and cash equivalents on hand and $1.75 billion in available borrowing capacity under our Revolving Credit Facility. Together with cash provided by operating activities, we believe that this will enable us to meet our liquidity needs for the foreseeable future and to satisfy ordinary course business obligations.

In response to the COVID-19 pandemic, we took a number of proactive steps to preserve cash and maximize our financial flexibility in order to efficiently manage through the COVID-19 pandemic, including:

•

Aggressively reducing operating costs, capital expenditures and working capital, including reducing discretionary spending

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•

Reducing salaried employee costs throughout the organization through salary reductions and deferrals

•

Suspending share repurchases and quarterly dividends

•

Maximizing opportunities offered under government incentive programs throughout the world

•

Reducing the compensation of the Board of Directors

•

Reducing hourly factory worker costs through temporary layoffs

•

Delaying planned pension funding and deferring other retirement plan contributions

Our future financial results and our ability to continue to meet our liquidity needs are subject to, and will be affected by, cash flows from operations, including the continuing effects of the COVID-19 pandemic, as well as restructuring activities, automotive industry conditions, the financial condition of our customers and suppliers and other related factors.

For further discussion of the risks and uncertainties affecting our cash flows from operations and our overall liquidity, see "— Executive Overview" above, "— Forward-Looking Statements" below, Part II — Item 1A, "Risk Factors," included in this Report and Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019.

Cash Provided by Subsidiaries

A substantial portion of our operating income is generated by our subsidiaries. As a result, we are dependent on the earnings and cash flows of and the combination of dividends, royalties, intercompany loan repayments and other distributions and advances from our subsidiaries to provide the funds necessary to meet our obligations.

As of ~~September 28, 2019~~October 3, 2020 and December 31, ~~2018,~~2019, cash and cash equivalents of ~~$803~~$788 million and ~~$1,094~~$895 million, respectively, were held in foreign subsidiaries and can be repatriated, primarily through the repayment of intercompany loans and the payment of dividends, without creating additional income tax expense. There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Lear.

For further information related to potential dividends from our non-U.S. subsidiaries, see ~~"— Adequacy of Liquidity Sources" below and~~ Note 7,8, "Income Taxes," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

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2019.

Cash Flows

A summary of net cash provided by operating activities is shown below (in millions):

	Nine Months Ended
	October 3, 2020			September 28, 2019			Increase (Decrease) in Operating Cash Flow
Consolidated net income and depreciation and amortization	$	408		$	1,067		$	(659	)
Net change in working capital items:
Accounts receivable		(417	)		(513	)		96
Inventory		(14	)		(124	)		110
Accounts payable		124			209			(85	)
Accrued liabilities and other		169			266			(97	)
Net change in working capital items		(138	)		(162	)		24
Other		(8	)		(106	)		98
Net cash provided by operating activities	$	262		$	799		$	(537	)

Nine Months Ended
September 28, 2019 September 29, 2018
Increase (Decrease) in Operating
Cash Flow
Consolidated net income and depreciation and amortization $ 1,067
$ 1,366
$ (299 )
Net change in working capital items:
Accounts receivable (513 ) (173 ) (340 )
Inventory (124 ) (118 ) (6 )
Accounts payable 209
(33 ) 242
Accrued liabilities and other 266
(5 ) 271
Net change in working capital items (162 ) (329 ) 167
Other (106 ) (15 ) (91 )
Net cash provided by operating activities $ 799
$ 1,022
$ (223 )

In the first nine months of ~~2019~~2020 and ~~2018,~~2019, net cash provided by operating activities was ~~$799~~$262 million and ~~$1,022~~$799 million, respectively. The overall decrease in operating cash flows of ~~$223~~$537 million was primarily ~~attributable~~due to lower ~~net income. The incremental increase~~earnings in ~~accounts receivable~~2020.

Net cash used in investing activities was $297 million in the first nine months of ~~2019,~~2020, as compared to the first nine months of 2018, was largely due to lower sales at the end of 2018, as compared to the end of 2017, as well as the timing of certain customer payments. The resulting decrease in operating cash flows between periods was more than offset by increases in accounts payable and certain accrued liabilities in the first nine months of 2019.

~~Net cash used in investing activities was~~ $739 million in the first nine months of ~~2019, as compared to $511 million in~~2019. In the ~~first nine months of 2018. In~~ first nine months of 2019, we paid $322 million for the acquisition of Xevo. Capital spending was $285 million in the first nine months of 2020, as compared to $410 million in the first nine months of ~~2019, as compared~~2019. Capital spending is estimated to ~~$493~~be approximately $425 million in 2020, which reflects a delay in certain program launches and a reduction in discretionary spending in response to the COVID-19 pandemic.

Net cash used in financing activities was $212 million in the first nine months of ~~2018. Capital spending in 2019 is estimated at$625 million.~~

~~Net cash used in financing activities was~~2020, as compared to $237 million in the first nine months of ~~2019,~~2019. In the first quarter of 2020, we borrowed $1.0 billion under the Revolving Credit Facility as ~~compared~~a proactive measure in response to ~~$753 million~~the COVID-19 pandemic, which was repaid in full in the ~~first nine months~~third quarter of ~~2018.~~2020. In 2020, we received net proceeds of $669 million related to the issuance of the 2030 and additional 2049 Notes and paid $6 million of related issuance costs and $667 million related to the redemption of the outstanding 2025 Notes. Also in 2020, we paid $70 million for repurchases of our common stock, $52 million of dividends to Lear stockholders and $46 million of dividends to noncontrolling interest holders. In 2019, we received net proceeds of $693 million related to the issuance of the 2029 and 2049 Notes and paid $7$6 million of related issuance costs and $334

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million related to the redemption of the outstanding 2024 Notes. Also in 2019, we paid $360 million for repurchases of our common stock, $141 million of dividends to Lear stockholders and $34 million of dividends to noncontrolling interest holders. ~~In 2018, we paid $488 million for repurchases of our common stock, $142 million of dividends to Lear stockholders and $64 million of dividends to noncontrolling interest holders.~~

Capitalization

From time to time, we utilize uncommitted credit facilities to fund our capital expenditures and working capital requirements at certain of our foreign subsidiaries, in addition to cash provided by operating activities. The availability of uncommitted lines of credit may be affected by our financial performance, credit ratings and other factors. As of ~~September 28, 2019~~October 3, 2020 and December 31, ~~2018,~~2019, our short-term borrowings outstanding were $4 million and $19 million, ~~and $10 million,~~ respectively.

Senior Notes

As of ~~September 28, 2019,~~October 3, 2020, our senior notes (collectively, the "Notes") consisted of the amounts shown below (in millions, except stated coupon rates):

Note	Aggregate Principal Amount at Maturity		Stated Coupon Rate
Senior unsecured notes due 2027 (the "2027 Notes")		750		3.80	%
Senior unsecured notes due 2029 (the "2029 Notes")		375		4.25	%
2030 Notes		350		3.50	%
2049 Notes		625		5.25	%
	$	2,100

Note Aggregate Principal Amount at Maturity Stated Coupon Rate
Senior unsecured notes due 2025 (the "2025 Notes") $ 650
5.25 %
Senior unsecured notes due 2027 (the "2027 Notes") 750
3.80 %
2029 Notes 375
4.25 %
2049 Notes 325
5.25 %
$ 2,100

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The issue, maturity and interest ~~payments~~payment dates of the Notes are shown below:


Note	Issuance Date(s)
~~Note~~	~~Issuance Date~~	Maturity Date	Interest Payment Dates
~~2025 Notes~~	~~November 2014~~	~~January 15, 2025~~	~~January 15 and July 15~~
2027 Notes	August 2017	September 15, 2027	March 15 and September 15
2029 Notes	May 2019	May 15, 2029	May 15 and November 15
2030 Notes	February 2020	May 30, 2030	May 30 and November 30
2049 Notes	May 2019 and February 2020	May 15, 2049	May 15 and November 15

In ~~May 2019,~~February 2020, we issued ~~$375~~$350 million in aggregate principal amount at maturity of ~~2029~~2030 Notes and ~~$325~~an additional $300 million in aggregate principal amount at maturity of 2049 Notes. The ~~2029~~2030 Notes have a stated coupon rate of ~~4.25%~~3.5% and were ~~priced~~issued at ~~99.691%~~99.774% of par, resulting in a yield to maturity of ~~4.288%~~3.525%. The 2049 Notes have a stated coupon rate of 5.25% and were ~~priced~~issued at ~~98.32%~~106.626% of par, resulting in a yield to maturity of ~~5.363%~~4.821%.

The net proceeds from the offering were ~~$693~~$669 million after original issue discount. The proceeds were used to redeem the ~~$325~~$650 million in aggregate principal amount of ~~the 2024~~2025 Notes at a redemption price equal to ~~102.688%~~102.625% of the principal amount of such ~~2024~~2025 Notes, plus accrued ~~interest, as well as to finance the acquisition of Xevo and for general corporate purposes.~~ interest.

In connection with these transactions, we recognized a loss of ~~$11~~$21 million on the extinguishment of debt ~~in the nine months ended September 28, 2019,~~ and paid related issuance costs of $7$6 million.

The indentures governing the Notes contain certain investment-grade style restrictive covenants and customary events of default. As of October 3, 2020, we were in compliance with all covenants under the indentures governing the Notes.

For further information related to the Notes, including information on early redemption, covenants and events of default, see Note 9,8, "Debt," to the condensed consolidated financial statements included in this Report and Note 6, "Debt," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

2019.

Credit Agreement

Our Credit Agreement, dated August 8, 2017, consists of a $1.75 billion Revolving Credit Facility and a $250 million Term Loan Facility. ~~The~~In February 2020, we entered into an agreement to extend the maturity date of the Revolving Credit Facility isby one year to August 8, ~~2023,~~2024, and ~~the~~paid related issuance costs of $1 million. The maturity date of the Term Loan Facility isremains August 8, 2022.

~~As of September 28, 2019 and December 31, 2018, there were no borrowings outstanding~~

In March 2020, as a proactive measure in response to the COVID-19 pandemic, we borrowed $1.0 billion under the Revolving Credit Facility, which was repaid in full in September 2020.

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As of October 3, 2020 and ~~$239~~December 31, 2019, there were $225 million and ~~$242~~$234 million ~~respectively,~~ of borrowings outstanding under the Term Loan ~~Facility.~~Facility, respectively. During the first nine months of ~~2019,~~2020, we made required principal payments of $3$9 million under the Term Loan Facility.

The Credit Agreement contains various financial and other covenants that require us to maintain a minimum leverage coverage ratio. As of October 3, 2020, we were in compliance with all covenants under the Credit Agreement. Although we expect to maintain compliance with all covenants, the impact of the COVID-19 pandemic may negatively affect our ability to comply with certain of these covenants. In the event that we are unable to maintain compliance with such covenants, we expect to obtain an amendment or waiver from our lenders, refinance the indebtedness subject to the covenants or take other mitigating actions prior to a potential breach.

For further information related to the Credit Agreement, including information on pricing, covenants and events of default, see Note 9,8, "Debt," to the condensed consolidated financial statements included in this Report and Note 6, "Debt," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

~~Scheduled Interest Payment and Covenants~~

~~Scheduled cash interest payments on~~2019.

Accounts Receivable Factoring

During the ~~Notes and the Term Loan Facility are $20 million~~second quarter of 2020, we entered into an uncommitted factoring arrangement which provides for ~~the remaining three months~~aggregate purchases of ~~2019.~~

~~As of September 28, 2019, we were~~specified customer accounts in ~~compliance with all covenants under the Credit Agreement and the indentures governing the Notes.~~

~~Common Stock Share Repurchase Program~~

~~On February 7, 2019, our Board of Directors authorized an increase to our existing common stock share repurchase program authorization to $1.5 billion and extended the term~~North America. The factoring arrangement results in true sales of the ~~program to December 31, 2021.~~

~~Our share repurchases~~factored receivables, which are excluded from amounts reported in the consolidated balance sheets when the receivables are factored in accordance with ASC 860, "Transfers and Servicing." There were no receivables factored during the first nine months of ~~2019~~2020. We cannot provide any assurances that the factoring arrangement will be available or utilized in the future.

Common Stock Share Repurchase Program

In March 2020, as a proactive measure in response to the COVID-19 pandemic, we suspended share repurchases under our share repurchase program. Share repurchases prior to the suspension are shown below (in millions except for shares and per share amounts):

Nine Months Ended								As of
October 3, 2020								October 3, 2020
Aggregate Repurchases		Cash paid for Repurchases		Number of Shares		Average Price per Share⁽¹⁾		Remaining Purchase Authorization
$	70	$	70		641,149	$	109.22	$	1,430

⁽¹⁾	Excludes commissions

Nine Months Ended As of
September 28, 2019 September 28, 2019
Aggregate Repurchases ⁽¹⁾
Cash paid for Repurchases Number of Shares
Average Price per Share ⁽²⁾
Remaining Purchase Authorization
$ 355
$ 360
2,603,881 $ 136.48
$ 1,228

⁽¹⁾~~Includes $83 million of repurchases made prior to the increased authorization~~

⁽²⁾ ~~Excludes commissions~~

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Since the first quarter of 2011, our Board of Directors has authorized ~~$5.8~~$6.1 billion in share repurchases under our common stock share repurchase program. As of the end of the third quarter of ~~2019,~~2020, we have repurchased, in aggregate, ~~$4.6~~$4.7 billion of our outstanding common stock, at an average price of ~~$89.72~~$90.07 per share, excluding commissions and related fees.

We may implement ~~these~~ share repurchases through a variety of methods, including, but not limited to, open market purchases, accelerated stock repurchase programs and structured repurchase transactions. The extent to which we will repurchase our outstanding common stock and the timing of such repurchases will depend upon our financial condition, prevailing market conditions, alternative uses of capital and other factors (see "— Forward-Looking Statements").

For further information related to our common stock share repurchase program, see Note ~~16,~~15, "Comprehensive Income (Loss) and Equity," to the condensed consolidated financial statements included in this Report.

Dividends

~~The~~

In March 2020, as a proactive measure in response to the COVID-19 pandemic, we suspended our quarterly cash ~~dividend declared in the first three quarters of 2019 reflects a 7% increase over the quarterly cash dividend declared in the first three quarters of 2018.~~dividend. A summary of the ~~2019 dividends~~first quarter 2020 dividend (prior to the suspension) is shown below:

Payment Date

Dividend

Per Share

Declaration

Date

Record

Date

March 18, 2020

0.77

February 6, 2020

February 28, 2020

Payment Date Dividend Per Share Declaration Date Record Date
March 20, 2019 $ 0.75
February 7, 2019 March 1, 2019
June 26, 2019 $ 0.75
May 16, 2019 June 7, 2019
September 17, 2019 $ 0.75
August 7, 2019 August 29, 2019

~~We currently~~

Although we do expect to pay quarterly cash dividends at some point in the future, ~~although~~ such payments are at the discretion of our Board of Directors and will depend upon our financial condition, results of operations, capital requirements, alternative uses of capital and other factors that our Board of Directors may consider in its discretion.

~~Adequacy of Liquidity Sources~~

As of September 28, 2019, we had $1.3 billion of cash and cash equivalents on hand and $1.75 billion in available borrowing capacity under our Revolving Credit Facility. Together with cash provided by operating activities, we believe that this will enable us to meet our liquidity needs to satisfy ordinary course business obligations. In addition, we expect to continue to pay quarterly dividends and repurchase shares of our common stock pursuant to our authorized common stock share repurchase program (see "— Common Stock Share Repurchase Program," above). Our future financial results and our ability to continue to meet our liquidity needs are subject to, and will be affected by, cash flows from operations, including the impact of restructuring activities, automotive industry conditions, the financial condition of our customers and suppliers and other related factors. Additionally, an economic downturn or reduction in production levels could negatively impact our financial condition. For further discussion of the risks and uncertainties affecting our cash flows from operations and our overall liquidity, see "— Executive Overview" above, "— Forward-Looking Statements" below and Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2018.

Market Risk Sensitivity

In the normal course of business, we are exposed to market risks associated with fluctuations in foreign exchange rates, interest rates and commodity prices. We manage a portion of these risks through the use of derivative financial instruments in accordance with our

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policies. We enter into all hedging transactions for periods consistent with the underlying exposures. We do not enter into derivative instruments for trading purposes.

Foreign Exchange

Operating results may be impacted by our buying, selling and financing in currencies other than the functional currency of our operating companies ("transactional exposure"). We may mitigate a portion of this risk by entering into forward foreign exchange, futures and option contracts. The foreign exchange contracts are executed with banks that we believe are creditworthy. Gains and losses related to foreign exchange contracts are deferred where appropriate and included in the measurement of the foreign currency transaction subject to the hedge. Gains and losses incurred related to foreign exchange contracts are generally offset by the direct effects of currency movements on the underlying transactions.

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~~LEAR CORPORATION~~

A summary of the notional amount and estimated aggregate fair value of our outstanding foreign exchange contracts is shown below (in millions):

October 3,

2020

December 31,

2019

Notional amount (contract maturities < 24 months)

2,954

2,163

Fair value

)

September 28,
2019 December 31,
2018
Notional amount (contract maturities < 24 months) $ 2,381
$ 2,153
Fair value 23
14

Currently, our most significant foreign currency transactional exposures relate to the Mexican peso, various European currencies, the Chinese renminbi, the Thai baht, ~~the Chinese renminbi,~~ the Japanese yen, the ~~Brazilian real~~Honduran lempira and the ~~South African rand.~~Brazilian real. A sensitivity analysis of our net transactional exposure is shown below (in millions):

				Potential Earnings Benefit (Adverse Earnings Impact)
	Hypothetical Strengthening % ⁽¹⁾			October 3, 2020			December 31, 2019
U.S. dollar		10	%	$	26		$	(16	)
Euro		10	%		(4	)		19

⁽¹⁾	Relative to all other currencies to which it is exposed for a twelve-month period

Potential Earnings Benefit
(Adverse Earnings Impact)

Hypothetical Strengthening % ⁽¹⁾
September 28,
2019 December 31,
2018
U.S. dollar
10% $ (16 ) $ (19 )
Euro 10% 19
20

⁽¹⁾~~Relative to all other currencies to which it is exposed for a twelve-month period~~

A sensitivity analysis related to the aggregate fair value of our outstanding foreign exchange contracts is shown below (in millions):

				Estimated Change in Fair Value
	Hypothetical Change % ⁽²⁾			October 3, 2020		December 31, 2019
U.S. dollar		10	%	$	63	$	50
Euro		10	%		62		69

⁽²⁾	Relative to all other currencies to which it is exposed for a twelve-month period

Estimated Change in Fair Value

Hypothetical Change % ⁽²⁾
September 28,
2019 December 31,
2018
U.S. dollar 10% $ 51
$ 37
Euro 10% 56
72

⁽²⁾~~Relative to all other currencies to which it is exposed for a twelve-month period~~

There are certain shortcomings inherent in the sensitivity analyses above. The analyses assume that all currencies would uniformly strengthen or weaken relative to the U.S. dollar or Euro. In reality, some currencies may strengthen while others may weaken, causing the earnings impact to increase or decrease depending on the currency and the direction of the rate movement.

In addition to the transactional exposure described above, our operating results are impacted by the translation of our foreign operating income into U.S. dollars ("translational exposure"). In ~~2018,~~2019, net sales outside of the United States accounted for 82% of our consolidated net sales, although certain non-U.S. sales are U.S. dollar denominated. We do not enter into foreign exchange contracts to mitigate our translational exposure.

Commodity Prices

Raw material, energy and commodity costs can be volatile, reflecting changes in supply and demand and global trade and tariff policies. We have developed and implemented strategies to mitigate the impact of higher raw material, energy and commodity costs, such as the selective in-sourcing of components, the continued consolidation of our supply base, longer-term purchase commitments and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking. However, these strategies, together with commercial negotiations with our customers and suppliers, typically offset only a portion of the adverse impact. Certain of these strategies also may limit our opportunities in a declining commodity cost environment. If these costs increase, it could have an adverse impact on our operating results in the foreseeable future. See "— Forward-Looking Statements" below and Item 1A, "Risk Factors — Increases in the costs and restrictions on the availability of raw materials, energy, commodities and product components could adversely affect our financial performance," in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

2019.

We have commodity price risk with respect to purchases of certain raw materials, including steel, copper, diesel fuel, chemicals, resins and leather. Our main cost exposures relate to steel, copper and leather. The majority of the steel used in our products is comprised of fabricated components that are integrated into a seat system, such as seat frames, recliner mechanisms, seat tracks and other

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mechanical components. Therefore, our exposure to changes in steel prices is primarily indirect, through these purchased components. Approximately ~~90%~~91% of our copper purchases and a significant portion of our leather purchases are subject to price index agreements with our ~~customers.~~customers and suppliers.

For further information related to the financial instruments described above, see Note ~~19,~~18, "Financial Instruments," to the condensed consolidated financial statements included in this Report.

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OTHER MATTERS

Legal and Environmental Matters

We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial and contractual disputes, product liability claims and environmental and other matters. As of ~~September 28, 2019,~~October 3, 2020, we had recorded reserves for pending legal disputes, including commercial disputes and other matters, of ~~$14~~$16 million. In addition, as of ~~September 28, 2019,~~October 3, 2020, we had recorded reserves for product liability claims and environmental matters of ~~$30~~$45 million and $9 million, respectively. Although these reserves were determined in accordance with GAAP, the ultimate outcomes of these matters are inherently uncertain, and actual results may differ significantly from current estimates. For a description of risks related to various legal proceedings and claims, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. For a more complete description of our outstanding material legal proceedings, see Note ~~17,~~16, "Legal and Other Contingencies," to the condensed consolidated financial statements included in this Report.

Significant Accounting Policies and Critical Accounting Estimates

Certain of our accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on our historical experience, the terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers and information available from other outside sources, as appropriate. However, these estimates and assumptions are subject to an inherent degree of uncertainty. As a result, actual results in these areas may differ significantly from our estimates. For a discussion of our significant accounting policies and critical accounting estimates, see Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Significant Accounting Policies and Critical Accounting Estimates," and Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. There have been no significant changes in our significant accounting policies or critical accounting estimates during the ~~third quarter~~first nine months of ~~2019,~~2020, with the exception of ~~leases.~~credit losses. See Note ~~10, "Leases,~~18, "Financial Instruments — Accounts Receivable," to the condensed consolidated financial statements included in this Report.

Recently Issued Accounting Pronouncements

For information on the impact of recently issued accounting pronouncements, see Note ~~20,~~19, "Accounting Pronouncements," to the condensed consolidated financial statements included in this Report.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. The words "will," "may," "designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of these forward-looking statements. We also may provide forward-looking statements in oral statements or other written materials released to the public. All such forward-looking statements contained or incorporated in this Report or in any other public statements which address operating performance, events or developments that we expect or anticipate may occur in the future, including, without limitation, statements related to business opportunities, awarded sales contracts, sales backlog and ongoing commercial arrangements, or statements expressing views about future operating results, are forward-looking statements. Actual results may differ materially from any or all forward-looking statements made by us. Important factors, risks and uncertainties that may cause actual results to differ materially from anticipated results include, but are not limited to:

•

general economic conditions in the markets in which we operate, including changes in interest rates or currency exchange rates;

~~general economic conditions in the markets in which we operate, including changes in interest rates or currency exchange rates;~~

•

the impact of the COVID-19 pandemic on our business and the global economy;

•

changes in actual industry vehicle production levels from our current estimates;

•

fluctuations in the production of vehicles or the loss of business with respect to, or the lack of commercial success of, a vehicle model for which we are a significant supplier;

•

the outcome of customer negotiations and the impact of customer-imposed price reductions;

•

the cost and availability of raw materials, energy, commodities and product components and our ability to mitigate such costs;

~~disruptions in relationships with our suppliers;~~

~~the financial condition of and adverse developments affecting our customers and suppliers;~~

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•

disruptions in relationships with our suppliers;

•

the financial condition of and adverse developments affecting our customers and suppliers;

•

risks associated with conducting business in foreign countries;

•

currency controls and the ability to economically hedge currencies;

•

global sovereign fiscal matters and creditworthiness, including potential defaults and the related impacts on economic activity, including the possible effects on credit markets, currency values, monetary unions, international treaties and fiscal policies;

~~the operational and financial success of our joint ventures;~~

•

competitive conditions impacting us and our key customers and suppliers;

~~competitive conditions impacting us and our key customers and suppliers;~~

•

labor disputes involving us or our significant customers or suppliers or that otherwise affect us;

~~labor disputes involving us or our significant customers or suppliers or that otherwise affect us;~~

•

the operational and financial success of our joint ventures;

•

the impact and timing of program launch costs and our management of new program launches;

•

limitations imposed by our existing indebtedness and our ability to access capital markets on commercially reasonable terms;

~~changes in discount rates and the actual return on pension assets;~~

•

changes affecting the availability of LIBOR;

~~impairment charges initiated by adverse industry or market developments;~~

•

changes in discount rates and the actual return on pension assets;

~~our ability to execute our strategic objectives;~~

•

impairment charges initiated by adverse industry or market developments;

~~disruptions to our information technology, including those related to cybersecurity;~~

•

our ability to execute our strategic objectives;

~~increases in our warranty, product liability or recall costs;~~

•

disruptions to our information technology systems, or those of our customers or suppliers, including those related to cybersecurity;

~~the outcome of legal or regulatory proceedings to which we are or may become a party;~~

•

increases in our warranty, product liability or recall costs;

~~the impact of pending legislation and regulations or changes in existing federal, state, local or foreign laws or regulations;~~

•

the outcome of legal or regulatory proceedings to which we are or may become a party;

~~the impact of regulations on our foreign operations;~~

•

the impact of pending legislation and regulations or changes in existing federal, state, local or foreign laws or regulations;

~~costs associated with compliance with environmental laws and regulations;~~

•

the impact of regulations on our foreign operations;

~~developments or assertions by or against us relating to intellectual property rights;~~

•

costs associated with compliance with environmental laws and regulations;

~~the impact of potential changes in tax and trade policies in the United States and related actions by countries in which we do business;~~

•

developments or assertions by or against us relating to intellectual property rights;

~~the anticipated changes in economic and other relationships between the United Kingdom and the European Union;~~

•

the impact of potential changes in tax and trade policies in the United States and related actions by countries in which we do business;

~~other risks described in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2018, and our other Securities and Exchange Commission ("SEC") filings.~~

•

the anticipated changes in economic and other relationships between the United Kingdom and the European Union; and

•

other risks described in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented and updated by Part II — Item 1A, "Risk Factors,” in this Report, and our other Securities and Exchange Commission ("SEC") filings.

The forward-looking statements in this Report are made as of the date hereof, and we do not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof.

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ITEM 4 — CONTROLS AND PROCEDURES

(a)
~~(a)~~	Disclosure Controls and Procedures

The Company has evaluated, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer along with the Company’s Senior Vice President and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Report. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Based on the evaluation described above, the Company’s President and Chief Executive Officer along with the Company’s Senior Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the desired control objectives were achieved as of the end of the period covered by this Report.

(b)
~~(b)~~	Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended ~~September 28, 2019,~~October 3, 2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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In April 2019, the Company completed the acquisition of Xevo Inc. (“Xevo”) and is currently integrating Xevo into its operations, compliance programs and internal control processes. Xevo constituted approximately 3% of the Company's total assets as of September 28, 2019, including the goodwill and intangible assets recorded as part of the purchase price allocation, and less than 1% of the Company's net sales in the three months ended September 28, 2019. SEC guidance allows companies to exclude acquisitions from their assessment of the internal control over financial reporting during the first year following an acquisition while integrating the acquired company. The Company has excluded the acquired operations of Xevo from its assessment of the Company's internal controls over financial reporting.

PART II — OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial or contractual disputes, product liability claims and environmental and other matters. For a description of risks related to various legal proceedings and claims, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. For a description of our outstanding material legal proceedings, see Note ~~17,~~16, "Legal and Other Contingencies," to the condensed consolidated financial statements included in this Report.

ITEM 1A — RISK FACTORS

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019, except for the addition of the risk factor set forth below:

•

Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance.

Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, the global economy. The COVID-19 pandemic has led to a dramatic reduction in economic activity worldwide. International, federal, state and local public health and governmental authorities have taken extraordinary actions to contain and combat the outbreak and spread of COVID-19 throughout most regions of the world, including travel bans, quarantines, "stay-at-home" orders and similar mandates that have caused many individuals to substantially restrict their daily activities and many businesses to curtail or cease normal operations.

The automotive industry has been particularly negatively impacted by the evolving situation with a sudden and sharp decline in consumer demand and automotive manufacturers suspending or severely limiting automobile production globally. We have experienced, and may continue to experience, reductions in orders from our customers globally, which in turn has adversely affected, and may continue to affect, our financial performance. This reduction in orders may be further exacerbated by the global economic downturn resulting from the pandemic, which could decrease consumer demand for vehicles or result in the financial distress of one or more of our customers or suppliers. As described in more detail under "Our industry is cyclical and a decline in the production levels of our major customers, particularly with respect to models for which we are a significant supplier, or the financial distress of one or more of our major customers could adversely affect our financial performance" and "Adverse developments affecting or the financial distress of one or more of our suppliers could adversely affect our financial performance" in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019, decreases in consumer demand for automotive vehicles, declines in the production levels of our major customers, financial distress of one or more of our major customers or suppliers or other adverse developments affecting one or more of our suppliers, could adversely affect our financial performance. In addition, if COVID-19 were to affect a significant amount of the workforce employed or operating at our facilities, we could experience delays or the inability to produce and deliver products to our customers on a timely basis.

Unprecedented industry disruptions related to the COVID-19 pandemic impacted operations in every region of the world. Our operations in China were impacted first, with most plants in the country closed for several weeks during the first quarter of 2020, resulting in significant decreases in vehicle production. Beginning in mid-March 2020, our operations in Europe, North America, South America and Asia (outside of China) were impacted, with virtually all of our plants closed at the end of the first quarter and closures continuing throughout April and, in most cases, a portion of May. As described in more detail under "Our substantial international operations make us vulnerable to risks associated with doing business in foreign countries" in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019, our substantial international operations make us vulnerable to risks associated with doing business in foreign countries.

While all of our global manufacturing plants have resumed production, we may experience unexpected delays or obstacles, such as higher employee absenteeism, supply chain disruptions or government mandates, that may hamper our ability to fully resume operations. Further, we may not be able to operate at optimal levels of efficiency given new work rules and procedures that will need to be implemented to protect our employees. The suspension of production at our manufacturing facilities, or difficulties or inefficiencies in resuming production, would likely adversely impact our future results of operations, financial condition and liquidity, and that impact may be material.

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As described in more detail under "Our existing indebtedness and the inability to access capital markets could restrict our business activities or our ability to execute our strategic objectives or adversely affect our financial performance" in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019, the volatility created by COVID-19 could adversely affect our access to the debt and capital markets. In addition, our ability to continue implementing important strategic initiatives and capital expenditures may be reduced as we devote time and other resources to responding to the impacts of the COVID-19 pandemic.

COVID-19 continues to spread globally and the extent to which our financial performance will be adversely affected will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the effectiveness of actions to contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts on our business and financial performance as a result of its global economic impact, including a recession that has occurred or may occur in the future, which will likely result in lower demand for new vehicles for a period of time, as new vehicle sales are typically correlated with positive consumer confidence and low unemployment.

The COVID-19 pandemic may also exacerbate other risks disclosed in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019, including, but not limited to, our competitiveness, demand for our products and shifting consumer preferences.

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ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As discussed in Part I — Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capitalization — Common Stock Share Repurchase Program," and Note ~~16,~~15, "Comprehensive Income (Loss) and Equity," to the condensed consolidated financial statements included in this Report, in March 2020, as a proactive measure in response to the COVID-19 pandemic, we suspended share repurchases under our share repurchase program. We have a remaining repurchase authorization of ~~$1,227.6~~$1,430.0 million under our ~~ongoing~~ common stock share repurchase program. ~~A summary of the~~

As shown below, there were no shares of our common stock repurchased during the quarter ended ~~September 28, 2019, is shown below:~~October 3, 2020.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions)
July 5, 2020 through August 1, 2020		-		-		-	$	1,430.0
August 2, 2020 through August 29, 2020		-		-		-		1,430.0
August 30, 2020 through October 3, 2020		-		-		-		1,430.0
Total		-		-		-	$	1,430.0

Period
Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans or Programs

Approximate Dollar
Value of Shares that
May Yet be
Purchased Under
the Program
(in millions)
June 30, 2019 through July 27, 2019 227,293
$133.13 227,293
$ 1,273.3
July 28, 2019 through August 24, 2019 211,100
$116.84 211,100
1,248.6
August 25, 2019 through September 28, 2019 178,242
$117.57 178,242
1,227.6
Total 616,635
$123.06 616,635
$ 1,227.6

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ITEM 6 — EXHIBITS

Exhibit Index

	Exhibit Number		Exhibit Name
*	31.1
	~~Exhibit~~ ~~Number~~		~~Exhibit Name~~
	~~10.1~~	~~****~~	Employment Agreement, dated August 8, 2019, between Lear Corporation and Carl A. Esposito (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 14, 2019).
	~~10.2~~	~~****~~	Employment Agreement, dated September 27, 2019, between Lear Corporation and Jason M. Cardew (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 1, 2019).
	~~10.3~~	~~****~~	Amended and Restated Employment Agreement, dated September 30, 2019, between Lear Corporation and Jeffrey H. Vanneste (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on October 1, 2019).
*	~~31.1~~		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
*	31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
*	32.1		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*	32.2		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**	101.INS		XBRL Instance Document
***	101.SCH		XBRL Taxonomy Extension Schema Document.
***	101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
***	101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
***	101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
***	101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
**	104		Cover Page Interactive Data File

*	Filed herewith.
**	The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File ~~becasue~~because their XBRL tags are embedded within the Inline XBRL document.
***	Submitted electronically with the Report.
~~****~~	~~Compensatory plan or arrangement.~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

LEAR CORPORATION

~~LEAR CORPORATION~~ Dated:	October 30, 2020
By:
~~Dated:~~	~~October 25, 2019~~	~~By:~~	/s/ Raymond E. Scott
				Raymond E. Scott
				President and Chief Executive Officer

		By:		/s/ ~~Jeffrey H. Vanneste~~Jason M. Cardew
			~~Jeffrey H. Vanneste~~	Jason M. Cardew
				Senior Vice President and Chief Financial Officer

Delaware		13-3386776

~~Delaware~~		~~13-3386776~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



~~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~~	LEA	New York Stock Exchange



Large accelerated filer	x ☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

		Page No.

	~~Page No.~~
Part I – Financial Information
Item 1 – Condensed Consolidated Financial Statements
Introduction to the Condensed Consolidated Financial Statements		3
Condensed Consolidated Balance Sheets - ~~September 28, 2019~~October 3, 2020 (Unaudited) and December 31, ~~2018~~2019		4
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and Nine Months Ended October 3, 2020 and September 28, 2019 ~~and September 29, 2018~~		5
Condensed Consolidated Statements of Equity (Unaudited) - Three and Nine Months Ended October 3, 2020 and September 28, 2019 ~~and September 29, 2018~~		6
Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended October 3, 2020 and September 28, 2019 ~~and September 29, 2018~~		10
Notes to the Condensed Consolidated Financial Statements		11
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	35	33
Item 3 – Quantitative and Qualitative Disclosures about Market Risk (included in Item 2)
Item 4 – Controls and Procedures	51	48
Part II – Other Information
Item 1 – Legal Proceedings	52	49
Item 1A – Risk Factors	52	49
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	52	51
Item 6 – Exhibits	53	52
Signatures	54	53

	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); 0 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


☒
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


☐
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 28, 2019 ⁽¹⁾			December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,300.9		$	1,493.2
Accounts receivable	3,320.7			2,880.3
Inventories	1,294.1			1,196.8
Other	702.3			710.2
Total current assets	6,618.0			6,280.5
LONG-TERM ASSETS:
Property, plant and equipment, net	2,599.7			2,598.1
Goodwill	1,600.4			1,405.3
Other	1,935.2			1,316.8
Total long-term assets	6,135.3			5,320.2
Total assets	$	12,753.3		$	11,600.7

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings	$	18.7		$	9.9
Accounts payable and drafts	2,986.8			2,862.8
Accrued liabilities	1,885.2			1,615.0
Current portion of long-term debt	17.1			12.9
Total current liabilities	4,907.8			4,500.6
LONG-TERM LIABILITIES:
Long-term debt	2,297.6			1,941.0
Other	1,026.3			640.4
Total long-term liabilities	3,323.9			2,581.4

Redeemable noncontrolling interest	146.5			158.1

EQUITY:
Preferred stock, 100,000,000 shares authorized (including 10,896,250 Series A convertible preferred stock authorized); no shares outstanding	—			—
Common stock, $0.01 par value, 300,000,000 shares authorized; 64,563,291 shares issued as of September 28, 2019 and December 31, 2018	0.6			0.6
Additional paid-in capital	963.1			1,017.4
Common stock held in treasury, 3,919,021 and 1,623,678 shares as of September 28, 2019 and December 31, 2018, respectively, at cost	(539.0		)	(225.1		)
Retained earnings	4,608.4			4,113.6
Accumulated other comprehensive loss	(829.3		)	(705.8		)
Lear Corporation stockholders’ equity	4,203.8			4,200.7
Noncontrolling interests	171.3			159.9
Equity	4,375.1			4,360.6
Total liabilities and equity	$	12,753.3		$	11,600.7



	Three Months Ended September 28, 2019
	Common Stock		Additional Paid-In Capital			Common Stock Held in Treasury			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Tax			Lear Corporation Stockholders' Equity
Balance at June 29, 2019	$	0.6	$	965.3		$	(466.6	)	$	4,435.3		$	(698.2	)	$	4,236.4
Comprehensive income (loss):
Net income	—		—			—			215.9			—			215.9
Other comprehensive loss	—		—			—			—			(131.1		)	(131.1		)
Total comprehensive income (loss)	—		—			—			215.9			(131.1		)	84.8
Stock-based compensation	—		1.7			—			—			—			1.7
Net issuance of 23,786 shares held in treasury in settlement of stock-based compensation	—		(3.9		)	3.5			(0.7		)	—			(1.1		)
Repurchase of 616,635 shares of common stock at average price of $123.06 per share	—		—			(75.9		)	—			—			(75.9		)
Dividends declared to Lear Corporation stockholders	—		—			—			(45.7		)	—			(45.7		)
Dividends declared to non-controlling interest holders	—		—			—			—			—			—
Changes in noncontrolling interests	—		—			—			—			—			—
Redeemable non-controlling interest adjustment	—		—			—			3.6			—			3.6
Balance at September 28, 2019	$	0.6	$	963.1		$	(539.0	)	$	4,608.4		$	(829.3	)	$	4,203.8



	Three Months Ended September 28, 2019
	Lear Corporation Stockholders' Equity			Non-controlling Interests			Equity			Redeemable Non-controlling Interests
Balance at June 29, 2019	$	4,236.4		$	163.1		$	4,399.5		$	155.0
Comprehensive income (loss):
Net income	215.9			22.0			237.9			0.7
Other comprehensive loss	(131.1		)	(5.8		)	(136.9		)	(5.6		)
Total comprehensive income (loss)	84.8			16.2			101.0			(4.9		)
Stock-based compensation	1.7			—			1.7			—
Net issuance of 23,786 shares held in treasury in settlement of stock-based compensation	(1.1		)	—			(1.1		)	—
Repurchase of 616,635 shares of common stock at average price of $123.06 per share	(75.9		)	—			(75.9		)	—
Dividends declared to Lear Corporation stockholders	(45.7		)	—			(45.7		)	—
Dividends declared to non-controlling interest holders	—			(2.4		)	(2.4		)	—
Changes in noncontrolling interests	—			(5.6		)	(5.6		)	—
Redeemable non-controlling interest adjustment	3.6			—			3.6			(3.6		)
Balance at September 28, 2019	$	4,203.8		$	171.3		$	4,375.1		$	146.5



	Three Months Ended September 29, 2018
	Common Stock		Additional Paid-In Capital			Common Stock Held in Treasury			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Tax			Lear Corporation Stockholders' Equity
Balance at June 30, 2018	$	0.7	$	1,166.8		$	(989.9	)	$	4,750.0		$	(627.7	)	$	4,299.9
Comprehensive income (loss):
Net income	—		—			—			252.5			—			252.5
Other comprehensive loss	—		—			—			—			(28.2		)	(28.2		)
Total comprehensive income (loss)	—		—			—			252.5			(28.2		)	224.3
Stock-based compensation	—		13.6			—			—			—			13.6
Net issuance of 23,416 shares held in treasury in settlement of stock-based compensation	—		(4.4		)	3.2			—			—			(1.2		)
Repurchase of 1,149,839 shares of common stock at average price of $169.60 per share	—		—			(195.0		)	—			—			(195.0		)
Dividends declared to Lear Corporation stockholders	—		—			—			(46.4		)	—			(46.4		)
Dividends declared to non-controlling interest holders	—		—			—			—			—			—
Redeemable non-controlling interest adjustment	—		—			—			(2.3		)	—			(2.3		)
Balance at September 29, 2018	$	0.7	$	1,176.0		$	(1,181.7	)	$	4,953.8		$	(655.9	)	$	4,292.9



	Nine Months Ended September 29, 2018
	Common Stock		Additional Paid-In Capital			Common Stock Held in Treasury			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Tax			Lear Corporation Stockholders' Equity
Balance at January 1, 2018	$	0.7	$	1,215.4		$	(724.1	)	$	4,171.9		$	(513.4	)	$	4,150.5
Comprehensive income (loss):
Net income	—		—			—			937.6			—			937.6
Other comprehensive loss	—		—			—			—			(142.5		)	(142.5		)
Total comprehensive income (loss)	—		—			—			937.6			(142.5		)	795.1
Stock-based compensation	—		40.7			—			—			—			40.7
Net issuance of 368,332 shares held in treasury in settlement of stock-based compensation	—		(80.1		)	33.1			—			—			(47.0		)
Repurchase of 2,697,188 shares of common stock at average price of $181.93 per share	—		—			(490.7		)	—			—			(490.7		)
Dividends declared to Lear Corporation stockholders	—		—			—			(141.1		)	—			(141.1		)
Dividends declared to non-controlling interest holders	—		—			—			—			—			—
Adoption of ASU 2016-16	—		—			—			2.3			—			2.3
Affiliate transaction	—		—			—			—			—			—
Acquisition of outstanding non-controlling interest	—		—			—			—			—			—
Redeemable non-controlling interest adjustment	—		—			—			(16.9		)	—			(16.9		)
Balance at September 29, 2018	$	0.7	$	1,176.0		$	(1,181.7	)	$	4,953.8		$	(655.9	)	$	4,292.9



	June 29, 2019		Adjustments			September 28, 2019
Net purchase price	$	320.9	$	0.8		$	321.7

Other assets purchased and liabilities assumed, net	$	1.2	$	7.7		$	8.9
Goodwill	197.5		22.1			219.6
Intangible assets	122.2		(29.0		)	93.2
Preliminary purchase price allocation	$	320.9	$	0.8		$	321.7



	December 31, 2018
Debt Instrument	Long-Term Debt		Unamortized Debt Issuance Costs			Unamortized Original Issue Discount			Long-Term Debt, Net			Weighted Average Interest Rate
Credit Agreement — Term Loan Facility	$	242.2	$	(1.5	)	$	—		$	240.7		3.92%
5.375% Senior Notes due 2024 (the "2024 Notes")	325.0		(2.0		)	—			323.0			5.375%
2025 Notes	650.0		(5.0		)	—			645.0			5.25%
2027 Notes	750.0		(5.3		)	(4.6		)	740.1			3.885%
Other	5.1		—			—			5.1			N/A
	$	1,972.3	$	(13.8	)	$	(4.6	)	1,953.9
Less — Current portion									(12.9		)
Long-term debt									$	1,941.0



	September 28, 2019
2019⁽¹⁾	$	35.3
2020	123.2
2021	101.1
2022	77.9
2023	60.1
Thereafter	207.9
Total undiscounted cash flows	605.5
Less: Imputed interest	(83.9		)
Lease obligations under operating leases	$	521.6

	Three Months Ended October 3, 2020			Nine Months Ended October 3, 2020
Defined benefit plans:
Balance at beginning of period	$	(211.7	)	$	(217.6	)
Reclassification adjustments (net of tax expense of $0.6 million and $1.3 million in the three and nine months ended October 3, 2020, respectively)		11.0			13.1
Other comprehensive loss recognized during the period (net of tax benefit of $5.4 million in the three and nine months ended October 3, 2020)		(29.7	)		(25.9	)
Balance at end of period	$	(230.4	)	$	(230.4	)
Derivative instruments and hedging:
Balance at beginning of period	$	(50.4	)	$	9.8
Reclassification adjustments (net of tax expense of $0.1 million and $1.8 million in the three and nine months ended October 3, 2020, respectively)		3.9			9.2
Other comprehensive income (loss) recognized during the period (net of tax benefit (expense) of ($6.3) million and $9.6 million in the three and nine months ended October 3, 2020, respectively)		14.8			(50.7	)
Balance at end of period	$	(31.7	)	$	(31.7	)
Foreign currency translation:
Balance at beginning of period	$	(660.9	)	$	(564.9	)
Other comprehensive income (loss) recognized during the period (net of tax benefit of $2.9 million and $0.7 million in the three and nine months ended October 3, 2020, respectively)		83.3			(12.7	)
Balance at end of period	$	(577.6	)	$	(577.6	)

Total accumulated other comprehensive loss	$	(839.7	)	$	(839.7	)



Balance at January 1, 2019	$	28.5
Expense, net (including changes in estimates)	12.4
Settlements	(11.2		)
Foreign currency translation and other	0.2
Balance at September 28, 2019	$	29.9

Net losses related to:
Foreign currency contracts	$	6.6
Interest rate swap contracts		2.4
Total	$	9.0



Net gains related to foreign currency contracts	$	16.4
Net losses related to interest rate swap contracts	(2.3		)
Total	$	14.1


Market:
~~Market:~~		This approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Income:		This approach uses valuation techniques to convert future amounts to a single present value amount based on current market expectations.

Cost:		This approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost).



Level 1:		Observable inputs, such as quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2:		Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability.

Level 3:		Unobservable inputs that reflect the entity’s own assumptions about the exit price of the asset or liability. Unobservable inputs may be used if there is little or no market data for the asset or liability at the measurement date.

	October 3, 2020
	Frequency	Asset (Liability)			Valuation Technique	Level 1		Level 2			Level 3
Foreign currency contracts, net	Recurring	$	(3.2	)	Market/ Income	$	0	$	(3.2	)	$	0
Net investment hedges	Recurring	$	(7.9	)	Market/ Income	$	0	$	(7.9	)	$	0
Marketable equity securities	Recurring	$	50.8		Market	$	50.8	$	0		$	0

	December 31, 2019
	Frequency	Asset (Liability)			Valuation Technique	Level 1		Level 2			Level 3
Foreign currency contracts, net	Recurring	$	50.3		Market/ Income	$	0	$	50.3		$	0
Net investment hedges	Recurring	$	(4.4	)	Market/ Income	$	0	$	(4.4	)	$	0
Marketable equity securities	Recurring	$	59.2		Market	$	59.2	$	0		$	0

	Nine Months Ended
	October 3, 2020 ⁽¹⁾		September 28, 2019 ^(1) (2)		% Change
North America		9.2		12.5		(26	)%
Europe and Africa		11.5		16.4		(30	)%
Asia		26.4		32.5		(19	)%
South America		1.4		2.4		(41	)%
Other		1.0		1.1		(8	)%
Global light vehicle production		49.4		64.9		(24	)%



	Nine Months Ended
	September 28, 2019 ⁽¹⁾	September 29, 2018 ^{(1) (2)}	% Change
North America	12.5	12.8	(2	)%
Europe and Africa	16.4	17.1	(4	)%
Asia	32.7	35.2	(7	)%
South America	2.4	2.5	(3	)%
Other	1.0	1.5	(34	)%
Global light vehicle production	65.0	69.1	(6	)%



(in millions)	Cost of Sales
Third quarter 2018	$	4,365
Material cost	21
Labor and other	(25		)
Depreciation	5
Third quarter 2019	$	4,366



(in millions)	Cost of Sales
First nine months of 2018	$	14,410
Material cost	(720		)
Labor and other	(120		)
Depreciation	12
First nine months of 2019	$	13,582



Note	Aggregate Principal Amount at Maturity		Stated Coupon Rate
Senior unsecured notes due 2025 (the "2025 Notes")	$	650	5.25	%
Senior unsecured notes due 2027 (the "2027 Notes")	750		3.80	%
2029 Notes	375		4.25	%
2049 Notes	325		5.25	%
	$	2,100



Payment Date	Dividend Per Share		Declaration Date	Record Date
March 20, 2019	$	0.75	February 7, 2019	March 1, 2019
June 26, 2019	$	0.75	May 16, 2019	June 7, 2019
September 17, 2019	$	0.75	August 7, 2019	August 29, 2019



		Potential Earnings Benefit (Adverse Earnings Impact)
	Hypothetical Strengthening % ⁽¹⁾	September 28, 2019			December 31, 2018
U.S. dollar	10%	$	(16	)	$	(19	)
Euro	10%	19			20



		Estimated Change in Fair Value
	Hypothetical Change % ⁽²⁾	September 28, 2019		December 31, 2018
U.S. dollar	10%	$	51	$	37
Euro	10%	56		72



Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions)
June 30, 2019 through July 27, 2019	227,293	$133.13	227,293	$	1,273.3
July 28, 2019 through August 24, 2019	211,100	$116.84	211,100	1,248.6
August 25, 2019 through September 28, 2019	178,242	$117.57	178,242	1,227.6
Total	616,635	$123.06	616,635	$	1,227.6