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 |
(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 |
x | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | |||
Emerging growth company |
Page No. | |
Item 3 – Quantitative and Qualitative Disclosures about Market Risk (included in Item 2) | |
April 4, 2020(1) | December 31, 2019 | |||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | $ | ||||
Accounts receivable | ||||||
Inventories | ||||||
Other | ||||||
Total current assets | ||||||
LONG-TERM ASSETS: | ||||||
Property, plant and equipment, net | ||||||
Goodwill | ||||||
Other | ||||||
Total long-term assets | ||||||
Total assets | $ | $ | ||||
LIABILITIES AND EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Short-term borrowings | $ | $ | ||||
Revolving credit facility borrowings | ||||||
Accounts payable and drafts | ||||||
Accrued liabilities | ||||||
Current portion of long-term debt | ||||||
Total current liabilities | ||||||
LONG-TERM LIABILITIES: | ||||||
Long-term debt | ||||||
Other | ||||||
Total long-term liabilities | ||||||
Redeemable noncontrolling interest | ||||||
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 April 4, 2020 and December 31, 2019 | ||||||
Additional paid-in capital | ||||||
Common stock held in treasury, 4,645,124 and 4,127,806 shares as of April 4, 2020 and December 31, 2019, respectively, at cost | ( | ) | ( | ) | ||
Retained earnings | ||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||
Lear Corporation stockholders’ equity | ||||||
Noncontrolling interests | ||||||
Equity | ||||||
Total liabilities and equity | $ | $ |
(1) | Unaudited. |
Three Months Ended | ||||||
April 4, 2020 | March 30, 2019 | |||||
Net sales | $ | $ | ||||
Cost of sales | ||||||
Selling, general and administrative expenses | ||||||
Amortization of intangible assets | ||||||
Interest expense | ||||||
Other expense, net | ||||||
Consolidated income before provision for income taxes and equity in net income of affiliates | ||||||
Provision for income taxes | ||||||
Equity in net income of affiliates | ( | ) | ( | ) | ||
Consolidated net income | ||||||
Less: Net income attributable to noncontrolling interests | ||||||
Net income attributable to Lear | $ | $ | ||||
Basic net income per share available to Lear common stockholders (Note 14) | $ | $ | ||||
Diluted net income per share available to Lear common stockholders (Note 14) | $ | $ | ||||
Cash dividends declared per share | $ | $ | ||||
Average common shares outstanding | ||||||
Average diluted shares outstanding | ||||||
Consolidated comprehensive income (loss) (Condensed Consolidated Statements of Equity) | $ | ( | ) | $ | ||
Less: Comprehensive income attributable to noncontrolling interests | ||||||
Comprehensive income (loss) attributable to Lear | $ | ( | ) | $ |
Three Months Ended April 4, 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 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Comprehensive income (loss): | ||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | ( | ) | ||||||||||
Total comprehensive income (loss) | — | — | — | ( | ) | ( | ) | |||||||||||
Adoption of ASU 2016-13 (Note 18) | — | — | — | ( | ) | — | ( | ) | ||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||
Net issuance of 123,831 shares held in treasury in settlement of stock-based compensation | — | ( | ) | ( | ) | — | ( | ) | ||||||||||
Repurchase of 641,149 shares of common stock at average price of $109.22 per share | — | — | ( | ) | — | — | ( | ) | ||||||||||
Dividends declared to Lear Corporation stockholders | — | — | — | ( | ) | — | ( | ) | ||||||||||
Dividends declared to non-controlling interest holders | — | — | — | — | — | — | ||||||||||||
Redeemable non-controlling interest adjustment | — | — | — | ( | ) | — | ( | ) | ||||||||||
Balance at April 4, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ |
Three Months Ended April 4, 2020 | ||||||||||||||
Lear Corporation Stockholders' Equity | Non-controlling Interests | Equity | Redeemable Non-controlling Interests | |||||||||||
Balance at January 1, 2020 | $ | $ | $ | $ | ||||||||||
Comprehensive income (loss): | ||||||||||||||
Net income | ( | ) | ||||||||||||
Other comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||
Total comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||
Adoption of ASU 2016-13 (Note 18) | ( | ) | — | ( | ) | — | ||||||||
Stock-based compensation | — | — | ||||||||||||
Net issuance of 123,831 shares held in treasury in settlement of stock-based compensation | ( | ) | — | ( | ) | — | ||||||||
Repurchase of 641,149 shares of common stock at average price of $109.22 per share | ( | ) | — | ( | ) | — | ||||||||
Dividends declared to Lear Corporation stockholders | ( | ) | — | ( | ) | — | ||||||||
Dividends declared to non-controlling interest holders | — | — | ||||||||||||
Redeemable non-controlling interest adjustment | ( | ) | — | ( | ) | |||||||||
Balance at April 4, 2020 | $ | $ | $ | $ |
Three Months Ended March 30, 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 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Comprehensive income (loss): | ||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | ) | ( | ) | ||||||||||
Total comprehensive income (loss) | — | — | — | ( | ) | |||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||
Net issuance of 280,020 shares held in treasury in settlement of stock-based compensation | — | ( | ) | ( | ) | — | ( | ) | ||||||||||
Repurchase of 804,270 shares of common stock at average price of $146.56 per share | — | — | ( | ) | — | — | ( | ) | ||||||||||
Dividends declared to Lear Corporation stockholders | — | — | — | ( | ) | — | ( | ) | ||||||||||
Dividends declared to non-controlling interest holders | — | — | — | — | — | — | ||||||||||||
Redeemable non-controlling interest adjustment | — | — | — | — | ||||||||||||||
Balance at March 30, 2019 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ |
Three Months Ended March 30, 2019 | ||||||||||||||
Lear Corporation Stockholders' Equity | Non-controlling Interests | Equity | Redeemable Non-controlling Interests | |||||||||||
Balance at January 1, 2019 | $ | $ | $ | $ | ||||||||||
Comprehensive income (loss): | ||||||||||||||
Net income | ||||||||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||
Total comprehensive income (loss) | ||||||||||||||
Stock-based compensation | — | — | ||||||||||||
Net issuance of 280,020 shares held in treasury in settlement of stock-based compensation | ( | ) | — | ( | ) | — | ||||||||
Repurchase of 804,270 shares of common stock at average price of $146.56 per share | ( | ) | — | ( | ) | — | ||||||||
Dividends declared to Lear Corporation stockholders | ( | ) | — | ( | ) | — | ||||||||
Dividends declared to non-controlling interest holders | — | ( | ) | ( | ) | — | ||||||||
Redeemable non-controlling interest adjustment | — | ( | ) | |||||||||||
Balance at March 30, 2019 | $ | $ | $ | $ |
Three Months Ended | ||||||
April 4, 2020 | March 30, 2019 | |||||
Cash Flows from Operating Activities: | ||||||
Consolidated net income | $ | $ | ||||
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | ||||||
Loss on extinguishment of debt | ||||||
Net change in recoverable customer engineering, development and tooling | ( | ) | ( | ) | ||
Net change in working capital items (see below) | ( | ) | ( | ) | ||
Other, net | ( | ) | ||||
Net cash provided by operating activities | ||||||
Cash Flows from Investing Activities: | ||||||
Additions to property, plant and equipment | ( | ) | ( | ) | ||
Other, net | ||||||
Net cash used in investing activities | ( | ) | ( | ) | ||
Cash Flows from Financing Activities: | ||||||
Revolving credit facility borrowings | ||||||
Term loan repayments | ( | ) | ( | ) | ||
Short-term borrowings, net | ( | ) | ||||
Proceeds from the issuance of senior notes | ||||||
Redemption of senior notes | ( | ) | ||||
Payment of debt issuance and other financing costs | ( | ) | ||||
Repurchase of common stock | ( | ) | ( | ) | ||
Dividends paid to Lear Corporation stockholders | ( | ) | ( | ) | ||
Dividends paid to noncontrolling interests | ( | ) | ||||
Other, net | ( | ) | ( | ) | ||
Net cash provided by (used in) financing activities | ( | ) | ||||
Effect of foreign currency translation | ( | ) | ||||
Net Change in Cash, Cash Equivalents and Restricted Cash | ( | ) | ||||
Cash, Cash Equivalents and Restricted Cash as of Beginning of Period | ||||||
Cash, Cash Equivalents and Restricted Cash as of End of Period | $ | $ | ||||
Changes in Working Capital Items: | ||||||
Accounts receivable | $ | $ | ( | ) | ||
Inventories | ( | ) | ( | ) | ||
Accounts payable | ( | ) | ||||
Accrued liabilities and other | ( | ) | ||||
Net change in working capital items | $ | ( | ) | $ | ( | ) |
Supplementary Disclosure: | ||||||
Cash paid for interest | $ | $ | ||||
Cash paid for income taxes, net of refunds received | $ | $ |
Accrual as of | 2020 | Utilization | Accrual as of | ||||||||||||||||
January 1, 2020 | Charges | Cash | Non-cash | April 4, 2020 | |||||||||||||||
Employee termination benefits | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Asset impairment charges | ( | ) | |||||||||||||||||
Contract termination costs | ( | ) | |||||||||||||||||
Other related costs | ( | ) | |||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ( | ) | $ |
April 4, 2020 | December 31, 2019 | ||||||
Raw materials | $ | $ | |||||
Work-in-process | |||||||
Finished goods | |||||||
Reserves | ( | ) | ( | ) | |||
Inventories | $ | $ |
April 4, 2020 | December 31, 2019 | ||||||
Current | $ | $ | |||||
Long-term | |||||||
Recoverable customer E&D and tooling | $ | $ |
April 4, 2020 | December 31, 2019 | ||||||
Land | $ | $ | |||||
Buildings and improvements | |||||||
Machinery and equipment | |||||||
Construction in progress | |||||||
Total property, plant and equipment | |||||||
Less – accumulated depreciation | ( | ) | ( | ) | |||
Property, plant and equipment, net | $ | $ |
Seating | E-Systems | Total | |||||||||
Balance at January 1, 2020 | $ | $ | $ | ||||||||
Foreign currency translation and other | ( | ) | ( | ) | ( | ) | |||||
Balance at April 4, 2020 | $ | $ | $ |
April 4, 2020 | |||||||||||||||||
Debt Instrument | Long-Term Debt | Unamortized Debt Issuance Costs | Unamortized Original Issue Premium (Discount) | Long-Term Debt, Net | Weighted Average Interest Rate | ||||||||||||
Credit Agreement — Term Loan Facility | $ | $ | ( | ) | $ | $ | |||||||||||
3.8% Senior Notes due 2027 (the "2027 Notes") | ( | ) | ( | ) | |||||||||||||
4.25% Senior Notes due 2029 (the "2029 Notes") | ( | ) | ( | ) | |||||||||||||
3.5% Senior Notes due 2030 (the "2030 Notes") | ( | ) | ( | ) | |||||||||||||
5.25% Senior Notes due 2049 (the "2049 Notes") | ( | ) | |||||||||||||||
$ | $ | ( | ) | $ | $ | ||||||||||||
Less — Current portion | ( | ) | |||||||||||||||
Long-term debt | $ |
December 31, 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 | $ | $ | ( | ) | $ | $ | |||||||||||
5.25% Senior Notes due 2025 (the "2025 Notes") | ( | ) | |||||||||||||||
2027 Notes | ( | ) | ( | ) | |||||||||||||
2029 Notes | ( | ) | ( | ) | |||||||||||||
2049 Notes issued 2019 | ( | ) | ( | ) | |||||||||||||
$ | $ | ( | ) | $ | ( | ) | |||||||||||
Less — Current portion | ( | ) | |||||||||||||||
Long-term debt | $ |
Note | Issuance Date(s) | Maturity Date | Interest Payment Dates |
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 |
Eurocurrency Rate | Base Rate | |||||||||||||||||
Rate as of | Rate as of | |||||||||||||||||
Minimum | Maximum | April 4, 2020 | Minimum | Maximum | April 4, 2020 | |||||||||||||
Revolving Credit Facility | % | % | % | % | % | % | ||||||||||||
Term Loan Facility | % | % | % | % | % | % |
April 4, 2020 | December 31, 2019 | ||||||
Right-of-use assets under operating leases: | |||||||
Other long-term assets | $ | $ | |||||
Lease obligations under operating leases: | |||||||
Accrued liabilities | $ | $ | |||||
Other long-term liabilities | |||||||
$ | $ |
April 4, 2020 | |||
2020 (1) | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Thereafter | |||
Total undiscounted cash flows | |||
Less: Imputed interest | ( | ) | |
Lease obligations under operating leases | $ |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Non-cash activity: | |||||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | $ | |||||
Operating cash flows: | |||||||
Cash paid related to operating lease obligations | $ | $ |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Operating lease expense | $ | $ | |||||
Short-term lease expense | |||||||
Variable lease expense | |||||||
Total lease expense | $ | $ |
April 4, 2020 | ||
Weighted average remaining lease term (in years) | ||
Weighted average discount rate | % |
Three Months Ended | |||||||||||||||
April 4, 2020 | March 30, 2019 | ||||||||||||||
U.S. | Foreign | U.S. | Foreign | ||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Interest cost | |||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Amortization of actuarial loss | |||||||||||||||
Settlement loss | |||||||||||||||
Net periodic benefit (credit) cost | $ | ( | ) | $ | $ | $ |
Three Months Ended | |||||||||||||||
April 4, 2020 | March 30, 2019 | ||||||||||||||
U.S. | Foreign | U.S. | Foreign | ||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Interest cost | |||||||||||||||
Amortization of actuarial gain | ( | ) | ( | ) | |||||||||||
Net periodic benefit (credit) cost | $ | $ | $ | ( | ) | $ |
Three Months Ended | |||||||||||||||||||||||
April 4, 2020 | March 30, 2019 | ||||||||||||||||||||||
Seating | E-Systems | Total | Seating | E-Systems | Total | ||||||||||||||||||
North America | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Europe and Africa | |||||||||||||||||||||||
Asia | |||||||||||||||||||||||
South America | |||||||||||||||||||||||
$ | $ | $ | $ | $ | $ |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Other expense | $ | $ | |||||
Other income | ( | ) | ( | ) | |||
Other expense, net | $ | $ |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Provision for income taxes | $ | $ | |||||
Pretax income before equity in net income of affiliates | $ | $ | |||||
Effective tax rate | % | % |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Restructuring charges and various other items | $ | $ | |||||
Valuation allowances on deferred tax assets of a foreign subsidiary | |||||||
Share-based compensation | ( | ) | |||||
Change in tax status of certain affiliates | |||||||
$ | $ |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Net income attributable to Lear | $ | $ | |||||
Redeemable noncontrolling interest adjustment | |||||||
Net income available to Lear common stockholders | $ | $ | |||||
Average common shares outstanding | |||||||
Dilutive effect of common stock equivalents | |||||||
Average diluted shares outstanding | |||||||
Basic net income per share available to Lear common stockholders | $ | $ | |||||
Diluted net income per share available to Lear common stockholders | $ | $ |
Three Months Ended | |||
April 4, 2020 | |||
Defined benefit plans: | |||
Balance at beginning of period | $ | ( | ) |
Reclassification adjustments (net of tax expense of $0.3 million) | |||
Other comprehensive income recognized during the period (net of tax impact of $— million) | |||
Balance at end of period | $ | ( | ) |
Derivative instruments and hedging: | |||
Balance at beginning of period | $ | ||
Reclassification adjustments (net of tax benefit of $1.4 million) | ( | ) | |
Other comprehensive loss recognized during the period (net of tax benefit of $27.9 million) | ( | ) | |
Balance at end of period | $ | ( | ) |
Foreign currency translation: | |||
Balance at beginning of period | $ | ( | ) |
Other comprehensive loss recognized during the period (including tax expense of $4.8 million) | ( | ) | |
Balance at end of period | $ | ( | ) |
Total accumulated other comprehensive loss | $ | ( | ) |
Three Months Ended | |||
March 30, 2019 | |||
Defined benefit plans: | |||
Balance at beginning of period | $ | ( | ) |
Reclassification adjustments (net of tax expense of $0.4 million) | |||
Other comprehensive loss recognized during the period (net of tax impact of $— million) | ( | ) | |
Balance at end of period | $ | ( | ) |
Derivative instruments and hedging: | |||
Balance at beginning of period | $ | ( | ) |
Reclassification adjustments (net of tax benefit of $2.1 million) | ( | ) | |
Other comprehensive income recognized during the period (net of tax expense of $2.3 million) | |||
Balance at end of period | $ | ( | ) |
Foreign currency translation: | |||
Balance at beginning of period | $ | ( | ) |
Other comprehensive loss recognized during the period (net of tax impact of $— million) | ( | ) | |
Balance at end of period | $ | ( | ) |
Total accumulated other comprehensive loss | $ | ( | ) |
Three Months Ended | As of | |||||||||||||||
April 4, 2020 | April 4, 2020 | |||||||||||||||
Aggregate Repurchases | Cash paid for Repurchases | Number of Shares | Average Price per Share (1) | Remaining Purchase Authorization | ||||||||||||
$ | $ | $ | $ |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Dividends declared | $ | $ | |||||
Dividends paid |
Balance at January 1, 2020 | $ | ||
Expense, net (including changes in estimates) | |||
Settlements | ( | ) | |
Foreign currency translation and other | ( | ) | |
Balance at April 4, 2020 | $ |
Three Months Ended April 4, 2020 | |||||||||||||||
Seating | E-Systems | Other | Consolidated | ||||||||||||
Revenues from external customers | $ | $ | $ | $ | |||||||||||
Segment earnings (1) | ( | ) | |||||||||||||
Depreciation and amortization | |||||||||||||||
Capital expenditures | |||||||||||||||
Total assets |
Three Months Ended March 30, 2019 | |||||||||||||||
Seating | E-Systems | Other | Consolidated | ||||||||||||
Revenues from external customers | $ | $ | $ | $ | |||||||||||
Segment earnings (1) | ( | ) | |||||||||||||
Depreciation and amortization | |||||||||||||||
Capital expenditures | |||||||||||||||
Total assets |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Segment earnings | $ | $ | |||||
Interest expense | |||||||
Other expense, net | |||||||
Consolidated income before provision for income taxes and equity in net income of affiliates | $ | $ |
April 4, 2020 | December 31, 2019 | ||||||
Estimated aggregate fair value (1) | $ | $ | |||||
Aggregate carrying value (1)(2) |
April 4, 2020 | March 30, 2019 | ||||||
Balance sheet - cash and cash equivalents | $ | $ | |||||
Restricted cash included in other current assets | |||||||
Restricted cash included in other long-term assets | |||||||
Statement of cash flows - cash, cash equivalents and restricted cash | $ | $ |
April 4, 2020 | December 31, 2019 | ||||||
Current assets | $ | $ | |||||
Other long-term assets | |||||||
$ | $ |
April 4, 2020 | December 31, 2019 | ||||||
Fair value of foreign currency contracts designated as cash flow hedges: | |||||||
Other current assets | $ | $ | |||||
Other long-term assets | |||||||
Other current liabilities | ( | ) | ( | ) | |||
Other long-term liabilities | ( | ) | ( | ) | |||
( | ) | ||||||
Notional amount | $ | $ | |||||
Outstanding maturities in months, not to exceed | |||||||
Fair value of derivatives designated as net investment hedges: | |||||||
Other long-term assets | $ | $ | |||||
Other long-term liabilities | ( | ) | |||||
( | ) | ||||||
Notional amount | $ | $ | |||||
Outstanding maturities in months, not to exceed | |||||||
Fair value of foreign currency contracts not designated as hedging instruments: | |||||||
Other current assets | $ | $ | |||||
Other current liabilities | ( | ) | ( | ) | |||
( | ) | ||||||
Notional amount | $ | $ | |||||
Outstanding maturities in months, not to exceed | |||||||
Total fair value | $ | ( | ) | $ | |||
Total notional amount | $ | $ |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Gains (losses) recognized in accumulated other comprehensive loss: | |||||||
Foreign currency contracts | $ | ( | ) | $ | |||
Net investment hedge contracts | |||||||
Interest rate swap contracts | ( | ) | |||||
( | ) | ||||||
(Gains) losses reclassified from accumulated other comprehensive loss to: | |||||||
Net sales | ( | ) | |||||
Cost of sales | ( | ) | ( | ) | |||
Interest expense | |||||||
( | ) | ( | ) | ||||
Comprehensive income (loss) | $ | ( | ) | $ |
Net losses related to foreign currency contracts | $ | ||
Net losses related to interest rate swap contracts | |||
Total | $ |
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. |
April 4, 2020 | |||||||||||||||||||
Frequency | Asset (Liability) | Valuation Technique | Level 1 | Level 2 | Level 3 | ||||||||||||||
Foreign currency contracts, net | Recurring | $ | ( | ) | Market/ Income | $ | $ | ( | ) | $ | |||||||||
Net investment hedges | Recurring | $ | Market/ Income | $ | $ | $ | |||||||||||||
Marketable equity securities | Recurring | $ | Market | $ | $ | $ |
December 31, 2019 | ||||||||||||||||
Frequency | Asset (Liability) | Valuation Technique | Level 1 | Level 2 | Level 3 | |||||||||||
Foreign currency contracts, net | Recurring | $ | Market/ Income | |||||||||||||
Net investment hedges | Recurring | $ | ( | ) | Market/ Income | ( | ) | |||||||||
Marketable equity securities | Recurring | $ | Market |
Three Months Ended | ||||||
April 4, 2020 (1) | March 30, 2019 (1) (2) | % Change | ||||
North America | 3.8 | 4.2 | (10 | )% | ||
Europe and Africa | 4.7 | 5.8 | (19 | )% | ||
Asia | 7.9 | 11.3 | (30 | )% | ||
South America | 0.6 | 0.8 | (16 | )% | ||
Other | 0.3 | 0.4 | (16 | )% | ||
Global light vehicle production | 17.3 | 22.5 | (23 | )% |
Three Months Ended | |||||
April 4, 2020 | March 30, 2019 | ||||
North America | 42 | % | 36 | % | |
Europe and Africa | 40 | % | 42 | % | |
Asia | 15 | % | 19 | % | |
South America | 3 | % | 3 | % | |
Total | 100 | % | 100 | % |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Costs related to restructuring actions, including manufacturing inefficiencies of $1 million and $2 million in the three months ended April 4, 2020 and March 30, 2019 | $ | 34 | $ | 56 | |||
Loss on extinguishment of debt | 21 | — | |||||
Tax benefit, net | 11 | 37 |
Three Months Ended | |||||||||||||
April 4, 2020 | March 30, 2019 | ||||||||||||
Net sales | |||||||||||||
Seating | $ | 3,366.6 | 75.5 | % | $ | 3,913.7 | 75.8 | % | |||||
E-Systems | 1,091.1 | 24.5 | 1,246.4 | 24.2 | |||||||||
Net sales | 4,457.7 | 100.0 | 5,160.1 | 100.0 | |||||||||
Cost of sales | 4,123.5 | 92.5 | 4,686.9 | 90.8 | |||||||||
Gross profit | 334.2 | 7.5 | 473.2 | 9.2 | |||||||||
Selling, general and administrative expenses | 143.7 | 3.2 | 148.3 | 2.9 | |||||||||
Amortization of intangible assets | 17.1 | 0.4 | 12.7 | 0.3 | |||||||||
Interest expense | 24.4 | 0.5 | 20.9 | 0.4 | |||||||||
Other expense, net | 40.5 | 0.9 | 4.4 | 0.1 | |||||||||
Provision for income taxes | 26.5 | 0.6 | 43.1 | 0.8 | |||||||||
Equity in net income of affiliates | (1.6 | ) | — | (2.3 | ) | — | |||||||
Net income attributable to noncontrolling interests | 7.2 | 0.2 | 17.2 | 0.3 | |||||||||
Net income attributable to Lear | $ | 76.4 | 1.7 | % | $ | 228.9 | 4.4 | % |
(in millions) | Cost of Sales | |||
First quarter 2019 | $ | 4,687 | ||
Material cost | (482 | ) | ||
Labor and other | (83 | ) | ||
Depreciation | 2 | |||
First quarter 2020 | $ | 4,124 |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Net sales | $ | 3,366.6 | $ | 3,913.7 | |||
Segment earnings (1) | 186.1 | 252.3 | |||||
Margin | 5.5 | % | 6.4 | % |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Net sales | $ | 1,091.1 | $ | 1,246.4 | |||
Segment earnings (1) | 32.4 | 128.3 | |||||
Margin | 3.0 | % | 10.3 | % |
Three Months Ended | |||||||
April 4, 2020 | March 30, 2019 | ||||||
Net sales | $ | — | $ | — | |||
Segment earnings (1) | (45.1 | ) | (68.4 | ) | |||
Margin | N/A | N/A |
• | Aggressively reducing operating costs, capital expenditures and working capital, including eliminating discretionary spending and adjusting production activity |
• | Reducing salaried employee costs throughout the organization via salary reductions and deferrals |
• | Temporarily 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 via temporary layoffs |
• | Delaying planned pension funding and deferring other retirement plan contributions |
Three Months Ended | |||||||||||
April 4, 2020 | March 30, 2019 | Increase (Decrease) in Operating Cash Flow | |||||||||
Consolidated net income and depreciation and amortization | $ | 214 | $ | 370 | $ | (156 | ) | ||||
Net change in working capital items: | |||||||||||
Accounts receivable | 416 | (593 | ) | 1,009 | |||||||
Inventory | (114 | ) | (8 | ) | (106 | ) | |||||
Accounts payable | (248 | ) | 240 | (488 | ) | ||||||
Accrued liabilities and other | (77 | ) | 73 | (150 | ) | ||||||
Net change in working capital items | (23 | ) | (288 | ) | 265 | ||||||
Other | 31 | (30 | ) | 61 | |||||||
Net cash provided by operating activities | $ | 222 | $ | 52 | $ | 170 |
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 | Issuance Date | Maturity Date | Interest Payment Dates | |||
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 |
2020(1) | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | |||||||||||||||||||||
Scheduled interest payments | $ | 72 | $ | 90 | $ | 90 | $ | 90 | $ | 90 | $ | 1,027 | $ | 1,459 |
Three Months Ended | As of | |||||||||||||||
April 4, 2020 | April 4, 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 |
Payment Date | Dividend Per Share | Declaration Date | Record Date | |||||
March 18, 2020 | $ | 0.77 | February 6, 2020 | February 28, 2020 |
April 4, 2020 | December 31, 2019 | ||||||
Notional amount (contract maturities < 24 months) | $ | 2,362 | $ | 2,163 | |||
Fair value | (139 | ) | 50 |
Potential Earnings Benefit (Adverse Earnings Impact) | |||||||||
Hypothetical Strengthening % (1) | April 4, 2020 | December 31, 2019 | |||||||
U.S. dollar | 10% | $ | 4 | $ | (16 | ) | |||
Euro | 10% | (4 | ) | 19 |
Estimated Change in Fair Value | |||||||||
Hypothetical Change % (2) | April 4, 2020 | December 31, 2019 | |||||||
U.S. dollar | 10% | $ | 33 | $ | 50 | ||||
Euro | 10% | 61 | 69 |
• | 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; |
• | 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; |
• | 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; |
• | 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 affecting the availability of LIBOR; |
• | changes in discount rates and the actual return on pension assets; |
• | impairment charges initiated by adverse industry or market developments; |
• | our ability to execute our strategic objectives; |
• | disruptions to our information technology systems, or those of our customers or suppliers, including those related to cybersecurity; |
• | increases in our warranty, product liability or recall costs; |
• | the outcome of legal or regulatory proceedings to which we are or may become a party; |
• | the impact of pending legislation and regulations or changes in existing federal, state, local or foreign laws or regulations; |
• | the impact of regulations on our foreign operations; |
• | costs associated with compliance with environmental laws and regulations; |
• | developments or assertions by or against us relating to intellectual property rights; |
• | the impact of potential changes in tax and trade policies in the United States and related actions by countries in which we do business; |
• | 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. |
(a) | Disclosure Controls and Procedures |
(b) | Changes in Internal Control over Financial Reporting |
• | Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance. |
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) | |||||||||
January 1, 2020 through February 1, 2020 | — | $— | — | $ | 1,202.6 | ||||||||
February 2, 2020 through February 29, 2020 | 276,181 | $117.37 | 276,181 | 1,467.6 | (1) | ||||||||
March 1, 2020 through April 4, 2020 | 364,968 | $103.05 | 364,968 | 1,430.0 | (2) | ||||||||
Total | 641,149 | $109.22 | 641,149 | $ | 1,430.0 |
Exhibit Number | Exhibit Name | ||
4.1 | |||
10.1 | |||
* | 31.1 | ||
* | 31.2 | ||
* | 32.1 | ||
* | 32.2 | ||
** | 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 because their XBRL tags are embedded within the Inline XBRL document. | ||
*** | Submitted electronically with the Report. |
LEAR CORPORATION | |||
Dated: | May 8, 2020 | By: | /s/ Raymond E. Scott |
Raymond E. Scott | |||
President and Chief Executive Officer | |||
By: | /s/ Jason M. Cardew | ||
Jason M. Cardew | |||
Senior Vice President and Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Lear Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 8, 2020 | By: | /s/ Raymond E. Scott |
Raymond E. Scott | |||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Lear Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 8, 2020 | By: | /s/ Jason M. Cardew |
Jason M. Cardew | |||
Senior Vice President and Chief Financial Officer |
1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | May 8, 2020 | Signed: | /s/ Raymond E. Scott |
Raymond E. Scott | |||
Chief Executive Officer |
1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | May 8, 2020 | Signed: | /s/ Jason M. Cardew |
Jason M. Cardew | |||
Chief Financial Officer |
Comprehensive Income (Loss) and Equity |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss) and Equity | Comprehensive Income (Loss) and Equity Comprehensive Income (Loss) Comprehensive income (loss) is defined as all changes in the Company’s net assets except changes resulting from transactions with stockholders. It differs from net income in that certain items recorded in equity are included in comprehensive income (loss). Accumulated Other Comprehensive Loss A summary of changes, net of tax, in accumulated other comprehensive loss for the three months ended April 4, 2020, is shown below (in millions):
In the three months ended April 4, 2020, foreign currency translation adjustments are primarily related to the weakening of the Brazilian real, the Euro and the Chinese renminbi relative to the U.S. dollar and include pretax losses of $1.6 million related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future. A summary of changes, net of tax, in accumulated other comprehensive loss for the three months ended March 30, 2019, is shown below (in millions):
In the three months ended March 30, 2019, foreign currency translation adjustments are primarily related to weakening of the Euro, offset by the strengthening of the Chinese renminbi, relative to the U.S. dollar and include pretax gains of $0.1 million related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future. For further information regarding reclassification adjustments related to the Company's defined benefit plans, see Note 10, "Pension and Other Postretirement Benefit Plans." For further information regarding reclassification adjustments related to the Company's derivative and hedging activities, see Note 18, "Financial Instruments." Lear Corporation Stockholders’ Equity Common Stock Share Repurchase Program In March 2020, as a proactive measure in response to the COVID-19 pandemic, the Company temporarily suspended share repurchases under its share repurchase program. Shares repurchases in the first quarter of 2020 (prior to the suspension) are shown below (in millions except for shares and per share amounts):
(1) Excludes commissions Since the first quarter of 2011, the Company's Board of Directors has authorized $6.1 billion in share repurchases under the common stock share repurchase program. As of the end of the first quarter of 2020, the Company has repurchased, in aggregate, $4.7 billion of its outstanding common stock, at an average price of $90.07 per share, excluding commissions and related fees. The Company may implement 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 the Company will repurchase its outstanding common stock and the timing of such repurchases will depend upon its financial condition, prevailing market conditions, alternative uses of capital and other factors. In addition to shares repurchased under the Company’s common stock share repurchase program described above, the Company classified shares withheld from the settlement of the Company’s restricted stock unit and performance share awards to cover tax withholding requirements as common stock held in treasury in the accompanying condensed consolidated balance sheets as of April 4, 2020 and December 31, 2019. Quarterly Dividend In March 2020, as a proactive measure in response to the COVID-19 pandemic, the Company temporarily suspended its quarterly cash dividend. In the first three months of 2020 (prior to the suspension) and 2019, the Company’s Board of Directors declared quarterly cash dividends of $0.77 and $0.75 per share of common stock, respectively. Dividends declared and paid are shown below (in millions):
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 April 4, 2020 and December 31, 2019. For further information related to the redeemable noncontrolling interest adjustment, see Note 14, "Net Income 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, 2019.
|
Accounting Pronouncements |
3 Months Ended |
---|---|
Apr. 04, 2020 | |
Accounting Changes and Error Corrections [Abstract] | |
Accounting Pronouncements | Accounting Pronouncements The Company considers the applicability and impact of all ASUs issued by the Financial Accounting Standards Board ("FASB"). The Company considered the ASUs summarized below, effective for 2020: Measurement of Credit Losses on Financial Instruments See Note 18, "Financial Instruments — Accounts Receivable." Simplifying the Test for Goodwill Impairment Effective January 1, 2020, the standard simplifies the accounting for goodwill impairments and allows a goodwill impairment charge to be based on the amount of a reporting unit's carrying value in excess of its fair value. This eliminates the requirement to calculate the implied fair value of goodwill (i.e., "Step 2" under current guidance). Reference Rate Reform In March 2020, the FASB issued guidance related to reference rate reform. The guidance provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied to applicable contract modifications and hedge relationships through December 31, 2022. The adoption of this guidance is not expected to have a significant impact on the Company's financial statements. The Company considered the ASUs summarized below, effective after 2020: Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The standard simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of this standard is not expected to have a significant impact on the Company's financial statements.
|
Other Expense, Net - Summary of Other (Income) Expense, Net (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
|
Other Income and Expenses [Abstract] | ||
Other expense | $ 47.5 | $ 11.3 |
Other income | (7.0) | (6.9) |
Other expense, net | $ 40.5 | $ 4.4 |
Leases - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Apr. 04, 2020
USD ($)
lease_contract
| |
Leases [Abstract] | |
Number of lease contracts | lease_contract | 1 |
Lease not yet commenced, term of contract | 10 years |
Lease not yet commenced | $ | $ 50 |
Inventories (Details) - USD ($) $ in Millions |
Apr. 04, 2020 |
Dec. 31, 2019 |
|||
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Inventory Disclosure [Abstract] | |||||
Raw materials | $ 973.3 | $ 906.3 | |||
Work-in-process | 107.0 | 107.0 | |||
Finished goods | 381.2 | 380.4 | |||
Reserves | (137.2) | (135.5) | |||
Inventories | $ 1,324.3 | [1] | $ 1,258.2 | ||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Revenues from External Customers and Other Financial Information by Reportable Operating Segment | A summary of revenues from external customers and other financial information by reportable operating segment is shown below (in millions):
(1) See definition above
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Reconciliation of Segment Earnings to Consolidated Income Before Provision for Income Taxes and Equity | 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):
|
Comprehensive Income (Loss) and Equity - Narrative (Details) - USD ($) |
3 Months Ended | 111 Months Ended | |
---|---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
Apr. 04, 2020 |
|
Equity [Abstract] | |||
Foreign currency translation adjustments related to intercompany transactions | $ (1,600,000) | $ 100,000 | |
Aggregate purchases authorized under common stock share repurchase program | 6,100,000,000 | $ 6,100,000,000 | |
Aggregate repurchases | $ 70,000,000.0 | $ 117,900,000 | $ 4,700,000,000 |
Average price (in dollars per share) | $ 109.22 | $ 146.56 | $ 90.07 |
Cash dividends declared per share (in dollars per share) | $ 0.77 | $ 0.75 |
Income Taxes - Tax Benefits (Expense) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||
Restructuring charges and various other items | $ 10.0 | $ 15.6 |
Valuation allowances on deferred tax assets of a foreign subsidiary | 0.8 | 0.0 |
Share-based compensation | (0.2) | 3.2 |
Change in tax status of certain affiliates | 0.0 | 18.4 |
Income tax benefits (expense) related to significant discrete items | $ 10.6 | $ 37.2 |
Legal and Other Contingencies - Summary of Product Liability and Warranty Claims (Details) $ in Millions |
3 Months Ended |
---|---|
Apr. 04, 2020
USD ($)
| |
Movement in Standard Product Warranty Accrual [Roll Forward] | |
Balance at January 1, 2020 | $ 32.0 |
Expense, net (including changes in estimates) | 5.4 |
Settlements | (2.9) |
Foreign currency translation and other | (0.7) |
Balance at April 4, 2020 | $ 33.8 |
Financial Instruments - Net Losses Expected to be Reclassified into Earnings (Details) $ in Millions |
3 Months Ended |
---|---|
Apr. 04, 2020
USD ($)
| |
Fair Value Disclosures [Abstract] | |
Net losses related to foreign currency contracts | $ 71.8 |
Net losses related to interest rate swap contracts | 2.4 |
Total | $ 74.2 |
Goodwill - Summary of Changes in Carrying Amount of Goodwill (Details) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Apr. 04, 2020
USD ($)
| ||||
Goodwill [Roll Forward] | ||||
Balance at January 1, 2020 | $ 1,614.3 | |||
Foreign currency translation and other | (22.1) | |||
Balance at April 4, 2020 | 1,592.2 | [1] | ||
Seating | ||||
Goodwill [Roll Forward] | ||||
Balance at January 1, 2020 | 1,235.4 | |||
Foreign currency translation and other | (20.0) | |||
Balance at April 4, 2020 | 1,215.4 | |||
E-Systems | ||||
Goodwill [Roll Forward] | ||||
Balance at January 1, 2020 | 378.9 | |||
Foreign currency translation and other | (2.1) | |||
Balance at April 4, 2020 | $ 376.8 | |||
|
Debt - Credit Agreement (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
Dec. 31, 2019 |
Aug. 08, 2017 |
|
Debt Instrument [Line Items] | ||||
Payments of related issuance costs | $ 6,900,000 | $ 0 | ||
Repayments of amounts outstanding | $ 3,100,000 | $ 1,600,000 | ||
Credit Agreement — Revolving Credit Facility | Minimum | ||||
Debt Instrument [Line Items] | ||||
Facility fee | 0.125% | |||
Credit Agreement — Revolving Credit Facility | Maximum | ||||
Debt Instrument [Line Items] | ||||
Facility fee | 0.30% | |||
Credit agreement | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Payments of related issuance costs | $ 1,000,000.0 | |||
Credit agreement | Credit Agreement — Revolving Credit Facility | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Line of credit facility, maximum borrowing capacity | $ 1,750,000,000 | |||
Borrowings outstanding under Revolving Credit Facility | 1,000,000,000.0 | $ 0 | ||
Credit agreement | Credit Agreement — Term Loan Facility | Term Loan Facility | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, face amount | $ 250,000,000.0 | |||
Borrowings outstanding under Revolving Credit Facility | 231,200,000 | $ 234,400,000 | ||
Repayments of amounts outstanding | $ 3,100,000 |
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
|
Income Statement [Abstract] | ||
Net sales | $ 4,457.7 | $ 5,160.1 |
Cost of sales | 4,123.5 | 4,686.9 |
Selling, general and administrative expenses | 143.7 | 148.3 |
Amortization of intangible assets | 17.1 | 12.7 |
Interest expense | 24.4 | 20.9 |
Other expense, net | 40.5 | 4.4 |
Consolidated income before provision for income taxes and equity in net income of affiliates | 108.5 | 286.9 |
Provision for income taxes | 26.5 | 43.1 |
Equity in net income of affiliates | (1.6) | (2.3) |
Consolidated net income | 83.6 | 246.1 |
Less: Net income attributable to noncontrolling interests | 7.2 | 17.2 |
Net income attributable to Lear | $ 76.4 | $ 228.9 |
Basic net income per share available to Lear common stockholders (Note 14) (in dollars per share) | $ 1.26 | $ 3.75 |
Diluted net income per share available to Lear common stockholders (Note 14) (in dollars per share) | 1.26 | 3.73 |
Cash dividends declared per share (in dollars per share) | $ 0.77 | $ 0.75 |
Average common shares outstanding (in shares) | 60,509,450 | 62,818,792 |
Average diluted shares outstanding (in shares) | 60,678,590 | 63,123,197 |
Consolidated comprehensive income (loss) (Condensed Consolidated Statements of Equity) | $ (197.8) | $ 248.2 |
Less: Comprehensive income attributable to noncontrolling interests | 2.4 | 25.0 |
Comprehensive income (loss) attributable to Lear | $ (200.2) | $ 223.2 |
Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Revenue by Reportable Segment and Geography | A summary of the Company’s revenue by reportable operating segment and geography is shown below (in millions):
|
Basis of Presentation |
3 Months Ended |
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Apr. 04, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 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. In the second quarter of 2019, the Company completed the acquisition of Xevo Inc. (“Xevo”), a Seattle-based, global leader in connected car software, by acquiring all of Xevo's outstanding shares. The acquisition of Xevo has been accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in the accompanying condensed consolidated balance sheets as of April 4, 2020 and December 31, 2019. The operating results and cash flows of Xevo are included in the accompanying condensed consolidated financial statements from the date of acquisition and in the Company's E-Systems segment. For further information related to the acquisition of Xevo, see Note 3, “Acquisition,” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. 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.
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Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Carrying Amount of Goodwill | A summary of the changes in the carrying amount of goodwill, by operating segment, in the three months ended April 4, 2020, is shown below (in millions):
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition The Company enters into contracts with its customers to provide production parts generally at the beginning of a vehicle’s life cycle. Typically, these contracts do not provide for a specified quantity of products, but once entered into, the Company is often expected to fulfill its customers’ purchasing requirements for the production life of the vehicle. Many of these contracts may be terminated by the Company’s customers at any time. Historically, terminations of these contracts have been minimal. The Company receives purchase orders from its customers, which provide the commercial terms for a particular production part, including price (but not quantities). Contracts may also provide for annual price reductions over the production life of the vehicle, and prices may be adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors. Revenue is recognized at a point in time when control of the product is transferred to the customer under standard commercial terms, as the Company does not have an enforceable right to payment prior to such transfer. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for those products based on the annual purchase orders, annual price reductions and ongoing price adjustments. The Company's customers pay for products received in accordance with payment terms that are customary within the industry. The Company's contracts with its customers do not have significant financing components. The Company records a contract liability for advances received from its customers. As of April 4, 2020 and December 31, 2019, there were no significant contract liabilities recorded. Further, there were no significant contract liabilities recognized in revenue during the first three months of 2020. Amounts billed to customers related to shipping and handling costs are included in net sales in the condensed consolidated statements of comprehensive income (loss). Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales in the condensed consolidated statements of comprehensive income (loss). Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue. A summary of the Company’s revenue by reportable operating segment and geography is shown below (in millions):
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Restructuring |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | Restructuring Restructuring costs include employee termination benefits, asset impairment charges and contract termination costs, as well as other incremental costs resulting from the restructuring actions. Employee termination benefits are recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. Other incremental costs principally include equipment and personnel relocation costs. In addition to restructuring costs, the Company incurs incremental manufacturing inefficiency costs at the operating locations impacted by the restructuring actions during the related restructuring implementation period. Restructuring costs are recognized in the Company’s condensed consolidated financial statements in accordance with GAAP. Generally, charges are recorded as restructuring actions are approved and/or implemented. In the first three months of 2020, the Company recorded charges of $32.6 million in connection with its restructuring actions. These charges consist of $28.2 million recorded as cost of sales and $4.4 million recorded as selling, general and administrative expenses. The restructuring charges consist of employee termination costs of $20.0 million, asset impairment charges of $10.4 million and contract termination costs of $0.2 million, as well as other related costs of $2.0 million. Employee termination benefits were recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. Asset impairment charges relate to the disposal of buildings, leasehold improvements and/or machinery and equipment with carrying values of $10.4 million in excess of related estimated fair values. The Company expects to incur approximately $46 million of additional restructuring costs related to activities initiated as of April 4, 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 2020 activity is shown below (in millions):
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Goodwill |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill A summary of the changes in the carrying amount of goodwill, by operating segment, in the three months ended April 4, 2020, is shown below (in millions):
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 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. As of April 4, 2020, the results of the quantitative analysis indicated that the fair value of the reporting unit exceeded the related carrying value. 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 reporting unit is at risk of failing a future quantitative assessment if the impact of the COVID-19 pandemic is more severe or if economic recovery is slower or weaker than anticipated. As of April 4, 2020, the goodwill of the reporting unit represents less than 10% of the Company’s total goodwill.
|
Legal and Other Contingencies - Narrative (Details) - USD ($) $ in Millions |
Apr. 04, 2020 |
Dec. 31, 2019 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Reserves for pending legal disputes, including commercial disputes and other matters | $ 14.1 | $ 14.0 |
Environmental reserves | $ 9.2 | $ 9.3 |
Financial Instruments - Pretax Amounts Recognized in and Reclassified from Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
|
Derivative [Line Items] | ||
Gains (losses) recognized in accumulated other comprehensive loss | $ (120.3) | $ 10.1 |
(Gains) losses reclassified from accumulated other comprehensive loss | (7.1) | (9.2) |
Comprehensive income (loss) | (127.4) | 0.9 |
Net sales | ||
Derivative [Line Items] | ||
(Gains) losses reclassified from accumulated other comprehensive loss | (0.1) | 0.5 |
Cost of sales | ||
Derivative [Line Items] | ||
(Gains) losses reclassified from accumulated other comprehensive loss | (7.6) | (9.7) |
Interest expense | ||
Derivative [Line Items] | ||
(Gains) losses reclassified from accumulated other comprehensive loss | 0.6 | 0.0 |
Foreign currency contracts | ||
Derivative [Line Items] | ||
Gains (losses) recognized in accumulated other comprehensive loss | (143.3) | 24.8 |
Net investment hedge contracts | ||
Derivative [Line Items] | ||
Gains (losses) recognized in accumulated other comprehensive loss | 23.0 | 0.0 |
Interest rate swap contracts | ||
Derivative [Line Items] | ||
Gains (losses) recognized in accumulated other comprehensive loss | $ 0.0 | $ (14.7) |
Financial Instruments - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Millions |
Apr. 04, 2020 |
Dec. 31, 2019 |
Mar. 30, 2019 |
Dec. 31, 2018 |
|||
---|---|---|---|---|---|---|---|
Fair Value Disclosures [Abstract] | |||||||
Balance sheet - cash and cash equivalents | $ 2,449.1 | [1] | $ 1,487.7 | $ 1,199.4 | |||
Restricted cash included in other current assets | 11.2 | 13.9 | |||||
Restricted cash included in other long-term assets | 1.6 | 7.6 | |||||
Statement of cash flows - cash, cash equivalents and restricted cash | $ 2,461.9 | $ 1,510.4 | $ 1,220.9 | $ 1,519.8 | |||
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Comprehensive Income (Loss) and Equity - Summary of Changes, Net of Tax, in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
3 Months Ended | ||||
---|---|---|---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Balance at beginning of period | $ 4,501.1 | $ 4,360.6 | |||
Balance at end of period | 4,183.3 | [1] | 4,393.7 | ||
Defined benefit plans | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Balance at beginning of period | (217.6) | (172.8) | |||
Reclassification adjustments | 1.3 | 1.6 | |||
Other comprehensive income (loss) recognized during the period | 7.6 | (1.3) | |||
Balance at end of period | (208.7) | (172.5) | |||
Reclassification adjustments, tax expense (benefit) | 0.3 | 0.4 | |||
Other comprehensive income (loss) recognized during the period, tax expense (benefit) | 0.0 | 0.0 | |||
Derivative instruments and hedging | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Balance at beginning of period | 9.8 | (9.7) | |||
Reclassification adjustments | (5.7) | (7.1) | |||
Other comprehensive income (loss) recognized during the period | (115.4) | 7.8 | |||
Balance at end of period | (111.3) | (9.0) | |||
Reclassification adjustments, tax expense (benefit) | (1.4) | (2.1) | |||
Other comprehensive income (loss) recognized during the period, tax expense (benefit) | (27.9) | 2.3 | |||
Foreign currency translation | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Balance at beginning of period | (564.9) | (523.3) | |||
Other comprehensive income (loss) recognized during the period | (164.4) | (6.7) | |||
Balance at end of period | (729.3) | (530.0) | |||
Other comprehensive income (loss) recognized during the period, tax expense (benefit) | 4.8 | 0.0 | |||
Total accumulated other comprehensive loss | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Balance at end of period | $ (1,049.3) | $ (711.5) | |||
|
Income Taxes - Provision for Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 04, 2020 |
Mar. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||
Provision for income taxes | $ 26.5 | $ 43.1 |
Pretax income before equity in net income of affiliates | $ 108.5 | $ 286.9 |
Effective tax rate | 24.40% | 15.00% |
Segment Reporting - Narrative (Details) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 04, 2020
USD ($)
segment
|
Mar. 30, 2019
USD ($)
|
|
Segment Reporting Information [Line Items] | ||
Reportable operating segments | segment | 2 | |
Restructuring charges | $ 32.6 | |
Seating | ||
Segment Reporting Information [Line Items] | ||
Additional restructuring costs expected to occur | 19.0 | |
E-Systems | ||
Segment Reporting Information [Line Items] | ||
Additional restructuring costs expected to occur | 27.0 | |
Operating segments | Seating | ||
Segment Reporting Information [Line Items] | ||
Restructuring charges | 12.3 | $ 45.2 |
Operating segments | E-Systems | ||
Segment Reporting Information [Line Items] | ||
Restructuring charges | $ 20.3 | 8.9 |
Other | ||
Segment Reporting Information [Line Items] | ||
Restructuring charges | $ 0.2 |
Goodwill - Narrative (Details) |
Apr. 04, 2020 |
---|---|
E-Systems | Disrupted Reporting Unit | |
Goodwill [Line Items] | |
Percentage of fair value in excess of carrying value (less than) | 10.00% |
Debt - Credit Agreement Interest Rate Ranges (Details) |
3 Months Ended |
---|---|
Apr. 04, 2020 | |
Revolving Credit Facility | Credit Agreement — Revolving Credit Facility | Eurocurrency Rate | |
Debt Instrument [Line Items] | |
Interest rate as of period end | 1.10% |
Revolving Credit Facility | Credit Agreement — Revolving Credit Facility | Eurocurrency Rate | Minimum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.00% |
Revolving Credit Facility | Credit Agreement — Revolving Credit Facility | Eurocurrency Rate | Maximum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.60% |
Revolving Credit Facility | Credit Agreement — Revolving Credit Facility | Base Rate | |
Debt Instrument [Line Items] | |
Interest rate as of period end | 0.10% |
Revolving Credit Facility | Credit Agreement — Revolving Credit Facility | Base Rate | Minimum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 0.00% |
Revolving Credit Facility | Credit Agreement — Revolving Credit Facility | Base Rate | Maximum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 0.60% |
Term Loan Facility | Credit Agreement — Term Loan Facility | Eurocurrency Rate | |
Debt Instrument [Line Items] | |
Interest rate as of period end | 1.25% |
Term Loan Facility | Credit Agreement — Term Loan Facility | Eurocurrency Rate | Minimum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.125% |
Term Loan Facility | Credit Agreement — Term Loan Facility | Eurocurrency Rate | Maximum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.90% |
Term Loan Facility | Credit Agreement — Term Loan Facility | Base Rate | |
Debt Instrument [Line Items] | |
Interest rate as of period end | 0.25% |
Term Loan Facility | Credit Agreement — Term Loan Facility | Base Rate | Minimum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 0.125% |
Term Loan Facility | Credit Agreement — Term Loan Facility | Base Rate | Maximum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 0.90% |
Pension and Other Postretirement Benefit Plans (Tables) |
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Apr. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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):
The components of the Company’s net periodic other postretirement benefit (credit) cost are shown below (in millions):
|
Impact of COVID-19 Pandemic |
3 Months Ended |
---|---|
Apr. 04, 2020 | |
Unusual or Infrequent Items, or Both [Abstract] | |
Impact of COVID-19 Pandemic | Impact of COVID-19 Pandemic Unprecedented industry disruptions related to the COVID-19 pandemic during the first quarter of 2020 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 quarter. At the end of the quarter, all of our facilities in China were operating and capacity utilization is increasing. Beginning in mid-March, our operations in Europe, North America, South America and Asia (excluding China) were impacted, with virtually all plants closed at the end of the quarter and closures continuing throughout April and, in most cases, into May. While manufacturing has resumed at certain locations in Europe and North America, production levels at these facilities are currently well below capacity. Accordingly, the COVID-19 pandemic is expected to have a material impact on the Company's second quarter 2020 sales, operating results and cash flows. It is also likely that the global automotive industry will experience lower demand for new vehicle sales for a period of time as a result of the global economic slowdown caused by the COVID-19 pandemic, as new vehicle sales are correlated with positive consumer confidence and low unemployment. In addition, the Company's customers may request extended payment terms, as part of their own response to the COVID-19 pandemic. Finally, a resurgence of the virus with corresponding shelter-in-place orders later in the year could further impact the Company's financial results. The accompanying condensed consolidated financial statements reflect estimates and assumptions made by management as of April 4, 2020, and for the three 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 April 4, 2020, including those resulting from the impact of the COVID-19 pandemic, will be reflected in management's estimates and assumptions in future periods. For 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 Annual Report on Form 10-K for the year ended December 31, 2019. For more information related to income taxes, see Note 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.
|
Long-Term Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Property, Plant and Equipment | A summary of property, plant and equipment is shown below (in millions):
|
Cover Page - shares |
3 Months Ended | |
---|---|---|
Apr. 04, 2020 |
May 05, 2020 |
|
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Apr. 04, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-11311 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 13-3386776 | |
Entity Address, Address Line One | 21557 Telegraph Road | |
Entity Address, City or Town | Southfield | |
Entity Address, State or Province | MI | |
Entity Address, Postal Zip Code | 48033 | |
City Area Code | 248 | |
Local Phone Number | 447-1500 | |
Title of 12(b) Security | Common stock, par value $0.01 | |
Trading Symbol | LEA | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 59,919,614 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | LEAR CORP | |
Entity Central Index Key | 0000842162 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Statements of Equity - USD ($) $ in Millions |
Total |
Common Stock |
Additional Paid-In Capital |
Common Stock Held in Treasury |
Retained Earnings |
Accumulated Other Comprehensive Loss, Net of Tax |
Lear Corporation Stockholders' Equity |
Non-controlling Interests |
Redeemable Non-controlling Interests |
|||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at beginning of period at Dec. 31, 2018 | $ 4,360.6 | $ 0.6 | $ 1,017.4 | $ (225.1) | $ 4,113.6 | $ (705.8) | $ 4,200.7 | $ 159.9 | ||||
Comprehensive income (loss): | ||||||||||||
Net income | 244.9 | 228.9 | 228.9 | 16.0 | ||||||||
Other comprehensive income (loss) | (1.9) | (5.7) | (5.7) | 3.8 | ||||||||
Total comprehensive income (loss) | 243.0 | 228.9 | (5.7) | 223.2 | 19.8 | |||||||
Stock-based compensation | 9.5 | 9.5 | 9.5 | |||||||||
Net issuance of shares held in treasury in settlement of stock-based compensation | (29.2) | (65.4) | 37.4 | (1.2) | (29.2) | |||||||
Repurchase of shares of common stock | (117.9) | (117.9) | (117.9) | |||||||||
Dividends declared to Lear Corporation stockholders | (47.7) | (47.7) | (47.7) | |||||||||
Dividends declared to non-controlling interest holders | (31.3) | (31.3) | ||||||||||
Redeemable non-controlling interest adjustment | 6.7 | 6.7 | 6.7 | |||||||||
Balance at end of period at Mar. 30, 2019 | 4,393.7 | 0.6 | 961.5 | (305.6) | 4,300.3 | (711.5) | 4,245.3 | 148.4 | ||||
Balance at beginning of year at Dec. 31, 2018 | $ 158.1 | |||||||||||
Comprehensive income (loss): | ||||||||||||
Net income | 1.2 | |||||||||||
Other comprehensive income (loss) | 4.0 | |||||||||||
Total comprehensive income (loss) | 5.2 | |||||||||||
Redeemable non-controlling interest adjustment | (6.7) | |||||||||||
Balance at end of year at Mar. 30, 2019 | 156.6 | |||||||||||
Balance at beginning of period at Dec. 31, 2019 | 4,501.1 | 0.6 | 969.1 | (563.1) | 4,715.8 | (772.7) | 4,349.7 | 151.4 | ||||
Comprehensive income (loss): | ||||||||||||
Net income | 87.5 | 76.4 | 76.4 | 11.1 | ||||||||
Other comprehensive income (loss) | (279.3) | (276.6) | (276.6) | (2.7) | ||||||||
Total comprehensive income (loss) | (191.8) | 76.4 | (276.6) | (200.2) | 8.4 | |||||||
Stock-based compensation | 3.9 | 3.9 | 3.9 | |||||||||
Net issuance of shares held in treasury in settlement of stock-based compensation | (11.2) | (27.0) | 17.5 | (1.7) | (11.2) | |||||||
Repurchase of shares of common stock | (70.0) | (70.0) | (70.0) | |||||||||
Dividends declared to Lear Corporation stockholders | (46.8) | (46.8) | (46.8) | |||||||||
Dividends declared to non-controlling interest holders | 0.0 | 0.0 | ||||||||||
Redeemable non-controlling interest adjustment | (1.1) | (1.1) | (1.1) | |||||||||
Balance at end of period at Apr. 04, 2020 | 4,183.3 | [1] | $ 0.6 | $ 946.0 | $ (615.6) | $ 4,741.8 | $ (1,049.3) | $ 4,023.5 | $ 159.8 | |||
Balance at beginning of year at Dec. 31, 2019 | 118.4 | 118.4 | ||||||||||
Comprehensive income (loss): | ||||||||||||
Net income | (3.9) | |||||||||||
Other comprehensive income (loss) | (2.1) | |||||||||||
Total comprehensive income (loss) | (6.0) | |||||||||||
Redeemable non-controlling interest adjustment | 1.1 | |||||||||||
Balance at end of year at Apr. 04, 2020 | $ 113.5 | [1] | $ 113.5 | |||||||||
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Inventories |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | 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):
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Debt |
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Apr. 04, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | 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):
Senior Notes The issuance, maturity and interest payment dates of the Company's senior unsecured 2027 Notes, 2029 Notes, 2030 Notes and 2049 Notes (together, the "Notes") are shown below:
In February 2020, the Company issued $350.0 million in aggregate principal amount at maturity of 2030 Notes and an additional $300.0 million in aggregate principal amount at maturity of 2049 Notes. The 2030 Notes have a stated coupon rate of 3.5% and were issued at 99.774% of par, resulting in a yield to maturity of 3.525%. The 2049 Notes have a stated coupon rate of 5.25% and were issued at 106.626% of par, resulting in a yield to maturity of 4.821%. The net proceeds from the offering were $669.1 million after original issue discount. The proceeds were used to redeem the $650.0 million in aggregate principal amount of 2025 Notes at a redemption price equal to 102.625% of the principal amount of such 2025 Notes, plus accrued interest. In connection with these transactions, the Company recognized a loss of $21.1 million on the extinguishment of debt and paid related issuance costs of $5.9 million in the three months ended April 4, 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. As of April 4, 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"). In February 2020, the Company entered into an agreement to extend the maturity date of the Revolving Credit Facility by one year to August 8, 2024. The maturity date of the Term Loan Facility remains August 8, 2022. In connection with the extension agreement, the Company paid related issuance costs of $1.0 million. As of April 4, 2020, there were $1.0 billion of borrowings outstanding under the Revolving Credit Facility, which is reflected in current liabilities in the accompanying condensed consolidated balance sheet. As of December 31, 2019, there were no borrowings outstanding under the Revolving Credit Facility. As of April 4, 2020 and December 31, 2019, there were $231.2 million and $234.4 million, respectively, of borrowings outstanding under the Term Loan Facility. In the first three months of 2020, the Company made required principal payments of $3.1 million under the Term Loan Facility. 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 April 4, 2020, are shown below (in percentages):
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 April 4, 2020, the Company was in compliance with all covenants under the Credit Agreement. 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, 2019.
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Other Expense, Net |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Expense, Net | Other Expense, Net Other expense, net 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. A summary of other expense, net is shown below (in millions):
In the three months ended April 4, 2020, other expense includes net foreign currency transaction losses of $17.7 million and a loss of $21.1 million on the extinguishment of debt (Note 8, "Debt"). In the three months ended March 30, 2019, other expense includes net foreign currency transaction losses $5.8 million.
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Legal and Other Contingencies |
3 Months Ended | ||||||||||||||||||||||||||||
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Apr. 04, 2020 | |||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||
Legal and Other Contingencies | Legal and Other Contingencies As of April 4, 2020 and December 31, 2019, the Company had recorded reserves for pending legal disputes, including commercial disputes and other matters, of $14.1 million and $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. 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. 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 three months ended April 4, 2020, is shown below (in millions):
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 April 4, 2020 and December 31, 2019, the Company had recorded environmental reserves of $9.2 million and $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. 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.
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Subsequent Event |
3 Months Ended |
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Apr. 04, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Event | <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;"></font><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Subsequent Event</font></div></div> |
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