| --- | --- | --- | --- | --- | --- | --- | |----------------|-----------------|-------|-------|-------|----------------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | LEAR | | | | | | | | | Systems Product | | | | | | | March 25, 2021 | | | | | Making every drive better™ | | Safe Harbor Statement UT Automotive Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statemen ...

PART I [ITEM 1. Business](index=3&type=section&id=ITEM%201.%20Business) Lear Corporation is a leading global automotive supplier of seating and E-Systems, focusing on profitable growth, innovation, and ESG principles across 38 countries - Lear Corporation is a leading Tier 1 vertically integrated supplier to the global automotive industry, providing seating, electrical distribution and connection systems, electronic systems, and software and connected services[16](index=16&type=chunk) - Operates 251 manufacturing, engineering, and administrative locations in 38 countries, with **68%** of manufacturing facilities and **86%** of employees located in low-cost countries[16](index=16&type=chunk) - Financial goals include delivering profitable growth, investing in innovation, maintaining a strong balance sheet with investment-grade credit metrics, and consistently returning excess cash to stockholders[17](index=17&type=chunk) - Integrated responsible and sustainable environmental, social, and governance (ESG) principles, with ambitious carbon reduction goals by 2030 (**100%** renewable energy, **50%** carbon emission reduction at manufacturing facilities) and an aspiration to be carbon neutral by 2050[23](index=23&type=chunk)[24](index=24&type=chunk) - Innovating and manufacturing products that contribute to a more sustainable economy and future mobility, such as SoyFoam™ (petroleum-based substitute), seat coverings from recycled ocean plastics, on-board battery chargers, battery management systems, and high voltage wiring for hybrid and electric vehicles[25](index=25&type=chunk) [BUSINESS OF THE COMPANY - General](index=3&type=section&id=BUSINESS%20OF%20THE%20COMPANY%20-%20General) Lear is a global Tier 1 automotive supplier with Seating and E-Systems segments, offering integrated solutions for all vehicle architectures - Seating segment designs, develops, engineers, and manufactures complete seat systems, seat subsystems, and key seat components, including advanced comfort, wellness, safety, and sound offerings compatible with traditional internal combustion engine (ICE) architectures and all hybrid/electric architectures[17](index=17&type=chunk) - E-Systems segment designs, develops, engineers, and manufactures complete electrical distribution and connection systems, electronic systems, and software and connected services, including wire harnesses, terminals, connectors, body domain control modules, on-board battery chargers, high voltage battery management systems, gateway modules, and Xevo Market in-vehicle commerce platform[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - The combined capabilities of the Seating and E-Systems businesses provide a competitive advantage due to the increasing electrical and electronic integration required in seat systems[20](index=20&type=chunk) [History](index=5&type=section&id=History) Founded in 1917, Lear grew through strategic acquisitions, notably UT Automotive, to become a global seating and E-Systems supplier - Founded in Detroit in 1917 as American Metal Products, manufacturing seating assemblies and other components for the automotive and aircraft industries[31](index=31&type=chunk) - Acquired UT Automotive, Inc. in May 1999, marking entry into automotive electrical and electronic systems and forming the basis for the current E-Systems segment[32](index=32&type=chunk) - Key acquisitions include Guilford Mills (automotive fabric, 2012), Eagle Ottawa (automotive leather, 2015), Autonet Mobile (wireless communication software, 2015), Arada Systems Inc. (V2X communications, 2015), Grupo Antolin's automotive seating business (2017), EXO Technologies (GPS technology, 2018), and Xevo Inc. (connected car software, 2019)[33](index=33&type=chunk) - Launched Lear Innovation Ventures (LIV) in January 2019 to invest in advanced development teams, partnerships, and early-stage technologies[33](index=33&type=chunk) [Industry and Strategy](index=6&type=section&id=Industry%20and%20Strategy) Automotive industry is cyclical, impacted by COVID-19; Lear's strategy focuses on profitable growth, innovation, and emerging markets - Global automotive industry production volumes declined **6%** in 2019 and another **17%** in 2020 to **72.6 million** units, largely due to the COVID-19 pandemic[34](index=34&type=chunk) Light Vehicle Production by Region (2019-2020) | (In thousands of units) | 2020 | 2019 | % Change | | :---------------------- | :----- | :----- | :------- | | North America | 13,027.3 | 16,314.4 | (20%) | | Europe and Africa | 16,873.9 | 21,703.8 | (22%) | | Asia | 39,257.7 | 44,651.8 | (12%) | | South America | 2,163.5 | 3,128.5 | (31%) | | Other | 1,323.5 | 1,417.0 | (7%) | | **Total** | **72,645.9** | **87,215.5** | **(17%)** | - Key trends affecting the business include electrification, connectivity, autonomy, consolidation of automotive manufacturers, new non-traditional entrants, collaboration on common vehicle platforms, increasing demand for luxury and performance features, and China's emergence as the largest automotive market[39](index=39&type=chunk) - Strategy includes disciplined investment in business to grow and enhance product offerings, strategically focusing on products and technologies to support emerging trends (autonomy, connectivity, electrification, shared mobility), and leveraging an industry-leading cost structure to expand operating margins[22](index=22&type=chunk) - The shift toward crossover and sport utility vehicles is benefiting the business, with content on such vehicles significantly higher than average content per vehicle; crossover and SUV production grew to approximately **40%** of total vehicle production in 2020 (up from **27%** five years ago)[40](index=40&type=chunk) [Seating Segment](index=8&type=section&id=Seating%20Segment) Lear is a global leader in vertically integrated seating systems, targeting 28% market share with innovations for comfort, safety, and sustainability - Lear is a recognized global leader in complete automotive seat systems, realizing a **23%** global market share in 2020, with a target global market share of **28%**[47](index=47&type=chunk) - Most vertically integrated global seat supplier, with capabilities in seat trim covers, surface materials (leather and fabric), seat mechanisms, seat foam, and headrests[17](index=17&type=chunk)[47](index=47&type=chunk) - Advanced seating innovations include Intelligent Seating (INTU™ Seating) systems for enhanced wellness, safety, comfort, and sound performance, and Configurable Seating Architecture (ConfigurE+™) products for flexible seat positioning and functionality[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Committed to sustainability, producing "green" products like SoyFoam™ and seat coverings made from recycled ocean plastics[50](index=50&type=chunk) - Top five customers of the Seating segment are General Motors, Daimler, Stellantis, Volkswagen, and Ford[61](index=61&type=chunk) - Primary global competitors include Adient, plc, Faurecia S.A., Magna International Inc., Toyota Boshoku Corporation, and TS Tech Co., Ltd[63](index=63&type=chunk) [E-Systems Segment](index=11&type=section&id=E-Systems%20Segment) E-Systems leads in electrical distribution, electronic systems, and software for all vehicle architectures, supporting electrification and connectivity - E-Systems segment consists of the design, development, engineering, and manufacture of complete electrical distribution and connection systems, electronic systems, and software and connected services for light vehicles globally[64](index=64&type=chunk) - Possesses a competitive advantage as the only automotive supplier with both electrical distribution and electronic capabilities for all vehicle architectures, enabling customized, optimized solutions[65](index=65&type=chunk) - Electrified vehicle architectures represent a significant content per vehicle expansion opportunity, with two to three times the potential content per vehicle opportunity of traditional ICE architectures[65](index=65&type=chunk) - Product lines include wire harnesses, terminals and connectors, engineered components, body domain control modules, smart and passive junction boxes, gateway and communication modules, integrated power modules (on-board battery chargers, DC/DC converters, high voltage power distribution units), high voltage battery management systems, embedded control software, and Xevo Market in-vehicle commerce platform[66](index=66&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) - Technology includes expertise in alternative conductor materials (aluminum), proprietary manufacturing process technologies (3D wire harness assembly boards), advanced terminals and connectors, smart junction box technology, ethernet-enabled gateway modules, high efficiency battery chargers, and full software capabilities in-house, 5G cellular expertise, V2X communications, and cybersecurity[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Top five customers of the E-Systems segment are Ford, Volkswagen, Renault-Nissan, Jaguar Land Rover, and Geely[76](index=76&type=chunk) [Customers](index=14&type=section&id=Customers) Lear serves major automotive OEMs, with a **$2.8 billion** sales backlog for 2021-2023, influenced by production volumes and content per vehicle - In 2020, General Motors accounted for **19%** of net sales, Ford for **13%**, and Stellantis for **11%**[83](index=83&type=chunk) - As of January 2021, the 2021 to 2023 sales backlog is **$2.8 billion** (**4%** increase from January 2020), with **$1.0 billion** related to 2021, and **68%** for Seating and **32%** for E-Systems segments[85](index=85&type=chunk) - Sales backlog at non-consolidated joint ventures is approximately **$400 million**[85](index=85&type=chunk) - Net sales for the year ended December 31, 2020, consisted of **31%** passenger cars, **52%** crossover and sport utility vehicles, and **17%** trucks and vans[86](index=86&type=chunk) - Agreements with major customers generally provide for annual productivity price reductions, which are historically offset by cost reductions through product design changes, increased manufacturing productivity, and supplier programs[87](index=87&type=chunk) [Seasonality](index=15&type=section&id=Seasonality) Operations experience seasonal fluctuations due to automotive production slowdowns for model year changeovers and holidays - Experiences seasonal fluctuations due to automotive vehicle production slowdowns, such as in summer months for model year changeovers, in December for holidays, and during periods of high vehicle inventory[88](index=88&type=chunk) [Raw Materials](index=15&type=section&id=Raw%20Materials) Raw materials like fabric, foam, leather, steel, and copper are sourced from multiple suppliers, with some subject to price index agreements - Principal raw materials used in seat systems, electrical distribution and connection systems, and electronic systems are generally available and obtained from multiple suppliers[89](index=89&type=chunk) - Key components like fabric, foam, leather, seat mechanisms, terminals and connectors are either manufactured internally or purchased from multiple suppliers[89](index=89&type=chunk) - Exposure to changes in steel prices is primarily indirect, through fabricated components like seat frames, recliner mechanisms, and seat tracks[89](index=89&type=chunk) - Approximately **92%** of copper purchases and a significant portion of leather purchases are subject to price index agreements with customers and suppliers[89](index=89&type=chunk)[280](index=280&type=chunk) [Human Capital Management](index=15&type=section&id=Human%20Capital%20Management) Lear had **174,600** employees in 2020, with a unionized workforce, focusing on health, safety, DEI, and talent development Worldwide Employment Levels (2019-2020) | Region | 2020 | 2019 | | :------------------ | :----- | :----- | | United States and Canada | 10,600 | 10,100 | | Mexico | 55,200 | 50,400 | | Central and South America | 20,900 | 17,000 | | Europe and Africa | 56,500 | 56,800 | | Asia | 31,400 | 29,800 | | **Total** | **174,600** | **164,100** | - A substantial number of employees (approximately **47%**) are members of unions or national trade organizations, with collective bargaining agreements in North America, Mexico, and Europe[90](index=90&type=chunk)[125](index=125&type=chunk)[560](index=560&type=chunk) - Maintains health and safety programs designed around global standards, compliant with ISO 45001, and created a 'Safe Work Playbook' in 2020 in response to the COVID-19 pandemic[93](index=93&type=chunk)[94](index=94&type=chunk) - Committed to diversity, equity, and inclusion, with initiatives addressing racial inequality, an Executive Diversity Council, and employee resource groups[95](index=95&type=chunk) - Delivered over **3.7 million** hours of training since 2019, including leadership development programs like Leads Self Lite, Emerging Leaders Development Program, and CEO Academy[96](index=96&type=chunk) [Intellectual Property](index=16&type=section&id=Intellectual%20Property) Lear holds **2,300** patents and invests in new technologies through global centers, protecting key trademarks like XEVO and INTU - Holds approximately **2,300** patents and patent applications worldwide, though no individual patent or group is critical to business success[97](index=97&type=chunk) - Advanced technology development is conducted worldwide at nine advanced technology centers and product engineering centers, with a global innovation and technology center in Southfield, Michigan[98](index=98&type=chunk) - Key trademarks include LEAR CORPORATION, XEVO, GUILFORD, EAGLE OTTAWA, ConfigurE+™ seating, INTU™ seating, LEAR CONNEXUS™ signal and data communications, EXO® high-accuracy positioning, JOURNEYWARE™ software, ProTec® active head restraints, SMART JUNCTION BOX™ technology, STRUCSURE™ systems, AVENTINO® leather, and TeXstyle® fabrics[99](index=99&type=chunk) [Government Regulations and Environmental Matters](index=17&type=section&id=Government%20Regulations%20and%20Environmental%20Matters) Lear complies with health, safety, and environmental regulations, committed to sustainability and developing green technologies - Subject to a variety of federal, state, local, and foreign laws and regulations, including those related to health, safety, and environmental matters; compliance costs are not material[100](index=100&type=chunk) - Committed to sustainability in operations and products, adhering to environmental laws and developing "green" technology products like SoyFoam™ and technologies for hybrid and electric vehicles[100](index=100&type=chunk)[101](index=101&type=chunk) [Joint Ventures and Noncontrolling Interests](index=17&type=section&id=Joint%20Ventures%20and%20Noncontrolling%20Interests) Lear uses joint ventures to expand in new markets, with **13** operating JVs in five countries, contributing **8%** of net sales in 2020 - Forms joint ventures to gain entry into new markets, expand product offerings, and broaden its customer base, particularly with Asian automotive manufacturers in emerging markets[102](index=102&type=chunk) - As of December 31, 2020, had thirteen operating joint ventures in five countries (eleven in Asia, two in North America), with four consolidated and nine accounted for using the equity method[103](index=103&type=chunk) - Net sales of consolidated joint ventures accounted for approximately **8%** of net sales in 2020[103](index=103&type=chunk) - Investments in non-consolidated joint ventures totaled **$143 million** as of December 31, 2020[103](index=103&type=chunk) Summary of Non-Consolidated Operating Joint Ventures (Dec 31, 2020) | Country | Name | Ownership Percentage | | :-------- | :---------------------------------------- | :------------------- | | China | Beijing BHAP Lear Automotive Systems Co., Ltd. | 50% | | China | Guangzhou Lear Automotive Components Co., Ltd. | 50 | | China | Jiangxi Jiangling Lear Interior Systems Co., Ltd. | 50 | | China | Lear Dongfeng Automotive Seating Co., Ltd. | 50 | | China | Changchun Lear FAWSN Automotive Seat Systems Co., Ltd. | 49 | | China | Beijing Lear Hyundai Transys Co., Ltd. | 40 | | Honduras | Honduras Electrical Distribution Systems S. de R.L. de C.V. | 49 | | India | Hyundai Transys Lear Automotive Private Limited | 35 | | United States | Kyungshin-Lear Sales and Engineering LLC | 49 | [ITEM 1A. Risk factors](index=19&type=section&id=ITEM%201A.%20Risk%20factors) Lear faces risks from cyclical automotive industry, pandemics, supply chain, competition, international operations, and regulatory changes - The automotive industry is cyclical and sensitive to general economic conditions; a decline in production levels or financial distress of major customers could adversely affect financial performance[108](index=108&type=chunk)[109](index=109&type=chunk) - Pandemics or disease outbreaks, such as COVID-19, have disrupted and may continue to disrupt the global economy and the company's business, leading to reduced orders, supply chain disruptions, and operational inefficiencies[110](index=110&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) - Inability to achieve product cost reductions to offset customer-imposed annual price reductions could adversely affect financial performance[119](index=119&type=chunk) - Increases in the costs and restrictions on the availability of raw materials, energy, commodities, and product components could adversely affect financial performance[120](index=120&type=chunk) - Substantial international operations make the company vulnerable to risks associated with doing business in foreign countries, including economic instability, labor unrest, currency fluctuations, and trade barriers[122](index=122&type=chunk)[123](index=123&type=chunk) - Operates in a highly competitive industry, facing efforts by competitors and new non-traditional entrants to gain market share, which could exert downward pressure on pricing and margins[124](index=124&type=chunk) - A significant labor dispute involving the company or its customers/suppliers could adversely affect financial performance, especially with labor agreements covering approximately **85%** of the global unionized workforce expiring in 2021[125](index=125&type=chunk) - Risks related to indebtedness include covenants restricting business activities, potential inability to access capital markets, and changes affecting LIBOR, which could result in higher interest rates[132](index=132&type=chunk)[133](index=133&type=chunk) - Disruptions in information technology systems, including cybersecurity breaches, could lead to business disruption, theft of intellectual property, unauthorized data access, and regulatory actions[114](index=114&type=chunk)[134](index=134&type=chunk) - Changes in U.S. administrative policy, including trade agreements (e.g., USMCA transition) and tariffs (e.g., on China imports), could adversely affect business, financial condition, and operating results[143](index=143&type=chunk) [ITEM 1B. Unresolved staff comments](index=26&type=section&id=ITEM%201B.%20Unresolved%20staff%20comments) No unresolved staff comments to report - No unresolved staff comments[147](index=147&type=chunk) [ITEM 2. Properties](index=27&type=section&id=ITEM%202.%20Properties) Lear operates **251** facilities in **38** countries, including manufacturing, distribution, and technology centers, with headquarters in Southfield, Michigan - As of December 31, 2020, operations were conducted through **251** facilities in **38** countries, including **78** just-in-time manufacturing facilities, **127** dedicated component manufacturing facilities, **5** sequencing and distribution sites, **32** administrative/technical support facilities, and **9** advanced technology centers[150](index=150&type=chunk) - Corporate headquarters is located in Southfield, Michigan[150](index=150&type=chunk) Selected Facilities by Segment and Country | Seating (Selected) | E-Systems (Selected) | Administrative/Technical (Selected) | | :----------------- | :------------------- | :---------------------------------- | | Argentina, Brazil, Canada, China, Czech Republic, Dominican Republic, France, Germany, Hungary, India, Indonesia, Italy, Macedonia, Malaysia, Mexico, Moldova, Morocco, Poland, Portugal, Romania, Russia, Slovak Republic, South Africa, South Korea, Spain, Thailand, United Kingdom, United States, Vietnam | Argentina, Brazil, China, Czech Republic, Germany, Honduras, Hungary, Japan, Mexico, Morocco, Philippines, Romania, Serbia, South Africa, Spain, Thailand, United States | Belgium, Brazil, China, Czech Republic, France, Germany, India, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, Philippines, South Korea, Spain, Sweden, Thailand, United Kingdom, United States | [ITEM 3. Legal proceedings](index=28&type=section&id=ITEM%203.%20Legal%20proceedings) Lear is involved in various legal proceedings, with risks detailed in Item 1A and material cases in Note 14 of financial statements - Involved from time to time in various legal proceedings and claims, including commercial or contractual disputes, product liability claims, and environmental and other matters[154](index=154&type=chunk) - Risks related to these proceedings are described in Item 1A, "Risk Factors"[154](index=154&type=chunk) - Outstanding material legal proceedings are detailed in Note 14, "Commitments and Contingencies," to the consolidated financial statements[154](index=154&type=chunk) [ITEM 4. Mine safety disclosures](index=28&type=section&id=ITEM%204.%20Mine%20safety%20disclosures) No mine safety disclosures to report - None[156](index=156&type=chunk) [SUPPLEMENTARY ITEM. Information about our executive officers](index=28&type=section&id=SUPPLEMENTARY%20ITEM.%20Information%20about%20our%20executive%20officers) Provides a list of Lear's executive officers, their ages, positions, and business experience, appointed annually by the Board Executive Officers of Lear Corporation | Name | Age | Position | | :-------------- | :-- | :-------------------------------------------- | | Shari L. Burgess | 62 | Vice President and Treasurer | | Jason M. Cardew | 50 | Senior Vice President and Chief Financial Officer | | Alicia J. Davis | 50 | Senior Vice President, Corporate Development and Investor Relations | | Thomas A. DiDonato | 62 | Senior Vice President and Chief Administrative Officer | | Amy A. Doyle | 53 | Vice President and Chief Accounting Officer | | Carl A. Esposito | 53 | Senior Vice President and President, E-Systems | | Harry A. Kemp | 45 | Senior Vice President, General Counsel and Corporate Secretary | | Frank C. Orsini | 48 | Executive Vice President and President, Seating | | Raymond E. Scott | 55 | President and Chief Executive Officer | - Executive officers are appointed annually by the Board of Directors and serve at the pleasure of the Board[157](index=157&type=chunk) PART II [ITEM 5. Market for the Company's common equity, related stockholder matters and issuer purchases of equity securities](index=30&type=section&id=ITEM%205.%20Market%20for%20the%20Company%27s%20common%20equity%2C%20related%20stockholder%20matters%20and%20issuer%20purchases%20of%20equity%20securities) Lear's common stock (LEA) is on NYSE; dividends reinstated in Q4 2020, and a **$1.4 billion** share repurchase program was suspended - Common stock is listed on the New York Stock Exchange under the symbol "LEA"[163](index=163&type=chunk) - Quarterly cash dividends were suspended in March 2020 in response to the COVID-19 pandemic and reinstated in the fourth quarter of 2020 at **$0.25** per share[163](index=163&type=chunk)[212](index=212&type=chunk)[271](index=271&type=chunk) - Board of Directors authorized **$6.1 billion** in share repurchases since Q1 2011; **$1.4 billion** remaining authorization as of December 31, 2020, expiring December 31, 2022[165](index=165&type=chunk)[211](index=211&type=chunk)[531](index=531&type=chunk) - Share repurchases under the program were suspended in March 2020 as a proactive measure in response to the COVID-19 pandemic[165](index=165&type=chunk)[211](index=211&type=chunk)[528](index=528&type=chunk) Common Stock Repurchases (2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------------------- | :------------------------------- | :--------------------------- | | October 4, 2020 through October 31, 2020 | — | $— | | November 1, 2020 through November 28, 2020 | — | — | | November 29, 2020 through December 31, 2020 | — | — | | **Total** | **—** | **$—** | [ITEM 6. Selected financial data](index=32&type=section&id=ITEM%206.%20Selected%20financial%20data) Provides a five-year summary of selected financial data, highlighting the **COVID-19** impact on net sales, gross profit, and net income in 2020 Selected Income Statement Data (in millions) | For the year ended December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------ | :---------- | :---------- | :---------- | :---------- | :---------- | | Net sales | $17,045.5 | $19,810.3 | $21,148.5 | $20,467.0 | $18,557.6 | | Gross profit | $1,108.9 | $1,737.5 | $2,318.3 | $2,291.1 | $2,122.6 | | Net income attributable to Lear | $158.5 | $753.6 | $1,149.8 | $1,313.4 | $975.1 | | Basic net income per share | $2.63 | $12.80 | $17.35 | $18.79 | $13.48 | | Diluted net income per share | $2.62 | $12.75 | $17.22 | $18.59 | $13.33 | | Dividends per share | $1.02 | $3.00 | $2.80 | $2.00 | $1.20 | Selected Cash Flow Data (in millions) | For the year ended December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------ | :-------- | :-------- | :-------- | :-------- | :-------- | | Cash flows from operating activities | $663.1 | $1,284.3 | $1,779.8 | $1,783.1 | $1,619.3 | | Cash flows from investing activities | $(468.8) | $(922.4) | $(693.5) | $(868.6) | $(637.1) | | Cash flows from financing activities | $(411.7) | $(361.9) | $(1,030.5) | $(742.0) | $(872.9) | | Capital expenditures | $452.3 | $603.9 | $677.0 | $594.5 | $528.3 | Selected Balance Sheet Data (in millions) | As of December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Total assets | $13,198.6 | $12,680.7 | $11,600.7 | $11,945.9 | $9,900.6 | | Long-term debt | $2,300.3 | $2,293.7 | $1,941.0 | $1,951.5 | $1,898.0 | | Equity | $4,614.9 | $4,501.1 | $4,360.6 | $4,292.6 | $3,192.9 | Selected Other Data | Other Data (unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--------------------- | :------ | :------ | :------ | :------ | :------ | | Employees at year end | 174,600 | 164,100 | 169,000 | 165,000 | 148,400 | | North American content per vehicle | $509 | $451 | $452 | $456 | $422 | | European content per vehicle | $370 | $359 | $385 | $354 | $316 | [ITEM 7. Management's discussion and analysis of financial condition and results of operations](index=35&type=section&id=ITEM%207.%20Management%27s%20discussion%20and%20analysis%20of%20financial%20condition%20and%20results%20of%20operations) Management discusses Lear's financial performance, condition, and operations, focusing on **COVID-19** impact, liquidity, and strategic objectives - Strategic objectives include delivering profitable growth, investing in innovation, maintaining a strong balance sheet with investment-grade credit metrics, and consistently returning excess cash to stockholders[179](index=179&type=chunk) - Financial performance is primarily evaluated based on earnings, operating margins, cash flows, and return on invested capital[198](index=198&type=chunk) - Material cost as a percentage of net sales was **64.3%** in 2020, compared to **65.0%** in 2019 and **64.4%** in 2018[197](index=197&type=chunk) [Executive Overview](index=35&type=section&id=Executive%20Overview) Lear is a leading Tier 1 global automotive supplier of Seating and E-Systems, focused on profitable growth, innovation, and shareholder returns - Lear is a leading Tier 1 vertically integrated supplier to the global automotive industry, supplying seating, electrical distribution and connection systems, electronic systems, and software and connected services[178](index=178&type=chunk) - The Seating business designs, develops, engineers, and manufactures complete seat systems, seat subsystems, and key seat components, including advanced comfort, wellness, safety, and configurable seating product technologies[181](index=181&type=chunk) - The E-Systems business designs, develops, engineers, and manufactures complete electrical distribution and connection systems, electronic systems, and software and connected services, providing customizable solutions for all types of powertrains[182](index=182&type=chunk) - The combined capabilities of the Seating and E-Systems businesses offer a competitive advantage due to the increasing levels of electrical and electronic integration required in seat systems[183](index=183&type=chunk) [COVID-19 Pandemic](index=38&type=section&id=COVID-19%20Pandemic) **COVID-19** caused a **17%** decline in global light vehicle production, leading to operational disruptions and proactive liquidity measures Global Light Vehicle Production (2019-2020) | | 2020 (thousands of units) | 2019 (thousands of units) | % Change | | :------------------------ | :------------------------ | :------------------------ | :------- | | North America | 13,027.3 | 16,314.4 | (20 %) | | Europe and Africa | 16,873.9 | 21,703.8 | (22 %) | | Asia | 39,257.7 | 44,651.8 | (12 %) | | South America | 2,163.5 | 3,128.5 | (31 %) | | Other | 1,323.5 | 1,417.0 | (7 %) | | **Global light vehicle production** | **72,645.9** | **87,215.5** | **(17 %)** | - Operations in China were first impacted, followed by widespread plant closures in Europe, North America, South America, and Asia (outside of China) from mid-March through April/May 2020[186](index=186&type=chunk) - Experienced significant inefficiencies and incremental costs related to the COVID-19 pandemic in the first half of 2020, diminishing toward the end of Q2, but ongoing costs for personal protective equipment, employee transportation, and higher labor costs due to absenteeism in H2 2020[186](index=186&type=chunk) - Took proactive steps to preserve cash and maximize financial flexibility, including reducing discretionary spending, implementing salary reductions/deferrals, cutting capital expenditures, managing working capital, and suspending share repurchases and quarterly dividends (reinstated Q4 2020)[188](index=188&type=chunk) - Ended 2020 with **$1.3 billion** of cash on hand and **$1.75 billion** of availability under the revolving credit facility, positioning the company to withstand continuing effects of the pandemic[188](index=188&type=chunk) [Industry Overview](index=39&type=section&id=Industry%20Overview) Lear's results depend on production volumes and content per vehicle, with diversified sales across regions and a focus on emerging trends Consolidated Net Sales by Region (2019-2020) | | 2020 | 2019 | | :---------------- | :--- | :--- | | North America | 39 % | 37 % | | Europe and Africa | 37 % | 39 % | | Asia | 21 % | 20 % | | South America | 3 % | 4 % | | **Total** | **100 %** | **100 %** | - Key trends affecting the business include electrification, connectivity, autonomy, consolidation of automotive manufacturers, new non-traditional entrants, commonized vehicle platforms, increasing demand for luxury and performance features, and China's emergence as the largest automotive market[193](index=193&type=chunk) - Strategy focuses on quality, service, cost and efficiency, and innovation and technology, including expanding key component and software capabilities, aligning manufacturing and engineering footprint for competitive cost, and expanding in new/growing markets like China[195](index=195&type=chunk) - Material cost as a percentage of net sales was **64.3%** in 2020, compared to **65.0%** in 2019 and **64.4%** in 2018[197](index=197&type=chunk) - Strategies to mitigate higher raw material, energy, and commodity costs include selective in-sourcing, supply base consolidation, longer-term purchase commitments, low-cost country sourcing and engineering, value engineering, and product benchmarking[197](index=197&type=chunk) [Financial Measures](index=40&type=section&id=Financial%20Measures) Lear evaluates performance by earnings, operating margins, cash flows, and ROI, focusing expansion on emerging markets - Focuses primarily on earnings, operating margins, cash flows, and return on invested capital in evaluating financial condition and operating performance[198](index=198&type=chunk) - Expansion plans are focused primarily on emerging markets, particularly Asia and China, to expand market share and content per vehicle[198](index=198&type=chunk) - Success in generating cash flow depends on effective working capital management (aligning vendor/customer payment terms, managing inventory) and capital spending[199](index=199&type=chunk) [Acquisition](index=40&type=section&id=Acquisition) In 2019, Lear acquired **Xevo Inc.** for **$322 million**, integrating its connected car software into the E-Systems segment - Completed the acquisition of Xevo Inc., a Seattle-based, global leader in connected car software, in April 2019[200](index=200&type=chunk) - Acquired all of Xevo's outstanding shares for **$322 million**, net of cash acquired[200](index=200&type=chunk) - Xevo is a supplier of software solutions for the cloud, vehicles, and mobile devices deployed in millions of vehicles worldwide; its operating results are included in the E-Systems segment[200](index=200&type=chunk)[420](index=420&type=chunk) [Operational Restructuring](index=40&type=section&id=Operational%20Restructuring) Lear incurred **$145 million** in pretax restructuring costs in 2020 to optimize its footprint and improve profitability - Incurred pretax restructuring costs of **$145 million** and related manufacturing inefficiency charges of **$5 million** in 2020, compared to **$184 million** and **$6 million** in 2019[201](index=201&type=chunk) - Restructuring actions include plant closures and workforce reductions, initiated to maintain a competitive footprint or in response to customer initiatives/market changes, designed to improve operating results and profitability[202](index=202&type=chunk) - Expects to incur approximately **$18 million** of additional restructuring costs related to activities initiated as of December 31, 2020, all expected by the end of 2021[202](index=202&type=chunk) [Financing Transactions](index=41&type=section&id=Financing%20Transactions) In 2020, Lear issued **$650 million** in new notes to redeem existing debt, extending its revolving credit facility to August 2024 - In February 2020, issued **$350 million** of **3.5%** 2030 Notes and an additional **$300 million** of **5.25%** 2049 Notes, with net proceeds of **$669 million** used to redeem **$650 million** of 2025 Notes, resulting in a **$21 million** loss on extinguishment[204](index=204&type=chunk)[205](index=205&type=chunk) - In May 2019, issued **$375 million** of **4.25%** 2029 Notes and **$325 million** of **5.25%** 2049 Notes, with net proceeds of **$693 million** used to redeem **$325 million** of 2024 Notes and finance the acquisition of Xevo, resulting in an **$11 million** loss on extinguishment[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - Extended the maturity date of the **$1.75 billion** Revolving Credit Facility by one year to August 8, 2024[209](index=209&type=chunk) - Borrowed **$1.0 billion** under the Revolving Credit Facility in March 2020 as a proactive COVID-19 measure, which was repaid in full in September 2020[210](index=210&type=chunk) [Other Matters](index=42&type=section&id=Other%20Matters) Details non-operating financial impacts including tax benefits/expenses, valuation allowances, and a 2018 gain from affiliate control - In 2020, recognized **$34 million** in tax benefits related to restructuring and other items, and **$15 million** related to U.S. deferred tax effect of foreign branches, partially offset by **$29 million** in tax expense from a net increase in valuation allowances on deferred tax assets[214](index=214&type=chunk) - In 2019, recognized **$29 million** in tax benefits from increased R&D tax credits (2013-2018), **$18 million** from changes in affiliate tax status, **$14 million** from foreign tax credit regulations, and **$52 million** from restructuring and other items, offset by **$11 million** in tax expense from valuation allowances on foreign subsidiaries[215](index=215&type=chunk) - In 2018, recognized a **$10 million** gain from obtaining control of Changchun Lear FAWSN Automotive Electrical and Electronics Co., Ltd. and revaluing its prior equity investment at fair value[216](index=216&type=chunk) - In 2018, recognized a **$5 million** pension settlement charge in connection with an annuity purchase for certain U.S. defined benefit pension plan participants[217](index=217&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Net sales decreased **14%** to **$17.0 billion** in 2020 due to **COVID-19**, significantly impacting gross profit and net income Consolidated Operating Results (in millions, except percentages) | For the year ended December 31, | 2020 | % of Net Sales | 2019 | % of Net Sales | 2018 | % of Net Sales | | :------------------------------ | :---------- | :------------- | :---------- | :------------- | :---------- | :------------- | | Net sales | $17,045.5 | 100.0 % | $19,810.3 | 100.0 % | $21,148.5 | 100.0 % | | Cost of sales | $15,936.6 | 93.5 | $18,072.8 | 91.2 | $18,830.2 | 89.0 | | Gross profit | $1,108.9 | 6.5 | $1,737.5 | 8.8 | $2,318.3 | 11.0 | | Selling, general and administrative expenses | $588.9 | 3.5 | $605.0 | 3.1 | $612.8 | 2.9 | | Amortization of intangible assets | $65.9 | 0.4 | $62.3 | 0.3 | $51.4 | 0.2 | | Interest expense | $99.6 | 0.6 | $92.0 | 0.5 | $84.1 | 0.4 | | Other expense, net | $55.2 | 0.3 | $24.6 | 0.1 | $31.6 | 0.2 | | Provision for income taxes | $93.9 | 0.6 | $146.1 | 0.7 | $311.9 | 1.5 | | Equity in net income of affiliates | $(28.5) | (0.2) | $(23.2) | (0.1) | $(20.2) | (0.1) | | Net income attributable to noncontrolling interests | $75.4 | 0.4 | $77.1 | 0.4 | $96.9 | 0.5 | | Net income attributable to Lear | $158.5 | 0.9 % | $753.6 | 3.8 % | $1,149.8 | 5.4 % | - Net sales decreased by **$2.8 billion** (**14%**) to **$17.0 billion** in 2020 compared to **$19.8 billion** in 2019, primarily due to lower global production volumes on Lear platforms (over **$3.3 billion** negative impact) largely from the COVID-19 pandemic, partially offset by new business (over **$0.7 billion**)[221](index=221&type=chunk) - Gross profit and gross margin were **$1.1 billion** and **6.5%** of net sales in 2020, down from **$1.7 billion** and **8.8%** in 2019, negatively impacted by **$792 million** from lower production volumes and COVID-19 costs[223](index=223&type=chunk) - Selling, general and administrative expenses were **$589 million** in 2020 (**3.5%** of net sales), compared to **$605 million** in 2019 (**3.1%** of net sales), reflecting the significant decrease in net sales[224](index=224&type=chunk) - Net income attributable to Lear was **$159 million** (**$2.62** diluted EPS) in 2020, a significant decrease from **$754 million** (**$12.75** diluted EPS) in 2019[230](index=230&type=chunk) [Reportable Operating Segments](index=44&type=section&id=Reportable%20Operating%20Segments) Both Seating and E-Systems segments saw significant declines in net sales and earnings in 2020 due to **COVID-19** Segment Financial Measures (2019-2020, in millions) | Segment | Net Sales 2020 | Net Sales 2019 | % Change Net Sales | Segment Earnings 2020 | Segment Earnings 2019 | % Change Segment Earnings | | :-------- | :------------- | :------------- | :----------------- | :-------------------- | :-------------------- | :------------------------ | | Seating | $12,712.7 | $15,097.2 | (16%) | $590.5 | $961.2 | (38.6%) | | E-Systems | $4,332.8 | $4,713.1 | (8%) | $98.1 | $366.3 | (73.2%) | | Other | $— | $— | N/A | $(234.5) | $(257.3) | 8.9% | - Seating net sales decreased by **$2.4 billion** (**16%**) in 2020, primarily due to lower production volumes (nearly **$2.7 billion** negative impact) from COVID-19, partially offset by new business (over **$0.4 billion**)[235](index=235&type=chunk) - E-Systems net sales decreased by **$0.4 billion** (**8%**) in 2020, primarily due to lower production volumes (over **$0.6 billion** negative impact) from COVID-19, partially offset by new business (nearly **$0.3 billion**)[238](index=238&type=chunk) - Segment earnings for the 'Other' category improved from (**$257 million**) in 2019 to (**$235 million**) in 2020, primarily reflecting lower compensation-related costs[241](index=241&type=chunk) [Liquidity and Financial Condition](index=46&type=section&id=Liquidity%20and%20Financial%20Condition) Lear maintains strong liquidity with **$1.3 billion** cash and **$1.75 billion** credit facility, taking proactive measures during **COVID-19** - Primary liquidity needs are to fund general business requirements, including working capital, capital expenditures, operational restructuring, and debt service[243](index=243&type=chunk) - Primary sources of liquidity are cash flows from operating activities, borrowings under available credit facilities, and existing cash balance[243](index=243&type=chunk) - As of December 31, 2020, had approximately **$1.3 billion** of cash and cash equivalents and **$1.75 billion** in available borrowing capacity under the Revolving Credit Facility[244](index=244&type=chunk) - Proactive steps taken in response to COVID-19 to preserve cash included reducing operating costs, capital expenditures, and working capital; implementing salary reductions/deferrals; suspending share repurchases and quarterly dividends; and maximizing government incentive programs[245](index=245&type=chunk) - Cash and cash equivalents of **$780 million** (2020) and **$895 million** (2019) held in foreign subsidiaries can be repatriated without additional income tax expense[248](index=248&type=chunk) [Cash Flows](index=47&type=section&id=Cash%20Flows) Operating cash flow decreased to **$663 million** in 2020 due to lower earnings, while investing and financing cash flows also shifted - Net cash provided by operating activities decreased by **$621 million** to **$663 million** in 2020, compared to **$1,284 million** in 2019, primarily due to lower earnings[250](index=250&type=chunk) - Net cash used in investing activities was **$469 million** in 2020, down from **$922 million** in 2019, reflecting lower capital spending (**$452 million** in 2020 vs. **$604 million** in 2019) and no acquisition of Xevo (which cost **$322 million** in 2019)[251](index=251&type=chunk) - Net cash used in financing activities was **$412 million** in 2020, compared to **$362 million** in 2019[252](index=252&type=chunk) - In 2020, financing activities included **$1.0 billion** revolving credit facility borrowings and repayments, **$669 million** net proceeds from senior notes issuance, **$667 million** redemption of senior notes, **$70 million** common stock repurchases, **$67 million** dividends to Lear stockholders, and **$123 million** dividends to noncontrolling interest holders[252](index=252&type=chunk) [Capitalization](index=47&type=section&id=Capitalization) Lear's long-term debt was **$2.3 billion** as of 2020, with a **$1.75 billion** revolving credit facility and compliance with all covenants Long-Term Debt (Dec 31, 2020, in millions) | Note | Aggregate Principal Amount at Maturity | | :------------------------ | :------------------------------------- | | Senior unsecured notes due 2027 | $750 | | Senior unsecured notes due 2029 | $375 | | 2030 Notes | $350 | | 2049 Notes | $625 | | **Total** | **$2,100** | - Credit Agreement consists of a **$1.75 billion** Revolving Credit Facility (maturity August 8, 2024) and a **$250 million** Term Loan Facility (maturity August 8, 2022); no borrowings outstanding under the Revolving Credit Facility as of December 31, 2020[260](index=260&type=chunk) - In compliance with all covenants under the indentures governing the Notes and the Credit Agreement as of December 31, 2020[258](index=258&type=chunk)[262](index=262&type=chunk) Contractual Obligations (Dec 31, 2020, in millions) | Obligation | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | | :-------------------------------- | :--- | :--- | :--- | :--- | :--- | :--------- | :---- | | Senior notes | $— | $— | $— | $— | $— | $2,100 | $2,100 | | Credit agreement — term loan facility | $14 | $206 | $— | $— | $— | $— | $220 | | Scheduled interest payments | $90 | $90 | $90 | $90 | $90 | $937 | $1,387 | | **Total** | **$104** | **$296** | **$90** | **$90** | **$90** | **$3,037** | **$3,707** | - Unrecognized tax benefits of **$49 million** as of December 31, 2020, are excluded from the contractual obligations table due to the uncertainty of the timing of future cash settlement[267](index=267&type=chunk) - Minimum required contributions to domestic and foreign pension plans are expected to be approximately **$5 million** to **$10 million** in 2021; payments related to postretirement benefit obligation are expected to be approximately **$5 million** in 2021[268](index=268&type=chunk) [Market Risk Sensitivity](index=50&type=section&id=Market%20Risk%20Sensitivity) Lear manages market risks from foreign exchange, interest rates, and volatile commodity prices using derivatives and mitigation strategies - Exposed to market risks associated with fluctuations in foreign exchange rates, interest rates, and commodity prices[273](index=273&type=chunk) - Mitigates foreign exchange transactional exposure using derivative financial instruments (forward foreign exchange, futures, and option contracts) for currencies such as the Mexican peso, various European currencies, Chinese renminbi, Thai baht, Japanese yen, Brazilian real, and Honduran lempira[274](index=274&type=chunk)[275](index=275&type=chunk) - Translational exposure (impact of translating foreign operating income into U.S. dollars) is not mitigated by foreign exchange contracts; in 2020, net sales outside the United States accounted for **79%** of consolidated net sales[278](index=278&type=chunk) - Raw material, energy, and commodity costs can be volatile; main cost exposures relate to steel, copper, and leather[279](index=279&type=chunk)[280](index=280&type=chunk) - Strategies to mitigate commodity price impacts include selective in-sourcing, supply base consolidation, longer-term purchase commitments, low-cost country sourcing and engineering, value engineering, and product benchmarking[279](index=279&type=chunk) [Other Matters](index=51&type=section&id=Other%20Matters) Lear maintains reserves for legal disputes (**$17 million**), product liability (**$49 million**), and environmental matters (**$9 million**) Reserves for Legal and Environmental Matters (Dec 31, 2020, in millions) | Category | Amount | | :-------------------------------------- | :----- | | Pending legal disputes | $17 | | Product liability and warranty claims | $49 | | Environmental matters | $9 | - The ultimate outcomes of these matters are inherently uncertain, and actual results may differ significantly from current estimates[282](index=282&type=chunk) - Does not believe that environmental liabilities associated with current and former properties will have a material adverse impact on its business, financial condition, results of operations, or cash flows[282](index=282&type=chunk)[556](index=556&type=chunk) [Significant Accounting Policies and Critical Accounting Estimates](index=51&type=section&id=Significant%20Accounting%20Policies%20and%20Critical%20Accounting%20Estimates) Outlines Lear's significant accounting policies and critical estimates, including revenue recognition, pensions, income taxes, and **ASU 2016-13** adoption - Critical accounting estimates include revenue recognition, pension and other postretirement benefit plans, income taxes, accounts receivable realization, inventory obsolescence, asset impairments, useful lives of fixed and intangible assets, unsettled pricing discussions with customers and suppliers, restructuring accruals, deferred tax asset valuation allowances, litigation, warranty, environmental remediation costs, and self-insurance accruals[284](index=284&type=chunk)[301](index=301&type=chunk) - Revenue is recognized at a point in time when control of the product is transferred to the customer, reflecting the consideration expected based on annual purchase orders, price reductions, and ongoing price adjustments[285](index=285&type=chunk)[286](index=286&type=chunk) - Pension and other postretirement benefit plans' assets and obligations are measured using various actuarial assumptions (discount rates, rate of compensation increase, mortality rates, turnover rates, and health care cost trend rates), which are reviewed annually[289](index=289&type=chunk) - Deferred tax assets and liabilities are recognized for temporary differences, with valuation allowances maintained until it is more likely than not that deferred tax assets will be realized[295](index=295&type=chunk)[296](index=296&type=chunk) - Adopted ASU 2016-13, "Financial Instruments — Credit Losses," on January 1, 2020, using a modified retrospective approach, resulting in an increase of **$0.8 million** in the allowance for credit loss and a corresponding decrease in retained earnings[354](index=354&type=chunk) [Forward-Looking Statements](index=54&type=section&id=Forward-Looking%20Statements) Provides a safe harbor for forward-looking statements, cautioning that actual results may differ due to economic, industry, and operational risks - The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements, identified by words like "will," "may," "expects," "intends," "estimates," etc[303](index=303&type=chunk) - Actual results may differ materially from forward-looking statements due to factors such as general economic conditions, the impact of the COVID-19 pandemic, changes in industry vehicle production levels, customer negotiations, raw material costs, supplier disruptions, and international operational risks[304](index=304&type=chunk)[307](index=307&type=chunk) - Other significant risks include competitive conditions, labor disputes, operational and financial success of joint ventures, program launch costs, pension asset returns, impairment charges, ability to execute strategic objectives, limitations from indebtedness, LIBOR changes, IT system disruptions (cybersecurity), warranty/product liability/recall costs, legal/regulatory proceedings, and changes in tax and trade policies[307](index=307&type=chunk) - The company does not assume any obligation to update, amend, or clarify forward-looking statements to reflect events, new information, or circumstances occurring after the report date[306](index=306&type=chunk) [ITEM 8. Consolidated financial statements and supplementary data](index=56&type=section&id=ITEM%208.%20Consolidated%20financial%20statements%20and%20supplementary%20data) Presents audited consolidated financial statements for 2018-2020, including auditor reports, balance sheets, income, and cash flow statements - Includes Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Income, Comprehensive Income, Equity, and Cash Flows for the years ended December 31, 2020, 2019, and 2018, along with Notes to Consolidated Financial Statements and Schedule II – Valuation and Qualifying Accounts[309](index=309&type=chunk)[632](index=632&type=chunk) - Ernst & Young LLP expressed an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2020[311](index=311&type=chunk)[312](index=312&type=chunk)[322](index=322&type=chunk) - A critical audit matter identified was revenue recognition, specifically evaluating the sufficiency of evidence for non-routine price adjustments due to the highly judgmental nature of commercial negotiations[316](index=316&type=chunk)[317](index=317&type=chunk) Key Consolidated Financials (2020 vs 2019, in millions) | Metric | 2020 | 2019 | | :-------------------------------------- | :---------- | :---------- | | **Balance Sheet:** | | | | Total assets | $13,198.6 | $12,680.7 | | Total liabilities (Current + Long-Term) | $8,583.7 | $8,061.2 | | Total equity | $4,614.9 | $4,501.1 | | **Income Statement:** | | | | Net sales | $17,045.5 | $19,810.3 | | Gross profit | $1,108.9 | $1,737.5 | | Net income attributable to Lear | $158.5 | $753.6 | | **Cash Flow Statement:** | | | | Net cash provided by operating activities | $663.1 | $1,284.3 | | Net cash used in investing activities | $(468.8) | $(922.4) | | Net cash used in financing activities | $(411.7) | $(361.9) | [ITEM 9. Changes in and disagreements with accountants on accounting and financial disclosure](index=108&type=section&id=ITEM%209.%20Changes%20in%20and%20disagreements%20with%20accountants%20on%20accounting%20and%20financial%20disclosure) No changes in or disagreements with accountants on accounting and financial disclosure - No changes in and disagreements with accountants on accounting and financial disclosure[615](index=615&type=chunk) [ITEM 9A. Controls and procedures](index=108&type=section&id=ITEM%209A.%20Controls%20and%20procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020, providing reasonable assurance of achieving control objectives[617](index=617&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the Internal Control-Integrated Framework (2013 framework) issued by COSO[617](index=617&type=chunk) - The attestation report of the independent registered public accounting firm (Ernst & Young LLP) expressed an unqualified opinion on the effectiveness of internal control over financial reporting[312](index=312&type=chunk)[617](index=617&type=chunk) - No change in the company's internal control over financial reporting occurred during the fiscal quarter ended December 31, 2020, that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[617](index=617&type=chunk) [ITEM 9B. Other information](index=108&type=section&id=ITEM%209B.%20Other%20information) No other information is required to be reported - None[619](index=619&type=chunk) PART III [ITEM 10. Directors, executive officers and corporate governance](index=109&type=section&id=ITEM%2010.%20Directors%2C%20executive%20officers%20and%20corporate%20governance) Incorporates information on directors and corporate governance from the Proxy Statement, with executive officer details in Part I - Information regarding directors and corporate governance matters is incorporated by reference to the Proxy Statement sections entitled "Election of Directors" and "Directors and Corporate Governance"[622](index=622&type=chunk) - Information regarding executive officers appears as a supplementary item following Item 4 under Part I of this Report[622](index=622&type=chunk) - Adopted a Code of Business Conduct and Ethics, including "Specific Provisions for Executive Officers," available on the company's website (http://www.lear.com)[623](index=623&type=chunk) [ITEM 11. Executive compensation](index=109&type=section&id=ITEM%2011.%20Executive%20compensation) Incorporates executive compensation information from the Proxy Statement, including director compensation and committee reports - Information required by Item 11 is incorporated by reference to the Proxy Statement sections entitled "Directors and Corporate Governance — Director Compensation," "Compensation Discussion and Analysis," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report"[625](index=625&type=chunk) [ITEM 12. Security ownership of certain beneficial owners and management and related stockholder matters](index=109&type=section&id=ITEM%2012.%20Security%20ownership%20of%20certain%20beneficial%20owners%20and%20management%20and%20related%20stockholder%20matters) Incorporates security ownership from Proxy Statement and details equity compensation plans, with **1,534,501** securities outstanding - Information regarding security ownership is incorporated by reference to the Proxy Statement section entitled "Directors and Corporate Governance — Security Ownership of Certain Beneficial Owners, Directors and Management"[626](index=626&type=chunk) Equity Compensation Plan Information (As of December 31, 2020) | Metric | Value | | :------------------------------------------------------------------------ | :---------- | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | 1,534,501 | | Weighted average exercise price of outstanding options, warrants and rights | $9.90 | | Number of securities available for future issuance under equity compensation plans | 1,624,471 | - Securities to be issued include **616,584** outstanding restricted stock units, **809,471** outstanding performance shares (at maximum possible payout), and **108,446** outstanding stock options[627](index=627&type=chunk) [ITEM 13. Certain relationships and related transactions, and director independence](index=110&type=section&id=ITEM%2013.%20Certain%20relationships%20and%20related%20transactions%2C%20and%20director%20independence) Incorporates information on certain relationships, related party transactions, and director independence from the Proxy Statement - Information required by Item 13 is incorporated by reference to the Proxy Statement sections entitled "Certain Relationships and Related Party Transactions" and "Directors and Corporate Governance — Independence of Directors"[629](index=629&type=chunk) [ITEM 14. Principal accounting fees and services](index=110&type=section&id=ITEM%2014.%20Principal%20accounting%20fees%20and%20services) Incorporates information regarding principal accounting fees and services from the Proxy Statement - Information required by Item 14 is incorporated by reference to the Proxy Statement section entitled "Fees of Independent Accountants"[630](index=630&type=chunk) PART IV [ITEM 15. Exhibits and financial statement schedule](index=110&type=section&id=ITEM%2015.%20Exhibits%20and%20financial%20statement%20schedule) Lists consolidated financial statements, supplementary data, and exhibits filed with Form 10-K, including audited financials and corporate documents - Includes Consolidated Financial Statements (Reports of Ernst & Young LLP, Balance Sheets, Statements of Income, Comprehensive Income, Equity, Cash Flows, Notes to Consolidated Financial Statements) and Schedule II – Valuation and Qualifying Accounts[632](index=632&type=chunk) - A comprehensive list of exhibits is filed with this Form 10-K or incorporated by reference, including corporate documents (e.g., Certificate of Incorporation, Bylaws), indentures for senior notes, long-term stock incentive plans, executive employment agreements, and credit agreements[636](index=636&type=chunk)[637](index=637&type=chunk)[639](index=639&type=chunk)[640](index=640&type=chunk)[641](index=641&type=chunk) [ITEM 16. Form 10-K Summary](index=110&type=section&id=ITEM%2016.%20Form%2010-K%20Summary) No Form 10-K Summary is provided - No Form 10-K Summary is provided[635](index=635&type=chunk)

Financial Data and Key Metrics Changes - The company reported Q4 2020 sales of $5.2 billion, with core operating earnings of $330 million and an adjusted operating margin of 6.3% [7] - For the full year 2020, sales totaled $17 billion, with core operating earnings of $614 million, reflecting a challenging year due to COVID-19 [7][36] - Adjusted earnings per share for Q4 2020 were $3.66, a 39% increase from the previous year [35] Business Line Data and Key Metrics Changes - The E-Systems business grew 10 percentage points faster than the market in 2020, benefiting from the shift to electric vehicles [8] - Seating segment sales in Q4 2020 were $3.9 billion, up 7.5% from Q4 2019, with adjusted operating margins improving to 7.6% [37] - E-Systems segment sales in Q4 2020 were $1.3 billion, a 13% increase from Q4 2019, with core operating earnings of $103 million [39] Market Data and Key Metrics Changes - Global vehicle production was up approximately 2% in Q4 2020, but Lear's sales-weighted production declined by 2% due to fewer fiscal calendar days [29] - North America production was flat year-over-year, while production in Europe and China increased by 1% and 5%, respectively [30] Company Strategy and Development Direction - The company plans to strengthen vertical integration capabilities in seating and grow its wiring and connection systems business, focusing on electrification [51][52] - Lear aims to leverage its experience in electrification to capture significant market share, targeting $1.4 billion in electrification business by 2026 [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the year ahead, citing strong momentum in both business segments and the ongoing transition to electric vehicles [51] - The company anticipates a 9% increase in global production for 2021, with potential disruptions from semiconductor shortages and COVID-19 risks [42][44] Other Important Information - The company has a backlog of $2.8 billion, with a split of approximately two-thirds in seating and one-third in E-Systems [47][48] - Capital spending is forecasted at $600 million for 2021, with free cash flow expected to be between $550 million and $700 million [46] Q&A Session Summary Question: Expansion of EV Customer Base - Management noted the expansion of the customer base from five to 17, emphasizing a selective approach to new business opportunities [56] Question: Semiconductor Shortage Impact - The company is incurring modest premium costs due to the semiconductor shortage, but the main impact is on variable margins from lost production [61][62] Question: Backlog and Quoting Activity - Management acknowledged that the pandemic impacted quoting activity, but there is a significant amount of business in the pipeline for future growth [74][75] Question: Engineering Investment and Margin Impact - Engineering investments are expected to add 45 to 50 basis points of costs in E-Systems for 2021, with a 20 basis point impact from rising copper prices [79] Question: Market Share in Seating - The company ended 2020 with a 23% market share in seating, with confidence in achieving a target of 28% through backlog contributions [111][112]

| --- | --- | --- | --- | --- | |-------|-----------------------------------|-------|--------------------------------------------------------------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fourth Quarter and Full Year 2020 | | | | | | Financial Results | | | | | | February 4, 2021 | | Ray Scott, President and CEO Jason Cardew, Senior Vice President and CFO | | | | | | | | | | | | | | | --- ...

Financial Performance - The company delivered strong financial results, with both business segments reporting margins in the high-7% range[6] - Q3 2020 net sales increased to $4900 million from $4825 million in Q3 2019[18] - Q3 2020 free cash flow was $474 million, compared to $193 million in Q3 2019[18] - The company fully repaid $1000 million draw on revolver[23] Business Segments - Seating adjusted margins were 78% in Q3 2020[20] - E-Systems sales increased to $1209 million in Q3 2020 from $1110 million in Q3 2019[21] - E-Systems adjusted margins were 77% in Q3 2020[21] - E-Systems electrification sales outlook projects approximately $1000 million in sales by 2025[15] Market and Production - Global vehicle production decreased by 4% year-over-year in Q3 2020[16] - The company's E-Systems growth exceeded market growth by 12%[6] Outlook - The company anticipates full year 2020 net sales between $1635 billion and $1665 billion[29]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019. ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 1-11311 (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Delaware 1 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018. ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 1-11311 (Exact name of registrant as specified in its charter) Delaware 13-3386776 (State or other jurisdiction of incorporation or orga ...