Lea Bank Annual Report 2019

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2019.TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission file number: 1-11311(Exact name of registrant as specified in its charter)Delaware 13-3386776(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)21557 Telegraph Road, Southfield, MI 48033 (Address of principal executive offices) (248) 447-1500 (Registrant's telephone number including areas code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Trading Symbol(s) Name of each exchange on which registeredCommon Stock, par value $0.01 per share LEA New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. Seedefinitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filer Smaller reporting companyEmerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒As of June 29, 2019, the aggregate market value of the registrant’s common stock, par value $0.01 per share, held by non-affiliates of the registrant was $8,512,234,516. The closing price ofthe common stock on June 29, 2019, as reported on the New York Stock Exchange, was $139.27 per share.As of January 31, 2020, the number of shares outstanding of the registrant’s common stock was 60,472,179 shares.DOCUMENTS INCORPORATED BY REFERENCECertain sections of the registrant’s Notice of Annual Meeting of Stockholders and Definitive Proxy Statement on Schedule 14A for its Annual Meeting of Stockholders to be held in May 2020,as described in the Cross Reference Sheet and Table of Contents included herewith, are incorporated by reference into Part III of this Report.Table of ContentsLEAR CORPORATION AND SUBSIDIARIESCROSS REFERENCE SHEET AND TABLE OF CONTENTS Page Numberor ReferencePART IITEM 1.Business3ITEM 1A.Risk factors14ITEM 1B.Unresolved staff comments20ITEM 2.Properties21ITEM 3.Legal proceedings22ITEM 4.Mine safety disclosures22SUPPLEMENTARY ITEM.Information about our executive officers22PART IIITEM 5.Market for the Company’s common equity, related stockholder matters and issuer purchases of equity securities24ITEM 6.Selected financial data25ITEM 7.Management’s discussion and analysis of financial condition and results of operations29ITEM 7A.Quantitative and qualitative disclosures about market risk (included in Item 7) ITEM 8.Consolidated financial statements and supplementary data50ITEM 9.Changes in and disagreements with accountants on accounting and financial disclosure105ITEM 9A.Controls and procedures105ITEM 9B.Other information105PART III (1)ITEM 10.Directors, executive officers and corporate governance (2)106ITEM 11.Executive compensation (3)106ITEM 12.Security ownership of certain beneficial owners and management and related stockholder matters (4)106ITEM 13.Certain relationships and related transactions, and director independence (5)107ITEM 14.Principal accounting fees and services (6)107PART IVITEM 15.Exhibits and financial statement schedule107ITEM 16.Form 10-K Summary107________________________(1)Certain information is incorporated by reference, as indicated below, to the registrant’s Definitive Proxy Statement on Schedule 14A for its AnnualMeeting of Stockholders to be held in May 2020 (the "Proxy Statement").(2)A portion of the information required is incorporated by reference to the Proxy Statement sections entitled "Election of Directors" and "Directors andCorporate Governance."(3)Incorporated by reference to the Proxy Statement sections entitled "Directors and Corporate Governance — Director Compensation," "CompensationDiscussion and Analysis," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and "Compensation CommitteeReport."(4)A portion of the information required is incorporated by reference to the Proxy Statement section entitled "Directors and Corporate Governance — SecurityOwnership of Certain Beneficial Owners, Directors and Management."(5)Incorporated by reference to the Proxy Statement sections entitled "Certain Relationships and Related Party Transactions" and "Directors and CorporateGovernance — Independence of Directors."(6)Incorporated by reference to the Proxy Statement section entitled "Fees of IndependentAccountants."Table of ContentsPART IITEM 1 – BUSINESSIn this Report, when we use the terms the "Company," "Lear," "we," "us" and "our," unless otherwise indicated or the context otherwise requires, we are referringto Lear Corporation and its consolidated subsidiaries. A substantial portion of the Company’s operations are conducted through subsidiaries controlled by LearCorporation. The Company is also a party to various joint venture arrangements. Certain disclosures included in this Report constitute forward-lookingstatements that are subject to risks and uncertainties. See Item 1A, "Risk Factors," and Part II — Item 7, "Management’s Discussion and Analysis of FinancialCondition and Results of Operations — Forward-Looking Statements."BUSINESS OF THE COMPANYGeneralLear Corporation is a leading Tier 1 supplier to the global automotive industry. We supply seating, electrical distribution systems and electronic modules, as wellas related sub-systems, components and software, to all of the world's major automotive manufacturers. At Lear, we are Making every drive betterTM by providingtechnology for safer, smarter and more comfortable journeys, while adhering to our values - Be Inclusive. Be Inventive. Get Results The Right Way.We have 257 manufacturing, engineering and administrative locations in 39 countries and are continuing to grow our business in all automotive producing regionsof the world, both organically and through complementary acquisitions. Our manufacturing footprint reflects more than 143 facilities in 22 low cost countries.We use our product, design and technological expertise, global reach and competitive manufacturing footprint to achieve the following financial goals andobjectives:•Continue to deliver profitable growth, balancing risks and returns;•Maintain a strong balance sheet with investment grade credit metrics;and•Consistently return excess cash to ourstockholders.Our business is organized under two reporting segments: Seating and E-Systems. Each of these segments has a varied product and technology range across anumber of component categories:•Seating — Our Seating segment consists of the design, development, engineering, just-in-time assembly and delivery of complete seat systems, as well asthe design, development, engineering and manufacture of all major seat components, including seat covers and surface materials such as leather andfabric, seat structures and mechanisms, seat foam and headrests. Further, we have capabilities in active sensing and comfort for seats, utilizingelectronically controlled sensor and adjustment systems and internally developed algorithms.•E-Systems — Our E-Systems segment consists of the design, development, engineering and manufacture of complete electrical distribution systems, aswell as sophisticated electronic control modules, electrification products, connectivity products and software solutions for the cloud, vehicles and mobiledevices.Electrical distribution systems route networks and electrical signals and manage electrical power within the vehicle for all types of powertrains - fromtraditional internal combustion engine ("ICE") architectures to the full range of hybrid, plug-in hybrid and battery electric architectures. Key componentsin our electrical distribution portfolio include wire harnesses, terminals and connectors and junction boxes for both ICE and electrification architecturesthat require management of higher voltage and power.Electronic control modules facilitate signal, data and power management within the vehicle and include the associated software required to facilitatethese functions. Key components in our electronic control module portfolio include body control modules, wireless receiver and transmitter technologyand lighting and audio control modules, as well as products specific to electrification and connectivity trends.Electrification products include on board battery chargers, power conversion modules, high voltage battery management systems and high voltage powerdistribution.Connectivity products include gateway modules and communication modules to manage both wired and wireless networks and data in vehicles. Inaddition to fully functional electronic modules, we offer software that includes cybersecurity, advanced vehicle positioning for automated andautonomous driving applications, roadside modules that communicate real-time traffic information and full capabilities in both dedicated short-rangecommunication and3Table of Contentscellular protocols for vehicle connectivity. Our software solutions also include Xevo Journeyware, a thin-client platform for the cloud, vehicles andmobile devices that enables consumer e-commerce, multi-media applications and enterprise services to improve performance and safety, deliver anartificial intelligence-enhanced driving experience and provide new monetization opportunities for us and the automotive manufacturers, and XevoMarket, an in-vehicle commerce and service platform that connects customers with their favorite brands and services by delivering highly-contextualsales offers through vehicle touch screens and vehicle-branded mobile applications.We serve all of the world's major automotive manufacturers across both our Seating and E-Systems businesses, and we have automotive content on more than 400vehicle nameplates worldwide. It is common to have both seating and electrical content on the same and multiple vehicle platforms with a single customer.Further, the seat is becoming a more dynamic and integrated system requiring increased levels of electrical and electronic integration and facilitating theconvergence of our Seating and E-Systems businesses.We are focused on profitably growing our businesses and have implemented a strategy designed to deliver industry-leading, long-term financial returns. Thisstrategy includes disciplined investing in our business to grow and enhance our product offerings, strategically focusing our portfolio on products (includingsoftware and services) to support emerging trends, such as autonomy, connectivity, electrification and shared mobility, and leveraging an industry-leading coststructure to expand our operating margins.Environmental, social and governance ("ESG") considerations are integrated into our business strategy. Our ESG strategy and activities are reviewed and approvedby senior management and overseen by the Nominating and Corporate Governance Committee of our Board of Directors. Our sustainability efforts are based onthree pillars: social responsibility, economic prosperity and environmental stewardship.From a social responsibility standpoint, our emphasis is on supporting the communities in which we do business; promoting wellness and safety; and embracingdiversity, employee engagement and human rights. With respect to supporting our communities, we are especially proud of our employee volunteer efforts, such asour employee-led educational campaign, "Focus on the Drive," to increase awareness and decrease the incidence of distracted driving. With respect to employeeengagement, we strive to build a "Together We Win" culture globally around four key elements: (1) leadership, (2) work environment, (3) employee involvementand (4) teaming, using metrics such as quality, employee absenteeism, health and safety performance, and operational efficiency to measure engagement.The economic prosperity pillar of our sustainability strategy supports our participation in the trend toward more environmentally friendly products, therebygenerating returns for our stockholders. This pillar consists not only of producing "green" products such as SoyFoamTM, a substitute for certain petroleum-basedproducts, but also creating technologies that facilitate safety through enhanced vehicle connectivity and environmentally friendly transportation alternatives such ashybrid and electric vehicles. Of particular note are those products in our E-Systems segment which facilitate hybrid and electric vehicles such as on board batterychargers, battery management systems and high voltage wiring and terminals and connectors.From an environmental stewardship standpoint, we focus on the efficient use of energy to reduce greenhouse gas emissions, the prevention of pollution, safe andsustainable production processes, and the promotion of a safe and healthy workplace for our employees. We set targets where appropriate and monitor themthrough our environmental management systems.Our businesses benefit globally from leveraging common operating standards and disciplines, including world-class product development and manufacturingprocesses, as well as common customer support and regional infrastructures. Our core capabilities are shared across component categories and include high-precision manufacturing and assembly with short lead times, management of complex supply chains, global engineering and program management skills, theagility to establish and/or transfer production between facilities quickly and a unique customer-focused culture. Our businesses utilize proprietary, industry-specificprocesses and standards, leverage common low-cost engineering centers and share centralized operating support functions, such as logistics, supply chainmanagement, quality and health and safety, as well as all major administrative functions.Available Information on our WebsiteOur website address is http://www.lear.com. We make available on our website, free of charge, the periodic reports that we file with or furnish to the Securities andExchange Commission ("SEC"), as well as all amendments to these reports, as soon as reasonably practicable after such reports are filed with or furnished to theSEC. We also make available on our website or in printed form upon request, free of charge, our Corporate Governance Guidelines, Code of Business Conduct andEthics (which includes specific provisions for our executive officers), charters for the standing committees of our Board of Directors and other information relatedto the Company. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Report.4Table of ContentsThe SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information related to issuers that fileelectronically with the SEC.HistoryLear was founded in Detroit in 1917 as American Metal Products, a manufacturer of seating assemblies and other components for the automotive and aircraftindustries, and was incorporated in Delaware in 1987. Through a management-led buyout in 1988, Lear Corporation established itself as a privately-held seatassembly operation for the North American automobile market with annual sales of approximately $900 million. We completed an initial public offering in 1994and developed into a global supplier through organic growth and a series of acquisitions.In May 1999, we acquired UT Automotive, Inc. ("UT Automotive") from United Technologies Corporation. UT Automotive was a leading supplier of automotiveelectrical distribution systems. The acquisition of UT Automotive represented our entry into automotive electrical and electronic systems and was the basis for ourcurrent E-Systems segment.We have subsequently augmented our internal growth plans with selective acquisitions to expand our component capabilities and global footprint, as well asexpand our technology portfolio:•In May 2012, we acquired Guilford Mills, a leading supplier of automotive seat and interior fabric, for approximately $243million.•In January 2015, we acquired Everett Smith Group, Ltd., the parent company of Eagle Ottawa, LLC ("Eagle Ottawa"), the world's leading provider ofleather for the automotive industry, for approximately $844 million.•In August 2015, we acquired intellectual property and technology from Autonet Mobile, a developer of wireless communication software and devices forautomotive applications.•In November 2015, we acquired Arada Systems Inc., an automotive technology company that specializes in vehicle-to-vehicle ("V2V") and vehicle-to-infrastructure ("V2I" and together with V2V, "V2X") communications.•In April 2017, we acquired Grupo Antolin's automotive seating business for approximately $292million.•In January 2018, we acquired Israel-based EXO Technologies, a leading developer of differentiated GPS technology providing high-accuracy positioningsolutions for autonomous and connected vehicle applications.•In April 2019, we acquired Xevo Inc. ("Xevo"), a Seattle-based, global leader in connected car software, for approximately $322 million. Xevo is asupplier of software solutions for the cloud, vehicles and mobile devices that are deployed in millions of vehicles worldwide.Industry and StrategyWe supply all vehicle segments of the automotive light vehicle original equipment market in every major automotive producing region in the world. Our sales aredriven by the number of vehicles produced by the automotive manufacturers, which is ultimately dependent on consumer demand for automotive vehicles, and ourcontent per vehicle. Global automotive industry production volumes declined 1% in 2018 and another 6% in 2019 to 87.1 million units.Details on light vehicle production in certain key regions for 2019 and 2018 are provided below. Our actual results are impacted by the specific mix of productswithin each market, as well as other factors described in Item 1A, "Risk Factors."(In thousands of units)2019 (1) 2018 (1) (2) % ChangeNorth America16,289.9 16,959.0 (4%)Europe and Africa21,672.2 22,640.7 (4%)Asia44,550.3 47,649.2 (7%)South America3,122.4 3,248.5 (4%)Other1,432.2 1,971.7 (27%)Total87,067.0 92,469.1 (6%)(1)Production data based on IHS Automotive.(2)Production data for 2018 has been updated to reflect actual production levels.5Table of ContentsDetails on light vehicle production in certain emerging markets for 2019 and 2018 are provided below.(In thousands of units)2019 (1) 2018 (1) (2) % ChangeChina23,058.2 25,307.7 (9%)India4,167.8 4,679.5 (11%)Brazil2,803.8 2,777.6 1%Russia1,603.5 1,632.7 (2%)(1)Production data based on IHS Automotive.(2)Production data for 2018 has been updated to reflect actual production levels.Details on our sales in certain key regions for 2019 and 2018 are provided below.(In millions)2019 2018 % ChangeNorth America$7,365.5 $7,660.6 (4%)Europe and Africa7,785.5 8,726.9 (11%)Asia3,968.3 4,040.0 (2%)South America691.0 721.0 (4%)Total$19,810.3 $21,148.5 (6%) China (consolidated)$2,579.7 $2,781.5 (7%)China (non-consolidated)1,166.6 1,044.9 12%Key trends that specifically affect our business include automotive manufacturers’ utilization of global vehicle platforms, increasing demand for luxury andperformance features, including increasing levels of electrical and electronic content, and China’s emergence as the single largest major automotive market in theworld.Another key trend benefiting our business is the shift toward crossover and sport utility vehicles. Our content on such vehicles, especially those for which ourSeating segment supplies products, can be significantly higher than our average content per vehicle. Crossover and sport utility vehicle production has grown toapproximately 37% of total vehicle production in 2019, up from 23% of total vehicle production five years ago. China has been a major driver of this trend, wherecrossover and sport utility vehicle production now comprises approximately 41% of total vehicle production, up from 20% of total vehicle production five yearsago.Our strategy is built on addressing these trends and the major imperatives for success as an automotive supplier: quality, cost and efficiency, and innovation andtechnology. We have expanded key component and software capabilities through organic investment and acquisitions to ensure a full complement of the bestsolutions for our customers. We have restructured, and continue to align, our manufacturing and engineering footprint to attain a leading competitive cost positionglobally. We have established or expanded activities in new and growing markets, especially China, in support of our customers’ growth and global platforminitiatives. These initiatives have helped us achieve our financial goals overall, as well as a more balanced regional, customer and vehicle segment diversificationin our business.In addition, we believe that demand for efficiency, enhanced communications and safety are driving the technology trends of autonomy, connectivity andelectrification. These trends, along with the trend toward shared mobility, are likely to be at the forefront of our industry for the foreseeable future with eachconverging long-term toward fully autonomous, connected, electric or hybrid electric vehicles:•Autonomy/Advanced Driver Assistance - Customer and consumer demands are evolving from safety features and systems that protect vehicleoccupants when a crash occurs to advanced driver assistance systems that help prevent crashes by assisting in the vehicle’s operation under certainconditions. The development of automated intervention uses many of the same core technologies that will enable vehicles to drive autonomously underan increasing variety of driving conditions.•Connectivity - Customer and consumer demands for continuous communication and information exchange with the vehicle are increasing. What beganwith consumer demand to extend and integrate mobile connectivity into the vehicle by connecting mobile devices with vehicle infotainment systems isevolving such that the vehicle itself will have an embedded, direct line of wireless communication connecting the vehicle with various networks (e.g.,cellular, infrastructure, satellite, etc.) and other vehicles. We expect these trends to continue, making the vehicle a constantly6Table of Contentsconnected device, receiving and transmitting data through a variety of signals, which communicate directly with on-board vehicle systems.•Electrification - Demand for more energy efficient vehicles is increasing, both from automotive manufacturers to meet stricter fuel economy andemissions standards and from a growing segment of consumers to reduce the environmental impact of automobiles. This requires further use ofelectronically controlled and assisted powertrains and related components to improve fuel efficiency and the adoption of alternative energy powertrains,such as 48-volt mild hybrid, full hybrid, hybrid electric and high power battery electric, that facilitate electrification of the vehicle, as well as the use oflighter weight materials throughout the vehicle.•Shared Mobility - As vehicle utilization increases and ride-sharing becomes more relevant, customer and consumer demands for more services and animproved mobility experience are also increasing.Regulation is also a major influence on these trends, as government mandates (e.g., for vehicles to meet minimum fuel economy and emissions standards or beequipped with certain safety-related components) are driving vehicle design and technology plans.We are well positioned with respect to these trends as we design and manufacture products across our entire E-Systems portfolio that are aligned with the trendstoward autonomy, connectivity, electrification and shared mobility. Our product lines offer growth opportunities that are subject to the risks and opportunitiesassociated with these trends but are ultimately dependent on global vehicle production volumes.Furthermore, our seats are an active part of the vehicle safety system. As a result of our innovative product design and technology capabilities, we are able toprovide seats with enhanced safety features, such as the active head restraint and seat structures that withstand collision impact in excess of what is demanded byregulatory agencies. We have developed products and materials to reduce cost and enhance seat design and packaging flexibility, including our mini recliners andmicro adjust tracks. Another way in which we are well positioned to benefit from this trend-related growth is our belief that the seat system will becomeincreasingly more sophisticated, dynamic and connected to both the occupants and the vehicle. The seat is the logical focal point for monitoring the driver andpassenger and for facilitating feedback between the vehicle and the occupants.We believe that the convergence of these technology trends and eventual adoption of autonomous vehicles will benefit both our Seating and E-Systems segments.We believe that autonomous vehicles will have seat designs and requirements that are far more flexible and demanding in both autonomous and piloted drivingstates. Further, more active monitoring of the driver and the driver’s position and physical state will be required to manage the transitions between autonomous andpiloted driving conditions. A demand for mobility services and on-demand transportation from providers such as Uber or Lyft is helping to drive interest andgrowth in these technology trends, particularly fully autonomous vehicles. The increasing prevalence of mobility services will potentially create a new segment ofautonomous vehicle fleet customers with unique vehicle technology and design needs, including more flexible, durable and connected seating solutions for a widerange of passengers. Not only will autonomous vehicles need to be fully connected and networked to maximize their safety and efficiency, their powerconsumption will be significantly higher to support the array of sensors and processing power required to operate such vehicles. This will allow us to take furtheradvantage of our ability to design and offer efficient power management solutions.In January 2019, we launched Lear Innovation Ventures ("LIV") Possibilities, which provides a framework for us to invest in advanced development teams,partnerships and early stage technologies by working with venture capital firms, accelerators and incubators; providing direct capital to start-ups and internalinnovation initiatives.Seating SegmentLear is a recognized global leader in complete automotive seat systems and key individual seat components. The Seating segment consists of the design,development, engineering, just-in-time assembly and delivery of complete seat systems, as well as the design, development, engineering and manufacture of allmajor seat components, including seat covers and surface materials such as leather and fabric, seat structures and mechanisms, seat foam and headrests. Further, wehave capabilities in active sensing and comfort for seats, utilizing electronically controlled sensor and adjustment systems and internally developed algorithms. Webelieve that we have the most complete set of component offerings of any automotive seating supplier and are a market leader in every automotive producingmarket in the world. Overall, our global manufacturing and engineering expertise, low-cost footprint, complete component capabilities, quality leadership andstrong customer relationships provide us with a solid platform for continued growth in this segment.We produce seat systems that are fully assembled and ready for installation in automobiles and light trucks. Seat systems are generally designed and engineered forspecific vehicle models or platforms. We develop seat systems and components for all vehicle segments from compact cars to full-size sport utility vehicles. We arethe world leader in luxury and performance automotive seating, providing craftsmanship, elegance in design, use of innovative materials and industry-leadingtechnology7Table of Contentsrequired by premium brands, including Alfa Romeo, Audi, BMW, Cadillac, Ferrari, Jaguar Land Rover, Lamborghini, Lincoln, Maserati, Mercedes-Benz andPorsche.We have been executing a strategy for vertical integration of key seat components to enhance growth, improve quality, increase profitability and support ourcurrent market position in just-in-time seat assembly. In this regard, our capabilities in seat structures and mechanisms include complete development andmanufacturing capabilities in every major automotive producing region in the world. In addition, we have developed standardized seat structures and mechanismsthat can be adapted to multiple segments to minimize investment costs. We believe that our low-cost manufacturing footprint in seat structures and mechanismsand our precision engineered seat mechanism expertise are competitive advantages.We have also expanded our seat cover operations in low-cost markets, including precision cutting, assembly, sewing and lamination of seat fabric, entered thefabric business (largely through our acquisition of Guilford Mills) and added industry-leading leather design, development and manufacturing capabilities (throughour acquisition of Eagle Ottawa). On a global basis, we can provide a full range of seat cover capabilities and design solutions, including the use of unique leatherand fabric applications. We believe that the combination of these capabilities in seating surface materials leads the industry.Craftsmanship and Design (Crafted by LearTM)We believe that our broad portfolio of capabilities, including advanced design and material integration skills, is a differentiating competitive advantage for us. Ourteam of experts at our Center for Craftsmanship in Southfield, Michigan has developed a portfolio of product technologies that deliver differentiated design,craftsmanship and comfort, as well as sustainable products. Through this dedicated studio, we are leveraging our unique position to be an industry leader indifferentiated design and facilitating customer interactions with designers and engineers working collaboratively to create innovative solutions early in the designprocess. The breadth of our portfolio and depth of our design expertise allow us to have early involvement in the automotive manufacturer’s design process and theopportunity to better integrate all seating components to provide differentiated design comfort, quality and overall value for the end consumer. We have alsodeveloped a proprietary craftsmanship process called Harmonic Precision that synthesizes all of our component expertise and technologies with our customers’design visions to create an objective analysis of the impact that the final design and execution will have in the marketplace. We believe that our unmatchedcomponent capabilities, design know-how, global manufacturing presence and our Crafted by LearTM portfolio of enabling and sustainable technologies uniquelyposition us to bring innovative designs into production with the highest level of craftsmanship.Intelligent Seating (INTUTM Seating)The seat is emerging as an integral device facilitating the direct connection between drivers and passengers and the vehicle. We believe that we are the only seatingsupplier with both global capabilities in all major seat components and global electronics development (including software), manufacturing and integration. Webelieve that the seat will increasingly integrate electronics, not only for motorized control, but for dynamic sensing and response. We believe that intelligent anddynamic seating solutions, which we call INTUTM Seating, will provide future benefits as consumers and automotive manufacturers demand seats that can sensekey attributes of a driver and passenger and communicate these attributes within the vehicle network, as well as to external networks. We have developed activesensing and comfort seat capabilities, utilizing electronically controlled sensor and adjustment systems and internally developed algorithms. We are alsodeveloping technologies that will monitor certain bio-metric readings through seat sensors with a high level of accuracy and reliability. These seat designsautomatically and continuously optimize the user experience. Our seats will intuitively anticipate and dynamically adjust to the occupant's needs and preferencesrelated to health and wellness, comfort and safety. Our INTUTM technology is well-aligned with current industry trends, such as connectivity. We believe thatintegrating our electronic capabilities into our seating products is essential to succeeding in this dynamic and changing environment.Adaptive Seating Architecture (ConfigurE+TM)Our 2019 Automotive News PACE Award winning ConfigurE+TM adaptive seating solution provides enhanced flexibility and cargo management for crossovervehicles, sport utility vehicles and passenger vans, while delivering seat electrification via full-length, floor-mounted tracks instead of wires. We believe that weare the only supplier capable of providing these fully integrated, mechanical and electrical solutions. ConfigurE+TM is well-suited for ever-changing consumerlifestyles and is enabled by proprietary, advanced interface modules integrated into the seat structure and tracks. ConfigurE+TM optimizes functionality, such asstorage and transport, seat removal and executive seating. This technology is well-aligned with current industry trends, such as autonomy and shared mobility. ManufacturingOur seat assembly facilities use lean manufacturing techniques, and our finished products are delivered to the automotive manufacturers on a just-in-time basis,matching our customers’ exact build specifications for a particular day, shift and8Table of Contentssequence thereby reducing inventories to optimum levels. Facilities are typically located adjacent to or near our customers’ assembly sites and are capable ofmanaging complex, in-series, sequencing, batch and/or modular assembly requirements. We utilize the latest industry innovations and automated technologies. Wealso launched an intensive employee engagement initiative, called Together We Win, which is achieving global scalability and successfully driving culturaladvances, with increases in first time quality and decreases in absenteeism, material costs and average build times per vehicle.Core CapabilitiesWe maintain state-of-the-art testing, instrumentation and data analysis capabilities. We own industry-leading seat validation test centers featuring crashworthiness,durability and full acoustic and sound quality testing capabilities. Together with computer-controlled data acquisition and analysis capabilities, these centersprovide precisely controlled laboratory conditions for sophisticated testing of parts, materials and systems. In addition, we incorporate many convenience, comfortand safety features into our designs, including advanced whiplash prevention concepts, integrated restraint seat systems and side impact airbags. We also invest inour computer-aided engineering design and computer-aided manufacturing systems. CustomersThe top five customers of our Seating segment are: General Motors, Daimler, Volkswagen, Ford and Fiat Chrysler.CompetitionBased on independent market studies and management estimates, we believe that we hold the #2 position in seat systems assembly globally on the basis of revenuewith strong positions in all major markets. We are a leading supplier of various components produced for complete seat systems.Our primary competitor in this segment globally is Adient, plc. Other competitors in this segment include Faurecia S.A., Toyota Boshoku Corporation, TS TechCo., Ltd. and Magna International Inc., which have varying market presence depending on the region, country or automotive manufacturer. Peugeot S.A., ToyotaMotor Corporation and Honda Motor Co. Ltd. hold equity ownership positions in Faurecia S.A., Toyota Boshoku Corporation and TS Tech Co., Ltd., respectively.Other automotive manufacturers maintain a presence in the seat systems market through wholly owned subsidiaries or in-house operations. In seat components, wecompete with the seat systems suppliers identified above, as well as certain suppliers that specialize in particular components.TechnologyWe have developed products and materials to improve comfort and ease of adjustment, promote customization and styling flexibility, increase durability andreliability, enhance safety, expand the usage of environmentally friendly materials and reduce cost and weight. ProActive™ Seating uses proprietary MySeat byLear™ technology powered by our TheraMetric™ analytical process. This process is derived from our research to provide a driver with a seating position thatpromotes better posture and cumulative wellness benefits. ProActive™ Seating has been endorsed by the American Chiropractic Association, InternationalChiropractors Association, World Federation of Chiropractic and Loomis Institute of Enzyme Nutrition. Our Lear Crafted Comfort Connect™ and AdvancedComfort Systems™ are adjustable cushions, seat backs and side bolsters which support correct posture and provide improved comfort and appearance. OurGuilford TeXstyle™ fabrics provide customizable fabric engineered to improve the vehicle experience and durability, and our TeXstyle™ Enhance offeringsprovide a range of secondary embellishment technologies to enhance standard fabrics, enabling unique design within an array of fabric choices. Our proprietary,anti-soiling performance leather finishing technology, Ansolé™, improves durability and protects against fading. Our head restraints provide improved comfortand safety with adjustability. Our high speed smart fold technology is a regulated high speed folding adjustment mechanism that delivers premium conveniencewhile maintaining leading safety and comfort benefits. Our mini recliners and micro adjust tracks are seat mechanisms, which provide precision movement andfacilitate interior packaging space flexibility. Our Dynamic Environmental Comfort Systems™ and ComforTune™ technologies offer weight reductions of 30% -40%, as compared to current foam seat designs. Produced for multiple global customers, our SoyFoam™ reduces our carbon footprint by 614,000 pounds ofcarbon dioxide per year.For additional factors that may impact our Seating segment’s business, financial condition, operating results and/or cash flows, see Item 1A, "Risk Factors."9Table of ContentsE-Systems SegmentThe E-Systems segment consists of the design, development, engineering and manufacture of electrical distribution systems, electronic modules and relatedcomponents, and software for light vehicles globally. We are a leader in signal distribution and power management within the vehicle for all types of powertrains -from traditional ICE architectures to the full range of hybrid, plug-in hybrid and battery electric architectures. We have connectivity hardware and softwarecapabilities, including cybersecurity expertise, that facilitate secure, wireless communication between the vehicle’s electrical and electronic architecture andexternal networks, as well as other vehicles. We also offer software and services for the cloud, vehicles and mobile devices that enable consumer e-commerce,multi-media applications and enterprise services among other new and emerging applications.Electrical Distribution SystemsElectrical distribution systems route networks and electrical signals and manage electrical power within the vehicle for all types of powertrains, includingtraditional ICE architectures and the full range of hybrid, plug-in hybrid and battery electric architectures, supporting the current industry trend towardelectrification. Key components in the electrical distribution system include wire harnesses, terminals and connectors and junction boxes for both ICE andelectrification architectures that require management of higher voltage and power.Wire harness assemblies are a collection of wiring and terminals and connectors that link all of the various electrical and electronic devices within the vehicle toeach other and/or to a power source. Wire harness assemblies are a collection of individual circuits fabricated from raw and insulated wire, which is automaticallycut to length and terminated during the manufacturing process. Individual circuits are assembled together on a jig or table, inserted into connectors and wrapped ortaped to form wire harness assemblies. The assembly process is labor intensive, and as a result, production is generally performed in low-cost labor sites in Mexico,Honduras, Brazil, Eastern Europe, Africa, China, the Philippines and Thailand.Terminals and connectors include conductive metal components and connector housings that join wire harness assemblies together at their respective end points orconnect devices to wire harness assemblies. Terminals and connectors can vary significantly in size and complexity depending on the amount of power or databeing transferred and the number of connections being made at any particular point in the electrical distribution system. Our terminals and connectors are currentlymanufactured in Germany, Eastern Europe, China and the United States.Junction boxes are centrally located modules within the vehicle that contain fuses and/or relays for circuit and device protection and serve as a connection point formultiple wire harnesses. Junction boxes are manufactured in Mexico, Europe, Northern Africa, China and the Philippines with a proprietary, capital-intensiveassembly process using printed circuit boards, a portion of which are purchased from third-party suppliers. Certain materials, particularly certain specializedelectronic components, are available from a limited number of suppliers.ElectronicsIn our E-Systems segment, we also design, develop, engineer and manufacture electronics, which control various functions within the vehicle, as well as developand integrate the associated software for these electronic modules. Our electronic modules include body control modules, smart junction boxes, gateway modules,lighting control modules, audio domain controllers, amplifiers and communication modules that are applicable to all vehicle types. Our electronics business alsoincludes electronic modules that are specific to hybrid and electric vehicles, such as on board battery chargers, power conversion modules, high voltage batterymanagement systems and high voltage power distribution. Our engineering and development activities for electronics are in the United States (Southfield,Michigan and Northern California), Belgium, Germany, Spain, China and India. We assemble these modules using high-speed surface mount placement equipmentin Mexico, Europe, Northern Africa, China and the Philippines.Body control modules primarily control vehicle interior functions outside of the vehicle’s head unit or infotainment system. Depending on the vehicle’s electricaland electronic architecture, these modules can be either highly integrated, consolidating multiple functional controls into a single module, or focus on a specificfunction, such as seat position and comfort controls or the door zone control module which controls features such as window lift, door lock and power mirrors.We develop and produce gateway modules, which facilitate secure access to, and communication with, all of the vehicle systems at a central point and translatevarious signals to facilitate data exchange across various vehicle domains. Our connectivity capabilities include communication modules which manage wirelesscommunications over cellular, V2X, Bluetooth and WiFi and are connected to the vehicle networks. We develop and provide hardware and software for theseproducts. We also have capabilities in high accuracy vehicle positioning through a cloud-computing-based system combined with software on vehicles to achievehigh precision navigation solutions for our customers’ V2X and automated vehicle platforms.10Table of ContentsOur electronics product offerings also include lighting control modules, which provide the electronic control logic and diagnostics for increasingly advanced andcomplex vehicle lighting systems. We supply LED lighting control systems for vehicle interiors and exteriors. In addition, we offer audio electronics, includingpremium audio amplifiers and complete vehicle sound system development capabilities with advanced domain control and audio tuning.The higher level of complexity and processing power in these electronic control modules is driving rapid increases in software requirements associated with thesemodules. Accordingly, we continue to build on our knowledge and capabilities in software in order to design and develop more complex and integrated electroniccontrol modules capable of more efficiently managing the distribution of power and data signals through the vehicle.Our software solutions also include Xevo Journeyware, a thin-client platform for the cloud, vehicles and mobile devices that enables consumer e-commerce, multi-media applications and enterprise services to improve performance and safety, deliver an artificial intelligence-enhanced driving experience and provide newmonetization opportunities for us and the automotive manufacturers, and Xevo Market, an in-vehicle commerce and service platform that connects customers withtheir favorite brands and services by delivering highly-contextual sales offers through vehicle touch screens and vehicle-branded mobile applications.CustomersThe top five customers of our E-Systems segment are: Ford, Renault-Nissan, General Motors, Jaguar Land Rover and Volkswagen.CompetitionOur major competitors in electrical distribution systems include Aptiv PLC, Leoni AG, Molex Incorporated (a subsidiary of Koch Industries Inc.), SumitomoCorporation, TE Connectivity and Yazaki Corporation. Our major competitors in electronic modules, including connectivity solutions, include Aptiv PLC,Continental AG, Denso Corporation, Harman International Industries, Incorporated (acquired by Samsung Electronics Co. Ltd. in 2017), Hella AG, Robert BoschGmbH, Valeo S.A. and Visteon Corporation.TechnologyOur complete electrical distribution system design capabilities, coupled with certain market-leading component technologies, allow access to our customers’development teams, which provides an early indication of our customers’ product needs and enables us to develop system design efficiencies. Our ability to designand integrate electronic modules creates a competitive advantage as we support customers with complete electrical architecture development. The E-Systemssegment is technology driven and typically requires higher investment as a percentage of sales than our Seating segment. Our expertise is developed and deliveredby approximately 2,300 engineers across eighteen countries and is led by six global technology centers of excellence in Belgium, China, Germany, Spain and theUnited States (Southfield, MI and Seattle, WA) for each of our major product lines in this segment, which are described below.Software remains a critical element of our E-Systems business. Software capabilities are becoming more important in the management of complex and highlysophisticated electrical architectures. Software within the vehicle is rapidly growing as a key element of technological innovation and a cost effective way toprovide new features and functions. We currently employ more than 700 software engineers globally and are pursuing expansion of specialized capabilities invehicle networking, control algorithms, cybersecurity and connectivity platforms and protocols.In electrical distribution systems, our technology includes expertise in the design and use of alternative conductor materials, such as aluminum, copper-clad steeland other hybrid alloys. Alternative conductor materials can enable the use of ultra small gauge conductors, which reduce the weight and packaging size ofelectrical distribution systems. We also have developed proprietary manufacturing process technologies, such as our vertical manufacturing system that featuresthree dimensional wire harness assembly boards. Our expertise in terminals and connectors technology facilitates our ability to implement these small gauge andalternative alloy conductors. We have developed advanced capabilities in aluminum terminals and aluminum wire termination, ultra small gauge termination andhigh voltage terminals and connectors. We have developed high packaging density in-line connectors and new small gauge terminals that will enable wire gaugereduction and provide our customers with smaller and lower cost solutions. Our high voltage terminals and connectors are a part of our advanced efficiencysystems capabilities, and we have established a leading capability in power density (power per packaging size) that is being adopted by multiple automotivemanufacturers. We have 650 patents issued or applied for in the advanced efficiency systems product technology area. These technologies are supported by ourproprietary virtual proving grounds, which is an industry-leading suite of in-house developed tools and processes to significantly reduce the design, developmentand validation testing time and expense.11Table of ContentsIn electronics, we are a market leader in smart junction box technology and began production of our Automotive News PACE Award winning Solid State SmartJunction Box™ in 2016. We are a leader in gateway module technology and have capabilities to enable our gateway and other electronic control modules toefficiently and securely manage the increasing amount of both wired and wireless signals running throughout, as well as within and outside of, the vehicle,including being first-to-market with an ethernet-enabled gateway module. In lighting, we have developed advanced technology electronic controls, including aMatrix LED Control System capable of individually dimming and switching on/off up to 100 LEDs. This system enables steerable light beams and other advancedlighting features and can be paired with driver assistance system sensors for functionality, such as automatic high beam management and obstacle highlighting. Inaudio, we have developed an ethernet audio bridging amplifier that facilitates faster processing of digital data at a lower cost. In high power electronics, we offerleading efficiency battery chargers and high voltage battery management systems.For additional factors that may impact our E-Systems segment’s business, financial condition, operating results and/or cash flows, see Item 1A, "Risk Factors."CustomersIn 2019, General Motors and Ford, two of the largest automotive and light truck manufacturers in the world, accounted for 18% and 14% of our net sales,respectively. We supply and have expertise in all vehicle segments of the automotive market. Our sales content tends to be higher on those vehicle platforms andsegments which offer more features and functionality. The popularity of particular vehicle platforms and segments varies over time and by regional market. Weexpect to continue to win new business and grow sales at a greater rate than overall automotive industry production. For further information related to ourcustomers and domestic and foreign sales and operations, see Note 14, "Segment Reporting," to the consolidated financial statements included in this Report.Our customers award business to their suppliers in a number of ways, including the award of complete systems, which allows suppliers either to manufacturecomponents internally or to purchase components from other suppliers at their discretion. Certain of our customers also elect to award certain components directlyto component suppliers and independent of the award of the complete system. We have been selectively expanding our component capabilities and investing inmanufacturing capacity in low-cost regions in order to enhance our cost competitive structure and maximize our participation in such component sourcing.Our customers typically award contracts several years before actual production is scheduled to begin. Each year, the automotive manufacturers introduce newmodels, update existing models and discontinue certain models and, periodically, even complete brands. In this process, we may be selected as the supplier on anew model, we may continue as the supplier on an updated model or we may lose a new or updated model to a competitor. Our sales backlog reflects estimated netsales over the next three years from formally awarded new programs, less lost and discontinued programs. This measure excludes the sales backlog at our non-consolidated joint ventures. As of January 2020, our 2020 to 2022 sales backlog is $2.7 billion, a decrease of 19% as compared to our sales backlog as of January2019. Our current sales backlog reflects $0.8 billion related to 2020 and 65% and 35% related to our Seating and E-Systems segments, respectively. In addition,our 2020 to 2022 sales backlog at our non-consolidated joint ventures is $200 million. Our current sales backlog assumes volumes based on the independentindustry projections of IHS Automotive as of December 2019 and internal estimates, a Euro exchange rate of $1.10/Euro and a Chinese RMB exchange rate of7.00/$. This sales backlog is generally subject to a number of risks and uncertainties, including vehicle production volumes on new and replacement programs andforeign exchange rates, as well as the timing of production launches and changes in customer development plans. For additional information regarding risks thatmay affect our sales backlog, see Item 1A, "Risk Factors," and Part II — Item 7, "Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Forward-Looking Statements."We receive purchase orders from our customers that generally provide for the supply of a customer’s annual requirements for a particular vehicle model andassembly plant, or in some cases, for the supply of a customer’s requirements for the life of a particular vehicle model, rather than for the purchase of a specifiedquantity of products. Although most purchase orders may be terminated by our customers at any time, such terminations have been infrequent and have not had amaterial impact on our operating results. We are subject to risks that an automotive manufacturer will produce fewer units of a vehicle model than anticipated orthat an automotive manufacturer will not award us a replacement program following the life of a vehicle model. To reduce our reliance on any one vehicle model,we produce automotive systems and components for a broad cross-section of both new and established models. However, larger cars and light trucks, as well asvehicle platforms that offer more features and functionality, such as luxury, sport utility and crossover vehicles, typically have more content and, therefore, tend tohave a more significant impact on our operating performance. Our net sales for the year ended December 31, 2019, consisted of 33% passenger cars, 49%crossover and sport utility vehicles and 18% trucks and vans.Our agreements with our major customers generally provide for an annual productivity price reduction. Historically, cost reductions through product designchanges, increased manufacturing productivity and similar programs with our suppliers have generally offset these customer-imposed price reduction requirements.However, raw material, energy and commodity costs can be volatile. Although we have developed and implemented strategies to mitigate the impact of higher rawmaterial, energy and commodity costs, these strategies, together with commercial negotiations with our customers and suppliers, typically offset only a portion ofthe adverse impact. Certain of these strategies also may limit our opportunities in a declining commodity environment. In addition, we are exposed to increasingmarket risk associated with fluctuations in foreign exchange as a result of our low-cost footprint and vertical integration strategies. We use derivative financialinstruments to reduce our exposure to fluctuations in foreign exchange rates. For additional information regarding our foreign exchange and commodity price risk,see Part II — Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Financial Condition — ForeignExchange" and "— Commodity Prices."SeasonalityOur principal operations are directly related to the automotive industry. Consequently, we may experience seasonal fluctuations to the extent automotive vehicleproduction slows, such as in the summer months when many customer plants close for model year changeovers, in December when many customer plants close forthe holidays and during periods of high vehicle inventory. See Note 16, "Quarterly Financial Data," to the consolidated financial statements included in thisReport.Raw MaterialsThe principal raw materials used in our seat systems, electrical distribution systems and electronics are generally available and obtained from multiple suppliersunder various types of supply agreements. Components such as fabric, foam, leather, seat structures and mechanisms, terminals and connectors and certain othercomponents are either manufactured by us internally or purchased from multiple suppliers under various types of supply agreements. The majority of the steelused in our products is comprised of fabricated components that are integrated into a seat system, such as seat frames, recliner mechanisms, seat tracks and othermechanical components. Therefore, our exposure to changes in steel prices is primarily indirect, through these purchased components. With the exception ofcertain terminals and connectors, the materials that we use to manufacture wire harness assemblies are substantially purchased from suppliers, including extrudedand insulated wire and cable. The majority of our copper purchases are comprised of extruded wire and cable that we integrate into electrical wire harnesses. Ingeneral, our copper purchases, as well as a significant portion of our leather purchases, are subject to price index agreements with our customers and suppliers. Weutilize a combination of short-term and long-term supply contracts to purchase key components. We generally retain the right to terminate these agreements if oursupplier does not remain competitive in terms of cost, quality, delivery, technology or customer support.EmployeesAs of December 31, 2019 and 2018, our employment levels worldwide were approximately as follows:Region2019 2018United States and Canada10,100 9,700Mexico50,400 51,200Central and South America17,000 14,600Europe and Africa56,800 59,800Asia29,800 33,700Total164,100 169,000A substantial number of our employees are members of unions or national trade organizations. We have collective bargaining agreements with several NorthAmerican unions, including the United Auto Workers, Unifor, International Brotherhood of Electrical Workers and Workers United. Each of our unionizedfacilities in the United States and Canada has a separate collective bargaining agreement with the union that represents the workers at such facility, with each suchagreement having an expiration date that is independent of the other agreements. The majority of our employees in Mexico and Europe are members of industrialtrade union organizations or confederations within their respective countries. Many of these organizations and confederations operate under national contracts,which are not specific to any one employer. We have occasionally experienced labor disputes at our plants. We have been able to resolve all such labor disputesand believe our relations with our employees are generally good.See Item 1A, "Risk Factors — A significant labor dispute involving us or one or more of our customers or suppliers or that could otherwise affect our operationscould adversely affect our financial performance," and Part II — Item 7, "Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Forward-Looking Statements."12Table of ContentsIntellectual PropertyWorldwide, we have approximately 2,300 patents and patent applications pending. While we believe that our patent portfolio is a valuable asset, no individualpatent or group of patents is critical to the success of our business. We also license selected technologies to automotive manufacturers and to other automotivesuppliers. We continually strive to identify and implement new technologies for use in the design and development of our products.Advanced technology development is conducted worldwide at our nine advanced technology centers and at our product engineering centers. At these centers, weengineer our products to comply with applicable safety standards, meet quality and durability standards, respond to environmental conditions and conform tocustomer and consumer requirements. Our global innovation and technology center located in Southfield, Michigan, develops and integrates new concepts and isour central location for consumer research, benchmarking, craftsmanship and industrial design activity.We have numerous registered trademarks in the United States and in many foreign countries. The most important of these marks include LEARCORPORATION® (including our stylized version thereof) and LEAR®, which are widely used in connection with our products and services. Our other principalbrands include XEVO®, GUILFORD® and EAGLE OTTAWA®. ConfigurE+TM seating, INTUTM seating, LEAR CONNEXUSTM signal and data communications,EXOTM high-accuracy positioning, JOURNEYWARE® software, ProTec® active head restraints, SMART JUNCTION BOXTM technology, STRUCSURETMsystems, AVENTINO® leather and TeXstyleTM fabrics are some of our other trademarks used in connection with certain of our product lines.Environmental MattersWe are committed to sustainability in our operations and products. We adhere to local, state, federal and foreign laws, regulations and ordinances which governactivities or operations that may have adverse environmental effects. These laws, regulations and ordinances may impose liability for clean-up costs resulting frompast spills, disposals or other releases of hazardous wastes. For a description of our outstanding environmental matters and other legal proceedings, see Note 13,"Commitments and Contingencies," to the consolidated financial statements included in this Report.In addition, our customers are subject to significant environmentally focused state, federal and foreign laws and regulations that regulate vehicle emissions, fueleconomy and other matters related to the environmental impact of vehicles. To the extent that such laws and regulations ultimately increase or decrease automotivevehicle production, such laws and regulations would likely impact our business. See Item 1A, "Risk Factors."Furthermore, we currently offer products with green technology, such as SoyFoamTM, and are creating technologies that facilitate environmentally friendlytransportation alternatives such as hybrid and electric vehicles. Our expertise, capabilities and environmental leadership are allowing us to expand our productofferings in this area.Joint Ventures and Noncontrolling InterestsWe form joint ventures in order to gain entry into new markets, expand our product offerings and broaden our customer base. In particular, we believe that certainjoint ventures have provided us, and will continue to provide us, with the opportunity to expand our business relationships with Asian automotive manufacturers,particularly in emerging markets. We also partner with companies having significant local experience in commerce and customs, as well as capacity, to reduce ourfinancial risk and enhance our potential for achieving expected financial returns. In some cases, these joint ventures may be located in North America or Europeand used to expand our customer relationships.As of December 31, 2019, we had fourteen operating joint ventures located in five countries. Of these joint ventures, five are consolidated, and nine are accountedfor using the equity method of accounting. Twelve of the joint ventures operate in Asia, and two operate in North America (both of which are dedicated to servingAsian automotive manufacturers). Net sales of our consolidated joint ventures accounted for approximately 7% of our net sales in 2019. As of December 31, 2019,our investments in non-consolidated joint ventures totaled $120 million.A summary of our non-consolidated operating joint ventures, including ownership percentages, is shown below. For further information related to our jointventures, see Note 5, "Investments in Affiliates and Other Related Party Transactions," to the consolidated financial statements included in this Report.13Table of ContentsCountryNameOwnershipPercentageChinaBeijing BHAP Lear Automotive Systems Co., Ltd.50%ChinaGuangzhou Lear Automotive Components Co., Ltd.50ChinaJiangxi Jiangling Lear Interior Systems Co., Ltd.50ChinaLear Dongfeng Automotive Seating Co., Ltd.50ChinaChangchun Lear FAWSN Automotive Seat Systems Co., Ltd.49ChinaBeijing Lear Dymos Automotive Systems Co., Ltd.40HondurasHonduras Electrical Distribution Systems S. de R.L. de C.V.49IndiaHyundai Transys Lear Automotive Private Limited35United StatesKyungshin-Lear Sales and Engineering LLC49ITEM 1A – RISK FACTORSOur business, financial condition, operating results and cash flows may be impacted by a number of factors. In addition to the factors affecting our businessidentified elsewhere in this Report, the most significant factors affecting our operations include the following:•Our industry is cyclical and a decline in the production levels of our major customers, particularly with respect to models for which we are a significantsupplier, or the financial distress of one or more of our major customers could adversely affect our financial performance.Our sales are driven by the number of vehicles produced by our automotive manufacturer customers, which is ultimately dependent on consumer demand forautomotive vehicles, and our content per vehicle. The automotive industry is cyclical and sensitive to general economic conditions, including the globalcredit markets, interest rates, consumer credit and consumer spending and preferences. Automotive sales and production can also be affected by the age ofthe vehicle fleet and related scrappage rates, labor relations issues, fuel prices, regulatory requirements, government initiatives, trade agreements, tariffs andother non-tariff trade barriers, the availability and cost of credit, the availability of critical components needed to complete the production of vehicles,restructuring actions of our customers and suppliers, facility closures and increased competition, as well as consumer preferences regarding vehicle size,configuration and features, including alternative fuel vehicles, changing consumer attitudes toward vehicle ownership and usage, such as ride sharing and on-demand transportation, and other factors.Due to the overall global economic conditions in 2019, the automotive industry experienced a decline in global customer sales and production volumes. In2019, global vehicle production decreased 6% as compared to 2018. In Asia, vehicle production decreased 7%, including 9% in China and 11% in India.Vehicle production also decreased 4% in both North America and Europe and Africa. As a result, we have experienced and may continue to experiencereductions in orders from our customers in certain regions. An economic downturn or other adverse industry conditions that result in a decline in theproduction levels of our major customers, particularly with respect to models for which we are a significant supplier, or the financial distress of one or moreof our major customers could reduce our sales or otherwise adversely affect our financial condition, operating results and cash flows. Further, our ability toreduce the risks inherent in certain concentrations of business, and thereby maintain our financial performance in the future, will depend, in part, on ourability to continue to diversify our sales on a customer, product, platform and geographic basis to reflect the market overall. We may not be successful in suchdiversification.•The loss of business with respect to, or the lack of commercial success of, a vehicle model for which we are a significant supplier could adversely affectour financial performance.We receive purchase orders from our customers, which generally provide for the supply of a customer’s annual requirements for a particular vehicle modeland assembly plant or, in some cases, for the supply of a customer’s requirements for the life of a particular vehicle model, rather than for the purchase of aspecific quantity of products. In addition, it is possible that our customers could elect to manufacture our products internally or increase the extent to whichthey require us to utilize specific suppliers or materials in the manufacture of our products. The loss of business with respect to, the lack of commercialsuccess of or an increase in directed component sourcing for a vehicle model for which we are a significant supplier could reduce our sales or margins andthereby adversely affect our financial condition, operating results and cash flows.14Table of Contents•Our inability to achieve product cost reductions to offset customer-imposed price reductions could adversely affect our financialperformance.Downward pricing pressure by automotive manufacturers is a characteristic of the automotive industry. Our customer contracts generally provide for annualprice reductions over the production life of the vehicle, while requiring us to assume significant responsibility for the design, development and engineering ofour products. Prices may also be adjusted on an ongoing basis to reflect changes in product content/costs and other commercial factors. Our financialperformance is largely dependent on our ability to achieve product cost reductions through product design enhancement and supply chain management, aswell as manufacturing efficiencies and restructuring actions. We also seek to enhance our financial performance by investing in product development, designcapabilities and new product initiatives that respond to the needs of our customers and consumers. We continually evaluate operational and strategicalternatives to align our business with the changing needs of our customers and improve our business structure by investing in vertical integrationopportunities globally. Our inability to achieve product cost reductions that offset customer-imposed price reductions could adversely affect our financialcondition, operating results and cash flows.•Increases in the costs and restrictions on the availability of raw materials, energy, commodities and product components could adversely affect ourfinancial performance.Raw material, energy and commodity costs can be volatile. Although we have developed and implemented strategies to mitigate the impact of higher rawmaterial, energy and commodity costs, these strategies, together with commercial negotiations with our customers and suppliers, typically offset only aportion of the adverse impact. Certain of these strategies also may limit our opportunities in a declining commodity environment. In addition, the availabilityof raw materials, commodities and product components fluctuates from time to time due to factors outside of our control, including trade laws and tariffs. Ifthe costs of raw materials, energy, commodities and product components increase or the availability thereof is restricted, it could adversely affect ourfinancial condition, operating results and cash flows.•Adverse developments affecting or the financial distress of one or more of our suppliers could adversely affect our financialperformance.We obtain components and other products and services from numerous Tier 2 automotive suppliers and other vendors throughout the world. We areresponsible for managing our supply chain, including suppliers that may be the sole sources of products that we require, that our customers direct us to use orthat have unique capabilities that would make it difficult and/or expensive to re-source. In certain instances, entire industries may experience short-termcapacity constraints. Additionally, our production capacity, and that of our customers and suppliers, may be adversely affected by natural disasters. Any suchsignificant disruption could adversely affect our financial performance. Furthermore, unfavorable economic or industry conditions could result in financialdistress within our supply base, thereby increasing the risk of supply disruption. An economic downturn or other unfavorable industry conditions in one ormore of the regions in which we operate could cause a supply disruption and thereby adversely affect our financial condition, operating results and cashflows.•Our substantial international operations make us vulnerable to risks associated with doing business in foreigncountries.As a result of our global presence, a significant portion of our revenues and expenses are denominated in currencies other than the U.S. dollar. We havesubstantial manufacturing and distribution facilities in many foreign countries, including Mexico and countries in Africa, Asia, Central and South Americaand Europe. International operations are subject to certain risks inherent in doing business abroad, including:•exposure to local economicconditions;•political, economic and civil instability and uncertainty (including acts of terrorism, civil unrest, drug-cartel related and other forms of violence andoutbreaks of war);•laborunrest;•expropriation and nationalization;•currency exchange rate fluctuations, currency controls and the ability to economically hedgecurrencies;•withholding and other taxes on remittances and other payments by subsidiaries;•investment restrictions orrequirements;•repatriation restrictions orrequirements;•export and import restrictions and increases in duties and tariffs;15Table of Contents•concerns about human rights, working conditions and other labor rights and conditions and the environmental impact in foreign countries where ourproducts are produced and raw materials and/or components are sourced, as well as changing labor, environmental and other laws in these countries;•pandemic illness;•increases in working capital requirements related to long supply chains;and•global sovereign fiscal matters and creditworthiness, including potential defaults and the related impacts on economic activity, including the possibleeffects on credit markets, currency values, monetary unions, international treaties and fiscal policies.Expanding our sales and operations in Asia and our manufacturing operations in lower-cost regions are important elements of our strategy. As a result, ourexposure to the risks described above is substantial. The likelihood of such occurrences and their potential effect on us vary from country to country and areunpredictable. However, any such occurrences could adversely affect our financial condition, operating results and cash flows.•We operate in a highly competitive industry and efforts by our competitors, as well as new non-traditional entrants to the industry, to gain market sharecould adversely affect our financial performance.We operate in a highly competitive industry. We and most of our competitors are seeking to expand market share with new and existing customers, includingin Asia and other potential high growth regions. Our customers award business based on, among other things, price, quality, service and technology. Ourcompetitors’ efforts to grow market share could exert downward pressure on our product pricing and margins. In addition, the automotive industry hasattracted, and will continue to attract, non-traditional entrants as a result of the evolving nature of the automotive vehicle market, including autonomousvehicles, ride sharing and on-demand transportation. Further, the global automotive industry is experiencing a period of significant technological change,including a focus on environmentally sustainable products. As a result, the success of portions of our business requires us to develop, acquire and/orincorporate new technologies. Such technologies are subject to rapid obsolescence. Our inability to maintain access to these technologies (throughdevelopment, acquisition or licensing) may adversely affect our ability to compete. If we are unable to differentiate our products, maintain a low-costfootprint or compete effectively with technology-focused new market entrants, we may lose market share or be forced to reduce prices, thereby lowering ourmargins. Any such occurrences could adversely affect our financial condition, operating results and cash flows.•A significant labor dispute involving us or one or more of our customers or suppliers or that could otherwise affect our operations could adversely affectour financial performance.A substantial number of our employees and the employees of our largest customers and suppliers are members of industrial trade unions and are employedunder the terms of various labor agreements. We have labor agreements covering approximately 81,500 employees globally. In the United States and Canada,each of our unionized facilities has a separate collective bargaining agreement with the union that represents the workers at such facility, with each suchagreement having an expiration date that is independent of the other agreements. Labor agreements covering approximately 88% of our global unionizedwork force, including labor agreements in the United States and Canada covering approximately 2% of our global unionized workforce, are scheduled toexpire in 2020. There can be no assurances that future negotiations with the unions will be resolved favorably or that we will not experience a work stoppageor disruption that could adversely affect our financial condition, operating results and cash flows. A labor dispute involving us, any of our customers orsuppliers or any other suppliers to our customers or that otherwise affects our operations, or the inability by us, any of our customers or suppliers or any othersuppliers to our customers to negotiate, upon the expiration of a labor agreement, an extension of such agreement or a new agreement on satisfactory termscould adversely affect our financial condition, operating results and cash flows. In addition, if any of our significant customers experience a material workstoppage, such as the General Motors labor strike in the fall of 2019, that customer may halt or limit the purchase of our products. This could require us toshut down or significantly reduce production at facilities relating to such products, which could adversely affect our business and harm our profitability.•Certain of our operations are conducted through joint ventures which have uniquerisks.Certain of our operations, particularly in emerging markets, are conducted through joint ventures. With respect to our joint ventures, we may share ownershipand management responsibilities with one or more partners that may not share our goals and objectives. Operating a joint venture requires us to operate thebusiness pursuant to the terms of the agreement that we entered into with our partners, including additional organizational formalities, as well as to shareinformation and decision making. Additional risks associated with joint ventures include one or more partners failing to satisfy contractual obligations,conflicts arising between us and any of our partners, a change in the ownership of any of our partners and less of an ability to control compliance withapplicable rules and regulations, including the Foreign Corrupt Practices Act and16Table of Contentsrelated rules and regulations. Additionally, our ability to sell our interest in a joint venture may be subject to contractual and other limitations. Accordingly,any such occurrences could adversely affect our financial condition, operating results and cash flows.•Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financialperformance.In connection with the award of new business, we obligate ourselves to deliver new products and services that are subject to our customers’ timing,performance and quality standards. Additionally, as a Tier 1 supplier, we must effectively coordinate the activities of numerous suppliers in order for theprogram launches of our products to be successful. Given the complexity of new program launches, we may experience difficulties managing productquality, timeliness and associated costs. In addition, new program launches require a significant ramp up of costs; however, our sales related to these newprograms generally are dependent upon the timing and success of our customers’ introduction of new vehicles. Our inability to effectively manage the timing,quality and costs of these new program launches could adversely affect our financial condition, operating results and cash flows.•Our existing indebtedness and the inability to access capital markets could restrict our business activities or our ability to execute our strategic objectivesor adversely affect our financial performance.As of December 31, 2019, we had approximately $2.3 billion of outstanding indebtedness, as well as $1.75 billion available for borrowing under ourrevolving credit facility. As of December 31, 2019, there were no amounts outstanding under our revolving credit facility. The debt instruments governingour indebtedness contain covenants that may restrict our business activities or our ability to execute our strategic objectives, and our failure to comply withthese covenants could result in a default under our indebtedness. We also lease certain buildings and equipment under non-cancelable lease agreements withterms exceeding one year, which are accounted for as operating leases. Additionally, any downgrade in the ratings that rating agencies assign to us and ourdebt may ultimately impact our access to capital markets. Our inability to generate sufficient cash flow to satisfy our debt and lease obligations, to refinanceour debt obligations or to access capital markets on commercially reasonable terms could adversely affect our financial condition, operating results and cashflows.•Changes affecting the availability of the London Inter-bank Offered Rate ("LIBOR") may have consequences for us that cannot yet be reasonablypredicted.We have outstanding debt with variable interest rates based on LIBOR. Advances under our revolving credit facility and our term loan facility generally bearinterest based on (i) the Eurocurrency Rate (as defined in our credit agreement and calculated using LIBOR) or (ii) the ABR (as defined in our creditagreement). The LIBOR benchmark has been the subject of national, international and other regulatory guidance and proposals to reform. In July 2017, theUnited Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for thecalculation of LIBOR after 2021. These reforms may cause LIBOR to perform differently than it has in the past, and LIBOR may ultimately cease to existafter 2021. Alternative benchmark rates may replace LIBOR and could affect our debt securities, debt payments and receipts. At this time, it is not possibleto predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates. Any new benchmark rate willlikely not replicate LIBOR exactly, which could impact our contracts that terminate after 2021. There is uncertainty about how applicable law and the courtswill address the replacement of LIBOR with alternative rates on variable rate retail loan contracts and other contracts that do not include alternative ratefallback provisions. If LIBOR ceases to exist after 2021, the interest rates on our revolving credit facility and our term loan facility will be based on the ABR,which may result in higher interest rates. In addition, any changes to benchmark rates may have an uncertain impact on our cost of funds and our access tothe capital markets, which could impact our results of operations and cash flows. Uncertainty as to the nature of such potential changes may also adverselyaffect the trading market for our securities.•Significant changes in discount rates, the actual return on pension assets and other factors could adversely affect our financialperformance.Our earnings may be positively or negatively impacted by the amount of income or expense recorded related to our global defined benefit plans. Accountingprinciples generally accepted in the United States require that income or expense related to the defined benefit plans be calculated at the annual measurementdate using actuarial calculations, which reflect certain assumptions. The most significant of these assumptions relate to interest rates, the capital markets andother economic conditions. These assumptions, as well as the actual value of pension assets at the measurement date, will impact the calculation of pensionand other postretirement benefit expense for the year. Although pension expense and pension contributions are not directly related, the key economicindicators that affect pension expense also affect the amount of cash that we will contribute to our pension plans. Because interest rates and the values ofthese pension assets17Table of Contentshave fluctuated and will continue to fluctuate in response to changing market conditions, pension and other postretirement benefit expense in subsequentperiods, the funded status of our pension plans and the future minimum required pension contributions, if any, could adversely affect our financial condition,operating results and cash flows.•Impairment charges relating to our goodwill and long-lived assets could adversely affect our financialperformance.We regularly monitor our goodwill and long-lived assets for impairment indicators. In conducting our goodwill impairment testing, we may first perform aqualitative 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 goodwillimpairment 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 we elect not to perform aqualitative assessment of a reporting unit, we then compare the fair value of the reporting unit to the related net book value. If the net book value of areporting unit exceeds its fair value, an impairment loss is measured and recognized. In conducting our impairment analysis of long-lived assets, we comparethe undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. Changes in economic or operating conditionsimpacting our estimates and assumptions could result in the impairment of our goodwill or long-lived assets. In the event that we determine that our goodwillor long-lived assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition andoperating results.•Our failure to execute our strategic objectives could adversely affect our financialperformance.Our financial performance depends, in part, on our ability to successfully execute our strategic objectives. Our objectives are to deliver superior long-termstockholder value by investing in our business to grow and improve our competitive position, while maintaining a strong and flexible balance sheet andreturning cash to our stockholders. Various factors, including the industry environment and the other matters described herein and in Part II — Item 7,"Management’s Discussion and Analysis of Financial Condition and Results of Operations," including "— Forward-Looking Statements," could adverselyaffect our ability to execute our strategic objectives. These risk factors include our failure to identify suitable opportunities for organic investment and/oracquisitions, our inability to successfully develop such opportunities or complete such acquisitions or our inability to successfully utilize or integrate theinvestments in our operations. Our failure to execute our strategic objectives could adversely affect our financial condition, operating results and cash flows.Moreover, there can be no assurances that, even if implemented, our strategic objectives will be successful.•A disruption in our information technology systems, or those of our customers or suppliers, including a disruption related to cybersecurity, couldadversely affect our financial performance.We rely on the accuracy, capacity and security of our information technology networks. Despite the security measures that we have implemented, includingthose measures related to cybersecurity, our operational systems (including business, financial, accounting, human resources, product development andmanufacturing processes), as well as those of our customers, suppliers and other service providers, and certain of our connected vehicle systems andcomponents that may collect and store sensitive end-user data (which could include personally identifiable information) could be breached or damaged bycomputer viruses, malware, phishing attacks, denial-of-service attacks, human error, natural or man-made incidents or disasters or unauthorized physical orelectronic access. These types of incidents have become more prevalent and pervasive across industries, including our industry, and are expected to continuein the future. The secure operation of our information technology networks, and the processing and maintenance of information by these networks, is criticalto our operations and strategy. A breach could result in business disruption, including the vehicle systems and components that we supply to our customers orour plant operations, theft of our intellectual property, trade secrets or customer information or unauthorized access to personal information, such as that ofour employees or end consumers of vehicles that contain certain of our connected vehicle systems or components. Although cybersecurity and the continueddevelopment and enhancement of our controls, processes and practices designed to protect our operational systems and products from attack, damage orunauthorized access are a high priority for us, our actions and investments may not be deployed quickly enough or successfully protect our systems againstall vulnerabilities, including technologies developed to bypass our security measures. In addition, outside parties may attempt to fraudulently induceemployees or customers to disclose access credentials or other sensitive information in order to gain access to our secure systems and networks. There are noassurances that our actions and investments to improve the maturity of our systems, processes and risk management framework or remediate vulnerabilitieswill be sufficient or deployed quickly enough to prevent or limit the impact of any cyber intrusion or security breach. Moreover, because the techniques usedto gain access to or sabotage systems often are not recognized until launched against a target, we may be unable to anticipate the methods necessary to defendagainst these types of attacks, and we cannot predict the extent, frequency or impact these attacks may have on us. To the extent that our business isinterrupted, including the vehicle systems and components that we supply to our customers or our plant operations, or data is lost, destroyed orinappropriately used or disclosed, such disruptions could adversely affect our competitive position, relationships with our customers, financial condition,operating results and cash18Table of Contentsflows and/or subject us to regulatory actions, including those contemplated by data privacy laws and regulations like the European Union General DataPrivacy Regulation and California Consumer Privacy Act, or litigation. In addition, we may be required to incur significant costs to protect against thedamage caused by these disruptions or security breaches in the future.We are also dependent on security measures that some of our customers, suppliers and other third-party service providers take to protect their own systemsand infrastructures. Any security breach of any of these third-parties' systems could result in unauthorized access to our or our customers’ or suppliers'sensitive data or our own information technology systems, cause us to be non-compliant with applicable laws or regulations, subject us to legal claims orproceedings, disrupt our operations, damage our reputation or cause a loss of confidence in our products or services, any of which could adversely affect ourfinancial performance.•A significant product liability lawsuit, warranty claim or product recall involving us or one of our major customers could adversely affect our financialperformance.In the event that our products fail to perform as expected, regardless of fault, and such failure results in, or is alleged to result in, bodily injury and/or propertydamage or other losses, we may be subject to product liability lawsuits and other claims or we may be required or requested by our customers to participatein a recall or other corrective action involving such products. We also are a party to agreements with certain of our customers, whereby these customers maypursue claims against us for contribution of all or a portion of the amounts sought in connection with product liability and warranty claims. We carryinsurance for certain product liability claims, but such coverage may be limited. We do not maintain insurance for product warranty or recall matters. Inaddition, we may not be successful in recovering amounts from third parties, including sub-suppliers, in connection with these claims. These types of claimscould adversely affect our financial condition, operating results and cash flows.•We are involved from time to time in various legal and regulatory proceedings and claims, which could adversely affect our financialperformance.We are involved in various legal and regulatory proceedings and claims that, from time to time, are significant. These are typically claims that arise in thenormal course of business including, without limitation, commercial or contractual disputes, including disputes with our customers, suppliers or competitors,intellectual property matters, personal injury claims, environmental matters, tax matters, employment matters and antitrust matters. No assurances can begiven that such proceedings and claims will not adversely affect our financial condition, operating results and cash flows.•New laws or regulations or changes in existing laws or regulations could adversely affect our financialperformance.We and the automotive industry are subject to a variety of federal, state, local and foreign laws and regulations, including those related to health, safety andenvironmental matters. Governmental regulations also affect taxes and levies, capital markets, healthcare costs, energy usage, data privacy, internationaltrade and immigration and other labor issues, all of which may have a direct or indirect effect on our business and the businesses of our customers andsuppliers. We cannot predict the substance or impact of pending or future legislation or regulations, or the application thereof. The introduction of new lawsor regulations or changes in existing laws or regulations, or the interpretation thereof, could increase the costs of doing business for us or our customers orsuppliers or restrict our actions and adversely affect our financial condition, operating results and cash flows.•We are subject to regulation of our international operations that could adversely affect our financialperformance.We are subject to many laws governing our international operations, including those that prohibit improper payments to government officials and restrictwhere we can do business and what information or products we can supply to certain countries, including but not limited to the Foreign Corrupt Practices Actand the U.S. Export Administration Act. Violations of these laws, which are complex and often difficult to interpret and apply, could result in significantcriminal penalties or sanctions that could adversely affect our business, financial condition, operating results and cash flows.•We are required to comply with environmental laws and regulations that could cause us to incur significantcosts.Our manufacturing facilities are subject to numerous laws and regulations designed to protect the environment, and we expect that additional requirementswith respect to environmental matters will be imposed on us in the future. Material future expenditures may be necessary if compliance standards change ormaterial unknown conditions that require remediation are discovered. Environmental laws could also restrict our ability to expand our facilities or couldrequire us to acquire costly equipment or to incur other significant expenses in connection with our business. If we fail to comply with present and futureenvironmental laws and regulations, we could be subject to future liabilities, which could adversely affect our financial condition, operating results and cashflows.19Table of Contents•Developments or assertions by or against us relating to intellectual property rights could adversely affect our financialperformance.We own significant intellectual property, including a large number of patents, trademarks, copyrights and trade secrets, and we are involved in numerouslicensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a number of the markets that we serve.Developments or assertions by or against us relating to intellectual property rights could adversely affect our financial condition, operating results and cashflows.•Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international relations, couldadversely affect our financial performance.As a result of changes to U.S. administrative policy, among other possible changes, there may be (i) changes to existing trade agreements; (ii) greaterrestrictions on free trade generally; and (iii) significant increases in tariffs on goods imported into the United States. The United States, Mexico and Canadasigned the United States-Mexico-Canada Agreement ("USMCA"), the successor agreement to the North American Free Trade Agreement ("NAFTA"). It isexpected that the USMCA will become effective by January 1, 2021. On January 15, 2020, the United States signed the "Phase 1" trade agreement withChina. It remains unclear what the U.S. administration or foreign governments, including China, will or will not do with respect to tariffs, the USMCA orother international trade agreements and policies. A trade war, other governmental action related to tariffs or international trade agreements, changes in U.S.social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in theterritories and countries where we currently manufacture and sell products or any resulting negative sentiments towards the United States could adverselyaffect our business, financial condition, operating results and cash flows.•Changes in the United Kingdom's economic and other relationships with the European Union could adversely affectus.On January 31, 2020, the United Kingdom formally withdrew from the European Union. Pursuant to the Withdrawal Agreement Bill, the United Kingdomwill remain in the European Union's free market and customs union until December 31, 2020. On January 1, 2021, the United Kingdom will withdraw fromthe free market and customs union, and trade between the European Union and the United Kingdom will be subject to border controls. During the transition,the parties will negotiate a free trade agreement to manage future trade in goods and services. However, it is possible that an agreement will not be reachedwithin the transition period, and there remains significant uncertainty about the terms of the future trade relationship between the European Union and theUnited Kingdom.We have significant operations in both the European Union and the United Kingdom. In 2019, our European Union (excluding the United Kingdom) andUnited Kingdom sales totaled $5.5 billion and $1.0 billion, respectively. Our supply chain and that of our customers are highly integrated across the EuropeanUnion and the United Kingdom, and we are highly dependent on the free flow of goods in those regions. The ongoing uncertainty and imposition of bordercontrols on trade between the European Union and the United Kingdom could negatively impact our competitive position, supplier and customerrelationships and financial performance. The ultimate effects of the United Kingdom's withdrawal from the European Union on us will depend on the specificterms of any agreement the European Union and the United Kingdom reach to provide future access to each other’s respective markets.ITEM 1B – UNRESOLVED STAFF COMMENTSNone.20Table of ContentsITEM 2 – PROPERTIESAs of December 31, 2019, our operations were conducted through 257 facilities, some of which are used for multiple purposes, including 83 just-in-timemanufacturing facilities, 124 dedicated component manufacturing facilities, 5 sequencing and distribution sites, 36 administrative/technical support facilities and 9advanced technology centers, in 39 countries. Our corporate headquarters is located in Southfield, Michigan.SeatingArgentinaCzech RepublicIndia (continued)Mexico (continued)RomaniaUnited KingdomEscobar, BAHranicePuneMonclova, COIasiAlfretonFerreyra, CBAKolinTijaraNuevo CasasRussiaCoventryBelgiumStribroIndonesiaGrandes, CHKalugaRedditchBrusselsDominican RepublicCikarangPanzacola, TLNizhny NovgorodSunderlandBrazilSanto DomingoItalyPiedras Negras, COSlovak RepublicUnited StatesBetimFranceCaivano, NARamos Arizpe, COPresovArlington, TXCaçapavaFeigniesCassino, FRSaltillo, COVoderadyColumbia City, INJoinvilleHerblayGrugliasco, TOSan Felipe, GUSouth AfricaDetroit, MIPernambucoJarneyMelfi, PZSan Luis Potosi, SLEast LondonDuncan, SCSão BernardoRoche La MolierePozzo d’Adda, MISilao, GOPort ElizabethFarwell, MICanadaGermanyMacedoniaToluca, MXSouth KoreaFlint, MIAjax, ONBesigheimTetovoVilla Ahumada, CHGyeongjuHammond, INChinaBremenMalaysiaMoldovaSpainHebron, OHBeijingEisenachBehrang StesenUngheniBarcelonaKenansville, NCChangshuGinsheim-MexicoMoroccoBurgosLouisville, KYChongqingGustavsburgArteaga, CAKenitraEpilaMontgomery, ALHangzhouRietbergAscension, CHTangierMartorellMorristown, TNLiuzhouWackersdorfCuautlancingo, PUPolandO PorrinoPine Grove, PANanjingHungaryFresnillo, ZABierunValenciaRochester Hills, MIRui’anGyörHermosillo, SOJaroslawVigoRoscommon, MIShanghaiSzolnokHuamantla, TLLegnicaVitoriaSelma, ALShenyangIndiaJuarez, CHTychyThailandTuscaloosa, ALWuhanChennaiLeon, GTPortugalMueang NakhonWentzville, MOWuhuHalolMeoqui, CHMangualdeRatchasimaVietnamYangzhouHaridwarMexico City, DFValencaRayongHai Phong City Nasik E-SystemsArgentinaChina (continued)GermanyMexicoPolandSpainPacheco, BAChongqingBersenbrueckApodaca, NLMielecAlmussafesSan Francisco,KunShan HuaQiaoKronachChihuahua, CHRomaniaVallsCBAShanghaiPuttlingenJuarez, CHCampulungThailandBrazilSuiNingWismarTorreon, CAPitestiKabin BuriCamanducaiaTianJinHondurasMoroccoSerbiaUnited StatesNavegantesWuhanNacoKenitraNovi SadBellevue, WAChinaYangzhouHungarySalé Al-JadidaSouth AfricaPlymouth, INChangchunCzech RepublicGödöllöTangierPort ElizabethTraverse City, MI VyskovJapanPhilippines TokyoLapu-Lapu City Administrative/TechnicalAustraliaFranceIndiaJapan (continued)SingaporeUnited StatesEssendon FieldsVélizy-GurgaonTokyoSouth KoreaAnn Arbor, MIBelgiumVillacoublayPuneYokohamaSeoulDetroit, MILeuvenGermanyIsraelMalaysiaSpainEl Paso, TXBrazilCologneTel AvivKlangVallsRochester Hills, MISão PauloKorntal-ItalyMexicoSwedenSan Mateo, CAChinaMünchingenGrugliasco, TOJuarez, CHGothenburgSouthfield, MIShanghaiRemscheidJapanNetherlandsThailandSparta, MICzech RepublicSchwaig-OberdingHiroshimaHilversumBangkokWilmington, NCBrnoSindelfingenKariyaPhilippinesUnited Kingdom PilsenWolfsburgNagoyaLapu-Lapu CityCoventry 21Table of ContentsITEM 3 – LEGAL PROCEEDINGSLegal and Environmental MattersWe are involved from time to time in various legal proceedings and claims, including, without limitation, commercial or contractual disputes, product liabilityclaims and environmental and other matters. For a description of risks related to various legal proceedings and claims, see Item 1A, "Risk Factors." For adescription of our outstanding material legal proceedings, see Note 13, "Commitments and Contingencies," to the consolidated financial statements included inthis Report.ITEM 4 – MINE SAFETY DISCLOSURESNone.SUPPLEMENTARY ITEM – INFORMATION ABOUT OUR EXECUTIVE OFFICERSThe following table sets forth the names, ages and positions of our executive officers. Executive officers are appointed annually by our Board of Directors andserve at the pleasure of our Board.NameAgePositionShari L. Burgess61Vice President and TreasurerJason M. Cardew49Senior Vice President and Chief Financial OfficerAlicia J. Davis49Senior Vice President, Corporate Development and Investor RelationsThomas A. DiDonato61Senior Vice President and Chief Administrative OfficerAmy A. Doyle52Vice President and Chief Accounting OfficerCarl A. Esposito52Senior Vice President and President, E-SystemsHarry A. Kemp44Senior Vice President, General Counsel and Corporate SecretaryFrank C. Orsini47Executive Vice President and President, SeatingRaymond E. Scott54President and Chief Executive OfficerSet forth below is a description of the business experience of each of our executive officers.Shari L. BurgessMs. Burgess is the Company’s Vice President and Treasurer, a position she has held since August 2002. Ms. Burgess previouslyserved as the Company’s Vice President, Treasurer and Chief Diversity Officer from January 2014 to May 2018 and in variousfinancial roles since joining the Company in 1992. Prior to joining the Company, Ms. Burgess served as the corporate controller forVictor International Corporation and as an audit manager for Ernst & Young LLP. Jason M. CardewMr. Cardew is the Company’s Senior Vice President and Chief Financial Officer, a position he has held since November 2019. Mr.Cardew most recently served as the Company's Vice President, Finance - Seating and E-Systems since September 2018. Prior tothat, he served as the Company's Vice President, Finance - Seating since April 2012. Previously, he served as the Company's VicePresident and Interim Chief Financial Officer since September 2011, Vice President, Finance - Financial Planning and Analysissince April 2010, Vice President, Finance - Seating since 2008, Vice President - Finance since 2003 and in various financial rolessince joining the Company in 1992. Alicia J. DavisMs. Davis is the Company's Senior Vice President, Corporate Development and Investor Relations, a position she has held sinceSeptember 2019. Ms. Davis most recently served as the Company's Vice President, Investor Relations, since joining the Companyin August 2018. Prior to joining the Company, Ms. Davis was on the faculty at the University of Michigan Law School since June2004, where she most recently served as a professor and the Associate Dean for Strategic Initiatives. Previous to that, she was alawyer at Kirkland & Ellis since June 2002, a Vice President at Raymond James & Associates since August 1999 and anInvestment Banking Analyst at Goldman Sachs from August 1993 to June 1995. 22Table of ContentsThomas A. DiDonatoMr. DiDonato is the Company’s Senior Vice President and Chief Administrative Officer, a position he has held since January2019. Mr. DiDonato most recently served as the Company's Senior Vice President, Human Resources since joining the Companyin April 2012. Prior to joining the Company, Mr. DiDonato served as Executive Vice President, Human Resources for AmericanEagle Outfitters, Inc. since 2005, Chief People Officer for H.J. Heinz from April 2004 to July 2005 and Senior Vice President,Human Resources for Heinz North America from July 2001 to April 2004. Earlier experiences include directing human resourcesfor a $14 billion division of Merck & Co. and heading worldwide staffing for Pepsico. Mr. DiDonato began his career at GeneralFoods Corporation and moved up to manage the personnel at its largest manufacturing facility. Amy A. DoyleMs. Doyle is the Company’s Vice President and Chief Accounting Officer, a position she has held since May 2017. Ms. Doylemost recently served as the Company’s Assistant Corporate Controller since September 2006. Previously, she served in positionsof increasing responsibility at the Company, including Director, Financial Reporting since 2003 and Manager, Financial Reportingsince joining the Company in 1999. Prior to joining the Company, Ms. Doyle served as an audit manager for Arthur AndersenLLP. Carl A. EspositoMr. Esposito is the Company’s Senior Vice President and President, E-Systems, a position he has held since joining the Companyin September 2019. Prior to joining the Company, Mr. Esposito served at Honeywell Aerospace, a division of HoneywellInternational Inc., as President of the Electronic Solutions Strategic Business Unit from January 2017 to July 2019 and atHoneywell International Inc. as Vice President of Aerospace Marketing, Product Management and Strategy since December 2010,Vice President of Avionics Systems Marketing and Product Management since December 2009, Vice President of Global BusinessAviation Sales and EMEAI Customer Support since January 2007 and in various other roles since 1990. Harry A. KempMr. Kemp is the Company's Senior Vice President, General Counsel and Corporate Secretary, a position he has held since August2019. Mr. Kemp most recently served as the Company's Vice President and Corporate Counsel since January 2019. Previously, heserved as the Company's Vice President and Divisional Counsel - Seating since September 2016 and Vice President and DivisionalCounsel - E-Systems since joining the Company in December 2009. Prior to joining the Company, Mr. Kemp was a partner atBodman PLC since 2003 and served as an engagement manager at McKinsey and Company, a global management consulting firm,since 2000. Frank C. OrsiniMr. Orsini is the Company’s Executive Vice President and President, Seating, a position he has held since March 2018. Mr. Orsinimost recently served as the Company’s Senior Vice President and President, E-Systems since September 2012. Prior to that, heserved as the Company's Vice President and Interim President, E-Systems since October 2011. Previously, he served as theCompany’s Vice President, Operations, E-Systems since 2009, Vice President, Sales, Program Management & Manufacturing, E-Systems since 2008, Vice President, North America Seating Operations since 2005 and in various other management positions forthe Company since joining the Company in 1994. Raymond E. ScottMr. Scott is the Company’s President and Chief Executive Officer, a position he has held since March 2018. Mr. Scott mostrecently served as the Company’s Executive Vice President and President, Seating since November 2011. Prior to that, he servedas the Company’s Senior Vice President and President, E-Systems since February 2008. Previously, he served as the Company’sSenior Vice President and President, North American Seat Systems Group since August 2006, Senior Vice President andPresident, North American Customer Group since June 2005, President, European Customer Focused Division since June 2004and President, General Motors Division since November 2000.23Table of ContentsPART IIITEM 5 – MARKET FOR THE COMPANY’S COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur common stock is listed on the New York Stock Exchange under the symbol "LEA."DividendsWe currently expect to pay quarterly cash dividends in the future, although such payments are at the discretion of our Board of Directors and will depend upon ourfinancial condition, results of operations, capital requirements, alternative uses of capital and other factors that our Board of Directors may consider at itsdiscretion. See Part II — Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements," andNote 11, "Capital Stock, Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in this Report.Holders of Common StockThe Transfer Agent and Registrar for our common stock is Computershare Trust Company, N.A., located in Canton, Massachusetts. On January 31, 2020, therewere 152 registered holders of record of our common stock.For certain information regarding our equity compensation plans, see Part III — Item 12, "Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters — Equity Compensation Plan Information."Common Stock Share Repurchase ProgramSince the first quarter of 2011, our Board of Directors has authorized $5.8 billion in share repurchases under our common stock share repurchase program. As ofDecember 31, 2019, we have a remaining repurchase authorization of $1.2 billion, which will expire on December 31, 2021.We may implement our share repurchases through a variety of methods, including, but not limited to, open market purchases, accelerated stock repurchaseprograms and structured repurchase transactions. The extent to which we will repurchase our outstanding common stock and the timing of such repurchases willdepend upon our financial condition, prevailing market conditions, alternative uses of capital and other factors. See Part II — Item 7, "Management’s Discussionand Analysis of Financial Condition and Results of Operations — Forward-Looking Statements," and Note 11, "Capital Stock, Accumulated OtherComprehensive Loss and Equity," to the consolidated financial statements included in this Report.As of December 31, 2019, we have paid $4.6 billion in aggregate for repurchases of our outstanding common stock, at an average price of $89.83 per share,excluding commissions and related fees, since the first quarter of 2011. A summary of the shares of our common stock repurchased during the fiscal quarter endedDecember 31, 2019, is shown below:PeriodTotal Numberof SharesPurchased AveragePrice Paidper Share Total Number of SharesPurchased as Part ofPublicly Announced Plans or Programs Approximate DollarValue of Shares thatMay Yet be PurchasedUnder the Program(in millions)September 29, 2019 through October 26, 2019205,600 $116.09 205,600 $1,203.8October 27, 2019 through November 23, 20199,600 124.83 9,600 1,202.6November 24, 2019 through December 31, 2019— — — 1,202.6Total215,200 $116.48 215,200 $1,202.624Table of ContentsPerformance GraphThe following graph compares the cumulative total stockholder return from December 31, 2014 through December 31, 2019, for our common stock, the S&P 500Index and a peer group(1) of companies that we have selected for purposes of this comparison. We have assumed that dividends have been reinvested, and thereturns of each company in the S&P 500 Index and the peer group have been weighted to reflect relative stock market capitalization. The graph below assumes that$100 was invested on December 31, 2014, in each of our common stock, the stocks comprising the S&P 500 Index and the stocks comprising the peer group. December 31, 2014 December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019Lear Corporation $100.00 $126.35 $137.57 $186.01 $131.53 $150.42S&P 500 $100.00 $101.37 $113.49 $138.26 $132.19 $173.80Peer Group (1) $100.00 $91.79 $92.07 $124.50 $84.25 $113.11(1)We do not believe that there is a single published industry or line of business index that is appropriate for comparing stockholder returns. As a result, we haveselected a peer group comprised of representative independent automotive suppliers whose common stock is publicly traded. Our peer group, referenced in thegraph above, consists of Adient plc, American Axle & Manufacturing Holdings Inc., Aptiv PLC, BorgWarner Inc., Dana Holding Corporation, Gentex Corp.,Magna International, Inc., Superior Industries International, Inc., Tenneco Inc. and Visteon Corporation.25Table of ContentsITEM 6 – SELECTED FINANCIAL DATAThe following statement of operations, statement of cash flows and balance sheet data were derived from our consolidated financial statements. Our consolidatedfinancial statements for the years ended December 31, 2019, 2018, 2017, 2016 and 2015, have been audited by Ernst & Young LLP. The selected financial databelow should be read in conjunction with Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," and ourconsolidated financial statements and the notes thereto included in this Report.For the year ended December 31,2019 (1) 2018 (2) 2017 (3) 2016 (4) 2015 (5)Income Statement: (in millions) (6) Net sales$19,810.3 $21,148.5 $20,467.0 $18,557.6 $18,211.4Gross profit1,737.5 2,318.3 2,291.1 2,122.6 1,819.8Selling, general and administrative expenses605.0 612.8 635.2 608.2 580.5Amortization of intangible assets62.3 51.4 47.6 53.0 52.5Interest expense92.0 84.1 85.7 82.5 86.7Other (income) expense, net (7)24.6 31.6 (4.1) 40.6 68.6Consolidated income before provision for income taxes and equity innet income of affiliates953.61,538.41,526.71,338.31,031.5Provision for income taxes146.1 311.9 197.5 370.2 285.5Equity in net income of affiliates(23.2) (20.2) (51.7) (72.4) (49.8)Consolidated net income830.7 1,246.7 1,380.9 1,040.5 795.8Net income attributable to noncontrolling interests77.1 96.9 67.5 65.4 50.3Net income attributable to Lear$753.6 $1,149.8 $1,313.4 $975.1 $745.5For the year ended December 31,2019 (1) 2018 (2) 2017 (3) 2016 (4) 2015 (5)Income Statement Data: Basic net income per share available to Lear commonstockholders$12.80 $17.35 $18.79 $13.48 $9.71Diluted net income per share available to Lear commonstockholders$12.75 $17.22 $18.59 $13.33 $9.59Weighted average shares outstanding – basic61,697,192 65,672,164 68,542,363 72,345,436 76,754,270Weighted average shares outstanding – diluted61,923,528 66,161,816 69,277,981 73,124,949 77,767,017Dividends per share$3.00 $2.80 $2.00 $1.20 $1.00Statement of Cash Flows Data: (in millions) (8) Cash flows from operating activities$1,284.3 $1,779.8 $1,783.1 $1,619.3 $1,271.1Cash flows from investing activities(922.4) (693.5) (868.6) (637.1) (1,315.3)Cash flows from financing activities(361.9) (1,030.5) (742.0) (872.9) (406.3)Capital expenditures603.9 677.0 594.5 528.3 485.826Table of ContentsAs of or for the year ended December 31,2019 2018 2017 2016 2015Balance Sheet Data: (in millions) Current assets$6,406.7 $6,280.5 $6,613.0 $5,649.3 $5,286.6Total assets12,680.7 11,600.7 11,945.9 9,900.6 9,405.8Current liabilities4,666.2 4,500.6 4,854.3 4,182.3 3,839.6Long-term debt2,293.7 1,941.0 1,951.5 1,898.0 1,931.7Equity4,501.1 4,360.6 4,292.6 3,192.9 3,017.7Other Data (unaudited): Employees at year end164,100 169,000 165,000 148,400 136,200North American content per vehicle (9)$452 $452 $456 $422 $443North American vehicle production (in millions) (10)16.3 17.0 17.1 17.8 17.5European content per vehicle (11)$359 $385 $354 $316 $314European vehicle production (in millions) (12)21.7 22.6 23.0 22.3 21.5(1)2019 results include $189.7 million of restructuring and related manufacturing inefficiency charges (including $9.5 million of asset impairment charges),$1.6 million of transaction costs, $1.1 million loss related to litigation, $1.6 million related to a favorable indirect tax ruling in a foreign jurisdiction, $10.6million loss on the extinguishment of debt, $5.0 million impairment of an investment, $4.0 million gain related to the deconsolidation of an affiliate, $1.6million gain related to an affiliate and $122 million of net tax benefits related to an increase in research and development tax credits for the years 2013through 2018, changes in the tax status of certain affiliates, the U.S. tax impact of the foreign tax credit regulations issued in the fourth quarter of 2019, netreductions in tax reserves, share-based compensation, various tax-related items, including the release of valuation allowances, tax rate changes and auditadjustments, restructuring charges and various other special items partially offset by the establishment of valuation allowances on the deferred tax assets offoreign subsidiaries.(2)2018 results include $104.3 million of restructuring and related manufacturing inefficiency charges (including $4.7 million of fixed asset impairmentcharges), $0.5 million of transaction costs, $5.4 million pension settlement charge, $17.1 million gain related to litigation, $15.8 million related to afavorable indirect tax ruling in a foreign jurisdiction, $10.0 million gain related to obtaining control of an affiliate, $8.9 million loss related to affiliates and$49.1 million of net tax benefits related to the reversal of valuation allowances on the deferred tax assets of certain foreign subsidiaries, share-basedcompensation, a tax rate change in a foreign subsidiary, an adjustment to the 2017 provisional income tax expense, restructuring charges and various otheritems partially offset by an increase in foreign withholding tax on certain undistributed foreign earnings and the establishment of valuation allowances on thedeferred tax assets of certain foreign subsidiaries and various other items.(3)2017 results include $74.5 million of restructuring and related manufacturing inefficiency charges (including $1.3 million of fixed asset impairmentcharges), $3.8 million of transaction costs, $5.0 million charge due to an acquisition-related inventory fair value adjustment, $15.4 million litigation charge,$21.2 million loss on the extinguishment of debt, $54.2 million gain related to obtaining control of an affiliate and $214.8 million of net tax benefits relatedto U.S. corporate tax reform and its associated transition tax, foreign tax credits on repatriated earnings, the reversal of valuation allowances on the deferredtax assets of certain foreign subsidiaries, share-based compensation, an incentive tax credit in a foreign subsidiary, the redemption of senior notes due 2023,restructuring charges and various other items.(4)2016 results include $69.6 million of restructuring and related manufacturing inefficiency charges (including $4.7 million of fixed asset impairmentcharges), $34.2 million non-cash pension settlement charge, $1.3 million of transaction costs, $30.3 million gain related to obtaining control of an affiliateand $23.6 million of net tax benefits related to restructuring charges, a non-cash pension settlement charge and various other items.(5)2015 results include $97.2 million of restructuring and related manufacturing inefficiency charges (including $3.9 million of fixed asset impairmentcharges), $10.9 million of transaction and other related costs, $15.8 million charge due to an acquisition-related inventory fair value adjustment, $14.3million loss on the extinguishment of debt, $1.8 million loss related to an affiliate and $43.1 million of net tax benefits related to restructuring charges, debtredemption costs, acquisition costs and various other items.27Table of Contents(6)The income statement for 2016 has been restated to reflect a non-cash pension settlement charge as other (income) expense, net in conjunction with the 2018adoption of Accounting Standards Update ("ASU") 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic PostretirementBenefit Cost." As a result, gross profit increased $20.5 million, selling, general and administrative expenses decreased $13.7 million, and other (income)expense, net increased $34.2 million.(7)Includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, losseson the extinguishment of debt, gains and losses on the disposal of fixed assets, gains and losses on the consolidation and deconsolidation of affiliates, thenon-service cost components of net periodic benefit cost and other miscellaneous income and expense.(8)The statement of cash flows data for 2015 has been restated to reflect changes in restricted cash with changes in cash and cash equivalents in conjunction withthe 2018 adoption of ASU 2016-18, "Restricted Cash." As a result, cash flows from investing activities decreased by $350.0 million, and cash flows fromfinancing activities decreased by $250.0 million.(9)"North American content per vehicle" is our net sales in North America divided by total North American vehicle production. Content per vehicle dataexcludes business conducted through non-consolidated joint ventures. Content per vehicle data for 2018 has been updated to reflect actual production levels.(10)"North American vehicle production" includes car and light truck production in the United States, Canada and Mexico based on IHS Automotive. Productiondata for 2018 has been updated to reflect actual production levels.(11)"European content per vehicle" is our net sales in Europe and Africa divided by total European and African vehicle production. Content per vehicle dataexcludes business conducted through non-consolidated joint ventures. Content per vehicle data for 2018 has been updated to reflect actual production levels.(12)"European vehicle production" includes car and light truck production in Austria, Belarus, Belgium, Bosnia, Bulgaria, Czech Republic, Finland, France,Germany, Hungary, Italy, Morocco, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, South Africa, Spain, Sweden,Turkey, Ukraine and the United Kingdom based on IHS Automotive. Production data for 2018 has been updated to reflect actual production levels.28Table of ContentsITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSExecutive OverviewWe are a leading Tier 1 supplier to the global automotive industry. We supply seating, electrical distribution systems and electronic modules, as well as relatedsub-systems, components and software, to all of the world's major automotive manufacturers.We use our product, design and technological expertise, global reach and competitive manufacturing footprint to achieve our financial goals and objectives ofcontinuing to deliver profitable growth (balancing risks and returns), maintaining a strong balance sheet with investment grade credit metrics and consistentlyreturning excess cash to our stockholders.Our Seating business consists of the design, development, engineering, just-in-time assembly and delivery of complete seat systems, as well as the design,development, engineering and manufacture of all major seat components, including seat covers and surface materials such as leather and fabric, seat structures andmechanisms, seat foam and headrests. Further, we have capabilities in active sensing and comfort for seats, utilizing electronically controlled sensor and adjustmentsystems and internally developed algorithms.Our E-Systems business consists of the design, development, engineering and manufacture of complete electrical distribution systems, as well as sophisticatedelectronic control modules, electrification products, connectivity products and software solutions for the cloud, vehicles and mobile devices. Electrical distributionsystems route networks and electrical signals and manage electrical power within the vehicle for all types of powertrains - from traditional internal combustionengine ("ICE") architectures to the full range of hybrid, plug-in hybrid and battery electric architectures. Key components in our electrical distribution portfolioinclude wire harnesses, terminals and connectors and junction boxes for both ICE and electrification architectures that require management of higher voltage andpower. Electronic control modules facilitate signal, data and power management within the vehicle and include the associated software required to facilitate thesefunctions. Key components in our electronic control module portfolio include body control modules, wireless receiver and transmitter technology and lighting andaudio control modules, as well as products specific to electrification and connectivity trends. Electrification products include charging systems (onboard chargingmodules and cord set charging equipment), battery electronics (battery disconnect units, cell monitoring supervisory systems and integrated total battery controlmodules) and other power management modules, including converter and inverter systems which may be integrated into other modules or sold separately.Connectivity products include gateway modules and communication modules to manage both wired and wireless networks and data in vehicles. In addition to fullyfunctional electronic modules, we offer software that includes cybersecurity, advanced vehicle positioning for automated and autonomous driving applications,roadside modules that communicate real-time traffic information and full capabilities in both dedicated short-range communication and cellular protocols forvehicle connectivity. Our software solutions also include Xevo Journeyware, a thin-client platform for the cloud, vehicles and mobile devices that enablesconsumer e-commerce, multi-media applications and enterprise services to improve performance and safety, deliver an artificial intelligence-enhanced drivingexperience and provide new monetization opportunities for us and the automotive manufacturers, and Xevo Market, an in-vehicle commerce and service platformthat connects customers with their favorite brands and services by delivering highly-contextual sales offers through vehicle touch screens and vehicle-brandedmobile applications.We serve all of the world's major automotive manufacturers across both our Seating and E-Systems businesses, and we have automotive content on more than 400vehicle nameplates worldwide. It is common to have both seating and electrical content on the same and multiple vehicle platforms with a single customer.Further, the seat is becoming a more dynamic and integrated system requiring increased levels of electrical and electronic integration and accelerating theconvergence of our Seating and E-Systems businesses. We are the only global automotive supplier with complete capabilities in both of these critical businesssegments. Our businesses benefit globally from leveraging common operating standards and disciplines, including world-class product development andmanufacturing processes, as well as common customer support and regional infrastructures. Our core capabilities are shared across component categories andinclude high-precision manufacturing and assembly with short lead times, management of complex supply chains, global engineering and program managementskills, the agility to establish and/or transfer production between facilities quickly and a unique customer-focused culture. Our businesses utilize proprietary,industry-specific processes and standards, leverage common low-cost engineering centers and share centralized operating support functions, such as logistics,supply chain management, quality and health and safety, as well as all major administrative functions.29Table of ContentsIndustry OverviewOur sales are driven by the number of vehicles produced by the automotive manufacturers, which is ultimately dependent on consumer demand for automotivevehicles, and our content per vehicle. Global automotive industry production volumes in 2019, as compared to 2018, are shown below (in millions of units): 2019 (1) 2018 (1) (2) % ChangeNorth America16.3 17.0 (4%)Europe and Africa21.7 22.6 (4%)Asia44.6 47.7 (7%)South America3.1 3.2 (4%)Other1.4 2.0 (27%)Global light vehicle production87.1 92.5 (6%)(1)Production data based on IHS Automotive.(2)Production data for 2018 has been updated to reflect actual production levels.Automotive sales and production can be affected by the age of the vehicle fleet and related scrappage rates, labor relations issues, fuel prices, regulatoryrequirements, government initiatives, trade agreements, the availability and cost of credit, the availability of critical components needed to complete the productionof vehicles, restructuring actions of our customers and suppliers, facility closures, changing consumer attitudes toward vehicle ownership and usage and otherfactors. Our operating results are also significantly impacted by the overall commercial success of the vehicle platforms for which we supply particular products, aswell as the profitability of the products that we supply for these platforms. The loss of business with respect to any vehicle model for which we are a significantsupplier, or a decrease in the production levels of any such models, could adversely affect our operating results. In addition, larger cars and light trucks, as well asvehicle platforms that offer more features and functionality, such as luxury, sport utility and crossover vehicles, typically have more content and, therefore, tend tohave a more significant impact on our operating results.Our percentage of consolidated net sales by region in 2019 and 2018 is shown below: 2019 2018North America37% 36%Europe and Africa39% 41%Asia20% 19%South America4% 4%Total100% 100%Our ability to reduce the risks inherent in certain concentrations of business, and thereby maintain our financial performance in the future, will depend, in part, onour ability to continue to diversify our sales on a customer, product, platform and geographic basis to reflect the market overall.Key trends that specifically affect our business include automotive manufacturers’ utilization of global vehicle platforms, increasing demand for luxury andperformance features, including increasing levels of electrical and electronic content, and China’s emergence as the single largest automotive market in the world,as well as the shift toward crossover and sport utility vehicles, where our content can be significantly higher than our average content per vehicle. In addition, webelieve that demand for efficiency, enhanced communications and safety are driving the technology trends of autonomy, connectivity and electrification. Thesetrends, along with the trend toward shared mobility, are likely to be at the forefront of our industry for the foreseeable future with each converging long-termtoward fully autonomous, connected, electric or hybrid electric vehicles.Our sales and marketing approach is based on addressing these trends, while our strategy focuses on the major imperatives for success as an automotive supplier:quality, service, cost and efficiency and innovation and technology. We have expanded key component and software capabilities through organic investment andacquisitions to ensure a full complement of the highest quality solutions for our customers. We have restructured, and continue to align, our manufacturing andengineering footprint to attain a leading competitive position globally. We have established or expanded our capabilities in new and growing markets, especiallyChina, in support of our customers’ growth and global platform initiatives. These initiatives have helped us achieve our financial goals overall, as well as a morebalanced regional, customer and vehicle segment diversification in our business.For further information related to these trends and our strategy, see Part 1 — Item 1, "Business — Industry and Strategy."30Table of ContentsOur customers typically require us to reduce our prices over the life of a vehicle model and, at the same time, assume significant responsibility for the design,development and engineering of our products. Our financial performance is largely dependent on our ability to achieve product cost reductions through productdesign enhancement and supply chain management, as well as manufacturing efficiencies and restructuring actions. We also seek to enhance our financialperformance by investing in product development, design capabilities and new product initiatives that respond to the needs of our customers and consumers. Wecontinually evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers andmajor industry trends affecting our business.Our material cost as a percentage of net sales was 65.0% in 2019, as compared to 64.4% in 2018 and 64.5% in 2017. Raw material, energy and commodity costscan be volatile, reflecting changes in supply and demand and global trade and tariff policies. We have developed and implemented strategies to mitigate the impactof higher raw material, energy and commodity costs, such as the selective in-sourcing of components, the continued consolidation of our supply base, longer-termpurchase commitments and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking.However, these strategies, together with commercial negotiations with our customers and suppliers, typically offset only a portion of the adverse impact. Certain ofthese strategies also may limit our opportunities in a declining commodity environment. In addition, the availability of raw materials, commodities and productcomponents fluctuates from time to time due to factors outside of our control. If these costs increase or availability is restricted, it could have an adverse impact onour operating results in the foreseeable future. See Part I — Item 1A, "Risk Factors — Increases in the costs and restrictions on the availability of raw materials,energy, commodities and product components could adversely affect our financial performance," and "— Forward-Looking Statements."Financial MeasuresIn evaluating our financial condition and operating performance, we focus primarily on earnings, operating margins, cash flows and return on invested capital. Inaddition to maintaining and expanding our business with our existing customers in our more established markets, our expansion plans are focused primarily onemerging markets. Asia, and China in particular, continues to present long-term growth opportunities, as we focus on expanding our market share and content pervehicle, as demand for luxury and performance features increases in this region. In addition to our wholly owned locations, we currently have twelve operatingjoint ventures with operations in Asia, as well as two additional joint ventures in North America dedicated to serving Asian automotive manufacturers. We alsohave aggressively pursued this strategy by selectively increasing our vertical integration capabilities globally, as well as expanding our component manufacturingcapacity in Asia, Brazil, Eastern Europe, Mexico and Northern Africa. Furthermore, we have expanded our low-cost engineering capabilities in Asia, EasternEurope and Northern Africa.Our success in generating cash flow will depend, in part, on our ability to manage working capital effectively. Working capital can be significantly impacted by thetiming of cash flows from sales and purchases. Historically, we generally have been successful in aligning our vendor payment terms with our customer paymentterms. However, our ability to continue to do so may be impacted by adverse automotive industry conditions, changes to our customers’ payment terms and thefinancial condition of our suppliers, as well as our financial condition. In addition, our cash flow is impacted by our ability to manage our inventory and capitalspending effectively. We utilize return on invested capital as a measure of the efficiency with which our assets generate earnings. Improvements in our return oninvested capital will depend on our ability to maintain an appropriate asset base for our business and to increase productivity and operating efficiency.AcquisitionsXevoIn April 2019, we completed the acquisition of Xevo Inc. ("Xevo"), a Seattle-based, global leader in connected car software, by acquiring all of Xevo's outstandingshares for $322 million, net of cash acquired. Xevo is a supplier of software solutions for the cloud, vehicles and mobile devices that are deployed in millions ofvehicles worldwide.For further information, see Note 3, "Acquisitions," to the consolidated financial statements included in this Annual Report on Form 10-K (this "Report").EXOIn January 2018, we completed the acquisition of Israel-based EXO Technologies ("EXO"), a leading developer of differentiated GPS technology providing high-accuracy positioning solutions for autonomous and connected vehicle applications. EXO has operations in San Mateo, California and Tel Aviv, Israel and hasdeveloped core technology that addresses the need for high-accuracy positioning of a vehicle. Its proprietary technology works with existing GPS receivers toprovide centimeter-level accuracy anywhere on the globe without the need for terrestrial base-station networks. The integration of this technology with our vehicleand connectivity expertise enables an industry-leading vehicle positioning solution.31Table of ContentsOperational RestructuringIn 2019, we incurred pretax restructuring costs of $184 million and related manufacturing inefficiency charges of $6 million, as compared to pretax restructuringcosts of $88 million and related manufacturing inefficiency charges of $16 million in 2018. Our restructuring actions include plant closures and workforcereductions and are initiated to maintain our competitive footprint or are in response to customer initiatives or changes in global and regional automotive markets.The increase in restructuring costs in 2019, as compared to 2018, is primarily attributable to elevated customer actions and a significant reduction in global vehicleproduction volumes. None of the individual restructuring actions initiated during 2019 were material. Our restructuring actions are designed to maintain or improveour future operating results throughout the automotive industry cycles. Restructuring actions are generally funded within twelve months of initiation and are fundedby cash flows from operating activities and existing cash balances. There have been no changes in previously initiated restructuring actions that have resulted (orwill result) in a material change to our restructuring costs. We expect to incur approximately $55 million of additional restructuring costs related to activitiesinitiated as of December 31, 2019, all of which are expected to be incurred by the end of 2020. We plan to implement additional restructuring actions in the future,if necessary, in order to align our manufacturing capacity and other costs with prevailing regional automotive production levels and locations. Such futurerestructuring actions are dependent on market conditions, customer actions and other factors.For further information, see Note 4, "Restructuring," and Note 14, "Segment Reporting," to the consolidated financial statements included in this Report.Financing TransactionsSenior NotesIn May 2019, we issued $375 million in aggregate principal amount at maturity of senior unsecured notes due in 2029 (the "2029 Notes") and $325 million inaggregate principal amount at maturity of senior unsecured notes due in 2049 (the "2049 Notes"). The 2029 Notes have a stated coupon rate of 4.25% and werepriced at 99.691% of par, resulting in a yield to maturity of 4.288%. The 2049 Notes have a stated coupon rate of 5.25% and were priced at 98.32% of par,resulting in a yield to maturity of 5.363%.The net proceeds from the offering were $693 million after original issue discount. The proceeds were used to redeem the $325 million in aggregate principalamount of senior unsecured notes due in 2024 (the "2024 Notes") at a redemption price equal to 102.688% of the principal amount of such 2024 Notes, plusaccrued interest, as well as to finance the acquisition of Xevo and for general corporate purposes. In connection with these transactions, we recognized a loss of $11million on the extinguishment of debt and paid related issuance costs of $7 million.For further information, see "— Liquidity and Capital Resources — Capitalization — Senior Notes" below and Note 6 "Debt," to the consolidated financialstatements included in this Report.Credit AgreementOur 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 million term loan facility (the "Term Loan Facility"). The maturity date of the Revolving Credit Facility is August 8, 2023, and the maturity date of the TermLoan Facility is August 8, 2022.For further information, see "— Liquidity and Capital Resources — Capitalization — Credit Agreement" below and Note 6, "Debt," to the consolidated financialstatements included in this Report.Share Repurchase Program and Quarterly Cash DividendsSince the first quarter of 2011, our Board of Directors has authorized $5.8 billion in share repurchases under our common stock share repurchase program. In2019, we repurchased $380 million of shares and have a remaining repurchase authorization of $1.2 billion, which will expire on December 31, 2021.In 2019, our Board of Directors declared a quarterly cash dividend of $0.75 per share of common stock, reflecting a 7% increase over the quarterly cash dividenddeclared in 2018.For further information related to our common stock share repurchase program and our quarterly dividends, see Item 5, "Market for the Company’s CommonEquity, Related Stockholder Matters and Issuer Purchases of Equity Securities," "— Liquidity and Financial Condition — Capitalization" and Note 11, "CapitalStock, Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in this Report.32Table of ContentsOther MattersIn 2019, we recognized tax benefits of $29 million related to an increase in our research and development tax credits for the years 2013 through 2018, $18 millionrelated to changes in the tax status of certain affiliates, $14 million related to the U.S. tax impact of the foreign tax credit regulations issued in the fourth quarter of2019, $5 million related to net reductions in tax reserves, $3 million related to share-based compensation, $12 million related to various tax-related items,including the release of valuation allowances, tax rate changes and audit adjustments, and $52 million related to restructuring charges and various other items,offset by tax expense of $11 million related to the establishment of valuation allowances on the deferred tax assets of foreign subsidiaries.In 2018, we acquired an additional 20% interest in Changchun Lear FAWSN Automotive Electrical and Electronics Co., Ltd. ("Lear FAWSN") from a jointventure partner and amended the existing joint venture agreement to eliminate the substantive participating rights of the remaining joint venture partner. Prior to theamendment, Lear FAWSN was accounted for under the equity method. In conjunction with obtaining control of Lear FAWSN and the valuation of our prior equityinvestment in Lear FAWSN at fair value, we recognized a gain of approximately $10 million.In 2018, we recognized a $5 million settlement charge in connection with our annuity purchase for certain terminated vested plan participants of our U.S. definedbenefit pension plans.In 2018, we recognized tax benefits of $83 million related to the reversal of valuation allowances on the deferred tax assets of certain foreign subsidiaries, share-based compensation, a tax rate change in a foreign subsidiary, an adjustment to the 2017 provisional income tax expense, restructuring charges and various otheritems, offset by tax expense of $34 million related to an increase in foreign withholding tax on certain undistributed foreign earnings and the establishment ofvaluation allowances on the deferred tax assets of certain foreign subsidiaries and various other items.In 2017, we amended the joint venture agreement of Shanghai Lear STEC Automotive Parts Co., Ltd. ("Lear STEC") to eliminate the substantive participatingrights of our joint venture partner. In conjunction with obtaining control of Lear STEC and the valuation of our prior equity investment in Lear STEC at fair value,we recognized a gain of approximately $54 million.In 2017, we recognized a $15 million litigation charge, of which approximately $13 million is recorded in cost of sales and approximately $2 million is recorded ininterest expense, related to an unfavorable ruling issued by a foreign court.In 2017, we recognized tax expense of $131 million related to a one-time transition tax on accumulated foreign earnings and $43 million to reflect the new U.S.corporate tax rate and other tax reform changes to our deferred tax accounts, offset by tax benefits of $290 million related to foreign tax credits on repatriatedearnings, $30 million related to the reversal of valuation allowances on the deferred tax assets of certain foreign subsidiaries, $17 million related to share-basedcompensation, $14 million related to an incentive tax credit in a foreign subsidiary, $8 million related to the redemption of our senior notes due 2023 (the "2023Notes") and $30 million related to restructuring charges and various other items.As discussed above, our results for the years ended December 31, 2019, 2018 and 2017, reflect the following items (in millions):For the year ended December 31,2019 2018 2017Costs related to restructuring actions, including manufacturing inefficiencies of $6 million in 2019, $16million in 2018 and $2 million in 2017$190 $104 $75Acquisition and other related costs2 1 4Acquisition-related inventory fair value adjustment— — 5Pension settlement charge— 5 —Litigation1 (17) 15Favorable indirect tax ruling in a foreign jurisdiction(2) (16) —Loss on extinguishment of debt11 — 21Gain related to affiliate, net(1) (1) (54)Tax benefits, net(122) (49) (215)For further information regarding these items, see Note 3, "Acquisitions," Note 4, "Restructuring," Note 5, "Investments in Affiliates and Other Related PartyTransactions," Note 6, "Debt," Note 8, "Income Taxes," and Note 9, "Pension and Other Postretirement Benefit Plans," to the consolidated financial statementsincluded in this Report. This section includes forward-looking statements that are subject to risks and uncertainties. For further information regarding these andother factors that have had, or may have in the future, a significant impact on our business, financial condition or results of operations, see Part I — Item 1A, "RiskFactors," and "— Forward-Looking Statements."33Table of ContentsResults of OperationsA summary of our operating results in millions of dollars and as a percentage of net sales is shown below:For the year ended December 31,2019 2018 2017Net sales Seating$15,097.2 76.2 % $16,021.9 75.8 % $15,873.0 77.6 %E-Systems4,713.1 23.8 5,126.6 24.2 4,594.0 22.4Net sales19,810.3 100.0 21,148.5 100.0 20,467.0 100.0Cost of sales18,072.8 91.2 18,830.2 89.0 18,175.9 88.8Gross profit1,737.5 8.8 2,318.3 11.0 2,291.1 11.2Selling, general and administrative expenses605.0 3.1 612.8 2.9 635.2 3.1Amortization of intangible assets62.3 0.3 51.4 0.2 47.6 0.2Interest expense92.0 0.5 84.1 0.4 85.7 0.4Other (income) expense, net24.6 0.1 31.6 0.2 (4.1) —Provision for income taxes146.1 0.7 311.9 1.5 197.5 1.0Equity in net income of affiliates(23.2) (0.1) (20.2) (0.1) (51.7) (0.2)Net income attributable to noncontrollinginterests77.1 0.4 96.9 0.5 67.5 0.3Net income attributable to Lear$753.6 3.8 % $1,149.8 5.4 % $1,313.4 6.4 %Year Ended December 31, 2019, Compared With Year Ended December 31, 2018Net sales for the year ended December 31, 2019 were $19.8 billion, as compared to $21.1 billion for the year ended December 31, 2018, a decrease of $1.3 billionor 6%. Lower production volumes on Lear platforms in most regions, including the impact of a prolonged labor strike at our largest customer, and net foreignexchange rate fluctuations negatively impacted net sales by $1.7 billion and $0.7 billion, respectively. These decreases were partially offset by the impact of newbusiness in all regions, which increased net sales by $1.1 billion.(in millions) Cost of Sales2018 $18,830.2Material cost (735.7)Labor and other (36.8)Depreciation 15.12019 $18,072.8Cost of sales in 2019 was $18.1 billion, as compared to $18.8 billion in 2018. Lower production volumes on Lear platforms in most regions, including the impact ofa prolonged labor strike at our largest customer, and net foreign exchange rate fluctuations reduced cost of sales by $1.9 billion. These decreases were partiallyoffset by the impact of new business in all regions and higher restructuring costs.Gross profit and gross margin were $1.7 billion and 8.8% of net sales in 2019, as compared to $2.3 billion and 11.0% of net sales in 2018. Lower productionvolumes on Lear platforms, including the impact of a prolonged labor strike at our largest customer, and net foreign exchange rate fluctuations, partially offset bythe impact of new business, negatively impacted gross profit by $377 million. The impact of selling price reductions and, to a lesser extent, higher restructuringcosts was partially offset by favorable operating performance, including the benefit of operational restructuring actions. These factors had a corresponding impacton gross margin.Selling, general and administrative expenses, including engineering and development expenses, were $605 million for the year ended December 31, 2019, ascompared to $613 million for the year ended December 31, 2018. In 2019, selling, general and administrative expenses benefited from lower compensation-relatedcosts and the impact of net foreign exchange fluctuations, largely offset by the operating expenses of our Xevo acquisition. As a percentage of net sales, selling,general and administrative expenses were 3.1% in 2019, as compared to 2.9% in 2018.Amortization of intangible assets was $62 million in 2019, as compared to $51 million in 2018, reflecting the acquisition of Xevo.34Table of ContentsInterest expense was $92 million in 2019, as compared to $84 million in 2018, reflecting our 2019 financing transactions related to the acquisition of Xevo.Other expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments andhedging activities, losses on the extinguishment of debt, gains and losses on the disposal of fixed assets, gains and losses on the consolidation and deconsolidationof affiliates, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was $25 million in 2019, as compared to$32 million in 2018. In 2019, we recognized losses of $11 million related to the extinguishment of debt and $5 million related to the impairment of an investmentand a gain of $4 million related to the deconsolidation of an affiliate. In 2018, we recognized a gain of $10 million related to obtaining control of an affiliate and asettlement charge of $5 million related to our annuity purchase for certain terminated vested plan participants of our U.S. defined benefit pension plans.In 2019, the provision for income taxes was $146 million, representing an effective tax rate of 15.3% on pretax income before equity in net income of affiliates of$1.0 billion. In 2018, the provision for income taxes was $312 million, representing an effective tax rate of 20.3% on pretax income before equity in net income ofaffiliates of $1.5 billion.In 2019 and 2018, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In 2019, we recognized taxbenefits of $29 million related to an increase in our research and development tax credits for the years 2013 through 2018, $18 million related to changes in the taxstatus of certain affiliates, $14 million related to the U.S. tax impact of the foreign tax credit regulations issued in the fourth quarter of 2019, $5 million related tonet reductions in tax reserves, $3 million related to share-based compensation, $12 million related to various tax-related items, including the release of valuationallowances, tax rate changes and audit adjustments, and $52 million related to restructuring charges and various other items, offset by tax expense of $11 millionrelated to the establishment of valuation allowances on the deferred tax assets of foreign subsidiaries. In addition, we recognized a gain of $4 million related to thedeconsolidation of an affiliate, for which no tax expense was provided. In 2018, we recognized tax benefits of $39 million related to the reversal of valuationallowances on the deferred tax assets of certain foreign subsidiaries, $11 million related to share-based compensation, $7 million related to a tax rate change in aforeign subsidiary, $5 million related to an adjustment to the 2017 provisional income tax expense and $21 million related to restructuring charges and variousother items, offset by tax expense of $22 million related to an increase in foreign withholding tax on certain undistributed foreign earnings and $12 million toestablish valuation allowances on the deferred tax assets of certain foreign subsidiaries and various other items. In addition, we recognized a gain of $10 millionrelated to obtaining control of an affiliate, for which no tax expense was provided. Excluding these items, the effective tax rate for 2019 and 2018 approximated theU.S. federal statutory income tax rate of 21% adjusted for income taxes on foreign earnings, losses and remittances, valuation allowances, tax credits, income taxincentives and other permanent items.For information related to our valuation allowances, see "Other Matters — Significant Accounting Policies and Critical Accounting Estimates — Income Taxes."Equity in net income of affiliates was $23 million for the year ended December 31, 2019, as compared to $20 million for the year ended December 31, 2018.Net income attributable to Lear was $754 million, or $12.75 per diluted share, in 2019, as compared to $1,150 million, or $17.22 per diluted share, in 2018. Netincome and diluted net income per share decreased for the reasons described above. In addition, diluted net income per share was impacted by the decrease inaverage shares outstanding between periods.Reportable Operating SegmentsWe have two reportable operating segments: Seating and E-Systems. For a description of our reportable operating segments, see "Executive Overview" above.The financial information presented below is for our two reportable operating segments and our other category for the periods presented. The other categoryincludes unallocated costs related to corporate headquarters, regional headquarters and the elimination of intercompany activities, none of which meets therequirements for being classified as an operating segment. Corporate and regional headquarters costs include various support functions, such as informationtechnology, advance research and development, corporate finance, legal, executive administration and human resources. Financial measures regarding eachsegment’s pretax income before equity in net income of affiliates, interest expense and other expense, net ("segment earnings") and segment earnings divided bynet sales ("margin") are not measures of performance under accounting principles generally accepted in the United States ("GAAP"). Segment earnings and therelated margin are used by management to evaluate the performance of our reportable operating segments. Segment earnings should not be considered in isolationor as a substitute for net income attributable to Lear, net cash provided by operating activities or other income statement or cash flow statement data prepared inaccordance with GAAP or as measures of profitability or liquidity. In addition, segment earnings, as we determine it, may not be comparable to related or similarlytitled measures reported by other companies.35Table of ContentsFor a reconciliation of consolidated segment earnings to consolidated income before provision for income taxes and equity in net income of affiliates, see Note 14,"Segment Reporting," to the consolidated financial statements included in this Report.Seating –A summary of financial measures for our Seating segment is shown below (dollar amounts in millions):For the year ended December 31,2019 2018Net sales$15,097.2 $16,021.9Segment earnings (1)961.2 1,263.6Margin6.4% 7.9%(1)See definition above.Seating net sales were $15.1 billion for the year ended December 31, 2019, as compared to $16.0 billion for the year ended December 31, 2018, a decrease of $925million or (6%). Lower production volumes on Lear platforms, including the impact of a prolonged labor strike at our largest customer, and net foreign exchangerate fluctuations negatively impacted net sales by $1.3 billion and $0.5 billion, respectively. These decreases were partially offset by the impact of new business,which increased net sales by $0.9 billion.Segment earnings, including restructuring costs, and the related margin on net sales were $1.0 billion and 6.4% in 2019, as compared to $1.3 billion and 7.9% in2018. Lower production volumes on Lear platforms, including the impact of a prolonged labor strike at our largest customer, and net foreign exchange ratefluctuations, partially offset by the impact of new business, negatively impacted segment earnings by $251 million. Favorable operating performance, including thebenefit of operational restructuring actions, of $210 million was partially offset by the impact of selling price reductions. Segment earnings were also negativelyimpacted by higher restructuring costs.E-Systems –A summary of financial measures for our E-Systems segment is shown below (dollar amounts in millions):For the year ended December 31,2019 2018Net sales$4,713.1 $5,126.6Segment earnings (1)366.3 628.5Margin7.8% 12.3%(1)See definition above.E-Systems net sales were $4.7 billion for the year ended December 31, 2019, as compared to $5.1 billion for the year ended December 31, 2018, a decrease of $414million or 8%. Lower production volumes on Lear platforms and net foreign exchange rate fluctuations negatively impacted net sales by $386 million and $200million, respectively. These decreases were partially offset by the impact of new business, which increased net sales by $180 million.Segment earnings, including restructuring costs, and the related margin on net sales were $366 million and 7.8% in 2019, as compared to $629 million and 12.3%in 2018. Lower production volumes on Lear platforms and net foreign exchange rate fluctuations, partially offset by the impact of new business, negativelyimpacted segment earnings by $119 million. The impact of selling price reductions and, to a lesser extent, higher restructuring costs, were partially offset byimproved operating performance.Other –A summary of financial measures for our other category, which is not an operating segment, is shown below (dollar amounts in millions):For the year ended December 31,2019 2018Net sales$— $—Segment earnings (1)(257.3) (238.0)MarginN/A N/A(1)See definition above.36Table of ContentsSegment earnings related to our other category were $(257) million in 2019, as compared to $(238) million in 2018, reflecting lower compensation-related costs in2019 and a favorable litigation settlement in 2018.Year Ended December 31, 2018, Compared With Year Ended December 31, 2017Net sales for the year ended December 31, 2018 were $21.1 billion, as compared to $20.5 billion for the year ended December 31, 2017, an increase of $0.7 billionor 3%. New business in all regions, net foreign exchange rate fluctuations, sales as a result of obtaining control of affiliates and the acquisition of Grupo Antolin'sautomotive seating business ("Antolin Seating") positively impacted net sales by $1,062 million, $337 million, $311 million and $215 million, respectively. Theseincreases were partially offset by lower production volumes on key Lear platforms in all regions except South America, which negatively impacted net sales by$1,261 million.(in millions) Cost of Sales2017 $18,175.9Material cost 314.5Labor and other 290.8Depreciation 49.02018 $18,830.2Cost of sales in 2018 was $18.8 billion, as compared to $18.2 billion in 2017. New business in all regions and net foreign exchange rate fluctuations resulted in anincrease in cost of sales of $1,208 million. The impact of lower production volumes on key Lear platforms in all regions except South America was partially offsetby cost of sales as a result of obtaining control of affiliates and the acquisition of Antolin Seating.Gross profit and gross margin were $2.3 billion and 11.0% of net sales in 2018, as compared to $2.3 billion and 11.2% of net sales in 2017. New business and netforeign exchange rate fluctuations positively impacted gross profit by $191 million. The impact of selling price reductions and lower production volumes on keyLear platforms was partially offset by favorable operating performance, including the benefit of operational restructuring actions, gross profit as a result ofobtaining control of affiliates and the acquisition of Antolin Seating. These factors had a corresponding impact on gross margin.Selling, general and administrative expenses, including engineering and development expenses, were $613 million for the year ended December 31, 2018, ascompared to $635 million for the year ended December 31, 2017. In 2018, the benefit of lower compensation expense was partially offset by the impact of netforeign exchange rate fluctuations and higher restructuring costs. As a percentage of net sales, selling, general and administrative expenses were 2.9% in 2018, ascompared to 3.1% in 2017.Amortization of intangible assets was $51 million in 2018, as compared to $48 million in 2017.Interest expense was $84 million in 2018, as compared to $86 million in 2017.Other (income) expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instrumentsand hedging activities, losses on the extinguishment of debt, gains and losses on the disposal of fixed assets, gains and losses on the consolidation anddeconsolidation of affiliates, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was expense of $32 millionin 2018, as compared to income of $4 million in 2017. In 2018, we recognized a gain of $10 million related to obtaining control of an affiliate and a settlementcharge of $5 million related to our annuity purchase for certain terminated vested plan participants of our U.S. defined benefit pension plans. In 2017, werecognized a gain of $54 million related to obtaining control of an affiliate and a loss of $21 million related to the extinguishment of debt.In 2018, the provision for income taxes was $312 million, representing an effective tax rate of 20.3% on pretax income before equity in net income of affiliates of$1.5 billion. In 2017, the provision for income taxes was $198 million, representing an effective tax rate of 12.9% on pretax income before equity in net income ofaffiliates of $1.5 billion, for the reasons described below.In 2018 and 2017, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. The provision for income taxesin 2018 was also impacted by the reduction in the U.S. federal corporate income tax rate from 35% to 21%. In 2018, we recognized tax benefits of $39 millionrelated to the reversal of valuation allowances on the deferred tax assets of certain foreign subsidiaries, $11 million related to share-based compensation, $7million related to a tax rate change in a foreign subsidiary, $5 million related to an adjustment to the 2017 provisional income tax expense and $21 million relatedto restructuring charges and various other items, offset by tax expense of $22 million related to an increase in foreign withholding tax on certain undistributedforeign earnings and $12 million to establish valuation allowances on the37Table of Contentsdeferred tax assets of certain foreign subsidiaries and various other items. In addition, we recognized a gain of $10 million related to obtaining control of anaffiliate, for which no tax expense was provided. In 2017, we recognized tax expense of $131 million related to a one-time transition tax on accumulated foreignearnings and $43 million to reflect the new U.S. corporate tax rate and other tax reform changes to our deferred tax accounts. In addition, we recognized taxbenefits of $290 million related to foreign tax credits on repatriated earnings, $30 million related to the reversal of valuation allowances on the deferred tax assetsof certain foreign subsidiaries, $17 million related to share-based compensation, $14 million related to an incentive tax credit in a foreign subsidiary, $8 millionrelated to the redemption of the 2023 Notes and $30 million related to restructuring charges and various other items. In addition, we recognized a gain of $54million related to obtaining control of an affiliate, for which no tax expense was provided. Excluding these items, the effective tax rate for 2018 and 2017approximated the U.S. federal statutory income tax rate of 21% and 35%, respectively, adjusted for income taxes on foreign earnings, losses and remittances,valuation allowances, tax credits, income tax incentives and other permanent items.For information related to our valuation allowances, see "Other Matters — Significant Accounting Policies and Critical Accounting Estimates — Income Taxes."Equity in net income of affiliates was $20 million for the year ended December 31, 2018, as compared to $52 million for the year ended December 31, 2017, as aresult of lower customer production affecting certain of our affiliates and obtaining control of other affiliates.Net income attributable to Lear was $1,150 million, or $17.22 per diluted share, in 2018, as compared to $1,313 million, or $18.59 per diluted share, in 2017. Netincome and diluted net income per share decreased for the reasons described above. In addition, diluted net income per share was impacted by the decrease inaverage shares outstanding between the periods.Reportable Operating SegmentsWe have two reportable operating segments: Seating and E-Systems. For a description of our reportable operating segments, see "Executive Overview" and "YearEnded December 31, 2019, Compared With Year Ended December 31, 2018 — Reportable Operating Segments" above.Seating —A summary of financial measures for our Seating segment is shown below (dollar amounts in millions):For the year ended December 31,2018 2017Net sales$16,021.9 $15,873.0Segment earnings (1)1,263.6 1,250.8Margin7.9% 7.9%(1)See definition above.Seating net sales were $16.0 billion for the year ended December 31, 2018, as compared to $15.9 billion for the year ended December 31, 2017, an increase of$149 million or 1%. New business, net foreign exchange rate fluctuations and the acquisition of Antolin Seating positively impact net sales by $576 million, $231million and $215 million, respectively. These increases were partially offset by the impact of lower production volumes on key Lear platforms, which decreasednet sales by $888 million.Segment earnings, including restructuring costs, and the related margin on net sales were $1.3 billion and 7.9% in 2018 and 2017. New business, net foreignexchange rate fluctuations and the acquisition of Antolin Seating positively impact segment earnings by $107 million. Favorable operating performance, includingthe benefit of operational restructuring actions, of $234 million was more than offset by the impact of selling price reductions and lower production volumes onkey Lear platforms.E-Systems —A summary of financial measures for our E-Systems segment is shown below (dollar amounts in millions):For the year ended December 31,2018 2017Net sales$5,126.6 $4,594.0Segment earnings (1)628.5 641.6Margin12.3% 14.0%(1)See definition above.38Table of ContentsE-Systems net sales were $5.1 billion for the year ended December 31, 2018, as compared to $4.6 billion for the year ended December 31, 2017, an increase of$533 million or 12%. New business, sales as a result of obtaining control of affiliates and net foreign exchange rate fluctuations positively impacted net sales by$486 million, $311 million and $106 million, respectively. These increases were partially offset by lower production volumes on key Lear platforms, whichreduced net sales by $373 million.Segment earnings, including restructuring costs, and the related margin on net sales were $629 million and 12.3% in 2018, as compared to $642 million and 14.0%in 2017. New business, earnings as a result of obtaining control of affiliates and net foreign exchange rate fluctuations positively impacted segment earnings by$118 million. Improved operating performance of $75 million was more than offset by the impact of lower production volumes on key Lear platforms and sellingprice reductions.Other —A summary of financial measures for our other category, which is not an operating segment, is shown below (dollar amounts in millions):For the year ended December 31,2018 2017Net sales$— $—Segment earnings (1)(238.0) (284.1)MarginN/A N/A(1)See definition above.Segment earnings related to our other category were ($238) million in 2018, as compared to ($284) million in 2017, reflecting the benefit of lower compensationexpense and a favorable litigation settlement of $13 million in 2018.Liquidity and Financial ConditionOur primary liquidity needs are to fund general business requirements, including working capital requirements, capital expenditures, operational restructuringactions and debt service requirements. In addition, we expect to continue to pay quarterly dividends and repurchase shares of our common stock pursuant to ourauthorized common stock share repurchase program (see Item 5, "Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchasesof Equity Securities"). Our principal sources of liquidity are cash flows from operating activities, borrowings under available credit facilities and our existing cashbalance. A substantial portion of our operating income is generated by our subsidiaries. As a result, we are dependent on the earnings and cash flows of and thecombination of dividends, royalties, intercompany loan repayments and other distributions and advances from our subsidiaries to provide the funds necessary tomeet our obligations.As of December 31, 2019 and 2018, cash and cash equivalents of $895 million and $1,094 million, respectively, were held in foreign subsidiaries and can berepatriated, primarily through the repayment of intercompany loans and the payment of dividends, without creating additional income tax expense. There are nosignificant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Lear. For further information regarding potential dividendsfrom our non-U.S. subsidiaries, see "— Adequacy of Liquidity Sources," below and Note 8, "Income Taxes," to the consolidated financial statements included inthis Report.39Table of ContentsCash FlowsYear Ended December 31, 2019, Compared with Year Ended December 31, 2018A summary of net cash provided by operating activities is shown below (in millions):For the year ended December 31,2019 2018 Increase (Decrease) inOperatingCash FlowConsolidated net income and depreciation and amortization$1,341 $1,731 $(390)Net change in working capital items: Accounts receivable(116) 231 (347)Inventory(69) (33) (36)Other current assets71 (68) 139Accounts payable(6) (199) 193Accrued liabilities94 (50) 144Net change in working capital items(26) (119) 93Other(31) 168 (199)Net cash provided by operating activities$1,284 $1,780 $(496)In 2019 and 2018, net cash provided by operating activities was $1.3 billion and $1.8 billion, respectively. The overall decrease in operating cash flows of $496million was primarily attributable to lower net income. The increase in accounts receivable in 2019 was largely due to lower sales at the end of 2018, as comparedto the end of 2019. The decrease in accounts receivable in 2018 was largely due to lower sales at the end of 2018, as compared to the end of 2017. The timing ofcertain customer payments at the end of 2018 impacted both periods. The resulting decrease in operating cash flows between periods of $347 million was morethan offset by improved operating cash flows related to other current assets, accounts payable and accrued liabilities.Net cash used in investing activities was $922 million in 2019, as compared to $694 million in 2018. In 2019, we paid $322 million for the acquisition of Xevo. In2019, capital spending was $604 million, as compared to $677 million in 2018. Capital spending in 2020 is estimated at $600 million.Net cash used in financing activities was $362 million in 2019, as compared to $1,031 million in 2018. In 2019, we received net proceeds of $693 million related tothe issuance of the 2029 and 2049 Notes and paid $7 million of related issuance costs and $334 million related to the redemption of the outstanding 2024 Notes.Also in 2019, we paid $385 million for repurchases of our common stock, $186 million of dividends to Lear stockholders and $79 million of dividends tononcontrolling interest holders. In 2018, we paid $705 million for repurchases of our common stock, $186 million of dividends to Lear stockholders and $79million of dividends to noncontrolling interest holders.For further information regarding our 2019 and 2018 financing transactions, see "— Capitalization" below and Note 6, "Debt," and Note 11, "Capital Stock,Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in this Report.40Table of ContentsYear Ended December 31, 2018, Compared with Year Ended December 31, 2017A summary of net cash provided by operating activities is shown below (in millions):For the year ended December 31,2018 2017 Increase (Decrease) inOperatingCash FlowConsolidated net income and depreciation and amortization$1,731 $1,809 $(78)Net change in working capital items: Accounts receivable231 (115) 346Inventory(33) (76) 43Other current assets(68) 30 (98)Accounts payable(199) 195 (394)Accrued liabilities(50) 38 (88)Net change in working capital items(119) 72 (191)Other168 (98) 266Net cash provided by operating activities$1,780 $1,783 $(3)In 2018, decreases in accounts receivable and accounts payable primarily reflect lower production volumes at the end of 2018, as compared to 2017, and changesin other current assets and accrued liabilities primarily reflect the timing of tax payments and tax receipts. In 2018, other in the table above includes decreases inour net deferred tax assets and our recoverable customer engineering, development and tooling of $87 million and $54 million, respectively.Net cash used in investing activities was $694 million in 2018, as compared to $869 million in 2017. In 2017, we paid $292 million for the acquisition of AntolinSeating. In 2018, capital spending totaled $677 million, as compared to $595 million in 2017.Net cash used in financing activities was $1,031 million in 2018, as compared to $742 million in 2017. In 2018, we paid $705 million for repurchases of ourcommon stock, $186 million of dividends to Lear stockholders and $79 million of dividends to noncontrolling interest holders. In 2017, we received net proceedsof $745 million related to the issuance of our senior notes due 2027 (the "2027 Notes"), paid $517 million related to the redemption of the outstanding 2023 Notesand repaid a net of $203 million in connection with the refinancing of our credit agreement. Also in 2017, we paid $451 million for repurchases of our commonstock, $138 million of dividends to Lear stockholders and $82 million of dividends to noncontrolling interest holders.For further information regarding our 2018 and 2017 financing transactions, see "— Capitalization" below and Note 6, "Debt," and Note 11, "Capital Stock,Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in this Report.CapitalizationFrom time to time, we utilize uncommitted lines of credit to fund our capital expenditures and working capital requirements at certain of our foreign subsidiaries,in addition to cash provided by operating activities. As of December 31, 2019 and 2018, we had short-term debt balances outstanding of $19 million and $10million, respectively. The availability of uncommitted lines of credit may be affected by our financial performance, credit ratings and other factors.41Table of ContentsSenior NotesAs of December 31, 2019, our senior notes (collectively, the "Notes") consist of the amounts shown below (in millions, except stated coupon rates):Note Aggregate PrincipalAmount at Maturity Stated Coupon RateSenior unsecured notes due 2025 (the "2025 Notes") $650 5.25%2027 Notes 750 3.8%2029 Notes 375 4.25%2049 Notes 325 5.25% $2,100 The issue, maturity and interest payment dates of the Notes are shown below:Note Issuance Date Maturity Date Interest Payment Dates2025 Notes November 2014 January 15, 2025 January 15 and July 152027 Notes August 2017 September 15, 2027 March 15 and September 152029 Notes May 2019 May 15, 2029 May 15 and November 152049 Notes May 2019 May 15, 2049 May 15 and November 15In 2019, we issued $375 million in aggregate principal amount at maturity of 2029 Notes and $325 million in aggregate principal amount at maturity of 2049Notes. The 2029 Notes have a stated coupon rate of 4.25% and were priced at 99.691% of par, resulting in a yield to maturity of 4.288%. The 2049 Notes have astated coupon rate of 5.25% and were priced at 98.32% of par, resulting in a yield to maturity of 5.363%.The net proceeds from the offering were $693 million after original issue discount. The proceeds were used to redeem the $325 million in aggregate principalamount of the 2024 Notes at a redemption price equal to 102.688% of the principal amount of such 2024 Notes, plus accrued interest, as well as to finance theacquisition of Xevo and for general corporate purposes.In connection with these transactions, we recognized a loss of $11 million on the extinguishment of debt and paid related issuance costs of $7 million.The indentures governing the Notes contain certain restrictive covenants and customary events of default. As of December 31, 2019, we were in compliance withall covenants under the indentures governing the Notes.For further information related to the Notes, including information on early redemption, covenants and events of default, see Note 6, "Debt," to the consolidatedfinancial statements included in this Report and the indentures governing the Notes which have been incorporated by reference as exhibits to this Report.Credit AgreementOur Credit Agreement, dated August 8, 2017, consists of a $1.75 billion Revolving Credit Facility and a $250 million Term Loan Facility. The maturity date of theRevolving Credit Facility is August 8, 2023, and the maturity date of the Term Loan Facility is August 8, 2022. As of December 31, 2019 and 2018, there were noborrowings outstanding under the Revolving Credit Facility and $234 million and $242 million, respectively, outstanding under the Term Loan Facility.As of December 31, 2019, we were in compliance with all covenants under the Credit Agreement.For further information related to the Credit Agreement, including information on pricing, covenants and events of default, see Note 6, "Debt," to the consolidatedfinancial statements included in this Report and the amended and restated credit agreement, which has been incorporated by reference as an exhibit to this Report.42Table of ContentsContractual ObligationsThe scheduled maturities of the Notes, obligations under the Credit Agreement and scheduled interest payments on the Notes as of December 31, 2019, are shownbelow (in millions): 2020 2021 2022 2023 2024 Thereafter TotalSenior notes$— $— $— $— $— $2,100 $2,100Credit agreement —term loan facility14 14 206 — — — 234Scheduled interest payments96 96 96 96 96 590 1,070Total$110 $110 $302 $96 $96 $2,690 $3,404We enter into agreements with our customers to produce products at the beginning of a vehicle’s life cycle. Although such agreements do not provide for aspecified quantity of products, once we enter into such agreements, we are generally required to fulfill our customers’ purchasing requirements for the productionlife of the vehicle. Prior to being formally awarded a program, we typically work closely with our customers in the early stages of the design and engineering of avehicle’s systems. Failure to complete the design and engineering work related to a vehicle’s systems, or to fulfill a customer’s contract, could have a materialadverse impact on our business.We also enter into agreements with suppliers to assist us in meeting our customers’ production needs. These agreements vary as to duration and quantitycommitments. Historically, most have been short-term agreements, which do not provide for minimum purchases, or are requirements-based contracts.We may be required to make significant cash outlays related to our unrecognized tax benefits, including interest and penalties. However, due to the uncertainty ofthe timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement,if any, with the respective taxing authorities. Accordingly, unrecognized tax benefits, including interest and penalties, of $43 million as of December 31, 2019,have been excluded from the contractual obligations table above. For further information related to our unrecognized tax benefits, see Note 8, "Income Taxes," tothe consolidated financial statements included in this Report.We also have minimum funding requirements with respect to our pension obligation. We may elect to make contributions in excess of the minimum fundingrequirements in response to investment performance or changes in interest rates or when we believe that it is financially advantageous to do so and based on ourother cash requirements. Our minimum funding requirements after 2020 will depend on several factors, including investment performance and interest rates. Ourminimum funding requirements may also be affected by changes in applicable legal requirements. Our minimum required contributions to our domestic andforeign pension plans, including distributions to participants in certain of our non-qualified defined benefit plans, are expected to be approximately $15 million to$20 million in 2020. We also have payments due with respect to our postretirement benefit obligation. We do not fund our postretirement benefit obligation.Rather, payments are made as costs are incurred by covered retirees. We expect payments related to our postretirement benefit obligation to be approximately $5million in 2020.For further information related to our pension and other postretirement benefit plans, see "— Other Matters — Pension and Other Postretirement Benefit Plans"and Note 9, "Pension and Other Postretirement Benefit Plans," to the consolidated financial statements included in this Report.Common Stock Share Repurchase ProgramSee Item 5, "Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities."DividendsOur Board of Directors declared quarterly cash dividends of $0.75 and $0.70 per share of common stock in 2019 and 2018, respectively.We currently expect to pay quarterly cash dividends in the future, although such payments are at the discretion of our Board of Directors and will depend upon ourfinancial condition, results of operations, capital requirements, alternative uses of capital and other factors that our Board of Directors may consider at itsdiscretion. See Part II - Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements," andNote 6, "Debt," to the consolidated financial statements included in this Report.43Table of ContentsAdequacy of Liquidity SourcesAs of December 31, 2019, we had approximately $1.5 billion of cash and cash equivalents on hand and $1.75 billion in available borrowing capacity under ourRevolving Credit Facility. Together with cash provided by operating activities, we believe that this will enable us to meet our liquidity needs to satisfy ordinarycourse business obligations. In addition, we expect to continue to pay quarterly dividends and repurchase shares of our common stock pursuant to our authorizedcommon stock share repurchase program (see Item 5, "Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities"). Our future financial results and our ability to continue to meet our liquidity needs are subject to, and will be affected by, cash flows from operations,including the impact of restructuring activities, automotive industry conditions, the financial condition of our customers and suppliers and other related factors.Additionally, an economic downturn or reduction in production levels could negatively impact our financial condition. For further discussion of the risks anduncertainties affecting our cash flows from operations and our overall liquidity, see Part I — Item 1A, "Risk Factors," "— Executive Overview" above and "—Forward-Looking Statements" below.Market Risk SensitivityIn the normal course of business, we are exposed to market risks associated with fluctuations in foreign exchange rates, interest rates and commodity prices. Wemanage a portion of these risks through the use of derivative financial instruments in accordance with our policies. We enter into all hedging transactions forperiods consistent with the underlying exposures. We do not enter into derivative instruments for trading purposes.Foreign ExchangeOperating results may be impacted by our buying, selling and financing in currencies other than the functional currency of our operating companies ("transactionalexposure"). We may mitigate a portion of this risk by entering into forward foreign exchange, futures and option contracts. The foreign exchange contracts areexecuted with banks that we believe are creditworthy. Gains and losses related to foreign exchange contracts are deferred where appropriate and included in themeasurement of the foreign currency transaction subject to the hedge. Gains and losses incurred related to foreign exchange contracts are generally offset by thedirect effects of currency movements on the underlying transactions.A summary of the notional amount and estimated aggregate fair value of our outstanding foreign exchange contracts is shown below (in millions):December 31,2019 2018Notional amount (contract maturities < 24 months)$2,163 $2,153Fair value50 14Currently, our most significant foreign currency transactional exposures relate to the Mexican peso, various European currencies, the Thai baht, the Chineserenminbi, the Brazilian real, the Japanese yen and the South African rand. A sensitivity analysis of our net transactional exposure is shown below (in millions): Potential Earnings Benefit (Adverse EarningsImpact)December 31,HypotheticalStrengthening % (1) 2019 2018U.S. dollar 10% $(16) $(19)Euro10% 19 20(1)Relative to all other currencies to which it is exposed for a twelve-month period.A sensitivity analysis related to the aggregate fair value of our outstanding foreign exchange contracts is shown below (in millions): Estimated Change in Fair ValueDecember 31,HypotheticalChange % (2) 2019 2018U.S. dollar10% $50 $37Euro10% 69 72(2) Relative to all other currencies to which it is exposed.44Table of ContentsThere are certain shortcomings inherent in the sensitivity analyses above. The analyses assume that all currencies would uniformly strengthen or weaken relative tothe U.S. dollar or Euro. In reality, some currencies may strengthen while others may weaken, causing the earnings impact to increase or decrease depending on thecurrency and the direction of the rate movement.In addition to the transactional exposure described above, our operating results are impacted by the translation of our foreign operating income into U.S. dollars("translational exposure"). In 2019, net sales outside of the United States accounted for 82% of our consolidated net sales, although certain non-U.S. sales are U.S.dollar denominated. We do not enter into foreign exchange contracts to mitigate our translational exposure.Commodity PricesRaw material, energy and commodity costs can be volatile, reflecting changes in supply and demand and global trade and tariff policies. We have developed andimplemented strategies to mitigate the impact of higher raw material, energy and commodity costs, such as the selective in-sourcing of components, the continuedconsolidation of our supply base, longer-term purchase commitments and the selective expansion of low-cost country sourcing and engineering, as well as valueengineering and product benchmarking. However, these strategies, together with commercial negotiations with our customers and suppliers, typically offset only aportion of the adverse impact. Certain of these strategies also may limit our opportunities in a declining commodity cost environment. If these costs increase, itcould have an adverse impact on our operating results in the foreseeable future. See Part I — Item 1A, "Risk Factors — Increases in the costs and restrictions onthe availability of raw materials, energy, commodities and product components could adversely affect our financial performance," and "— Forward-LookingStatements."We have commodity price risk with respect to purchases of certain raw materials, including steel, copper, diesel fuel, chemicals, resins and leather. Our main costexposures relate to steel, copper and leather. The majority of the steel used in our products is comprised of fabricated components that are integrated into a seatsystem, such as seat frames, recliner mechanisms, seat tracks and other mechanical components. Therefore, our exposure to changes in steel prices is primarilyindirect, through these purchased components. Approximately 91% of our copper purchases and a significant portion of our leather purchases are subject to priceindex agreements with our customers and suppliers.For further information related to the financial instruments described above, see Note 15, "Financial Instruments," to the consolidated financial statementsincluded in this Report.Other MattersLegal and Environmental MattersWe are involved from time to time in various legal proceedings and claims, including, without limitation, commercial and contractual disputes, product liabilityclaims and environmental and other matters. As of December 31, 2019, we had recorded reserves for pending legal disputes, including commercial disputes andother matters, of $14 million. In addition, as of December 31, 2019, we had recorded reserves for product liability and warranty claims and environmental mattersof $32 million and $9 million, respectively. Although these reserves were determined in accordance with GAAP, the ultimate outcomes of these matters areinherently uncertain, and actual results may differ significantly from current estimates. For a description of risks related to various legal proceedings and claims,see Part I — Item 1A, "Risk Factors." For a more complete description of our outstanding material legal proceedings, see Note 13, "Commitments andContingencies," to the consolidated financial statements included in this Report.Significant Accounting Policies and Critical Accounting EstimatesOur significant accounting policies are more fully described in Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statementsincluded in this Report. Certain of our accounting policies require management to make estimates and assumptions that affect the reported amounts of assets andliabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimatesand assumptions are based on our historical experience, the terms of existing contracts, our evaluation of trends in the industry, information provided by ourcustomers and suppliers and information available from other outside sources, as appropriate. However, these estimates and assumptions are subject to an inherentdegree of uncertainty. Accordingly, actual results in these areas may differ significantly from our estimates.We consider an accounting estimate to be critical if it requires us to make assumptions about matters that were uncertain at the time the estimate was made andchanges in the estimate would have had a significant impact on our consolidated financial position or results of operations.45Table of ContentsRevenue Recognition and Sales CommitmentsWe enter into contracts with our customers to provide production parts generally at the beginning of a vehicle’s life cycle. Typically, these contracts do not providefor a specified quantity of products, but once entered into, we are often expected to fulfill our customers’ purchasing requirements for the production life of thevehicle. Many of these contracts may be terminated by our customers at any time. Historically, terminations of these contracts have been infrequent. We receivepurchase orders from our customers, which provide the commercial terms for a particular production part, including price (but not quantities). Contracts may alsoprovide for annual price reductions over the production life of the vehicle, and prices may be adjusted on an ongoing basis to reflect changes in productcontent/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 we do not have anenforceable right to payment prior to such transfer. The amount of revenue recognized reflects the consideration that we expect to be entitled to in exchange forthose products based on the annual purchase orders, annual price reductions and ongoing price adjustments. Our customers pay for products received in accordancewith payment terms that are customary within the industry. Our contracts with our customers do not have significant financing components. We record a contractliability for advances received from our customers. Amounts billed to customers related to shipping and handling costs are included in net sales in the consolidatedstatements of income. Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales in the consolidated statements of income.Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that we collect from a customerare excluded from revenue.Pension and Other Postretirement Benefit PlansWe provide certain pension and other postretirement benefits to our employees and retired employees, including pensions, postretirement health care benefits andother postretirement benefits.Approximately 6% of our active workforce is covered by defined benefit pension plans, and less than 1% of our active workforce is covered by otherpostretirement benefit plans. Pension plans provide benefits based on plan-specific benefit formulas as defined by the applicable plan documents. Postretirementbenefit plans generally provide for the continuation of medical benefits for all eligible employees. We also have contractual arrangements with certain employeeswhich provide for supplemental retirement benefits. In general, our policy is to fund our pension benefit obligation based on legal requirements, tax and liquidityconsiderations and local practices. We do not fund our postretirement benefit obligation.Plan assets and obligations are measured using various actuarial assumptions, such as discount rates, rate of compensation increase, mortality rates, turnover ratesand health care cost trend rates, which are determined as of the current year measurement date. The measurement of net periodic benefit cost is based on variousactuarial assumptions, including discount rates, expected return on plan assets and rate of compensation increase, which are determined as of the prior yearmeasurement date. We review our actuarial assumptions on an annual basis and modify these assumptions when appropriate. As required by GAAP, the effects ofthe modifications are recorded currently or are amortized over future periods.The determination of the discount rate is generally based on an index created from a hypothetical bond portfolio consisting of high-quality fixed income securitieswith durations that match the timing of expected benefit payments. Changes in the selected discount rate could have a material impact on the projected benefitobligations, unfunded status and related net periodic benefit cost of our pension and other postretirement benefit plans.The expected return on plan assets is determined based on several factors, including adjusted historical returns, historical risk premiums for various asset classesand target asset allocations within the portfolio. Adjustments made to the historical returns are based on recent return experience in the equity and fixed incomemarkets and the belief that deviations from historical returns are likely over the relevant investment horizon.46Table of ContentsKey assumptions are shown below: Pension Other PostretirementBenefit obligations as of December 31, 2019$1,005 $81Discount rate - Domestic plans3.4% 3.2%Foreign plans2.6% 3.1%Net periodic benefit cost for the year ended December 31, 2019$6 $(10)Discount rate - Domestic plans4.3% 4.2%Foreign plans3.4% 3.8%Expected return on plan assets - Domestic plans6.3% N/AForeign plans5.9% N/ANet periodic benefit cost for the year ended December 31, 2020 (1)$1 $1Discount rate - Domestic plans3.4% 3.2%Foreign plans2.6% 3.1%Expected return on plan assets - Domestic plans5.8% N/AForeign plans5.4% N/A(1)Forecasted.The sensitivity to a 100 basis point ("bp") decrease in the discount rate and expected return on plan assets is shown below (in millions): Increase in Benefit Obligation Increase in 2019Net Periodic Benefit Cost Pension Other Postretirement Pension Other Postretirement100 bp decrease in discount rate$158 $9 $3 $1100 bp decrease in expected return on plan assetsN/A N/A $8 N/AFor further information related to our pension and other postretirement benefit plans, see "— Liquidity and Financial Condition — Capitalization — ContractualObligations" above and Note 9, "Pension and Other Postretirement Benefit Plans," to the consolidated financial statements included in this Report.Income TaxesWe account for income taxes in accordance with GAAP. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporarydifferences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax loss and credit carryforwards.Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences areexpected to be recovered or settled.Our current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in certain countries. We intend tomaintain these allowances until it is more likely than not that the deferred tax assets will be realized. Our future provision for income taxes will include no taxbenefit with respect to losses incurred and, except for certain jurisdictions, no tax expense with respect to income generated in these countries until the respectivevaluation allowances are eliminated. Accordingly, income taxes are impacted by changes in valuation allowances and the mix of earnings among jurisdictions. Weevaluate the realizability of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available evidence in order to determinewhether, based on the weight of the evidence, a valuation allowance for our deferred tax assets is necessary. Such evidence includes historical results, futurereversals of existing taxable temporary differences and expectations for future taxable income (exclusive of the reversal of temporary differences andcarryforwards),47Table of Contentsas well as the implementation of feasible and prudent tax planning strategies. If, based on the weight of the evidence, it is more likely than not that all or a portionof our deferred tax assets will not be realized, a valuation allowance is recorded.As of December 31, 2019, we had a valuation allowance related to tax loss and credit carryforwards and other deferred tax assets of $12 million in the UnitedStates and $333 million in several international jurisdictions. If operating results improve or decline on a continual basis in a particular jurisdiction, our decisionregarding the need for a valuation allowance could change, resulting in either the initial recognition or reversal of a valuation allowance in that jurisdiction, whichcould have a significant impact on income tax expense in the period recognized and subsequent periods. In determining the provision for income taxes for financialstatement purposes, we make certain estimates and judgments, which affect our evaluation of the carrying value of our deferred tax assets, as well as ourcalculation of certain tax liabilities.The calculation of our gross unrecognized tax benefits and liabilities includes uncertainties in the application of, and changes in, complex tax regulations in amultitude of jurisdictions across our global operations. We recognize tax benefits and liabilities based on our estimate of whether, and the extent to which,additional taxes will be due. We adjust these benefits and liabilities based on changing facts and circumstances; however, due to the complexity of theseuncertainties and the impact of tax audits, the ultimate resolutions may differ significantly from our estimates.For further information, see "— Forward-Looking Statements," and Note 8, "Income Taxes," to the consolidated financial statements included in this Report.Use of EstimatesThe preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during thereporting period. During 2019, there were no material changes in the methods or policies used to establish estimates and assumptions. Other matters subject toestimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of fixed and intangibleassets, unsettled pricing discussions with customers and suppliers, restructuring accruals, deferred tax asset valuation allowances and income taxes, pension andother postretirement benefit plan assumptions, accruals related to litigation, warranty and environmental remediation costs and self-insurance accruals. Actualresults may differ significantly from our estimates.Recently Issued Accounting PronouncementsFor information on the impact of recently issued accounting pronouncements, see Note 17, "Accounting Pronouncements," to the consolidated financial statementsincluded in this Report.Forward-Looking StatementsThe Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. The words "will," "may,""designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of theseforward-looking statements. We also may provide forward-looking statements in oral statements or other written materials released to the public. All such forward-looking statements contained or incorporated in this Report or in any other public statements which address operating performance, events or developments that weexpect or anticipate may occur in the future, including, without limitation, statements related to business opportunities, awarded sales contracts, sales backlog andongoing commercial arrangements, or statements expressing views about future operating results, are forward-looking statements. Actual results may differmaterially from any or all forward-looking statements made by us. Important factors, risks and uncertainties that may cause actual results to differ materially fromanticipated results include, but are not limited to:•general economic conditions in the markets in which we operate, including changes in interest rates or currency exchangerates;•changes in actual industry vehicle production levels from our currentestimates;•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 asignificant supplier;•the outcome of customer negotiations and the impact of customer-imposed pricereductions;•the cost and availability of raw materials, energy, commodities and product components and our ability to mitigate suchcosts;•disruptions in relationships with oursuppliers;•the financial condition of and adverse developments affecting our customers andsuppliers;•risks associated with conducting business in foreigncountries;48Table of Contents•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 effectson credit markets, currency values, monetary unions, international treaties and fiscal policies;•competitive conditions impacting us and our key customers andsuppliers;•labor disputes involving us or our significant customers or suppliers or that otherwise affectus;•the operational and financial success of our jointventures;•the impact and timing of program launch costs and our management of new programlaunches;•limitations imposed by our existing indebtedness and our ability to access capital markets on commercially reasonableterms;•changes affecting the availability ofLIBOR;•changes in discount rates and the actual return on pensionassets;•impairment charges initiated by adverse industry or market developments;•our ability to execute our strategicobjectives;•disruptions to our information technology systems, or those of our customers or suppliers, including those related tocybersecurity;•increases in our warranty, product liability or recallcosts;•the outcome of legal or regulatory proceedings to which we are or may become aparty;•the impact of pending legislation and regulations or changes in existing federal, state, local or foreign laws orregulations;•the impact of regulations on our foreignoperations;•costs associated with compliance with environmental laws andregulations;•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 dobusiness;•the anticipated changes in economic and other relationships between the United Kingdom and the European Union;and•other risks, described in Part I — Item 1A, "Risk Factors," as well as the risks and information provided from time to time in our filings with the Securitiesand Exchange Commission.The forward-looking statements in this Report are made as of the date hereof, and we do not assume any obligation to update, amend or clarify them to reflectevents, new information or circumstances occurring after the date hereof.49Table of ContentsITEM 8 – CONSOLIDATED FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm51 Consolidated Balance Sheets as of December 31, 2019 and 201854 Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 201755 Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 201756 Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 201757 Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 201759 Notes to Consolidated Financial Statements60 Schedule II – Valuation and Qualifying Accounts10450Table of ContentsReport of Independent Registered Public Accounting FirmTo the Stockholders and Board of Directors of Lear CorporationOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Lear Corporation and subsidiaries (the Company) as of December 31, 2019 and 2018, therelated consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2019, andthe related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In ouropinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and theresults of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally acceptedaccounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internalcontrol over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 4, 2020, expressed an unqualified opinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statementsbased on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordancewith the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures toassess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion.Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated orrequired to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2)involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on theconsolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the criticalaudit matter or on the account or disclosure to which it relates. Revenue recognitionDescription of MatterAs discussed in Note 2, Summary of Significant Accounting Policies, the Company’s sales contracts with its customers may provide forannual price reductions over the production life of the vehicle. Prices may also be adjusted on an ongoing basis to reflect changes inproduct content, product cost and other commercial factors. Some of these price adjustments are non-routine in nature. The amount ofrevenue recognized by the Company reflects the consideration that the Company expects to be entitled to in exchange for its productsbased on annual purchase orders, annual price reductions and ongoing price adjustments.Auditing the consideration that the Company expects to be entitled to in exchange for certain of its products which are subject to non-routine price adjustments is highly judgmental as it relates to evaluating the sufficiency of evidence available from commercialnegotiations to support the ultimate consideration that the Company is entitled to in exchange for those products.51Table of ContentsHow We Addressed theMatter in Our AuditWe identified and tested controls over the identification and evaluation of product sales with non-routine price adjustments, includingmanagement’s review of the evidence to support the Company’s measurement of revenue related to those product sales.Our audit procedures included, among others, inspecting communications between the Company and its customers related to the pricingarrangements, auditing adjustments at period-end related to those product sales, performing retrospective reviews of management’sestimates to identify contrary evidence, if any, and performing inquiries of and obtaining written representations from executives, withinthe Company, responsible for the respective customer relationships./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2002.Detroit, MichiganFebruary 4, 202052Table of ContentsReport of Independent Registered Public Accounting FirmTo the Stockholders and Board of Directors of Lear CorporationOpinion on Internal Control over Financial ReportingWe have audited Lear Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2019, based on criteria established in InternalControl - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Inour opinion, Lear Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2019, based on the COSO criteria.As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on theeffectiveness of internal control over financial reporting did not include the internal controls of Xevo Inc. (“Xevo”), which is included in the 2019 consolidatedfinancial statements of the Company and constituted 2.9% of total assets as of December 31, 2019 and 0.4% of revenues for the year then ended. Our audit ofinternal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Xevo.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidatedfinancial statements of the Company and our report dated February 4, 2020 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is toexpress an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate./s/ Ernst & Young LLPDetroit, MichiganFebruary 4, 202053Table of ContentsLEAR CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In millions, except share data) December 31,2019 2018Assets Current Assets: Cash and cash equivalents$1,487.7 $1,493.2Accounts receivable2,982.6 2,880.3Inventories1,258.2 1,196.8Other678.2 710.2Total current assets6,406.7 6,280.5Long-Term Assets: Property, plant and equipment, net2,704.2 2,598.1Goodwill1,614.3 1,405.3Other1,955.5 1,316.8Total long-term assets6,274.0 5,320.2Total assets$12,680.7 $11,600.7Liabilities and Equity Current Liabilities: Short-term borrowings$19.2 $9.9Accounts payable and drafts2,821.7 2,862.8Accrued liabilities1,811.2 1,615.0Current portion of long-term debt14.1 12.9Total current liabilities4,666.2 4,500.6Long-Term Liabilities: Long-term debt2,293.7 1,941.0Other1,101.3 640.4Total long-term liabilities3,395.0 2,581.4 Redeemable noncontrolling interest118.4 158.1 Equity: Preferred stock, 100,000,000 shares authorized (including 10,896,250 sharesof 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 December 31,2019 and 20180.6 0.6Additional paid-in capital969.1 1,017.4Common stock held in treasury, 4,127,806 and 1,623,678 shares as of December 31, 2019 and 2018, respectively, at cost(563.1) (225.1)Retained earnings4,715.8 4,113.6Accumulated other comprehensive loss(772.7) (705.8)Lear Corporation stockholders’ equity4,349.7 4,200.7Noncontrolling interests151.4 159.9Equity4,501.1 4,360.6Total liabilities and equity$12,680.7 $11,600.7The accompanying notes are an integral part of these consolidated balance sheets.54Table of ContentsLEAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In millions, except share and per share data)For the year ended December 31,2019 2018 2017Net sales$19,810.3 $21,148.5 $20,467.0Cost of sales18,072.8 18,830.2 18,175.9Selling, general and administrative expenses605.0 612.8 635.2Amortization of intangible assets62.3 51.4 47.6Interest expense92.0 84.1 85.7Other (income) expense, net24.6 31.6 (4.1)Consolidated income before provision for income taxes and equity in net income ofaffiliates953.6 1,538.4 1,526.7Provision for income taxes146.1 311.9 197.5Equity in net income of affiliates(23.2) (20.2) (51.7)Consolidated net income830.7 1,246.7 1,380.9Less: Net income attributable to noncontrolling interests77.1 96.9 67.5Net income attributable to Lear$753.6 $1,149.8 $1,313.4 Basic net income per share available to Lear common stockholders$12.80 $17.35 $18.79 Diluted net income per share available to Lear common stockholders$12.75 $17.22 $18.59 Average common shares outstanding61,697,192 65,672,164 68,542,363 Average diluted shares outstanding61,923,528 66,161,816 69,277,981The accompanying notes are an integral part of these consolidated financial statements.55Table of ContentsLEAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions)For the year ended December 31,2019 2018 2017Consolidated net income$830.7 $1,246.7 $1,380.9Other comprehensive income (loss), net of tax: Defined benefit plan adjustments(44.8) 11.2 8.8Derivative instruments and hedging activities19.5 13.2 22.2Foreign currency translation adjustments(45.1) (233.0) 305.0Total other comprehensive income (loss)(70.4) (208.6) 336.0Consolidated comprehensive income760.3 1,038.1 1,716.9Less: Comprehensive income attributable to noncontrolling interests73.6 80.7 81.3Comprehensive income attributable to Lear$686.7 $957.4 $1,635.6The accompanying notes are an integral part of these consolidated financial statements.56Table of ContentsLEAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EQUITY(In millions, except share data) RedeemableNon-controllingInterests CommonStock Additional Paid-in Capital CommonStock Held inTreasury RetainedEarningsBalance as of December 31, 2016$— $0.8 $1,385.3 $(1,200.2) $3,706.9Comprehensive income:— Net income3.2 — — — 1,313.4Other comprehensive income4.6 — — — —Total comprehensive income7.8 — — — 1,313.4Adoption of ASU 2016-09 (Note 8, "Income Taxes")— — — — 52.9Stock-based compensation— — 70.2 — —Net issuances of 456,252 shares held in treasury insettlement of stock-based compensation— — (84.2) 39.0 —Repurchases of 3,014,131 shares of common stock at anaverage price of $150.77 per share— — — (454.4) —Retirement of 8,000,000 shares held in treasury ataverage price of $111.43 per share— (0.1) (155.9) 891.5 (735.5)Dividends declared to Lear Corporation stockholders— — — — (140.3)Dividends declared to noncontrolling interests(4.9) — — — —Affiliate transaction125.0 — — — —Redeemable noncontrolling interest adjustment25.5 — — — (25.5)Balance as of December 31, 2017$153.4 $0.7—$1,215.4 $(724.1)—$4,171.9Comprehensive income (loss): Net income12.9 — — — 1,149.8Other comprehensive income (loss)(9.4) — — — —Total comprehensive income (loss)3.5 — — — 1,149.8Adoption of ASU 2016-16 (Note 8, "Income Taxes")— — — — 2.3Stock-based compensation— — 41.4 — —Net issuances of 374,267 shares held in treasury insettlement of stock-based compensation— — (81.5) 34.0 —Repurchases of 4,308,418 shares of common stock at anaverage price of $163.69 per share— — — (705.2) —Retirement of 8,000,000 shares held in treasury ataverage price of $146.27 per share— (0.1) (155.9) 1,170.2 (1,014.2)Dividends declared to Lear Corporation stockholders— — — — (185.8)Dividends declared to noncontrolling interests(9.2) — — — —Affiliate transaction— — — — —Acquisition of outstanding noncontrolling interests— — (2.0) — —Redeemable noncontrolling interest adjustment10.4 — — — (10.4)Noncontrolling interests — other— — — — —Balance as of December 31, 2018$158.1 $0.6 $1,017.4 $(225.1) $4,113.6Comprehensive income (loss): Net income1.8 — — — 753.6Other comprehensive income (loss)(1.8) — — — —Total comprehensive income (loss)— ———753.6Stock-based compensation— — 23.3 — —Net issuances of 314,953 shares held in treasury insettlement of stock-based compensation— — (71.6) 42.4 (2.1)Repurchases of 2,819,081 shares of common stock at anaverage price of $134.95 per share— — — (380.4) —Dividends declared to Lear Corporation stockholders— — — — (186.3)Dividends declared to noncontrolling interests(2.7) — — — —Noncontrolling interests — other— — — — —Disposal of noncontrolling interests— — — — —Redeemable noncontrolling interest adjustment(37.0) — — — 37.0Balance as of December 31, 2019$118.4 $0.6 $969.1 $(563.1) $4,715.8The accompanying notes are an integral part of these consolidated financial statements.57Table of ContentsLEAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EQUITY (continued)(In millions, except share data) Accumulated Other Comprehensive Loss, net of tax DefinedBenefit Plans DerivativeInstruments andHedgeActivities CumulativeTranslationAdjustments LearCorporationStockholders’Equity Non-controllingInterests EquityBalance as of December 31, 2016$(192.8) $(45.1) $(597.7) $3,057.2 $135.7 $3,192.9Comprehensive income: Net income— — — 1,313.4 64.3 1,377.7Other comprehensive income8.8 22.2 291.2 322.2 9.2 331.4Total comprehensive income8.8 22.2 291.2 1,635.6 73.5 1,709.1Adoption of ASU 2016-09 (Note 8, "Income Taxes")— — — 52.9 — 52.9Stock-based compensation— — — 70.2 — 70.2Net issuances of 456,252 shares held in treasury insettlement of stock-based compensation— — — (45.2) — (45.2)Repurchases of 3,014,131 shares of common stock at anaverage price of $150.77 per share— — — (454.4) — (454.4)Retirement of 8,000,000 shares held in treasury at averageprice of $111.43 per share— — — — — —Dividends declared to Lear Corporation stockholders— — — (140.3) — (140.3)Dividends declared to noncontrolling interests— — — — (67.1) (67.1)Affiliate transaction— — — — — —Redeemable noncontrolling interest adjustment— — — (25.5) — (25.5)Balance as of December 31, 2017$(184.0) $(22.9) $(306.5)$4,150.5$142.1$4,292.6Comprehensive income (loss): Net income— — — 1,149.8 84.0 1,233.8Other comprehensive income (loss)11.2 13.2 (216.8) (192.4) (6.8) (199.2)Total comprehensive income (loss)11.2 13.2 (216.8) 957.4 77.2 1,034.6Adoption of ASU 2016-16 (Note 8, "Income Taxes")— — — 2.3 — 2.3Stock-based compensation— — — 41.4 — 41.4Net issuances of 374,267 shares held in treasury insettlement of stock-based compensation— — — (47.5) — (47.5)Repurchases of 4,308,418 shares of common stock at anaverage price of $163.69 per share— — — (705.2) — (705.2)Retirement of 8,000,000 shares held in treasury at averageprice of $146.27 per share— — — — — —Dividends declared to Lear Corporation stockholders— — — (185.8) — (185.8)Dividends declared to noncontrolling interests— — — — (70.0) (70.0)Affiliate transaction— — — — 14.0 14.0Acquisition of outstanding noncontrolling interests— — — (2.0) — (2.0)Redeemable noncontrolling interest adjustment— — — (10.4) — (10.4)Noncontrolling interests — other— — — — (3.4) (3.4)Balance as of December 31, 2018$(172.8) $(9.7) $(523.3) $4,200.7 $159.9 $4,360.6Comprehensive income (loss): Net income— — — 753.6 75.3 828.9Other comprehensive income (loss)(44.8) 19.5 (41.6) (66.9) (1.7) (68.6)Total comprehensive income (loss)(44.8) 19.5 (41.6) 686.7 73.6 760.3Stock-based compensation— — — 23.3 — 23.3Net issuances of 314,953 shares held in treasury insettlement of stock-based compensation— — — (31.3) — (31.3)Repurchases of 2,819,081 shares of common stock at anaverage price of $134.95 per share— — — (380.4) — (380.4)Dividends declared to Lear Corporation stockholders— — — (186.3) — (186.3)Dividends declared to noncontrolling interests— — — — (76.3) (76.3)Noncontrolling interests — other— — — — (0.2) (0.2)Disposal of noncontrolling interests— — — — (5.6) (5.6)Redeemable noncontrolling interest adjustment— — — 37.0 — 37.0Balance as of December 31, 2019$(217.6) $9.8 $(564.9) $4,349.7 $151.4 $4,501.1The accompanying notes are an integral part of these consolidated financial statements.58Table of ContentsLEAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)For the year ended December 31,2019 2018 2017Cash Flows from Operating Activities: Consolidated net income$830.7 $1,246.7 $1,380.9Adjustments to reconcile consolidated net income to net cash provided by operating activities – Equity in net income of affiliates(23.2) (20.2) (51.7)Loss on extinguishment of debt10.6 — 21.2Impairment charges14.5 6.1 3.4Deferred tax (benefit) provision(38.2) 86.7 (81.3)Depreciation and amortization509.9 484.4 427.7Stock-based compensation23.3 41.4 70.2Net change in recoverable customer engineering, development and tooling(32.4) 54.4 (54.1)Net change in working capital items (see below)(25.5) (118.9) 72.5Changes in other long-term liabilities5.0 (23.0) 6.6Changes in other long-term assets(10.1) (16.7) 2.1Other, net19.7 38.9 (14.4)Net cash provided by operating activities1,284.3 1,779.8 1,783.1Cash Flows from Investing Activities: Additions to property, plant and equipment(603.9) (677.0) (594.5)Acquisitions, net of cash acquired(321.7) — (292.4)Other, net3.2 (16.5) 18.3Net cash used in investing activities(922.4) (693.5) (868.6)Cash Flows from Financing Activities: Proceeds from the issuance of senior notes693.3 — 744.7Repurchase of senior notes(333.7) — (517.0)New credit agreement borrowings— — 250.0New credit agreement repayments(7.8) (6.3) (1.6)Prior credit agreement repayments— — (468.7)Short-term borrowings (repayments), net9.5 7.3 (8.9)Payment of debt issuance and other financing costs(6.5) — (11.9)Repurchase of common stock(384.7) (704.9) (450.5)Dividends paid to Lear Corporation stockholders(186.3) (186.3) (137.7)Dividends paid to noncontrolling interests(78.9) (79.1) (81.6)Other, net(66.8) (61.2) (58.8)Net cash used in financing activities(361.9) (1,030.5) (742.0)Effect of foreign currency translation(9.4) (36.4) 56.3Net Change in Cash, Cash Equivalents and Restricted Cash(9.4) 19.4 228.8Cash, Cash Equivalents and Restricted Cash as of Beginning of Period1,519.8 1,500.4 1,271.6Cash, Cash Equivalents and Restricted Cash as of End of Period$1,510.4 $1,519.8 $1,500.4Changes in Working Capital Items: Accounts receivable$(116.2) $230.8 $(115.2)Inventories(69.1) (32.5) (76.0)Accounts payable(5.5) (199.3) 195.3Accrued liabilities and other165.3 (117.9) 68.4Net change in working capital items$(25.5) $(118.9) $72.5Supplementary Disclosure: Cash paid for interest$104.4 $97.1 $94.0Cash paid for income taxes, net of refunds received of $69.4 million in 2019, $40.6 million in2018 and $35.5 million in 2017$172.1 $279.2 $284.0The accompanying notes are an integral part of these consolidated financial statements.59Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements(1) Basis of PresentationLear Corporation ("Lear," and together with its consolidated subsidiaries, the "Company") and its affiliates design and manufacture automotive seating andelectrical distribution systems and related components. The Company’s main customers are automotive original equipment manufacturers. The Company operatesfacilities worldwide.The accompanying consolidated financial statements include the accounts of Lear, a Delaware corporation, and the wholly owned and less than wholly ownedsubsidiaries controlled by Lear.(2) Summary of Significant Accounting PoliciesConsolidationLear consolidates all entities, including variable interest entities, in which it has a controlling financial interest. Investments in affiliates in which Lear does nothave control, but does have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method (Note 5,"Investments in Affiliates and Other Related Party Transactions").Fiscal Period ReportingThe Company’s annual financial results are reported on a calendar year basis, and quarterly interim results are reported using a thirteen week reporting calendar.Cash, Cash Equivalents and Restricted CashCash and cash equivalents include all highly liquid investments with original maturities of ninety days or less. Restricted cash includes cash that is legallyrestricted as to use or withdrawal.Accounts ReceivableThe Company records accounts receivable as title is transferred to its customers. The Company’s customers are the world’s major automotive manufacturers. TheCompany records accounts receivable reserves for known collectibility issues, as such issues relate to specific transactions or customer balances. As ofDecember 31, 2019 and 2018, accounts receivable are reflected net of reserves of $36.0 million and $33.2 million, respectively. The Company writes off accountsreceivable when it becomes apparent, based upon age or customer circumstances, that such amounts will not be collected. Generally, the Company does not requirecollateral for its accounts receivable.The Company receives bank notes from its customers, which are classified as other current assets in the consolidated balance sheets, for certain amounts ofaccounts receivable, primarily in Asia. The Company may hold such bank notes until maturity, exchange them with suppliers to settle liabilities or sell them tothird-party financial institutions in exchange for cash. InventoriesInventories 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-processinventories include material, labor and manufacturing overhead costs. The Company records reserves for inventory in excess of production and/or forecastedrequirements and for obsolete inventory in production and service inventories. A summary of inventories is shown below (in millions):December 31,2019 2018Raw materials$906.3 $859.4Work-in-process107.0 104.6Finished goods380.4 346.0Reserves(135.5) (113.2)Inventories$1,258.2 $1,196.860Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Pre-Production Costs Related to Long-Term Supply AgreementsThe Company incurs pre-production engineering and development ("E&D") and tooling costs related to the products produced for its customers under long-termsupply agreements. The Company expenses all pre-production E&D costs for which reimbursement is not contractually guaranteed by the customer. In addition,the Company expenses all pre-production tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customeror for which the Company does not have a non-cancelable right to use the tooling.During 2019 and 2018, the Company capitalized $211.2 million and $230.6 million, respectively, of pre-production E&D costs for which reimbursement iscontractually guaranteed by the customer. During 2019 and 2018, the Company also capitalized $231.6 million and $198.1 million, respectively, of pre-productiontooling costs related to customer-owned tools for which reimbursement is contractually guaranteed by the customer or for which the Company has a non-cancelable right to use the tooling. These amounts are included in other current and long-term assets in the accompanying consolidated balance sheets as ofDecember 31, 2019 and 2018. During 2019 and 2018, the Company collected $408.3 million and $487.5 million, respectively, of cash related to E&D and toolingcosts.The classification of recoverable customer E&D and tooling costs related to long-term supply agreements is shown below (in millions):December 31,2019 2018Current$157.2 $160.9Long-term113.8 80.4Recoverable customer E&D and tooling$271.0 $241.3Property, Plant and EquipmentProperty, plant and equipment is stated at cost. Costs associated with the repair and maintenance of the Company’s property, plant and equipment are expensed asincurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency or safety of the Company’s property, plant andequipment are capitalized and depreciated over the remaining useful life of the related asset. Depreciable property is depreciated over the estimated useful lives ofthe assets, using principally the straight-line method as follows:Buildings and improvements10 to 40 yearsMachinery and equipment5 to 10 yearsA summary of property, plant and equipment is shown below (in millions):December 31,2019 2018Land$113.1 $116.8Buildings and improvements831.3 809.3Machinery and equipment3,844.1 3,463.3Construction in progress382.4 389.3Total property, plant and equipment5,170.9 4,778.7Less – accumulated depreciation(2,466.7) (2,180.6)Net property, plant and equipment$2,704.2 $2,598.1For the years ended December 31, 2019, 2018 and 2017, depreciation expense was $447.6 million, $433.0 million and $380.1 million, respectively. As ofDecember 31, 2019, 2018 and 2017, capital expenditures recorded in accounts payable totaled $131.6 million, $156.2 million and $119.7 million, respectively.Impairment of GoodwillGoodwill 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 orcircumstance indicates that an impairment is more likely than not to have occurred. In conducting its annual impairment testing, the Company may first perform aqualitative 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 impairmenttesting 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 aqualitative assessment of a reporting unit, the Company then compares the fair value of the reporting unit to the related net61Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)book value. If the net book value of a reporting unit exceeds its fair value, an impairment loss is measured and recognized. The Company conducts its annualimpairment testing as of the first day of its fourth quarter.The Company utilizes an income approach to estimate the fair value of each of its reporting units and a market valuation approach to further support this analysis.The income approach is based on projected debt-free cash flow which is discounted to the present value using discount factors that consider the timing and risk ofcash flows. The Company believes that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-termoperating cash flow performance. This approach also mitigates the impact of cyclical trends that occur in the industry. Fair value is estimated using recentautomotive industry and specific platform production volume projections, which are based on both third-party and internally developed forecasts, as well ascommercial and discount rate assumptions. The discount rate used is the value-weighted average of the Company’s estimated cost of equity and of debt ("cost ofcapital") derived using both known and estimated customary market metrics. The Company’s weighted average cost of capital is adjusted by reporting unit toreflect a risk factor, if necessary. Other significant assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures andchanges in future working capital requirements. While there are inherent uncertainties related to the assumptions used and to management’s application of theseassumptions to this analysis, the Company believes that the income approach provides a reasonable estimate of the fair value of its reporting units. The marketvaluation approach is used to further support the Company’s analysis and is based on recent transactions involving comparable companies.The annual goodwill impairment assessment was completed as of the first day of the Company's fourth quarter. In 2019, the Company performed a qualitativeassessment for each reporting unit except for one where a quantitative analysis was performed. The qualitative assessments indicated that it was more likely thannot that the fair value of each of the reporting units exceeded its respective carrying value. The quantitative analysis resulted in the current fair value of thereporting unit exceeding its carrying value. We do not believe that any of our reporting units are at risk for impairment.A summary of the changes in the carrying amount of goodwill for each of the periods in the two years ended December 31, 2019, is shown below (in millions): Seating E-Systems TotalBalance as of December 31, 2017$1,274.4 $126.9 $1,401.3Affiliate transaction— 22.4 22.4Foreign currency translation and other(30.1) 11.7 (18.4)Balance as of December 31, 20181,244.3 161.0 1,405.3Acquisition— 219.0 219.0Foreign currency translation and other(8.9) (1.1) (10.0)Balance as of December 31, 2019$1,235.4 $378.9 $1,614.3For further information related to acquisitions and affiliate transactions, see Note 3, "Acquisitions," and Note 5, "Investments in Affiliates and Other Related PartyTransactions."Intangible AssetsAs of December 31, 2019, intangible assets consist primarily of certain intangible assets recorded in connection with the acquisitions of Guilford Mills in 2012, theparent company of Eagle Ottawa, LLC in 2015, AccuMED Holdings Corp. in 2016, Grupo Antolin's automotive seating business ("Antolin Seating") in 2017 andXevo Inc. ("Xevo") in 2019 (Note 3, "Acquisitions"). These intangible assets were recorded at their estimated fair value, based on independent appraisals, as of thetransaction or acquisition date. The value assigned to technology intangibles is based on the royalty savings method, which applies a hypothetical royalty rate toprojected revenues attributable to the identified technologies. Royalty rates were determined based primarily on analysis of market information. The customer-based intangible asset includes the acquired entity's established relationships with its customers and the ability of these customers to generate future economicprofits for the Company. The value assigned to customer-based intangibles is based on the present value of future earnings attributable to the asset group afterrecognition of required returns to other contributory assets.62Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)A summary of intangible assets as of December 31, 2019 and 2018, is shown below (in millions): Gross CarryingValue AccumulatedAmortization Net CarryingValue WeightedAverage UsefulLife (years)Amortized intangible assets: Customer-based$531.9 $(203.0) $328.9 11.6Licensing agreements75.0 (10.2) 64.8 5.0Technology35.0 (15.9) 19.1 7.0Other1.4 (1.3) 0.1 2.5$643.3 $(230.4) $412.9 10.5Unamortized intangible assets: In-process research and development10.8 — 10.8 Balance as of December 31, 2019$654.1 $(230.4) $423.7 Gross CarryingValue AccumulatedAmortization Net CarryingValue WeightedAverage UsefulLife (years)Amortized intangible assets: Customer-based$533.4 $(156.3) $377.1 11.6Technology20.1 (11.8) 8.3 8.5Other1.4 (1.1) 0.3 2.5 $554.9 $(169.2) $385.7 11.5Unamortized intangible assets: In-process research and development10.8 — 10.8 Balance as of December 31, 2018$565.7 $(169.2) $396.5 Excluding the impact of any future acquisitions, the Company’s estimated annual amortization expense for the five succeeding years is shown below (in millions):YearExpense2020$66.2202164.5202263.7202362.1202446.8Impairment of Long-Lived AssetsThe Company monitors its long-lived assets for impairment indicators on an ongoing basis in accordance with accounting principles generally accepted in theUnited States ("GAAP"). If impairment indicators exist, the Company performs the required impairment analysis by comparing the undiscounted cash flowsexpected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss ismeasured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value isestimated based upon a combination of market and cost approaches, as appropriate.For the years ended December 31, 2019, 2018 and 2017, the Company recognized asset impairment charges of $9.5 million, $4.7 million and $1.3 millionrespectively, in conjunction with its restructuring actions (Note 4, "Restructuring"). For the years ended December 31, 2018 and 2017, the Company recognizedadditional asset impairment charges of $1.4 million and $2.1 million, respectively. Asset impairment charges are recorded in cost of sales in the accompanyingconsolidated statements of income for the years ended December 31, 2019, 2018 and 2017.63Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Impairment of Investments in AffiliatesThe Company monitors its investments in affiliates for indicators of other-than-temporary declines in value on an ongoing basis in accordance with GAAP. If theCompany determines that an other-than-temporary decline in value has occurred, it recognizes an impairment loss, which is measured as the difference betweenthe recorded book value and the fair value of the investment. Fair value is generally determined using an income approach based on discounted cash flows ornegotiated transaction values.Accrued LiabilitiesA summary of accrued liabilities as of December 31, 2019 and 2018, is shown below (in millions):December 31,2019 2018Compensation and employee benefits$319.2 $321.2Income and other taxes payable256.6 279.3Restructuring157.7 108.7Current portion of lease obligations113.9 —Other963.8 905.8Accrued liabilities$1,811.2 $1,615.0LeasesOn January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") 842, "Leases," which requires lessees to record right-of-use assets andrelated lease obligations on the balance sheet, as well as disclose key information regarding leasing arrangements. The Company adopted the standard by applyingthe modified retrospective method without the restatement of comparative periods. Adoption of the standard resulted in the recognition of right-of-use assets of$438.1 million and related lease obligations of $445.8 million as of January 1, 2019. The standard did not have a significant impact on the Company's operatingresults or cash flows.TransitionThe Company elected the package of practical expedients, which permits a lessee to not reassess under the new standard its prior conclusions regarding leaseidentification, lease classification and initial direct costs. The Company did not elect the practical expedient which permits the use of hindsight when determiningthe lease term and assessing right-of-use assets for impairment.As permitted by the transition guidance, the Company used the remaining lease term as of the date of adoption of the standard to estimate discount rates. Aspermitted by the standard, the Company elected, for all asset classes, the short-term lease exemption. A short-term lease is a lease that, at the commencement date,has a term of twelve months or less and does not include an option to purchase the underlying asset.Accounting PolicyThe Company determines if an arrangement contains a lease at inception. The Company elected the practical expedient, for all asset classes, to account for eachlease component of a contract and its associated non-lease components as a single lease component, rather than allocating a standalone value to each component ofa lease.For purposes of calculating operating lease obligations under the standard, the Company's lease terms may include options to extend or terminate the lease when itis reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual value guarantees or material restrictivecovenants.Operating lease expense is recognized on a straight-line basis over the lease terms.Discount RateThe discount rate used to measure a lease obligation should be the rate implicit in the lease; however, the Company’s operating leases generally do not provide animplicit rate. Accordingly, the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. Theincremental borrowing rate is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar termwith similar payments.64Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Revenue Recognition and Sales CommitmentsOn January 1, 2018, the Company adopted ASC 606, "Revenue from Contracts with Customers," using the modified retrospective method as applied to customercontracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning on or after January 1, 2018, arepresented in accordance with ASC 606. Comparative financial information for reporting periods beginning prior to January 1, 2018, has not been adjusted andcontinues to be reported in accordance with the Company's revenue recognition policies prior to the adoption of ASC 606. The Company did not record acumulative adjustment related to the adoption of ASC 606, and the effects of adoption were not significant.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 donot provide for a specified quantity of products, but once entered into, the Company is often expected to fulfill its customers’ purchasing requirements for theproduction life of the vehicle. Many of these contracts may be terminated by the Company’s customers at any time. Historically, terminations of these contractshave been infrequent. The Company receives purchase orders from its customers, which provide the commercial terms for a particular production part, includingprice (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 ongoingbasis 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 nothave an enforceable right to payment prior to such transfer. The amount of revenue recognized reflects the consideration that the Company expects to be entitled toin exchange for those products based on the annual purchase orders, annual price reductions and ongoing price adjustments. In 2019, revenue recognized related toprior years represented less than 1% of consolidated net sales. The Company's customers pay for products received in accordance with payment terms that arecustomary 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 December 31, 2019, there were no significant contract liabilitiesrecorded. Further, there were no significant contract liabilities recognized in revenue during the year ended December 31, 2019.Amounts billed to customers related to shipping and handling costs are included in net sales in the consolidated statements of income. Shipping and handling costsare accounted for as fulfillment costs and are included in cost of sales in the consolidated statements of income.Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by theCompany from a customer are excluded from revenue.Cost of Sales and Selling, General and Administrative ExpensesCost of sales includes material, labor and overhead costs associated with the manufacture and distribution of the Company’s products. Distribution costs includeinbound freight costs, purchasing and receiving costs, inspection costs, warehousing costs and other costs of the Company’s distribution network. Selling, generaland administrative expenses include selling, engineering and development and administrative costs not directly associated with the manufacture and distribution ofthe Company’s products.Restructuring CostsRestructuring costs include employee termination benefits, asset impairment charges and contract termination costs, as well as other incremental costs resultingfrom the restructuring actions. Employee termination benefits are recorded based on existing union and employee contracts, statutory requirements, completednegotiations and Company policy. Other incremental costs principally include equipment and personnel relocation costs. In addition to restructuring costs, theCompany also incurs incremental manufacturing inefficiency costs at the operating locations impacted by the restructuring actions during the related restructuringimplementation period. Restructuring costs are recognized in the Company’s consolidated financial statements in accordance with GAAP. Generally, charges arerecorded as restructuring actions are approved and/or implemented.Engineering and DevelopmentCosts incurred in connection with product launches, to the extent not recoverable from the Company’s customers, are charged to cost of sales as incurred. All otherengineering and development costs are charged to selling, general and administrative expenses when incurred. Engineering and development costs charged toselling, general and administrative expenses totaled $151.2 million, $153.5 million and $147.9 million for the years ended December 31, 2019, 2018 and 2017,respectively.65Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Other (Income) Expense, NetOther (income) expense, net includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments andhedging activities, losses on the extinguishment of debt, gains and losses on the disposal of fixed assets, gains and losses on the consolidation and deconsolidationof affiliates, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense. A summary of other (income) expense, netis shown below (in millions):For the year ended December 31,2019 2018 2017Other expense$52.2 $43.8 $57.2Other income(27.6) (12.2) (61.3)Other (income) expense, net$24.6 $31.6 $(4.1)Income TaxesDeferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carryingamounts of existing assets and liabilities and their respective tax bases and tax loss and credit carryforwards. Deferred tax assets and liabilities are measured usingenacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.The Company’s current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in certaincountries. The Company intends to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. The Company’s futureprovision for income taxes will include no tax benefit with respect to losses incurred and, except for certain jurisdictions, no tax expense with respect to incomegenerated in these countries until the respective valuation allowances are eliminated. Accordingly, income taxes are impacted by changes in valuation allowancesand the mix of earnings among jurisdictions. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation,the Company considers all available evidence in order to determine whether, based on the weight of the evidence, a valuation allowance for its deferred tax assetsis necessary. Such evidence includes historical results, future reversals of existing taxable temporary differences and expectations for future taxable income(exclusive of the reversal of temporary differences and carryforwards), as well as the implementation of feasible and prudent tax planning strategies. If, based onthe weight of the evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized, a valuation allowance isrecorded. If operating results improve or decline on a continual basis in a particular jurisdiction, the Company’s decision regarding the need for a valuationallowance could change, resulting in either the initial recognition or reversal of a valuation allowance in that jurisdiction, which could have a significant impact onincome tax expense in the period recognized and subsequent periods. In determining the provision for income taxes for financial statement purposes, the Companymakes certain estimates and judgments, which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities.The calculation of the Company’s gross unrecognized tax benefits and liabilities includes uncertainties in the application of, and changes in, complex taxregulations in a multitude of jurisdictions across its global operations. The Company recognizes tax benefits and liabilities based on its estimates of whether, andthe extent to which, additional taxes will be due. The Company adjusts these benefits and liabilities based on changing facts and circumstances; however, due to thecomplexity of these uncertainties and the impact of tax audits, the ultimate resolutions may differ significantly from the Company’s estimates.The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate from 35% to 21%beginning in 2018, required companies to pay a one-time transition tax on all offshore earnings that were previously tax deferred and created new taxes on certainforeign sourced earnings.Effective January 1, 2019, Accounting Standards Update ("ASU") 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other ComprehensiveIncome," allows for the reclassification of "stranded" tax effects as a result of the Act from accumulated other comprehensive income to retained earnings. TheCompany elected not to reclassify such amounts. The Company reclassifies taxes from accumulated other comprehensive loss to earnings as the items to which thetax effects relate are similarly reclassified.Foreign CurrencyAssets and liabilities of foreign subsidiaries that use a functional currency other than the U.S. dollar are translated into U.S. dollars at the foreign exchange rates ineffect at the end of the period. Revenues and expenses of foreign subsidiaries are translated into U.S. dollars using an average of the foreign exchange rates ineffect during the period. Translation adjustments66Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)that arise from translating a foreign subsidiary’s financial statements from the functional currency to the U.S. dollar are reflected in accumulated othercomprehensive loss in the consolidated balance sheets.Transaction gains and losses that arise from foreign exchange rate fluctuations on transactions denominated in a currency other than the functional currency,except certain long-term intercompany transactions, are included in the consolidated statements of income as incurred. For the years ended December 31, 2019,2018 and 2017, other (income) expense, net includes net foreign currency transaction losses of $20.6 million, $14.4 million and $5.1 million, respectively.Stock-Based CompensationThe Company measures stock-based employee compensation expense at fair value in accordance with GAAP and recognizes such expense over the vesting periodof the stock-based employee awards.Net Income Per Share Attributable to LearBasic net income per share available to Lear common stockholders is computed using the two-class method by dividing net income attributable to Lear, afterdeducting the redemption adjustment related to redeemable noncontrolling interest, by the average number of common shares outstanding during the period.Common shares issuable upon the satisfaction of certain conditions pursuant to a contractual agreement are considered common shares outstanding and areincluded in the computation of basic net income per share available to Lear common stockholders.Diluted net income per share available to Lear common stockholders is computed using the two-class method by dividing net income attributable to Lear, afterdeducting the redemption adjustment related to redeemable noncontrolling interest, by the average number of common shares outstanding, including the dilutiveeffect of common stock equivalents computed using the treasury stock method and the average share price during the period.A summary of information used to compute basic and diluted net income per share available to Lear common stockholders is shown below (in millions, exceptshare and per share data):For the year ended December 31,2019 2018 2017Net income attributable to Lear$753.6 $1,149.8 $1,313.4Redeemable noncontrolling interest adjustment35.9 (10.4) (25.5)Net income available to Lear common stockholders$789.5 $1,139.4 $1,287.9 Average common shares outstanding61,697,192 65,672,164 68,542,363Dilutive effect of common stock equivalents226,336 489,652 735,618Average diluted shares outstanding61,923,528 66,161,816 69,277,981 Basic net income per share available to Lear common stockholders$12.80 $17.35 $18.79 Diluted net income per share available to Lear common stockholders$12.75 $17.22 $18.59For further information related to the redeemable noncontrolling interest adjustment, see Note 5, "Investments in Affiliates and Other Related Party Transactions."Product WarrantyLosses from warranty obligations are accrued when it is probable that a liability has been incurred and the related amounts are reasonably estimable.Segment ReportingThe Company has two reportable operating segments: Seating, which includes complete seat systems and all major seat components, including seat covers andsurface materials such as leather and fabric, seat structures and mechanisms, seat foam and headrests, and E-Systems, which includes complete electricaldistribution systems, as well as sophisticated electronic control modules, electrification products and connectivity products. Key components in the Company'selectrical distribution portfolio include wire harnesses, terminals and connectors and junction boxes for both internal combustion engine and electrificationarchitectures that require management of higher voltage and power. Key components in the Company's electronic control module portfolio include body controlmodules, wireless receiver and transmitter technology and lighting and audio67Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)control modules, as well as products specific to electrification and connectivity trends. Electrification products include charging systems (onboard chargingmodules and cord set charging equipment), battery electronics (battery disconnect units, cell monitoring supervisory systems and integrated total battery controlmodules) and other power management modules, including converter and inverter systems. Connectivity products include gateway modules and communicationmodules to manage both wired and wireless networks and data in vehicles. The other category includes unallocated costs related to corporate headquarters,regional headquarters and the elimination of intercompany activities, none of which meets the requirements for being classified as an operating segment. Corporateand regional headquarters costs include various support functions, such as information technology, advance research and development, corporate finance, legal,executive administration and human resources, as well as advanced engineering expenses.Each of the Company’s operating segments reports its results from operations and makes its requests for capital expenditures directly to the chief operatingdecision maker. The economic performance of each operating segment is driven primarily by automotive production volumes in the geographic regions in which itoperates, as well as by the success of the vehicle platforms for which it supplies products. Also, each operating segment operates in the competitive Tier 1automotive supplier environment and is continually working with its customers to manage costs and improve quality. The Company’s production processesgenerally make use of hourly labor, dedicated facilities, sequential manufacturing and assembly processes and commodity raw materials.The Company evaluates the performance of its operating segments based primarily on (i) revenues from external customers, (ii) pretax income before equity in netincome of affiliates, interest expense and other expense ("segment earnings") and (iii) cash flows, being defined as segment earnings less capital expenditures plusdepreciation and amortization.The accounting policies of the Company’s operating segments are the same as those described in this note to the consolidated financial statements.Derivative Instruments and Hedge ActivitiesThe Company has used derivative financial instruments, including forwards, futures, options, swaps and other derivative contracts to reduce the effects offluctuations in foreign exchange rates and interest rates and the resulting variability of the Company’s operating results. The Company is not a party to leveragedderivatives. The Company’s derivative financial instruments are subject to master netting arrangements that provide for the net settlement of contracts, bycounterparty, in the event of default or termination. On the date that a derivative contract for a hedge instrument is entered into, the Company designates thederivative as either (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or of an unrecognized firm commitment (a fair valuehedge), (2) a hedge of the exposure of a forecasted transaction or of the variability in the cash flows of a recognized asset or liability (a cash flow hedge), (3) ahedge of a net investment in a foreign operation (a net investment hedge) or (4) a contract not designated as a hedge instrument.For a fair value hedge, the change in the fair value of the derivative is recorded in earnings and reflected in the consolidated statements of income on the same lineas the gain or loss on the hedged item attributable to the hedged risk. For a cash flow hedge, the change in the fair value of the derivative is recorded inaccumulated other comprehensive loss in the consolidated balance sheet. When the underlying hedged transaction is realized, the gain or loss included inaccumulated other comprehensive loss is recorded in earnings and reflected in the consolidated statements of income on the same line as the gain or loss on thehedged item attributable to the hedged risk. For a net investment hedge, the change in the fair value of the derivative is recorded in cumulative translationadjustment, which is a component of accumulated other comprehensive loss in the consolidated balance sheets. When the related currency translation adjustment isrequired to be reclassified, usually upon the sale or liquidation of the investment, the gain or loss included in accumulated other comprehensive loss is recorded inearnings and reflected in other (income) expense, net in the consolidated statements of income. Changes in the fair value of contracts not designated as hedgeinstruments are recorded in earnings and reflected in other (income) expense, net in the consolidated statements of income. Cash flows attributable to derivativesused to manage foreign currency risks are classified on the same line as the hedged item attributable to the hedged risk in the consolidated statements of cash flows.Upon settlement, cash flows attributable to derivatives designated as net investment hedges are classified as investing activities in the consolidated statements ofcash flows. Cash flows attributable to forward starting interest rate swaps are classified as financing activities in the consolidated statements of cash flows.The Company formally documents its hedge relationships, including the identification of the hedge instruments and the related hedged items, as well as its riskmanagement objectives and strategies for undertaking the hedge transaction. Derivatives are recorded at fair value in other current and long-term assets and othercurrent and long-term liabilities in the consolidated balance sheet. The Company also formally assesses whether a derivative used in a hedge transaction is highlyeffective in offsetting changes in either the fair value or the cash flows of the hedged item. When it is determined that a hedged transaction is no longer probable tooccur, the Company discontinues hedge accounting.68Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)On January 1, 2018, the Company early adopted ASU 2017-12, "Targeted Improvements to Accounting for Hedging Activities." The new standard eliminates therequirement to separately measure and report hedge ineffectiveness, due to a difference between the economic terms of the hedge instrument and the underlyingtransaction, and generally requires, for qualifying hedges, the entire change in the fair value of a hedge instrument to be presented in the same line as the hedgeditem in the consolidated statement of income. The standard also modifies the accounting for components excluded from the assessment of hedge effectiveness andsimplifies the application of hedge accounting in certain situations. The provisions of the standard were applied on a modified retrospective basis, and the effects ofadoption were not significant.Use of EstimatesThe preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during thereporting period. During 2019, there were no material changes in the methods or policies used to establish estimates and assumptions. Other matters subject toestimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of fixed and intangibleassets and unsettled pricing negotiations with customers and suppliers (Note 2, "Summary of Significant Accounting Policies"); acquisitions (Note 3,"Acquisitions"); restructuring accruals (Note 4, "Restructuring"); deferred tax asset valuation allowances and income taxes (Note 8, "Income Taxes"); pension andother postretirement benefit plan assumptions (Note 9, "Pension and Other Postretirement Benefit Plans"); accruals related to litigation, warranty andenvironmental remediation costs (Note 13, "Commitments and Contingencies"); and self-insurance accruals. Actual results may differ significantly from theCompany’s estimates.ReclassificationsCertain amounts in prior years’ financial statements have been reclassified to conform to the presentation used in the year ended December 31, 2019.(3) AcquisitionsOn April 17, 2019, the Company completed the acquisition of Xevo, a Seattle-based, global leader in connected car software, by acquiring all of Xevo'soutstanding shares for $321.7 million, net of cash acquired. Xevo is a supplier of software solutions for the cloud, vehicles and mobile devices that are deployed inmillions of vehicles worldwide.The acquisition of Xevo has been accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in theaccompanying consolidated balance sheet as of December 31, 2019. The operating results and cash flows of Xevo are included in the accompanying consolidatedfinancial statements from the date of acquisition and in the Company's E-Systems segment.The Company incurred transaction costs of $1.6 million, which were expensed as incurred and are recorded in selling, general and administrative expenses in theaccompanying consolidated statement of income for the year ended December 31, 2019.The purchase price and preliminary allocation are shown below (in millions): June 29, 2019AdjustmentsDecember 31, 2019Net purchase price$320.9$0.8$321.7 Other assets purchased and liabilities assumed, net$1.2$8.3$9.5Goodwill197.521.5219.0Intangible assets122.2(29.0)93.2Preliminary purchase price allocation$320.9$0.8$321.7Goodwill recognized in this transaction is primarily attributable to expected synergies related to future growth and commercialization opportunities and is notdeductible for tax purposes.Intangible assets consist primarily of provisional amounts recognized for the fair value of licensing agreements and developed technology and are based onindependent appraisals. Licensing agreements represent the fair values of the underlying licensing agreements with Xevo customers with estimated useful lives ofapproximately five years. Developed technology represents the fair value of Xevo's technology with an estimated useful life of approximately five years.Adjustments to the preliminary purchase price allocation primarily reflect changes in certain assumptions in the third quarter of 2019 related to the valuation ofdeveloped technology.69Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)The purchase price and related allocation are preliminary and may be revised as a result of additional information regarding the assets acquired and liabilitiesassumed, including, but not limited to, certain tax attributes and contingent liabilities.The pro-forma effects of this acquisition do not materially impact the Company's reported results for any period presented.For further information related to acquired assets measured at fair value, see Note 15, "Financial Instruments."Antolin SeatingOn April 28, 2017, the Company completed the acquisition of Antolin Seating for $292.4 million, net of cash acquired. The Antolin Seating business is comprisedof just-in-time seat assembly, as well as seat structures, mechanisms and seat covers, with operations in five countries in Europe and North Africa.The Company incurred transaction costs of $3.0 million related to advisory services, which were expensed as incurred and are recorded in selling, general andadministrative expenses in the accompanying consolidated statement of income for the year ended December 31, 2017.The Antolin Seating acquisition was accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in theaccompanying consolidated balance sheets as of December 31, 2019 and 2018. The operating results and cash flows of Antolin Seating are included in theaccompanying consolidated financial statements from the date of acquisition and in the Company's Seating segment. The purchase price and allocation are shownbelow (in millions):Net purchase price $292.4 Property, plant and equipment $79.2Other assets purchased and liabilities assumed, net (31.5)Goodwill 123.3Intangible assets 121.4Purchase price allocation $292.4Recognized goodwill is attributable to the assembled workforce, expected synergies and other intangible assets that do not qualify for separate recognition.Intangible assets consist of amounts recognized for the fair value of customer-based assets and were based on an independent appraisal. Customer-based assetsinclude Antolin Seating's established relationships with its customers and the ability of these customers to generate future economic profits for the Company. It isestimated that these intangible assets have a weighted average useful life of approximately fifteen years.The pro-forma effects of this acquisition do not materially impact the Company's reported results for any period presented.For further information related to acquired assets measured at fair value, see Note 15, "Financial Instruments."(4) Restructuring2019In 2019, the Company recorded charges of $183.6 million in connection with its restructuring actions. These charges consist of $173.8 million recorded as cost ofsales, $16.4 million recorded as selling, general and administrative expenses and $6.6 million recorded as other income. The restructuring charges consist ofemployee termination benefits of $167.8 million, asset impairment charges of $9.5 million, contract termination costs of $3.0 million and an other postretirementcurtailment gain of $10.6 million, as well as other related costs of $13.9 million. Asset impairment charges relate to the disposal of buildings, leaseholdimprovements and machinery and equipment with carrying values of $8.7 million in excess of related estimated fair values and the impairment of right-of-use-assets of $0.8 million.The Company expects to incur approximately $55 million of additional restructuring costs related to activities initiated as of December 31, 2019, and expects thatthe components of such costs will be consistent with its historical experience. Any future restructuring actions will depend upon market conditions, customeractions and other factors.70Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)A summary of 2019 activity, excluding the other postretirement curtailment gain of $10.6 million, is shown below (in millions): Accrual as of 2019 Utilization Accrual as of January 1, 2019 Charges Cash Non-cash December 31, 2019Employee termination benefits$103.3 $167.8 $(118.3) $— $152.8Asset impairments— 9.5 — (9.5) —Contract termination costs5.4 3.0 (3.5) — 4.9Other related costs— 13.9 (13.9) — —Total$108.7 $194.2 $(135.7) $(9.5) $157.72018In 2018, the Company recorded charges of $88.0 million in connection with its restructuring actions. These charges consist of $63.7 million recorded as cost ofsales, $24.0 million recorded as selling, general and administrative expenses and $0.3 million recorded as other expense. The restructuring charges consist ofemployee termination benefits of $74.5 million, asset impairment charges of $4.7 million and contract termination costs of $1.5 million, as well as other relatedcosts of $7.3 million. Asset impairment charges relate to the disposal of buildings, leasehold improvements and machinery and equipment with carrying values of$4.7 million in excess of related estimated fair values.A summary of 2018 activity is shown below (in millions): Accrual as of 2018 Utilization Accrual as of January 1, 2018 Charges Cash Non-cash December 31, 2018Employee termination benefits$93.0 $74.5 $(64.2) $— $103.3Asset impairments— 4.7 — (4.7) —Contract termination costs5.0 1.5 (1.1) — 5.4Other related costs— 7.3 (7.3) — —Total$98.0 $88.0 $(72.6) $(4.7) $108.72017In 2017, the Company recorded charges of $72.6 million in connection with its restructuring actions. These charges consist of $59.2 million recorded as cost ofsales, $14.3 million recorded as selling, general and administrative expenses and $0.9 million recorded as other income. The restructuring charges consist ofemployee termination benefits of $62.9 million, asset impairment charges of $1.3 million, pension benefit plan curtailment and settlement losses of $1.7 millionand other contract termination costs of $1.7 million, as well as other related costs of $5.0 million. Asset impairment charges relate to the disposal of buildings,leasehold improvements and machinery and equipment with carrying values of $1.3 million in excess of related estimated fair values.A summary of 2017 activity, excluding the pension benefit plan curtailment and settlement losses of $1.7 million, is shown below (in millions): Accrual as of 2017 Utilization Accrual as of January 1, 2017 Charges Cash Non-cash December 31, 2017Employee termination benefits$69.4 $62.9 $(39.3) $— $93.0Asset impairments— 1.3 — (1.3) —Contract termination costs4.6 1.7 (1.3) — 5.0Other related costs— 5.0 (5.0) — —Total$74.0 $70.9 $(45.6) $(1.3) $98.071Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)(5) Investments in Affiliates and Other Related Party TransactionsThe Company’s beneficial ownership in affiliates accounted for under the equity method is shown below:December 31,2019 2018 2017Beijing BHAP Lear Automotive Systems Co., Ltd. (China)50% 50% 50%Jiangxi Jiangling Lear Interior Systems Co., Ltd. (China)50 50 50Lear Dongfeng Automotive Seating Co., Ltd. (China)50 50 50Guangzhou Lear Automotive Components Co., Ltd. (China)50 — —Changchun Lear FAWSN Automotive Seat Systems Co., Ltd. (China)49 49 49Honduras Electrical Distribution Systems S. de R.L. de C.V. (Honduras)49 49 49Kyungshin-Lear Sales and Engineering LLC49 49 49Beijing Lear Dymos Automotive Systems Co., Ltd. (China)40 40 40Techstars Corporate Partner 2017 LLC38 — —Hyundai Transys Lear Automotive Private Limited (India)35 35 35RevoLaze, LLC20 20 20Trucks Venture Fund 2, L.P.19 — —Maniv Mobility II A, L.P.8 — —Autotech Fund II, L.P.6 — —Dong Kwang Lear Yuhan Hoesa (Korea)— 50 50Industrias Cousin Freres, S.L. (Spain)— — 50Changchun Lear FAWSN Automotive Electrical and Electronics Co., Ltd. (China)— — 49eLumigen, LLC— — 46HB Polymer Company, LLC— — 10Summarized group financial information for affiliates accounted for under the equity method as of December 31, 2019 and 2018, and for the years endedDecember 31, 2019, 2018 and 2017, is shown below (unaudited; in millions):December 31,2019 2018Balance sheet data: Current assets$856.3 $753.8Non-current assets173.9 180.8Current liabilities739.5 679.3Non-current liabilities6.6 6.3For the year ended December 31,2019 2018 2017Income statement data: Net sales$1,670.0 $1,520.2 $2,000.4Gross profit89.2 75.9 172.8Income before provision for income taxes85.7 60.0 169.6Net income attributable to affiliates53.5 42.2 117.8A summary of amounts recorded in the Company's consolidated balance sheets related to its affiliates is shown below (in millions):December 31,2019 2018Aggregate investment in affiliates$119.5 $108.2Receivables due from affiliates (including notes and advances)170.5 141.1Payables due to affiliates0.1 0.272Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)A summary of transactions with affiliates accounted for under the equity method and other related parties is shown below (in millions):For the year ended December 31,2019 2018 2017Sales to affiliates$647.2 $603.0 $499.9Purchases from affiliates1.6 2.0 9.5Management and other fees for services provided to affiliates35.5 29.6 26.6Dividends received from affiliates23.3 39.0 33.0The Company has certain investments with beneficial ownership interests of less than 20% that are accounted for under the equity method as the Company’sbeneficial ownership interests in these entities are similar to partnership interests.2019In July 2019, the Company deconsolidated Guangzhou Automobile Group Component Co., Ltd. ("GACC") as it no longer controls this entity. As a result, thecarrying values of the assets and liabilities of GACC are not reflected in the consolidated balance sheet as of December 31, 2019. In addition, the Companyrecorded a gain of $4.0 million related to the excess of the estimated fair value over the carrying value of its interest in GACC immediately prior todeconsolidation. The gain is included in other (income) expense, net in the accompanying consolidated statement of income for the year ended December 31, 2019.2018In January 2018, the Company gained control of Changchun Lear FAWSN Automotive Electrical and Electronics Co., Ltd. ("Lear FAWSN") by acquiring anadditional 20% interest from a joint venture partner and by amending the joint venture agreement to eliminate the substantive participating rights of the remainingjoint venture partner. Prior to the amendment, Lear FAWSN was accounted for under the equity method.This transaction was accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in the accompanyingconsolidated balance sheet as of December 31, 2018. The operating results and cash flows of Lear FAWSN are included in the accompanying consolidatedfinancial statements from the effective date of the amended joint venture agreement and are reflected in the Company’s E-Systems segment.A summary of the fair value of the assets acquired and liabilities assumed in conjunction with the transaction is shown below (in millions):Property, plant and equipment$11.0Other assets and liabilities assumed, net5.7Goodwill22.4Intangible assets7.5 $46.6Recognized goodwill is attributable to the assembled workforce, expected synergies and other intangible assets that do not qualify for separate recognition.Intangible assets consist of amounts recognized for the fair value of customer-based assets and were based on an independent appraisal. Customer-based assetsinclude Lear FAWSN's established relationships with its customers and the ability of these customers to generate future economic profits for the Company. It iscurrently estimated that these intangible assets have a weighted average useful life of approximately ten years.As of the effective date of the transaction, the fair value of the Company’s previously held equity interest in Lear FAWSN was $23.0 million, and the fair value ofthe noncontrolling interest in Lear FAWSN was $14.0 million. As a result of valuing the Company’s previously held equity interest in Lear FAWSN at fair value,the Company recognized a gain of $10.0 million, which is included in other (income) expense, net in the accompanying consolidated statement of income for theyear ended December 31, 2018.The pro forma effects of this consolidation would not materially impact the Company’s reported results for any period presented.For further information related to acquired assets measured at fair value, see Note 15, "Financial Instruments."73Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)2017In September 2017, the Company gained control of Shanghai Lear STEC Automotive Parts Co., Ltd. ("Lear STEC") by amending the joint venture agreement toeliminate the substantive participating rights of its joint venture partner. Prior to the amendment, Lear STEC was accounted for under the equity method. Thistransaction was accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in the accompanyingconsolidated balance sheets as of December 31, 2019 and 2018. The operating results and cash flows of Lear STEC are included in the accompanying consolidatedfinancial statements from the date of the amended joint venture agreement and are reflected in the Company’s E-Systems segment.A summary of the fair value of the assets acquired and liabilities assumed in conjunction with the transaction is shown below (in millions):Property, plant and equipment$16.2Other assets and liabilities assumed, net42.7Goodwill94.1Intangible assets66.0 $219.0Recognized goodwill is attributable to the assembled workforce, expected synergies and other intangible assets that do not qualify for separate recognition.Intangible assets consist of amounts recognized for the fair value of customer-based assets and were based on an independent appraisal. Customer-based assetsinclude Lear STEC’s established relationships with its customers and the ability of these customers to generate future economic profits for the Company. It iscurrently estimated that these intangible assets have a weighted average useful life of approximately twelve years.As of the date of the transaction, the fair value of the Company’s previously held equity interest in Lear STEC was $94.0 million, and the fair value of thenoncontrolling interest in Lear STEC was $125.0 million. As a result of valuing the Company’s previously held equity interest in Lear STEC at fair value, theCompany recognized a gain of $54.2 million which is included in other (income) expense, net in the accompanying consolidated statements of income for the yearended December 31, 2017.In connection with the transaction, the noncontrolling interest holder obtained the option, which is embedded in the noncontrolling interest, to require the Companyto purchase or redeem the 45% noncontrolling interest based on a pre-determined earnings multiple formula. In accordance with GAAP, the Company recordsredeemable noncontrolling interests at the greater of (1) the initial carrying amount adjusted for the noncontrolling interest holder’s share of total comprehensiveincome 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 redemption adjustments are recorded as an increase to redeemable noncontrolling interests, with an offsetting adjustment to retained earnings. Theredeemable noncontrolling interest is classified in mezzanine equity in the accompanying consolidated balance sheets as of December 31, 2019 and 2018.Redemption value of a noncontrolling interest in excess of carrying value represents a dividend distribution that is different from dividend distributions to othercommon stockholders. Therefore, periodic redemption adjustments recorded in excess of carrying value are reflected as a reduction to the income available tocommon stockholders in the computation of earnings per share. Redeemable noncontrolling interest of $118.4 million and $158.1 million related to Lear STEC isreflected in the Company's consolidated balance sheets as of December 31, 2019 and 2018, respectively. These amounts include noncontrolling interest redemptionadjustments of ($37.0) million and $10.4 million, representing the difference between the redemption value and carrying value, for the years ended December 31,2019 and 2018, respectively.Lear STEC provides wire harnesses to SAIC Motor Corporation Limited and its joint ventures with both North American and European automotive manufacturers.The pro forma effects of this consolidation would not materially impact the Company’s reported results for any period presented.For further information related to acquired assets measured at fair value, see Note 15, "Financial Instruments."74Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)(6) DebtShort-Term BorrowingsThe Company utilizes uncommitted lines of credit as needed for its short-term working capital fluctuations. As of December 31, 2019 and 2018, the Company hadlines of credit from banks totaling $94.6 million and $88.9 million, respectively. As of December 31, 2019 and 2018, the Company had short-term debt balancesoutstanding related to draws on the lines of credit of $19.2 million and $9.9 million, respectively.Long-Term DebtA summary of long-term debt, net of unamortized debt issuance costs and unamortized original issue discount, and the related weighted average interest rates isshown below (in millions):December 31,2019Debt InstrumentLong-Term Debt Unamortized DebtIssuance Costs UnamortizedOriginal IssueDiscount Long-TermDebt, Net WeightedAverageInterestRateCredit Agreement — Term Loan Facility$234.4 $(1.0) $— $233.4 2.88%5.25% Senior Notes due 2025 (the "2025 Notes")650.0 (4.2) — 645.8 5.25%3.8% Senior Notes due 2027 (the "2027 Notes")750.0 (4.7) (4.1) 741.2 3.885%4.25% Senior Notes due 2029 (the "2029 Notes")375.0 (2.9) (1.1) 371.0 4.288%5.25% Senior Notes due 2049 (the "2049 Notes")325.0 (3.3) (5.3) 316.4 5.363% $2,334.4 $(16.1) $(10.5) 2,307.8 Less — Current portion (14.1) Long-term debt $2,293.7 December 31,2018Debt InstrumentLong-Term Debt Unamortized DebtIssuance Costs UnamortizedOriginal IssueDiscount Long-TermDebt, Net WeightedAverageInterestRateCredit Agreement — Term Loan Facility$242.2 $(1.5) $— $240.7 3.92%5.375% Senior Notes due 2024 (the "2024 Notes")325.0 (2.0) — 323.0 5.375%2025 Notes650.0 (5.0) — 645.0 5.25%2027 Notes750.0 (5.3) (4.6) 740.1 3.885%Other5.1 — — 5.1 N/A $1,972.3 $(13.8) $(4.6) 1,953.9 Less — Current portion (12.9) Long-term debt $1,941.0 Senior NotesThe issuance, maturity and interest payment dates of the Company's senior unsecured 2025 Notes, 2027 Notes, 2029 Notes and 2049 Notes (collectively, the"Notes") are as shown below:NoteIssuance Date Maturity Date Interest Payment Dates2025 NotesNovember 2014 January 15, 2025 January 15 and July 152027 NotesAugust 2017 September 15, 2027 March 15 and September 152029 NotesMay 2019 May 15, 2029 May 15 and November 152049 NotesMay 2019 May 15, 2049 May 15 and November 1575Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)2025 NotesThe Company may redeem the 2025 Notes, in whole or in part, on or after January 15, 2020, at the redemption prices set forth below, plus accrued and unpaidinterest to the redemption date.Twelve-Month Period Commencing January 15,2025 Notes2020102.625%2021101.750%2022100.875%2023 and thereafter100.000%2027 NotesIn 2017, the Company issued $750.0 million in aggregate principal amount at maturity of 2027 Notes at a stated coupon rate of 3.8%. The 2027 Notes were pricedat 99.294% of par, resulting in a yield to maturity of 3.885%. The proceeds from the offering of $744.7 million, after original issue discount, were used to redeemthe outstanding $500.0 million in aggregate principal amount of the 2023 Notes at a redemption price equal to 100% of the aggregate principal amount thereof,plus a "make-whole" premium of $17.0 million, as well as to refinance a portion of the Company's $500.0 million prior term loan facility (see "— CreditAgreement" below). In connection with these transactions, the Company recognized a loss of $21.2 million on the extinguishment of debt and paid related issuancecosts of $6.0 million.Prior to June 15, 2027, the Company, at its option, may redeem some or all of the 2027 Notes at a redemption price equal to 100% of the principal amount thereof,plus a "make-whole" premium as of, and accrued and unpaid interest to, the redemption date. At any time on or after June 15, 2027, but prior to the maturity dateof September 15, 2027, the Company, at its option, may redeem some or all of the 2027 Notes at a redemption price equal to 100% of the principal amount thereof,plus accrued and unpaid interest to the redemption date.2029 and 2049 NotesIn 2019, the Company issued $375.0 million in aggregate principal amount at maturity of 2029 Notes and $325.0 million in aggregate principal amount at maturityof 2049 Notes. The 2029 Notes have a stated coupon rate of 4.25% and were priced at 99.691% of par, resulting in a yield to maturity of 4.288%. The 2049 Noteshave a stated coupon rate of 5.25% and were priced at 98.32% of par, resulting in a yield to maturity of 5.363%.The net proceeds from the offering were $693.3 million after original issue discount. The proceeds were used to redeem the $325.0 million in aggregate principalamount of the 2024 Notes at a redemption price equal to 102.688% of the principal amount of such 2024 Notes, plus accrued interest, as well as to finance theacquisition of Xevo (Note 3, "Acquisitions") and for general corporate purposes.In connection with these transactions, the Company recognized a loss of $10.6 million on the extinguishment of debt and paid related issuance costs of $6.5million.CovenantsSubject to certain exceptions, the indentures governing the Notes contain 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 providefor customary events of default. As of December 31, 2019, the Company was in compliance with all covenants under the indentures governing the Notes.Credit AgreementIn 2017, the Company entered into an unsecured credit agreement (the "Credit Agreement") consisting of a $1.75 billion revolving credit facility (the "RevolvingCredit Facility") and a $250.0 million term loan facility (the "Term Loan Facility"). The maturity date of the Revolving Credit Facility is August 8, 2023, and thematurity date of the Term Loan Facility is August 8, 2022. In connection with this transaction, the Company borrowed $250.0 million under the Term LoanFacility and paid related issuance costs of $5.7 million. At the same time, the Company terminated its previously existing credit agreement, which consisted of a$1.25 billion revolving credit facility and a $500 million term loan facility, and repaid amounts outstanding under the term loan facility of $453.1 million.76Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)In 2019, aggregate borrowings and repayments under the Revolving Credit Facility were $30.0 million. In 2018, there were no borrowings or repayments under theRevolving Credit Facility. In 2017, aggregate borrowings and repayments under the Revolving Credit Facility and prior revolving credit facility were $109.5million.As of December 31, 2019 and 2018, there were no borrowings outstanding under the Revolving Credit Facility.In 2019, 2018 and 2017, the Company made required principal payments under the Term Loan Facility of $7.8 million, $6.3 million and $1.6 million, respectively.In addition, in 2017, the Company made required principal payments under the prior term loan facility of $15.6 million, as well as a payment of $453.1 million inconnection with the Credit Agreement described above.Advances under the Revolving Credit Facility and the Term Loan Facility generally bear interest based on (i) the Eurocurrency Rate (as defined in the CreditAgreement) or (ii) the Base Rate (as defined in the Credit Agreement) plus a margin, determined in accordance with a pricing grid. As of December 31, 2019, theranges and rates are as follows (in percentages): Eurocurrency Rate Base Rate Minimum Maximum Rate as ofDecember 31, 2019 Minimum Maximum Rate as ofDecember 31, 2019Revolving Credit Facility 1.00% 1.60% 1.10% 0.00% 0.60% 0.10%Term Loan Facility 1.125% 1.90% 1.25% 0.125% 0.90% 0.25%A facility fee, which ranges from 0.125% to 0.30% of the total amount committed under the Revolving Credit Facility, is payable quarterly.CovenantsThe Credit Agreement contains various customary representations, warranties and covenants by the Company, including, without limitation, (i) covenantsregarding maximum leverage, (ii) limitations on fundamental changes involving the Company or its subsidiaries and (iii) limitations on indebtedness and liens. Asof December 31, 2019, the Company was in compliance with all covenants under the Credit Agreement.OtherAs of December 31, 2018, other long-term debt consisted of amounts outstanding under capital leases.Scheduled MaturitiesAs of December 31, 2019, scheduled maturities related to the Credit Agreement — Term Loan Facility for the five succeeding years, as of the date of this Report,are shown below (in millions):2020$14.1202114.12022206.22023—2024—77Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)(7) LeasesRight-of-Use Assets and Lease ObligationsThe Company has operating leases for production, office and warehouse facilities, manufacturing and office equipment and vehicles. Operating lease assets andobligations included in the accompanying consolidated balance sheet are shown below (in millions):For the year ended December 31,2019Right-of-use assets under operating leases: Other long-term assets$527.0Lease obligations under operating leases: Accrued liabilities$113.9Other long-term liabilities422.4 $536.3Maturities of lease obligations as of December 31, 2019, are shown below (in millions):2020$131.32021108.4202284.0202364.5202454.1Thereafter173.4Total undiscounted cash flows615.7Less: Imputed interest(79.4)Lease obligations under operating leases$536.3The Company has entered into two lease contracts, of which one is expected to commence in the first quarter of 2020 with a lease term of approximately sevenyears, and the other is expected to commence in the third quarter of 2021 with a lease term of approximately ten years. The aggregate right-of-use asset and relatedlease obligation are expected to be $62.0 million.In 2019, the Company recognized an impairment charge of $0.8 million related to its right-of-use assets in conjunction with its restructuring actions (Note 4,"Restructuring").Cash flow information related to operating leases is shown below (in millions):For the year ended December 31,2019Non-cash activity: Right-of-use assets obtained in exchange for operating lease obligations$214.3Operating cash flows: Cash paid related to operating lease obligations$141.8Lease expense included in the accompanying consolidated statement of income is shown below (in millions):For the year ended December 31,2019Operating lease expense$140.6Short-term lease expense17.0Variable lease expense6.5Total lease expense$164.1The Company's short-term lease expense excludes leases with a duration of one month or less, as permitted by the standard.Variable lease expense includes payments based on performance or usage, as well as changes to index and rate-based lease payments. Additionally, the Companyevaluated its supply contracts with its customers and concluded that variable lease (income) expense in these arrangements is not material.78Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)For the years ended December 31, 2018 and 2017, the Company recorded rent expense of $163.8 million and $144.7 million, respectively.The weighted average lease term and discount rate for operating leases as of December 31, 2019, are shown below:Weighted average remaining lease term (in years)7.0Weighted average discount rate4.0%The Company has entered into certain finance lease agreements which are not material to the consolidated financial statements (Note 6, "Debt").(8) Income TaxesA summary of consolidated income before provision for income taxes and equity in net income of affiliates and the components of provision for income taxes isshown below (in millions):For the year ended December 31,2019 2018 2017Consolidated income before provision for income taxes and equity in net income of affiliates: Domestic$317.4 $726.2 $449.5Foreign636.2 812.2 1,077.2 $953.6 $1,538.4 $1,526.7Domestic (benefit) provision for income taxes: Current provision$24.2 $35.0 $25.8Deferred (benefit) provision(52.6) 91.5 (46.1)Total domestic (benefit) provision(28.4) 126.5 (20.3)Foreign provision for income taxes: Current provision160.1 190.2 253.0Deferred (benefit) provision14.4 (4.8) (35.2)Total foreign provision174.5 185.4 217.8Provision for income taxes$146.1 $311.9 $197.5The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate from 35% to 21%beginning in 2018, required companies to pay a one-time transition tax on all offshore earnings that were previously tax deferred and created new taxes on certainforeign sourced earnings. In March 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-05, "Income Taxes - Amendments to SECParagraphs Pursuant to SEC Staff Accounting Bulletin No. 118." The guidance provided for a provisional one-year measurement period for entities to finalize theiraccounting for certain tax effects related to the Act. Accordingly, for the year ended December 31, 2018, the Company recognized a favorable adjustment to the2017 income tax expense of $5.3 million related to the remeasurement of the December 31, 2017 deferred tax balances, the one-time transition tax and numerousother items included in the Act. The Company also analyzed the impact of several new provisions of the Act that became effective as of January 1, 2018, such asglobal intangible low-tax income ("GILTI") provision, foreign-derived intangible income ("FDII") deduction, a new minimum tax related to payments to foreignsubsidiaries and affiliates known as base erosion anti-abuse tax ("BEAT"), interest expense limitations under Internal Revenue Code ("IRC") section 163(j),executive compensation limitations under IRC section 162(m) and various other provisions.The domestic (benefit) provision includes withholding taxes related to dividends and royalties paid by the Company’s foreign subsidiaries, as well as state andlocal taxes. In 2019, 2018 and 2017, the foreign deferred (benefit) provision includes the benefit of prior unrecognized net operating loss carryforwards of $1.8million, $7.1 million and $11.5 million, respectively.79Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)A summary of the differences between the provision for income taxes calculated at the United States federal statutory income tax rate of 21% in 2019 and 2018and 35% in 2017 and the consolidated provision for income taxes is shown below (in millions):For the year ended December 31,2019 2018 2017Consolidated income before provision for income taxes and equity in net income of affiliatesmultiplied by the United States federal statutory income tax rate$200.2 $323.1 $534.4Differences in income taxes on foreign earnings, losses and remittances13.8 56.6 (128.9)Valuation allowance adjustments1.2 (52.4) (56.8)Research and development and other tax credits(40.8) (9.9) (26.8)Foreign-derived intangible income ("FDII") deduction(29.3) (27.6) —U.S. expenses apportioned to GILTI and foreign branches (1)10.4 17.6 —Tax audits and assessments0.4 6.9 (1.4)Change in the tax status of certain affiliates(18.1) — —Transition tax on accumulated foreign earnings— (15.1) 131.0U.S. tax rate change and other tax reform items— 9.8 42.5Repatriation of certain foreign earnings— — (289.7)Other8.3 2.9 (6.8)Provision for income taxes$146.1 $311.9 $197.5(1)Reflects the U.S. tax impact of apportioning U.S. expenses against the GILTI and foreign branch baskets in calculating the foreign tax credit limitation resulting in no tax benefit for theseexpenses due to the Company’s excess foreign tax credit position in the GILTI basket for 2019 and 2018 and foreign branch basket for 2018.In 2019, the Company completed a U.S. research and development ("R&D") tax credit study for the years 2013 to 2018, the results of which were accepted by theInternal Revenue Service and pursuant to which the Company recognized a tax benefit of $28.6 million. The tax benefit is reflected in the table above in researchand development and other tax credits.For the years ended December 31, 2019, 2018 and 2017, income in foreign jurisdictions with tax holidays was $87.0 million, $107.1 million and $124.1 million,respectively. Such tax holidays generally expire from 2020 through 2027.Deferred income taxes represent temporary differences in the recognition of certain items for financial reporting and income tax purposes. A summary of thecomponents of the net deferred income tax asset is shown below (in millions):December 31,2019 2018Deferred income tax assets (liabilities): Tax loss carryforwards$419.7 $420.2Tax credit carryforwards294.0 260.6Retirement benefit plans59.1 54.2Accrued liabilities136.1 136.9Self-insurance reserves5.8 5.3Current asset basis differences43.7 37.8Long-term asset basis differences(65.4) (77.7)Deferred compensation27.2 35.9Recoverable customer engineering, development and tooling(10.5) 0.1Undistributed earnings of foreign subsidiaries(76.7) (75.0)Derivative instruments and hedging activities(5.2) 0.3Other(5.8) (2.7) 822.0 795.9Valuation allowance(344.8) (350.4)Net deferred income tax asset$477.2 $445.580Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)As of December 31, 2019 and 2018, the valuation allowance with respect to the Company’s deferred tax assets was $344.8 million and $350.4 million,respectively, a net decrease of $5.6 million.Concluding that a valuation allowance is not required is difficult when there is significant negative evidence, such as cumulative losses in recent years, which isobjective and verifiable. When measuring cumulative losses in recent years, the Company uses a rolling three-year period of pretax book income, adjusted forpermanent differences between book and taxable income and certain other items. As of December 31, 2019, the Company continues to maintain a valuationallowance of $11.8 million with respect to certain of its U.S. deferred tax assets that, due to their nature, are not likely to be realized. In addition, the Companycontinues to maintain a valuation allowance of $333.0 million with respect to its deferred tax assets in several international jurisdictions.The classification of the net deferred income tax asset is shown below (in millions):December 31,2019 2018Long-term deferred income tax assets$563.8 $528.8Long-term deferred income tax liabilities(86.6) (83.3)Net deferred income tax asset$477.2 $445.5As of December 31, 2019, deferred income taxes have not been provided on the undistributed earnings of the Company’s foreign subsidiaries since these earningswill not be taxable upon repatriation to the United States. These earnings will be primarily treated as previously taxed income from either the one-time transitiontax or GILTI, or they will be offset with a 100% dividend received deduction. However, the Company continues to provide a deferred tax liability for foreignwithholding tax that will be incurred with respect to the undistributed foreign earnings that are not permanently reinvested.As of December 31, 2019, the Company had tax loss carryforwards of $1.8 billion. Of the total tax loss carryforwards, $1.5 billion have no expiration date, and$265.0 million expire between 2020 and 2036. In addition, the Company had tax credit carryforwards of $294.0 million, comprised principally of U.S. foreign taxcredits of $137.0 million that expire between 2023 and 2028, U.S. research and development credits of $110.0 million that expire between 2024 and 2039 andother tax credits primarily in international jurisdictions of $47.0 million that generally expire between 2020 and 2037.On January 1, 2018, the Company adopted ASU 2016-16, "Income Taxes - Intra-Entity Transfers of Assets Other than Inventory." The new standard requires therecognition of the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the sale or transfer occurs. Thestandard also requires modified retrospective adoption. Accordingly, the Company recognized a deferred tax asset of $2.3 million and a corresponding credit toretained earnings in conjunction with the adoption. The effects of adopting the other provisions of ASU 2016-16 were not significant.On January 1, 2017, the Company adopted ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." The new standard requires that the taximpact related to the difference between share-based compensation for book and tax purposes be recognized as income tax benefit or expense in the Company’sconsolidated statement of income in the reporting period in which such awards vest. The standard also required a modified retrospective adoption for previouslyunrecognized excess tax benefits. Accordingly, the Company recognized a deferred tax asset of $52.9 million and a corresponding credit to retained earnings inconjunction with the adoption. The effects of adopting the other provisions of ASU 2016-09 were not significant.As of December 31, 2019, the Company’s gross unrecognized tax benefits were $31.6 million (excluding interest and penalties), of which $0.7 million is recordedin other current liabilities and $30.9 million is recorded in other long-term liabilities in the accompanying consolidated balance sheet. As of December 31, 2018,the Company’s gross unrecognized tax benefits were $36.7 million (excluding interest and penalties), all of which is recorded in other long-term liabilities in theaccompanying consolidated balance sheet. If recognized, all of the Company’s gross unrecognized tax benefits would affect the Company’s effective tax rate.81Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)A summary of the changes in gross unrecognized tax benefits is shown below (in millions):For the year ended December 31,2019 2018 2017Balance at beginning of period$36.7 $33.2 $29.5Additions (reductions) based on tax positions related to current year(0.3) 7.9 5.4Additions (reductions) based on tax positions related to prior years2.0 0.1 (0.3)Settlements(3.7) — (0.8)Statute expirations(2.8) (2.7) (2.2)Foreign currency translation(0.3) (1.8) 1.6Balance at end of period$31.6 $36.7 $33.2The Company recognizes interest and penalties with respect to unrecognized tax benefits as income tax expense. As of December 31, 2019 and 2018, the Companyhad recorded gross reserves of $11.5 million and $11.8 million, respectively, related to interest and penalties, all of which, if recognized, would affect theCompany’s effective tax rate.The Company operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited or subject to review by both domestic and foreigntax authorities. During the next twelve months, it is reasonably possible that, as a result of audit settlements, the conclusion of current examinations and theexpiration of the statute of limitations in multiple jurisdictions, the Company may decrease the amount of its gross unrecognized tax benefits by $5.8 million, all ofwhich, if recognized, would affect the Company’s effective tax rate. The gross unrecognized tax benefits subject to potential decrease involve issues related totransfer pricing and various other tax items in multiple jurisdictions. However, as a result of ongoing examinations, tax proceedings in certain countries, additionsto the gross unrecognized tax benefits for positions taken and interest and penalties, if any, arising in 2020, it is not possible to estimate the potential net increase ordecrease to the Company’s gross unrecognized tax benefits during the next twelve months.The Company considers its significant tax jurisdictions to include China, Germany, Italy, Mexico, Morocco, Poland, Spain, the United Kingdom and the UnitedStates. The Company or its subsidiaries generally remain subject to income tax examination in certain U.S. state and local jurisdictions for years after 2012.Further, the Company or its subsidiaries remain subject to income tax examination in Spain for years after 2005, in Mexico for years after 2006, in Morocco foryears after 2014, in Italy and Poland for years after 2013, in China and the United Kingdom for years after 2015 and in the United States generally for years after2017.(9) Pension and Other Postretirement Benefit PlansThe Company has noncontributory defined benefit pension plans covering certain domestic employees and certain employees in foreign countries, principallyCanada. The Company’s salaried pension plans provide benefits based on final average earnings formulas. The Company’s hourly pension plans provide benefitsunder flat benefit and cash balance formulas. The Company also has contractual arrangements with certain employees which provide for supplemental retirementbenefits. In general, the Company’s policy is to fund its pension benefit obligation based on legal requirements, tax and liquidity considerations and local practices.The Company has postretirement benefit plans covering certain domestic and Canadian retirees. The Company’s postretirement benefit plans generally provide forthe continuation of medical benefits for eligible participants who completed a specified number of years of service and retired from the Company at age 55 orolder. The Company does not fund its postretirement benefit obligation. Rather, payments are made as costs are incurred by covered retirees.82Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Obligation and Funded StatusA reconciliation of the change in benefit obligation and the change in plan assets for the years ended December 31, 2019 and 2018, is shown below (in millions): Pension Other Postretirement December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 U.S. Foreign U.S. Foreign U.S. Foreign U.S. ForeignChange in benefit obligation: Benefit obligation at beginning of period$438.0 $437.1 $558.0 $490.6 $52.4 $34.3 $56.6 $41.2Service cost0.1 6.3 0.1 6.9 — 0.3 — 0.4Interest cost18.6 14.7 19.8 14.7 2.1 1.3 1.9 1.4Amendments and settlements— — — 0.7 — — — —Actuarial (gain) loss63.0 55.8 (43.1) (21.8) 4.5 0.4 (1.8) (3.9)Benefits paid(18.9) (21.5) (23.6) (21.3) (3.6) (1.3) (4.3) (1.6)Annuity purchase (1)— — (73.2) — — — — —Curtailment— (2.4) — 0.4 — (10.9) — —Translation adjustment— 14.3 — (33.1) — 1.5 — (3.2)Benefit obligation at end of period$500.8 $504.3 $438.0 $437.1 $55.4 $25.6 $52.4 $34.3 Pension Other Postretirement December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 U.S. Foreign U.S. Foreign U.S. Foreign U.S. ForeignChange in plan assets: Fair value of plan assets at beginning of period$330.6 $351.8 $438.2 $406.4 $— $— $— $—Actual return on plan assets61.5 42.3 (13.7) (11.7) — — — —Employer contributions3.4 6.6 2.9 7.3 3.6 1.3 4.3 1.6Benefits paid(18.9) (21.5) (23.6) (21.3) (3.6) (1.3) (4.3) (1.6)Annuity purchase (1)— — (73.2) — — — — —Translation adjustment— 17.6 — (28.9) — — — —Fair value of plan assets at end of period$376.6 $396.8 $330.6 $351.8 $— $— $— $— Funded status$(124.2) $(107.5) $(107.4) $(85.3) $(55.4) $(25.6) $(52.4) $(34.3) Pension Other Postretirement December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 U.S. Foreign U.S. Foreign U.S. Foreign U.S. ForeignAmounts recognized in the consolidated balance sheet: Other long-term assets$0.1 $23.8 $— $29.0 $— $— $— $—Accrued liabilities(2.6) (3.3) (2.3) (2.9) (3.9) (1.4) (3.9) (1.5)Other long-term liabilities(121.7) (128.0) (105.1) (111.4) (51.5) (24.2) (48.5) (32.8)(1)See Annuity Purchase below for further discussion.83Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Accumulated Benefit ObligationAs of December 31, 2019 and 2018, the accumulated benefit obligation for all of the Company’s pension plans was $990.3 million and $864.1 million,respectively.As of December 31, 2019 and 2018, the majority of the Company's pension plans had accumulated benefit obligations in excess of plan assets. Information relatedto pension plans with accumulated benefit obligations in excess of plan assets is shown below (in millions):December 31,2019 2018Projected benefit obligation$726.3 $635.0Accumulated benefit obligation711.5 624.0Fair value of plan assets470.8 414.2Annuity PurchaseIn 2018, the Company entered into a purchase agreement for group annuity contracts ("Annuity Purchase") for certain terminated vested plan participants of itsU.S. defined benefit pension plans. The transaction reduces the Company's future administrative costs and risks related to its U.S. defined benefit pension plansand irrevocably relieves the Company of responsibility for the pension benefit obligation for those plan participants. In connection with the Annuity Purchase,payments of $73.2 million were distributed from existing defined benefit pension plan assets, and the Company recognized pension settlement losses of $5.4million.Other Comprehensive Income (Loss) and Accumulated Other Comprehensive LossPretax amounts recognized in other comprehensive income (loss) for the years ended December 31, 2019 and 2018, are shown below (in millions): Pension Other Postretirement December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 U.S. Foreign U.S. Foreign U.S. Foreign U.S. ForeignActuarial gains (losses) recognized: Reclassification adjustments$1.8 $7.8 $2.0 $6.2 $(2.3) $— $(2.2) $0.2Actuarial gain (loss) arising during theperiod(21.7) (33.8) 2.1 (11.2) (4.5) — 1.8 3.9Effect of curtailment— 0.1 — — — — — —Effect of settlements0.1 — 5.7 — — — — —Prior service credit recognized: Reclassification adjustments— — — — (0.2) (0.2) (0.2) (0.3)Prior service cost arising during the period— — — (0.6) — — — —Translation adjustment— (3.8) — 7.4 — — — 0.4 $(19.8) $(29.7) $9.8 $1.8 $(7.0) $(0.2) $(0.6) $4.2In addition, the Company recognized tax (benefit) expense in other comprehensive income (loss) related to its defined benefit plans of ($13.7) million, $3.0 millionand $1.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.Pretax amounts recorded in accumulated other comprehensive loss not yet recognized in net periodic benefit cost as of December 31, 2019 and 2018, are shownbelow (in millions): Pension Other Postretirement December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 U.S. Foreign U.S. Foreign U.S. Foreign U.S. ForeignNet unrecognized actuarial gain (loss)$(105.9) $(135.9) $(86.1) $(106.8) $19.6 $(0.9) $26.6 $(0.9)Prior service (cost) credit— (1.2) — (0.6) 1.9 0.1 1.9 0.3 $(105.9) $(137.1) $(86.1) $(107.4) $21.5 $(0.8) $28.5 $(0.6)84Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Pretax amounts recorded in accumulated other comprehensive loss as of December 31, 2019, that are expected to be recognized as components of net periodicbenefit cost in the year ending December 31, 2020, are shown below (in millions): Pension Other Postretirement U.S. Foreign U.S. ForeignNet unrecognized actuarial gain (loss)$(2.3) $(4.7) $1.6 $—Prior service credit— — 0.2 — $(2.3) $(4.7) $1.8 $—The Company uses the corridor approach when amortizing actuarial gains and losses. Under the corridor approach, net unrecognized actuarial gains and losses inexcess of 10% of the greater of i) the projected benefit obligation or ii) the fair value of plan assets are amortized over future periods. For plans with little to noactive participants, the amortization period is the remaining average life expectancy of the participants. For plans with active participants, the amortization periodis the remaining average service period of the active participants. The amortization periods range from 5 to 36 years for the Company's defined benefit pensionplans and from 2 to 18 years for the Company's other postretirement benefit plans.Net Periodic Pension and Other Postretirement Benefit Cost (Credit)The components of the Company’s net periodic pension benefit cost are shown below (in millions): Year Ended December 31, 2019 2018 2017PensionU.S. Foreign U.S. Foreign U.S. ForeignService cost$0.1 $6.3 $0.1 $6.9 $0.1 $7.3Interest cost18.6 14.7 19.8 14.7 21.8 15.0Expected return on plan assets(20.2) (20.9) (27.3) (23.0) (24.0) (22.9)Amortization of actuarial loss1.8 7.8 2.0 6.2 2.6 5.1Curtailment (gain) loss— (2.3) — 0.4 — 0.9Settlement losses0.1 — 5.7 — 0.2 0.8Net periodic benefit cost$0.4 $5.6 $0.3 $5.2 $0.7 $6.2The components of the Company’s net periodic other postretirement benefit cost (credit) are shown below (in millions): Year Ended December 31, 2019 2018 2017Other PostretirementU.S. Foreign U.S. Foreign U.S. ForeignService cost$— $0.3 $— $0.4 $0.1 $0.5Interest cost2.1 1.3 1.9 1.4 2.4 1.5Amortization of actuarial (gain) loss(2.3) — (2.2) 0.2 (2.6) 0.3Amortization of prior service credit(0.2) (0.2) (0.2) (0.3) — (0.4)Curtailment gain— (10.6) — — — —Special termination benefits— — — — — 0.1Net periodic benefit cost (credit)$(0.4) $(9.2) $(0.5) $1.7 $(0.1) $2.0For the year ended December 31, 2019, the Company recognized an other postretirement curtailment gain of $10.6 million related to its restructuring actions(Note 4, "Restructuring").For the year ended December 31, 2018, the Company recognized pension settlement losses of $5.4 million related to its Annuity Purchase described above.For the year ended December 31, 2017, the Company recognized pension curtailment and settlement losses of $1.7 million related to its restructuring actions(Note 4, "Restructuring").Accounting Standards UpdateOn January 1, 2018, the Company adopted ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement BenefitCost." The new standard requires the classification of the non-service cost components of net85Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)periodic benefit cost in other (income) expense, net and the classification of the service cost component in the same line item as other current employeecompensation costs. The provisions of the standard were applied retrospectively. As a result, the consolidated statement of income for the year ended December31, 2016, was restated to reflect the non-cash settlement charge of $34.2 million related to the Company's Lump-Sum Payout as other (income) expense, net withcorresponding decreases in cost of sales of $20.5 million and selling, general and administrative expenses of $13.7 million. The adoption of ASU 2017-07 did notimpact the Company's financial statements for the year ended December 31, 2017.AssumptionsThe weighted average actuarial assumptions used in determining the benefit obligations are shown below: Pension Other PostretirementDecember 31,2019 2018 2019 2018Discount rate: Domestic plans3.4% 4.3% 3.2% 4.2%Foreign plans2.6% 3.4% 3.1% 3.8%Rate of compensation increase: Foreign plans3.7% 3.4% N/A N/AThe weighted average actuarial assumptions used in determining the net periodic benefit cost (credit) are shown below:For the year ended December 31,2019 2018 2017Pension Discount rate: Domestic plans4.3% 3.6% 4.1%Foreign plans3.4% 3.1% 3.3%Expected return on plan assets: Domestic plans6.3% 6.5% 7.3%Foreign plans5.9% 5.9% 6.3%Rate of compensation increase: Foreign plans3.4% 3.3% 3.3%Other postretirement Discount rate: Domestic plans4.2% 3.5% 3.9%Foreign plans3.8% 3.5% 3.9%The expected return on plan assets is determined based on several factors, including adjusted historical returns, historical risk premiums for various asset classesand target asset allocations within the portfolio. Adjustments made to the historical returns are based on recent return experience in the equity and fixed incomemarkets and the belief that deviations from historical returns are likely over the relevant investment horizon.Healthcare Trend RateAssumed healthcare cost trend rates have a significant effect on the amounts reported for the postretirement benefit plans. As of December 31, 2019, the sensitivityto a 100 basis point ("bp") change in the assumed healthcare cost trend rates is shown below (in millions): Postretirement BenefitObligation Net Periodic PostretirementCost100 bp increase in healthcare cost trend rates$9.7 $0.5100 bp decrease in healthcare cost trend rates$(8.2) $(0.4)86Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)The assumed healthcare cost trend rates used to measure the postretirement benefit obligation as of December 31, 2019, are shown below: U.S. Plans Foreign PlansInitial healthcare cost trend rate6.8% 4.7%Ultimate healthcare cost trend rate4.5% 4.0%Year ultimate healthcare cost trend rate achieved2028 2040Plan AssetsFair value measurements and the related valuation techniques and fair value hierarchy level for the Company’s pension plan assets measured at fair value on arecurring basis as of December 31, 2019 and 2018, are shown below (in millions): December 31, 2019 Total Level 1 Level 2 Level 3 ValuationTechniqueU.S. Plans: Equity securities - Equity funds$103.6 $81.5 $22.1 $— MarketCommon stock77.4 45.5 31.9 — MarketFixed income - Fixed income funds76.0 76.0 — — MarketCorporate bonds53.9 — 53.9 — MarketGovernment obligations7.3 — 7.3 — MarketPreferred stock1.2 0.6 0.6 — MarketCash and short-term investments14.0 8.4 5.6 — MarketAssets at fair value333.4 $212.0 $121.4 $— Investments measured at net asset value - Alternative investments43.2 Assets at fair value$376.6 Foreign Plans: Equity securities - Equity funds$148.4 $— $148.4 $— MarketCommon stock66.7 66.7 — — MarketFixed income - Fixed income funds45.6 — 45.6 — MarketCorporate bonds31.5 — 31.5 — MarketGovernment obligations55.8 — 55.8 — MarketCash and short-term investments10.9 7.7 3.2 — MarketAssets at fair value358.9 $74.4 $284.5 $— Investments measured at net asset value - Alternative investments37.9 Assets at fair value$396.8 87Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued) December 31, 2018 Total Level 1 Level 2 Level 3 ValuationTechniqueU.S. Plans: Equity securities - Equity funds$89.1 $74.4 $14.7 $— MarketCommon stock61.2 33.6 27.6 — MarketFixed income - Fixed income funds78.6 78.6 — — MarketCorporate bonds47.7 — 47.7 — MarketGovernment obligations1.0 — 1.0 — MarketPreferred stock1.3 0.8 0.5 — MarketCash and short-term investments4.2 0.2 4.0 — MarketAssets at fair value283.1 $187.6 $95.5 $— Investments measured at net asset value - Alternative investments47.5 Assets at fair value$330.6 Foreign Plans: Equity securities - Equity funds$138.1 $— $138.1 $— MarketCommon stock58.3 58.3 — — MarketFixed income - Fixed income funds28.2 — 28.2 — MarketCorporate bonds32.9 — 32.9 — MarketGovernment obligations52.8 — 52.8 — MarketCash and short-term investments7.4 4.0 3.4 — MarketAssets at fair value317.7 $62.3 $255.4 $— Investments measured at net asset value - Alternative investments34.1 Assets at fair value$351.8 For further information on the GAAP fair value hierarchy, see Note 15, "Financial Instruments." Pension plan assets for the foreign plans relate to the Company’spension plans primarily in Canada and the United Kingdom.The Company’s investment policies incorporate an asset allocation strategy that emphasizes the long-term growth of capital. The Company believes that thisstrategy is consistent with the long-term nature of plan liabilities and ultimate cash needs of the plans. For the domestic portfolio, the Company targets a returnseeking asset (e.g., equity securities, equity mutual funds and exchange traded funds ("ETFs") and alternative investments) allocation of 45% — 65% and a riskmitigating asset (e.g., fixed income securities and fixed income mutual funds and ETFs) allocation of 35% — 55%. As the funding ratio for the defined benefitpension plans covering certain domestic employees changes, the proportion of return seeking assets will be adjusted accordingly. For the foreign portfolio, theCompany targets an equity allocation of 45% — 65% of plan assets, a fixed income allocation of 25% — 45%, an alternative investment allocation of 0% — 25%and a cash allocation of 0% — 15%. Differences in the target allocations of the domestic and foreign portfolios are reflective of differences in the underlying planliabilities. Diversification within the investment portfolios is pursued by asset class and investment management style. The investment portfolios are reviewed on aquarterly basis to maintain the desired asset allocations, given the market performance of the asset classes and investment management styles. Alternativeinvestments are redeemable in the near term, generally with 90 days notice.The Company utilizes investment management firms to manage these assets in accordance with the Company’s investment policies. Excluding alternativeinvestments, mutual funds and ETFs, retained investment managers are provided investment guidelines which restrict the use of certain assets, includingcommodities contracts, futures contracts, options, venture capital, real estate, interest-only or principal-only strips and investments in the Company’s own debt orequity. Derivative instruments88Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)are also prohibited without the specific approval of the Company. Investment managers are limited in the maximum size of individual security holdings and themaximum exposure to any one industry relative to the total portfolio. Fixed income managers are provided further investment guidelines that indicate minimumcredit ratings for debt securities and limitations on weighted average maturity and portfolio duration.The Company evaluates investment manager performance against market indices which the Company believes are appropriate to the investment management stylefor which the investment manager has been retained. The Company’s investment policies incorporate an investment goal of aggregate portfolio returns whichexceed the returns of the appropriate market indices by a reasonable spread over the relevant investment horizon.ContributionsIn 2020, the Company's minimum required contributions to its domestic and foreign pension plans are expected to be approximately $15.0 million to $20.0million. The Company may elect to make contributions in excess of minimum funding requirements in response to investment performance or changes in interestrates or when the Company believes that it is financially advantageous to do so and based on its other cash requirements. After 2020, the Company’s minimumfunding requirements will depend on several factors, including investment performance and interest rates. The Company’s minimum funding requirements mayalso be affected by changes in applicable legal requirements.Benefit PaymentsAs of December 31, 2019, the Company’s estimate of expected benefit payments in each of the five succeeding years and in the aggregate for the five yearsthereafter are shown below (in millions): Pension Other PostretirementYearU.S. Foreign U.S. Foreign2020$20.1 $22.0 $4.0 $1.4202120.9 18.8 3.9 1.5202222.6 20.2 3.9 1.5202323.3 20.0 3.9 1.5202423.3 20.7 3.9 1.5Five years thereafter126.3 122.5 17.6 7.1Multi-Employer Pension PlansThe Company currently participates in two multi-employer pension plans, the U.A.W. Labor-Management Group Pension Plan (EIN 51-6099782-001) and UNITEHere National Retirement Fund (EIN 13-6130178-001), for certain of its employees. Contributions to these plans are based on four collective bargainingagreements. One of the agreements expires on April 24, 2020, two expire on July 3, 2020, and one expires on June 30, 2022. Detailed information related to theseplans is shown below (amounts in millions): Pension Protection ActZone Status Contributions to Multiemployer Pension PlansEmployer Identification Number("EIN")December 31,2019Certification December 31,2018Certification FIP/RPPending orImplemented Surcharge Year EndedDecember 31, 2019 Year EndedDecember 31, 2018 Year EndedDecember 31, 201751-6099782-001Green Green Yes No $0.5 $0.6 $0.613-6130178-001Red Red Yes No 0.4 0.4 0.4For its plan years 2019 and 2018, the Company's contributions to the U.A.W. Labor-Management Group Pension Plan represented more than 5% of the plan's totalcontributions.Defined Contribution PlanThe Company also sponsors defined contribution plans and participates in government-sponsored programs in certain foreign countries. Contributions aredetermined as a percentage of each covered employee’s salary. For the years ended December 31, 2019, 2018 and 2017, the aggregate cost of the definedcontribution plans was $14.0 million, $13.7 million and $15.0 million, respectively.89Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)The Company also has a defined contribution retirement program for its salaried employees. Contributions to this program are determined as a percentage of eachcovered employee’s eligible compensation. For the years ended December 31, 2019, 2018 and 2017, the Company recorded expense of $17.6 million, $21.5million and $21.3 million, respectively, related to this program.(10) Revenue RecognitionA summary of the Company’s revenue by reportable operating segment and geography is shown below (in millions):For the year ended December 31,2019 Seating E-Systems TotalNorth America$6,265.2 $1,100.3 $7,365.5Europe and Africa5,620.2 2,165.3 7,785.5Asia2,710.7 1,257.6 3,968.3South America501.1 189.9 691.0 $15,097.2 $4,713.1 $19,810.3For the year ended December 31,2018 Seating E-Systems TotalNorth America$6,549.7 $1,110.9 $7,660.6Europe and Africa6,299.0 2,427.9 8,726.9Asia2,624.6 1,415.4 4,040.0South America548.6 172.4 721.0 $16,021.9 $5,126.6 $21,148.5For the year ended December 31,2017 Seating E-Systems TotalNorth America$6,695.6 $1,092.5 $7,788.1Europe and Africa5,850.4 2,286.1 8,136.5Asia2,761.7 1,033.2 3,794.9South America565.3 182.2 747.5 $15,873.0 $4,594.0 $20,467.0(11) Capital Stock, Accumulated Other Comprehensive Loss and EquityCommon StockThe Company is authorized to issue up to 300,000,000 shares of Common Stock. The Company’s Common Stock is listed on the New York Stock Exchange underthe symbol "LEA" and has the following rights and privileges:•Voting Rights – All shares of the Company’s common stock have identical rights and privileges. With limited exceptions, holders of common stock areentitled to one vote for each outstanding share of common stock held of record by each stockholder on all matters properly submitted for the vote of theCompany’s stockholders.•Dividend Rights – Subject to applicable law, any contractual restrictions and the rights of the holders of outstanding preferred stock, if any, holders ofcommon stock are entitled to receive ratably such dividends and other distributions that the Company’s Board of Directors, in its discretion, declaresfrom time to time.•Liquidation Rights – Upon the dissolution, liquidation or winding up of the Company, subject to the rights of the holders of outstanding preferred stock,if any, holders of common stock are entitled to receive ratably the assets of the Company available for distribution to the Company’s stockholders inproportion to the number of shares of common stock held by each stockholder.90Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)•Conversion, Redemption and Preemptive Rights – Holders of common stock have no conversion, redemption, sinking fund, preemptive, subscription orsimilar rights.Common Stock Share Repurchase ProgramSince the first quarter of 2011, the Company's Board of Directors has authorized $5.8 billion in share repurchases under its common stock share repurchaseprogram. As of December 31, 2019, the Company has paid $4.6 billion in aggregate for repurchases of its common stock, at an average price of $89.83 per share,excluding commissions and related fees.Share repurchases are shown below (in millions except for shares and per share amounts):For the year ended December 31,AggregateRepurchases (1) Cash paid forRepurchases Number of Shares Average Price perShare (2)2019$380.4 $384.7 2,819,081 $134.952018$705.2 $704.9 4,308,418 $163.692017$454.4 $450.5 3,014,131 $150.77(1)2018 and 2019 include purchases prior to the increased authorization.(2)Excludes commissions.As of December 31, 2019, the Company has a remaining repurchase authorization of $1.2 billion under its current common stock share repurchase program, whichwill expire on December 31, 2021. The Company may implement these share repurchases through a variety of methods, including, but not limited to, open marketpurchases, accelerated stock repurchase programs and structured repurchase transactions. The extent to which the Company will repurchase its outstandingcommon stock and the timing of such repurchases will depend upon its financial condition, prevailing market conditions, alternative uses of capital and otherfactors.In addition to shares repurchased under the Company’s common stock share repurchase program described above, the Company classified shares withheld fromthe settlement of the Company’s restricted stock unit and performance share awards to cover tax withholding requirements as common stock held in treasury in theaccompanying consolidated balance sheets as of December 31, 2019 and 2018.In 2018, the Company’s Board of Directors approved the retirement of 8 million shares of common stock held in treasury. These retired shares are reflected asauthorized, but not issued, in the accompanying consolidated balance sheets as of December 31, 2019 and 2018. The retirement of shares held in treasury resultedin a reduction in the par value of common stock, additional paid-in capital and retained earnings of $0.1 million, $155.9 million and $1,014.2 million, respectively.These reductions were offset by a corresponding reduction in shares held in treasury of $1,170.2 million. Accordingly, there was no effect on stockholders' equityas a result of this transaction.In 2017, the Company’s Board of Directors approved the retirement of 8 million shares of common stock held in treasury. These retired shares are reflected asauthorized, but not issued, in the accompanying consolidated balance sheets as of December 31, 2019 and 2018. The retirement of shares held in treasury resultedin a reduction in the par value of common stock, additional paid-in capital and retained earnings of $0.1 million, $155.9 million and $735.5 million, respectively.These reductions were offset by a corresponding reduction in shares held in treasury of $891.5 million. Accordingly, there was no effect on stockholders' equity asa result of this transaction.Quarterly DividendIn 2019, 2018 and 2017, the Company’s Board of Directors declared quarterly cash dividends of $0.75, $0.70 and $0.50, respectively, per share of common stock.Dividends declared and paid are shown below (in millions):For the year ended December 31,2019 2018 2017Dividends declared$186.3 $185.8 $140.3Dividends paid$186.3 $186.3 $137.7Dividends payable on common shares to be distributed under the Company’s stock-based compensation program and common shares contemplated as part of theCompany’s emergence from Chapter 11 bankruptcy proceedings will be paid when such common shares are distributed.91Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Accumulated Other Comprehensive LossComprehensive income is defined as all changes in the Company’s net assets except changes resulting from transactions with stockholders. It differs from netincome in that certain items recorded in equity are included in comprehensive income.A summary of changes in accumulated other comprehensive loss, net of tax is shown below (in millions):For the year ended December 31,2019 2018 2017Defined benefit plans: Balance at beginning of year$(172.8) $(184.0) $(192.8)Reclassification adjustments (net of tax expense of $2.0 million in 2019, $2.4 million in 2018 and $1.1million in 2017)5.0 9.0 4.9Other comprehensive income (loss) recognized during the period (net of tax benefit (expense) of $15.7million in 2019, ($0.6) million in 2018 and ($0.4) million in 2017)(49.8) 2.2 3.9Balance at end of year$(217.6) $(172.8) $(184.0)Derivative instruments and hedge activities: Balance at beginning of year$(9.7) $(22.9) $(45.1)Reclassification adjustments (net of tax benefit (expense) of $10.2 million in 2019, $4.1 million in 2018and ($3.1) million in 2017)(38.0) (15.2) 6.4Other comprehensive income recognized during the period (net of tax expense of $15.7 million in 2019,$7.4 million in 2018 and $12.8 million in 2017)57.5 28.4 15.8Balance at end of year$9.8 $(9.7) $(22.9)Currency translation adjustments: Balance at beginning of year$(523.3) $(306.5) $(597.7)Other comprehensive income (loss) recognized during the period (net of tax benefit of $0.9 million in2019, $2.3 million in 2018 and $— million in 2017)(41.6) (216.8) 291.2Balance at end of year$(564.9) $(523.3) $(306.5)For the years ended December 31, 2019, 2018 and 2017, other comprehensive income (loss) related to currency translation adjustments includes pretax gains(losses) related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future of ($0.5) million, ($1.2) million and $0.9million, respectively.For the year ended December 31, 2019, other comprehensive loss related to currency translation adjustments also includes net investment hedge losses of $4.4million.Redeemable Noncontrolling InterestIn accordance with GAAP, the Company records redeemable noncontrolling interests at the greater of (1) the initial carrying amount adjusted for thenoncontrolling interest holder’s share of total comprehensive income or loss and dividends ("noncontrolling interest carrying value") or (2) the redemption value asof and based on conditions existing as of the reporting date. Required redemption 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 consolidatedbalance sheets as of December 31, 2019 and 2018.Noncontrolling InterestsIn 2019, the Company deconsolidated GACC as it no longer controls the entity. In 2018 and 2017, the Company gained control of Lear FAWSN and Lear STEC,respectively. For further information related to these transactions, see Note 5, "Investments in Affiliates and Other Related Party Transactions."92Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)(12) Stock-Based CompensationAs of November 9, 2009, the Company adopted the Lear Corporation 2009 Long-Term Stock Incentive Plan (as amended, the "2009 LTSIP"). The 2009 LTSIPreserved 11,815,748 shares of common stock for issuance under stock option, restricted stock, restricted stock unit, restricted unit, performance share,performance unit and stock appreciation right awards. As of May 16, 2019, the Company adopted the Lear Corporation 2019 Long-Term Stock Incentive Plan (the"2019 LTSIP"), after which no awards will be issued under the 2009 LTSIP. The 2019 LTSIP reserves 2,526,858 shares of common stock plus shares of commonstock awarded under the 2009 LTSIP that are cancelled subsequent to May 16, 2019, for issuance under stock option, restricted stock, restricted stock unit,restricted unit, performance share, performance unit and stock appreciation right awards. In addition, the Company adopted the Lear Corporation 2019 InducementGrant Plan ("Inducement Plan") as of April 17, 2019, in conjunction with the acquisition of Xevo. The Inducement Plan reserved 146,516 shares of common stockfor issuance under restricted stock and restricted stock unit awards, of which 145,202 awards were granted on April 17, 2019. The remaining shares under theInducement Plan will not be awarded.Under the 2009 LTSIP, the 2019 LTSIP and the Inducement Plan, the Company has granted restricted stock units and performance shares to certain of itsemployees. The restricted stock units and performance shares generally vest in three years following the grant date. For the years ended December 31, 2019, 2018and 2017, the Company recognized compensation expense related to the restricted stock unit and performance share awards of $22.3 million, $40.1 million and$68.7 million, respectively. Unrecognized compensation expense related to the restricted stock unit and performance share awards of $48.3 million will berecognized over the next 1.8 years on a weighted average basis. In accordance with the provisions of the restricted stock unit and performance share awards, theCompany withholds shares from the settlement of such awards to cover minimum statutory tax withholding requirements. The withheld shares are classified ascommon stock held in treasury in the accompanying consolidated balance sheets as of December 31, 2019 and 2018.A summary of restricted stock unit and performance share transactions for the year ended December 31, 2019, is shown below: RestrictedStock UnitsWeighted AverageGrant DateFair ValuePerformanceSharesWeighted AverageGrant DateFair ValueOutstanding as of December 31, 2018517,331$125.30920,706$139.56Granted379,242$134.65383,798$124.48Distributed (vested)(156,974) (364,054) Cancelled(34,463) (90,906) Outstanding as of December 31, 2019 (1)705,136$128.71849,544$140.83 Vested or expected to vest as of December 31, 2019705,136 200,863 (1)Outstanding performance shares are reflected at the maximum possible payout that may be earned during the relevant performance periods.The grant date fair values of restricted stock units are based on the share price on the grant date. The grant date fair values of performance shares were based on aMonte Carlo simulation in 2019 and on the share price on the grant date in 2018 and 2017. The weighted average grant date fair value of restricted stock unitsgranted in 2018 and 2017 was $168.86 and $142.14, respectively. The weighted average grant date fair value of performance shares granted in 2018 and 2017 was$179.40 and $132.94, respectively.93Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)(13) Commitments and ContingenciesLegal and Other ContingenciesAs of December 31, 2019 and 2018, the Company had recorded reserves for pending legal disputes, including commercial disputes and other matters, of $14.0million and $11.0 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 DisputesThe 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 MattersIn 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 besubject to product liability lawsuits and other claims. Such lawsuits generally seek compensatory damages, punitive damages and attorneys’ fees and costs. Inaddition, 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 recallor other corrective action involving such products. Certain of the Company’s customers have asserted claims against the Company for costs related to recalls orother 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 notincur 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 forcontribution 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 servicesincluded 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. Futuredispositions with respect to the Company’s product liability claims that were subject to compromise under the Chapter 11 bankruptcy proceedings will be satisfiedout 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 each of the periods in the two years ended December 31, 2019, is shown below(in millions):Balance as of January 1, 2018$46.5Expense, net, including changes in estimates8.6Settlements(25.3)Foreign currency translation and other(1.3)Balance as of December 31, 201828.5Expense, net, including changes in estimates17.9Settlements(15.2)Foreign currency translation and other0.8Balance as of December 31, 2019$32.0Environmental MattersThe Company is subject to local, state, federal and foreign laws, regulations and ordinances which govern activities or operations that may have adverseenvironmental effects and which impose liability for clean-up costs resulting from past spills, disposals or other releases of hazardous wastes and environmentalcompliance. The Company’s policy is to comply with all applicable environmental laws and to maintain an environmental management program based on ISO14001 to ensure compliance with this standard. However, the Company currently is, has been and in the future may become the subject of formal or informalenforcement actions or procedures.94Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)As of December 31, 2019 and 2018, the Company had recorded environmental reserves of $9.3 million and $9.0 million, respectively. The Company does notbelieve 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 MattersThe Company is involved from time to time in various other legal proceedings and claims, including, without limitation, intellectual property matters, tax claimsand employment matters. Although the outcome of any legal matter cannot be predicted with certainty, the Company does not believe that any of the other legalproceedings 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.EmployeesApproximately 50% of the Company’s employees are members of industrial trade unions and are employed under the terms of various labor agreements. Laboragreements covering approximately 88% of the Company’s global unionized workforce of approximately 81,500 employees, including labor agreements in theUnited States and Canada covering approximately 2% of the Company’s global unionized workforce, are scheduled to expire in 2020. Management does notanticipate any significant difficulties with respect to the renewal of these agreements.(14) Segment ReportingA summary of revenues from external customers and other financial information by reportable operating segment is shown below (in millions): Year Ended December 31, 2019 Seating E-Systems Other ConsolidatedRevenues from external customers$15,097.2 $4,713.1 $— $19,810.3Segment earnings (1)961.2 366.3 (257.3) 1,070.2Depreciation and amortization331.0 163.0 15.9 509.9Capital expenditures370.4 213.9 19.6 603.9Total assets7,277.6 3,068.1 2,335.0 12,680.7 Year Ended December 31, 2018 Seating E-Systems Other ConsolidatedRevenues from external customers$16,021.9 $5,126.6 $— $21,148.5Segment earnings (1)1,263.6 628.5 (238.0) 1,654.1Depreciation and amortization323.5 146.2 14.7 484.4Capital expenditures459.8 208.4 8.8 677.0Total assets6,857.5 2,452.0 2,291.2 11,600.7 Year Ended December 31, 2017 Seating E-Systems Other ConsolidatedRevenues from external customers$15,873.0 $4,594.0 $— $20,467.0Segment earnings (1)1,250.8 641.6 (284.1) 1,608.3Depreciation and amortization289.5 123.4 14.8 427.7Capital expenditures398.3 176.3 19.9 594.5(1)For a definition of segment earnings, see Note 2 , "Summary of Significant Accounting Policies — Segment Reporting."95Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)For the year ended December 31, 2019, segment earnings include restructuring charges of $150.1 million, $38.0 million and $2.1 million in the Seating and E-Systems segments and in the other category, respectively. The Company expects to incur approximately $33 million and approximately $22 million of additionalrestructuring costs in the Seating and E-Systems segments, respectively, related to activities initiated as of December 31, 2019, and expects that the components ofsuch costs will be consistent with its historical experience.For the year ended December 31, 2018, segment earnings include restructuring charges of $62.3 million, $20.9 million and $4.8 million in the Seating and E-Systems segments and in the other category, respectivelyFor the year ended December 31, 2017, segment earnings include restructuring charges of $45.7 million, $19.9 million and $7.9 million in the Seating and E-Systems segments and in the other category.For further information, see Note 4, "Restructuring."A reconciliation of segment earnings to consolidated income before provision for income taxes and equity in net income of affiliates is shown below (in millions):For the year ended December 31,2019 2018 2017Segment earnings$1,327.5 $1,892.1 $1,892.4Corporate and regional headquarters and elimination of intercompany activity ("Other")(257.3) (238.0) (284.1)Consolidated income before interest, other expense, provision for income taxes and equity innet income of affiliates1,070.2 1,654.1 1,608.3Interest expense92.0 84.1 85.7Other (income) expense, net24.6 31.6 (4.1)Consolidated income before provision for income taxes and equity in net income of affiliates$953.6 $1,538.4 $1,526.7Revenues from external customers and tangible long-lived assets for each of the geographic areas in which the Company operates is shown below (in millions):For the year ended December 31,2019 2018 2017Revenues from external customers United States$3,658.5 $3,717.7 $3,955.1Mexico3,058.6 3,236.9 3,170.9China2,579.7 2,781.5 2,519.3Germany1,698.7 2,187.2 2,139.4Other countries8,814.8 9,225.2 8,682.3Total$19,810.3 $21,148.5 $20,467.0December 31,2019 2018Tangible long-lived assets (1) United States$549.8 $422.9Mexico700.1 617.1China450.2 344.4Germany204.9 183.3Other countries1,326.2 1,030.4Total$3,231.2 $2,598.1(1)Tangible long-lived assets include property, plant and equipment and right-of-use assets.96Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)The following is a summary of the percentage of revenues from major customers:For the year ended December 31,2019 2018 2017General Motors18.2% 18.1% 18.0%Ford13.8% 15.6% 18.3%Daimler11.1% 9.9% 8.7%Volkswagen10.9% 9.6% 7.8%(15) Financial InstrumentsDebt InstrumentsThe carrying values of the Notes vary from their fair values. The fair values of the Notes were determined by reference to the quoted market prices of thesesecurities (Level 2 input based on the GAAP fair value hierarchy). The carrying value of the Company’s Term Loan Facility approximates its fair value (Level 3input based on the GAAP fair value hierarchy). The estimated fair value, as well as the carrying value, of the Company's debt instruments are shown below (inmillions):December 31,2019 2018Estimated aggregate fair value (1)$2,384.6 $1,921.6Aggregate carrying value (1) (2)2,334.4 1,967.2(1)Term Loan Facility and Notes (excludes "other" debt).(2)Excludes the impact of unamortized debt issuance costs and original issue discount.Cash, Cash Equivalents and Restricted CashThe Company has cash that is legally restricted as to use or withdrawal. A reconciliation of cash and cash equivalents reported on the accompanying consolidatedbalance sheets to cash, cash equivalents and restricted cash reported on the consolidated statements of cash flows is shown below (in millions):December 31,2019 2018 2017Balance sheet - cash and cash equivalents$1,487.7 $1,493.2 $1,500.4Restricted cash included in other current assets15.9 8.7 —Restricted cash included in other long-term assets6.8 17.9 —Statement of cash flows - cash, cash equivalents and restricted cash$1,510.4 $1,519.8 $1,500.4Marketable Equity SecuritiesMarketable equity securities, which the Company accounts for under the fair value option, are included in the accompanying consolidated balance sheets as shownbelow (in millions):December 31,2019 2018Other current assets$17.1 $4.8Other long-term assets42.1 42.5 $59.2 $47.3Unrealized gains and losses arising from changes in the fair value of the marketable equity securities are recognized in other (income) expense, net in theaccompanying consolidated statements of income. The fair value of the marketable equity securities is determined by reference to quoted market prices in activemarkets (Level 1 input based on the GAAP fair value hierarchy).Equity Securities Without Readily Determinable Fair ValuesAs of December 31, 2019 and 2018, investments in equity securities without readily determinable fair values of $15.2 million and $12.7 million, respectively, areincluded in other long-term assets in the accompanying consolidated balance sheets. Such investments are valued at cost, less any impairment, and adjusted forchanges resulting from observable, orderly transactions97Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)for identical or similar securities. For the year ended December 31, 2019, the Company recognized an impairment charge of $5.0 million related to one of itsequity securities without a readily determinable fair value.Derivative Instruments and Hedging ActivitiesForeign ExchangeThe Company uses forwards, swaps and other derivative contracts to reduce the effects of fluctuations in foreign exchange rates on known foreign currencyexposures. Gains and losses on the derivative instruments are intended to offset gains and losses on the hedged transaction in an effort to reduce exposure tofluctuations in foreign exchange rates. The principal currencies hedged by the Company include the Mexican peso, various European currencies, the Thai baht, theJapanese yen, the Philippine peso and the Chinese renminbi.Foreign currency derivative contracts not designated as hedging instruments consist principally of hedges of cash transactions, intercompany loans and certainother balance sheet exposures.Net Investment HedgesThe Company uses cross-currency interest rate swaps which are designated as net investment hedges of the foreign currency rate exposure of its investment incertain Euro-denominated subsidiaries. For the year ended December 31, 2019, contra interest expense on net investment hedges was $1.8 million and is includedin interest expense in the accompanying consolidated statement of income.Interest Rate SwapsAs of December 31, 2018, the estimated fair value of forward starting interest rate swap contracts with a notional amount of $500.0 million was $14.7 million andis included in other current liabilities in the accompanying consolidated balance sheet.Balance Sheet ClassificationThe notional amount, estimated aggregate fair value and related balance sheet classification of the Company's foreign currency and net investment hedge contractsare shown below (in millions, except for maturities):December 31,2019 2018Fair value of foreign currency contracts designated as cash flow hedges: Other current assets$44.0 $20.6Other long-term assets7.3 2.8Other current liabilities(4.5) (8.4)Other long-term liabilities(0.2) (2.0) 46.6 13.0Notional amount$1,465.8 $1,499.0Outstanding maturities in months, not to exceed24 24Fair value of derivatives designated as net investment hedges: Other long-term liabilities$(4.4) $—Notional amount$300.0 $—Outstanding maturities in months, not to exceed57 N/AFair value of foreign currency contracts not designated as hedge instruments: Other current assets$6.9 $6.1Other current liabilities(3.2) (4.8) 3.7 1.3Notional amount$697.0 $654.0Outstanding maturities in months, not to exceed12 12Total fair value$45.9 $14.3Total notional amount$2,462.8 $2,153.098Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)Accumulated Other Comprehensive Loss - Derivative Instruments and Hedge ActivitiesPretax amounts related to foreign currency, interest rate swap and net investment hedge contracts that were recognized in and reclassified from accumulated othercomprehensive loss are shown below (in millions):For the year ended December 31,2019 2018 2017Gains (losses) recognized in accumulated other comprehensive loss: Foreign currency contracts$82.4 $50.5 $28.8Interest rate swap contracts(9.2) (14.7) —Net investment hedges(4.4) — — 68.8 35.8 28.8(Gains) losses reclassified from accumulated other comprehensive loss to: Net sales3.8 2.3 2.1Cost of sales(52.6) (21.6) 7.4Interest expense1.1 — — (47.7) (19.3) 9.5Comprehensive income$21.1 $16.5 $38.3As of December 31, 2019 and 2018, pretax net gains (losses) of $19.4 million and ($1.7) million, respectively, related to the Company’s derivative instruments andhedge activities were recorded in accumulated other comprehensive loss.During the next twelve month period, net gains (losses) expected to be reclassified into earnings are shown below (in millions):Net gains related to foreign currency contracts$39.5Net losses related to interest rate swap contracts(2.4)Net losses related to net investment hedges—Total$37.1Such gains and losses will be reclassified at the time that the underlying hedged transactions are realized.For the years ended December 31, 2019, 2018 and 2017, the Company recognized tax expense of $5.5 million, $3.3 million and $15.9 million, respectively, inother comprehensive income related to its derivative instruments and hedge activities.Fair Value MeasurementsGAAP provides that fair value is an exit price, defined as a market-based measurement that represents the amount that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants. Fair value measurements are based on one or more of the following three valuationtechniques: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).Further, GAAP prioritizes the inputs and assumptions used in the valuation techniques described above into a three-tier fair value hierarchy as follows: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 ifthere is little or no market data for the asset or liability at the measurement date.99Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)The Company discloses fair value measurements and the related valuation techniques and fair value hierarchy level for its assets and liabilities that are measuredor disclosed at fair value.Items Measured at Fair Value on a Recurring BasisFair value measurements and the related valuation techniques and fair value hierarchy level for the Company’s assets and liabilities measured at fair value on arecurring basis as of December 31, 2019 and 2018, are shown below (in millions): December 31, 2019 Frequency Asset(Liability) ValuationTechnique Level 1 Level 2 Level 3Foreign currency contracts, netRecurring $50.3 Market /Income $— $50.3 $—Net investment hedgesRecurring (4.4) Market /Income — (4.4) —Marketable equity securitiesRecurring 59.2 Market 59.2 — — December 31, 2018 Frequency Asset(Liability) ValuationTechnique Level 1 Level 2 Level 3Foreign currency contracts, netRecurring $14.3 Market /Income $— $14.3 $—Interest rate swap contractRecurring (14.7) Market /Income — (14.7) —Marketable equity securitiesRecurring 47.3 Market 47.3 — —The Company determines the fair value of its derivative contracts using quoted market prices to calculate the forward values and then discounts such forwardvalues to the present value. The discount rates used are based on quoted bank deposit or swap interest rates. If a derivative contract is in a net liability position, theCompany adjusts these discount rates, if required, by an estimate of the credit spread that would be applied by market participants purchasing these contracts fromthe Company’s counterparties. If an estimate of the credit spread is required, the Company uses significant assumptions and factors other than quoted market rates,which would result in the classification of its derivative liabilities within Level 3 of the fair value hierarchy. As of December 31, 2019 and 2018, there were noderivative contracts that were classified within Level 3 of the fair value hierarchy. In addition, there were no transfers in or out of Level 3 of the fair value hierarchyduring 2019 and 2018.For further information on fair value measurements and the Company’s defined benefit pension plan assets, see Note 9, "Pension and Other Postretirement BenefitPlans."Items Measured at Fair Value on a Non-Recurring BasisThe Company measures certain assets and liabilities at fair value on a non-recurring basis, which are not included in the table above. As these non-recurring fairvalue measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy.In 2019, as a result of the acquisition of Xevo (Note 3, "Acquisitions"), Level 3 fair value estimates of $93.2 million related to intangible assets are recorded in theaccompanying consolidated balance sheet as of December 31, 2019. The estimated fair values of these assets were based on third-party valuations andmanagement's estimates, generally utilizing the income and cost approaches.In 2019, as a result of the deconsolidation of GACC (Note 5, "Investments in Affiliates and Other Related Party Transactions"), the Company is accounting for itsinvestment in GACC under the equity method. The Level 3 fair value estimate related to the Company's equity interest was based on the present value of futurecash flows and reflects a discount for the lack of control and the lack of marketability associated with equity interests.In 2019, the Company completed a quantitative goodwill impairment assessment for one of its reporting units. The Level 3 fair value estimate of the reporting unitwas based on a third-party valuation and management's estimates, using a combination of the discounted cash flow method and guideline public company method.100Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)In 2018, as a result of the Lear FAWSN transaction (Note 5, "Investments in Affiliates and Other Related Party Transactions"), Level 3 fair value estimates relatedto property, plant and equipment of $11.0 million, intangible assets of $7.5 million and noncontrolling interests of $14.0 million are recorded in the accompanyingconsolidated balance sheets as of December 31, 2019 and 2018. In addition, the Lear FAWSN transaction required a Level 3 fair value estimate related to theCompany's previously held equity interest of $23.0 million. These Level 3 fair value estimates were determined as of the effective date of the transaction.Fair value estimates of property, plant and equipment were based on independent appraisals, giving consideration to the highest and best use of the assets. Keyassumptions used in the appraisals were based on a combination of market and cost approaches, as appropriate. Fair value estimates of customer-based intangibleassets were based on the present value of future earnings attributable to the asset group after recognition of required returns to other contributory assets. Fair valueestimates of noncontrolling and equity interests were based on the present value of future cash flows and a value to earnings multiple approach and reflectdiscounts for the lack of control and the lack of marketability associated with noncontrolling and equity interests.As of December 31, 2019 and 2018, there were no additional significant assets or liabilities measured at fair value on a non-recurring basis.For further information on assets and liabilities measured at fair value on a non-recurring basis, see Note 2, "Summary of Significant Accounting Policies," Note3, "Acquisitions," and Note 5, "Investments in Affiliates and Other Related Party Transactions."(16) Quarterly Financial Data (unaudited)(In millions, except per share data) Thirteen Weeks Ended March 30, 2019 June 29, 2019 September 28, 2019 December 31, 2019Net sales$5,160.1 $5,007.6 $4,825.0 $4,817.6Gross profit473.2 478.2 459.3 326.8Consolidated net income246.1 202.0 238.6 144.0Net income attributable to Lear228.9 182.8 215.9 126.0Basic net income per share attributable to Lear3.75 2.92 3.59 2.51Diluted net income per share attributable to Lear3.73 2.92 3.58 2.50In the first quarter of 2019, the Company recognized tax benefits of $18.4 million related to changes in the tax status of certain affiliates, $3.2 million related toshare-based compensation and $15.6 million related to restructuring charges and various other items.In the second quarter of 2019, the Company recognized tax benefits of $11.0 million related to restructuring charges and various other items, offset by tax expenseof $10.4 million related to the establishment of a valuation allowance on the deferred tax assets of a foreign subsidiary. The Company also recognized a loss of$10.6 million related to the extinguishment of debt.In the third quarter of 2019, the Company recognized tax benefits of $28.6 million related to research and development tax credits and $9.1 million related torestructuring charges and various other items. The Company also recognized a gain of $4.0 million related to the deconsolidation of an affiliate.In the fourth quarter of 2019, the Company recognized tax benefits of $14.1 million related to the U.S. tax impact of the foreign tax credit regulations and $32.2million related to restructuring charges and various other items. The Company also recognized curtailment gains of $12.9 million related to certain foreign pensionand postretirement benefit plans and an impairment charge of $5.0 million related to an investment.For further information, see Note 5, "Investments in Affiliates and Other Related Party Transactions," Note 6, "Debt," Note 8, "Income Taxes," and Note 9,"Pension and Other Postretirement Benefit Plans."101Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued) Thirteen Weeks Ended March 31, 2018 June 30, 2018 September 29, 2018 December 31, 2018Net sales$5,733.7 $5,580.8 $4,891.6 $4,942.4Gross profit631.4 638.1 526.3 522.5Consolidated net income374.2 355.0 274.7 242.8Net income attributable to Lear353.7 331.4 252.5 212.2Basic net income per share attributable to Lear5.19 4.86 3.83 3.42Diluted net income per share attributable to Lear5.16 4.83 3.80 3.39In the first quarter of 2018, the Company recognized a gain of $10.0 million related to obtaining control of an affiliate, tax benefits of $35.1 million related to thereversal of valuation allowances on the deferred tax assets of a certain foreign subsidiary, $10.1 million related to share-based compensation and $4.1 millionrelated to restructuring charges and various other items and tax expense of $22.0 million related to an increase in foreign withholding tax on certain undistributedforeign earnings.In the second quarter of 2018, the Company recognized $17.4 million related to favorable litigation settlements.In the third quarter of 2018, the Company recognized tax benefits of $6.9 million related to an adjustment to the 2017 provisional U.S. income tax expense, $7.2million related to a tax rate change in a foreign subsidiary and $7.5 million related to restructuring charges and various other items.In the fourth quarter of 2018, the Company recognized $15.8 million related to a favorable indirect tax ruling in a foreign jurisdiction, a $5.4 million pensionsettlement charge related to the Company's Annuity Purchase, a tax benefit of $8.6 million related to restructuring charges and various other items and tax expenseof $11.1 million to establish valuation allowances on the deferred tax assets of certain foreign subsidiaries and various other items.For further information see, Note 5, "Investments in Affiliates and Other Related Party Transactions," Note 8, "Income Taxes," and Note 9, "Pension and OtherPostretirement Benefit Plans ."(17) Accounting PronouncementsThe Company considers the applicability and impact of all ASUs issued by the FASB.The Company considered the ASUs summarized below, effective for 2019:LeasesIn February 2016, the Financial Accounting Standards Board issued ASU 2016-02, "Leases," which requires lessees to record right-of-use assets and related leaseobligations on the balance sheet, as well as disclose key information regarding leasing arrangements. On January 1, 2019, the Company adopted the standard byapplying the modified retrospective method without the restatement of comparative financial information, as permitted by the transition guidance (Note 7,"Leases").Tax Effects from Accumulated Other Comprehensive IncomeEffective January 1, 2019, ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" allows for thereclassification of "stranded" tax effects as a result of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. TheCompany elected not to reclassify such amounts. The Company reclassifies taxes from accumulated other comprehensive loss to earnings as the items to which thetax effects relate are similarly reclassified.102Table of ContentsLear Corporation and SubsidiariesNotes to Consolidated Financial Statements (continued)The Company considered the ASUs summarized below, effective after 2019:Measurement of Credit Losses on Financial InstrumentsEffective January 1, 2020, the standard changes the impairment model for most financial instruments to a current expected credit loss model. The guidance appliesto all financial assets such as loans, accounts receivable (including long-term receivables), contract assets, net investments in sales-type and direct financing leases,held-to-maturity securities and certain financial guarantees. The new model will generally result in earlier recognition of credit losses.The Company has drafted its accounting policy with respect to the standard and continues to assess all potential impacts of the guidance; however, the Companydoes not expect the adoption to have a significant impact on its consolidated financial position, results of operations or cash flows. As required by the standard, theCompany expects to make additional disclosures related to the nature of the change in accounting principle, the method of applying the change, the cumulativeeffect of adoption and the amount of its credit losses. The Company plans to adopt the standard effective January 1, 2020. The Company will continue to evaluatethe effect of the standard on its ongoing financial reporting.Simplifying the Test for Goodwill ImpairmentEffective January 1, 2020, the standard simplifies the accounting for goodwill impairments and allows a goodwill impairment charge to be based on the amount ofa 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" undercurrent guidance).103Table of ContentsLEAR CORPORATION AND SUBSIDIARIESSCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS(In millions) Balanceas of Beginningof Period Additions Retirements OtherChanges Balanceas of Endof PeriodFor the year ended December 31, 2019 Valuation of accounts deducted from related assets: Allowance for doubtful accounts$33.2 $14.3 $(10.9) $(0.6) $36.0Allowance for deferred tax assets350.4 31.3 (30.7) (6.2) 344.8Total$383.6 $45.6 $(41.6) $(6.8) $380.8 Balanceas of Beginningof Period Additions Retirements OtherChanges Balanceas of Endof PeriodFor the year ended December 31, 2018 Valuation of accounts deducted from related assets: Allowance for doubtful accounts$41.8 $11.4 $(17.5) $(2.5) $33.2Allowance for deferred tax assets402.2 24.5 (56.7) (19.6) 350.4Total$444.0 $35.9 $(74.2) $(22.1) $383.6 Balanceas of Beginningof Period Additions Retirements OtherChanges Balanceas of Endof PeriodFor the year ended December 31, 2017 Valuation of accounts deducted from related assets: Allowance for doubtful accounts$32.8 $16.4 $(3.7) $(3.7) $41.8Allowance for deferred tax assets445.6 25.0 (91.9) 23.5 402.2Total$478.4 $41.4 $(95.6) $19.8 $444.0104Table of ContentsITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A – CONTROLS AND PROCEDURES (a)Disclosure Controls and ProceduresThe Company has evaluated, under the supervision and with the participation of the Company’s management, including the Company’s President and ChiefExecutive Officer along with the Company’s Senior Vice President and Chief Financial Officer, the effectiveness of the Company’s disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of theperiod covered by this Report. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances offraud, if any, within the Company have been detected. Based on the evaluation described above, the Company’s President and Chief Executive Officer alongwith the Company’s Senior Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effectiveto provide reasonable assurance that the desired control objectives were achieved as of the end of the period covered by this Report.(b)Management’s Annual Report on Internal Control over FinancialReportingThe Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company’s management, including the Company’s President and ChiefExecutive Officer along with the Company’s Senior Vice President and Chief Financial Officer, the Company conducted an evaluation of the effectivenessof internal control over financial reporting based on the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 framework). In April 2019, the Company completed the acquisition of Xevo Inc. ("Xevo") and is currently integrating Xevointo its operations, compliance programs and internal control processes. Xevo constituted 2.9% of the Company's total assets as of December 31, 2019,including the goodwill and intangible assets recorded as part of the purchase price allocation, and 0.4% of the Company's net sales for the year endedDecember 31, 2019. SEC guidance allows companies to exclude acquisitions from their assessment of internal control over financial reporting during the firstyear following an acquisition while integrating the acquired company. The Company has excluded the acquired operations of Xevo from its assessment ofinternal control over financial reporting. Based on this evaluation, management concluded that the Company’s internal control over financial reporting waseffective as of December 31, 2019.(c)Attestation Report of the Registered Public AccountingFirmThe attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting is set forth inItem 8, "Consolidated Financial Statements and Supplementary Data," under the caption "Report of Independent Registered Public Accounting Firm onInternal Control over Financial Reporting" and incorporated herein by reference.(d)Changes in Internal Control over FinancialReportingThere was no change in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2019, that hasmaterially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.ITEM 9B – OTHER INFORMATIONNone.105Table of ContentsPART IIIITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by Item 10 regarding our directors and corporate governance matters is incorporated by reference herein to the Proxy Statement sectionsentitled "Election of Directors" and "Directors and Corporate Governance." The information required by Item 10 regarding our executive officers appears as asupplementary item following Item 4 under Part I of this Report. The information required by Item 10 regarding compliance with section 16(a) of the SecuritiesExchange Act of 1934, as amended, is incorporated by reference herein to the Proxy Statement section entitled "Directors and Corporate Governance —Section 16(a) Beneficial Ownership Reporting Compliance."Code of EthicsWe have adopted a code of ethics that applies to our executive officers, including our Principal Executive Officer, our Principal Financial Officer and our PrincipalAccounting Officer. This code of ethics is entitled "Specific Provisions for Executive Officers" within our Code of Business Conduct and Ethics, which can befound on our website at http://www.lear.com. We will post any amendment to or waiver from the provisions of the Code of Business Conduct and Ethics thatapplies to the executive officers above on the same website and will provide it to stockholders free of charge upon written request by contacting Lear Corporationat 21557 Telegraph Road, Southfield, Michigan 48033, Attention: Investor Relations.ITEM 11 – EXECUTIVE COMPENSATIONThe information required by Item 11 is incorporated by reference herein to the Proxy Statement sections entitled "Directors and Corporate Governance — DirectorCompensation," "Compensation Discussion and Analysis," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and"Compensation Committee Report." Notwithstanding anything indicating the contrary set forth in this Report, the "Compensation Committee Report" section ofthe Proxy Statement shall be deemed to be "furnished" not "filed" for purposes of the Securities Exchange Act of 1934, as amended.ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERSExcept as set forth herein, the information required by Item 12 is incorporated by reference herein to the Proxy Statement section entitled "Directors and CorporateGovernance — Security Ownership of Certain Beneficial Owners, Directors and Management."Equity Compensation Plan InformationAs of December 31, 2019Number of securities to beissued upon exercise ofoutstanding options,warrants and rights(a) Weighted averageexercise price ofoutstanding options,warrants and rights(b) Number of securitiesavailable for futureissuance under equitycompensation plans(excluding securitiesreflected in column (a))(c)Equity compensation plans approved by security holders1,554,680(1) $—(2) 1,988,665Equity compensation plans not approved by securityholders— — —Total1,554,680 $— 1,988,665(1)Includes 705,136 of outstanding restricted stock units and 849,544 of outstanding performance shares. Outstanding performance shares are reflected at the maximum possible payout thatmay be earned during the relevant performance periods.(2)Reflects outstanding restricted stock units and performance shares at a weighted average price of zero.106Table of ContentsITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 13 is incorporated by reference herein to the Proxy Statement sections entitled "Certain Relationships and Related PartyTransactions" and "Directors and Corporate Governance — Independence of Directors."ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by Item 14 is incorporated by reference herein to the Proxy Statement section entitled "Fees of Independent Accountants."PART IVITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULE The following documents are filed as part of this Form 10-K.(a)1. Consolidated FinancialStatements:Reports of Ernst & Young LLP, Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2019 and 2018Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017Notes to Consolidated Financial Statements2. Financial Statement Schedule:Schedule II — Valuation and Qualifying AccountsAll other financial statement schedules are omitted because such schedules are not required or the information required has been presented in theaforementioned financial statements.3.The exhibits listed on the "Index to Exhibits" on pages 109 through 111 are filed with this Form 10-K or incorporated by reference as set forthbelow.(b)The exhibits listed on the "Index to Exhibits" on pages 109 through 111 are filed with this Form 10-K or incorporated by reference as set forthbelow.(c)Additional Financial StatementSchedulesNone.ITEM 16 – FORM 10-K SummaryNone.107Table of ContentsIndex to Exhibits ExhibitNumber Exhibit Name 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to theCompany’s Current Report on Form 8-K filed on November 9, 2009). 3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report onForm 8-K filed on November 9, 2009). 4.1 Indenture, dated March 26, 2010, among the Company, the subsidiary guarantors party thereto and The Bank of New YorkMellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form8-K filed on March 29, 2010). 4.2 Fifth Supplemental Indenture, dated November 21, 2014, among the Company, the Subsidiary Guarantors party thereto andThe Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company’sCurrent Report on Form 8-K filed on November 21, 2014). 4.3 Sixth Supplemental Indenture, dated June 25, 2015, among the Company, the Subsidiary Guarantors party thereto and TheBank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company’sQuarterly Report on Form 10-Q for the quarter ended June 27, 2015). 4.4 Indenture, dated August 17, 2017, among the Company and U.S. Bank National Association, as Trustee (incorporated byreference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 17, 2017). 4.5 First Supplemental Indenture, dated August 17, 2017, among the Company and U.S. Bank National Association, as Trustee(incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on August 17, 2017). 4.6 Second Supplemental Indenture, dated May 1, 2019, among the Company and U.S. Bank National Association, as Trustee(incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 1, 2019). 4.7 Third Supplemental Indenture, dated May 1, 2019, among the Company and U.S. Bank National Association, as Trustee(incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 1, 2019).**4.8 Description of Lear Corporation's securities. 10.1* Lear Corporation 2009 Long-Term Stock Incentive Plan, amended and restated effective January 1, 2014 (incorporated byreference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013). 10.2* Lear Corporation Pension Equalization Program, as amended through August 15, 2003 (incorporated by reference to Exhibit10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004). 10.3* First Amendment to the Lear Corporation Pension Equalization Program, dated as of December 21, 2006 (incorporated byreference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006). 10.4* Second Amendment to the Lear Corporation Pension Equalization Program, dated as of May 9, 2007 (incorporated byreference to Exhibit 10.49 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007). 10.5* Third Amendment to the Lear Corporation Pension Equalization Program, effective as of December 18, 2007 (incorporated byreference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 19, 2007). 10.6* Lear Corporation Outside Directors Compensation Plan, amended and restated effective January 1, 2016 (incorporated byreference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015). 10.7* Lear Corporation Outside Directors Compensation Plan - Form of Cash Retainer Deferral Election, effective as of September13, 2017 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2017). 10.8* Form of 2019 Performance Share Terms and Conditions under the Lear Corporation 2009 Long-Term Stock Incentive Plan(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30,2019). 10.9* Form of 2019 Restricted Stock Unit Terms and Conditions under the Lear Corporation 2009 Long-Term Stock Incentive Plan(incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30,2019).108Table of Contents 10.10* Form of 2018 Restricted Stock Unit "Career Shares" Award Agreement under the Lear Corporation 2009 Long-Term StockIncentive Plan (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2017).**10.11* Form of 2019 Restricted Stock Unit “Career Shares” Award Agreement under the Lear Corporation 2019 Long-Term StockIncentive Plan. 10.12 Lear Corporation Salaried Retirement Restoration Program (f/k/a Lear Corporation PSP Excess Plan), amended and restatedeffective December 29, 2017 (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K forthe year ended December 31, 2017). 10.13* Form of 2016 Restricted Stock Unit "Career Shares" Award Agreement under the Lear Corporation 2009 Long-Term StockIncentive Plan (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2015). 10.14* Form of 2018 Restricted Stock Unit Terms and Conditions under the Lear Corporation 2009 Long-Term Stock Incentive Plan(incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31,2017). 10.15* Lear Corporation Outside Directors Compensation Plan, amended and restated effective May 16, 2019 (incorporated byreference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2019). 10.16* Lear Corporation 2019 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 4.3 to the Company’sRegistration Statement on Form S-8 filed on July 26, 2019). 10.17* Form of RSU Grant Deferral Election under the Lear Corporation Outside Directors Compensation Plan, effective as of May16, 2019 (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter endedJune 29, 2019). 10.18* Form of 2019 Restricted Stock Unit Terms and Conditions for Non-Employee Directors under the Lear Corporation 2019Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Qfor the quarter ended June 29, 2019). 10.19* Employment Agreement, dated September 27, 2019, between Lear Corporation and Jason M. Cardew (incorporated byreference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 1, 2019). 10.20* Amended and Restated Employment Agreement, dated September 30, 2019, between Lear Corporation and Jeffrey H.Vanneste (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 1, 2019). 10.21* Second Amended and Restated Employment Agreement, dated March 1, 2018, between the Company and Frank C. Orsini(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 1, 2018). 10.22* Second Amended and Restated Employment Agreement, dated February 14, 2018, between the Company and Raymond E.Scott (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 14, 2018). 10.23* Employment Agreement, dated June 25, 2019, between Lear Corporation and Harry A. Kemp (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 28, 2019). 10.24* Second Amended and Restated Employment Agreement, dated June 25, 2019, between Lear Corporation and Terrence B.Larkin (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 28, 2019). 10.25* Employment Agreement, dated August 8, 2019, between Lear Corporation and Carl A. Esposito (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 14, 2019). 10.26* Employment Agreement, dated March 1, 2018, between the Company and Jeneanne M. Hanley (incorporated by reference toExhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 1, 2018). 10.27* Employment Agreement, dated April 2, 2012, between the Company and Thomas A. DiDonato (incorporated by reference toExhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018). 10.28* Lear Corporation Annual Incentive Plan (Amended and Restated as of January 1, 2014) (incorporated by reference toAppendix B to the Company’s definitive proxy statement on Schedule 14A filed with the Securities and ExchangeCommission on April 1, 2014). 10.29* First Amendment to the Lear Corporation 2009 Long-Term Stock Incentive Plan (amended and restated as of January 1,2014), effective as of January 1, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form10-Q for the quarter ended April 1, 2017).109Table of Contents 10.30 Credit Agreement, dated as of August 8, 2017, among the Company, the foreign subsidiary borrowers from time to time partythereto, the lenders from time to time party thereto, HSBC Securities (USA) Inc., as syndication agent, Barclays Bank PLC,Citibank N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as co-documentation agents, and JPMorgan ChaseBank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-Kfiled on August 8, 2017). 10.31 Extension Agreement, dated March 27, 2019, related to the Credit Agreement, dated as of August 8, 2017, among theCompany, the foreign subsidiary borrowers from time to time party thereto, the lenders from time to time party thereto, HSBCSecurities (USA) Inc., as syndication agent, Barclays Bank PLC, Citibank N.A. and Merrill Lynch, Pierce, Fenner & SmithIncorporated, as co-documentation agents, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated byreference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 27, 2019). 10.32* First Amendment to the Lear Corporation Annual Incentive Plan (amended and restated as of January 1, 2014), effectiveFebruary 9, 2017 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterended April 1, 2017).**10.33* Second amendment to the Lear Corporation Annual Incentive Plan (amended and restated January 1, 2014), effectiveDecember 19, 2019. 10.34* Statement on Confidential Information, effective as of August 9, 2017 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017). 10.35* First Amendment to the Lear Corporation Outside Directors Compensation Plan, effective September 13, 2017 (incorporatedby reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017). 10.36* Lear Corporation Outside Directors Compensation Plan - Form of Stock Grant Deferral Election, effective as of September13, 2017 (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2017). 10.37* Anti-Hedging and Anti-Pledging Policy, amended and restated as of September 13, 2017 (incorporated by reference to Exhibit10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017). 10.38* Lear Corporation 2019 Inducement Grant Plan (incorporated by reference to Exhibit 4.3 to the Company's RegistrationStatement on Form S-8 filed on April 17, 2019).**21.1 List of subsidiaries of the Company.**23.1 Consent of Ernst & Young LLP.**31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.**31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.**32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.**32.2 Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002. 99.1 Debtors’ First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated September 18, 2009(incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on November 5, 2009).***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______________________* Compensatory plan or arrangement.** Filed herewith.*** The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive DataFile because their XBRL tags are embedded within the Inline XBRL document.**** Submitted electronically with the Report.110Table of ContentsSignaturesPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed onits behalf by the undersigned, thereunto duly authorized on February 4, 2020.Lear Corporation By: /s/ Raymond E. Scott Raymond E. Scott President and Chief Executive Officer and a Director (Principal Executive Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of LearCorporation and in the capacities indicated on February 4, 2020./s/ Raymond E. Scott /s/ Mary Lou JepsenRaymond E. Scott Mary Lou JepsenPresident and Chief Executive Officer and a Director a Director(Principal Executive Officer) /s/ Jason M. Cardew /s/ Kathleen A. LigockiJason M. Cardew Kathleen A. LigockiSenior Vice President and Chief Financial Officer a Director(Principal Financial Officer) /s/ Amy A. Doyle /s/ Conrad L. Mallett, Jr.Amy A. Doyle Conrad L. Mallett, Jr.Vice President and Chief Accounting Officer a Director(Principal Accounting Officer) /s/ Gregory C. Smith/s/ Thomas P. Capo Gregory C. SmithThomas P. Capo a Directora Director /s/ Henry D.G. Wallace/s/ Mei-Wei Cheng Henry D.G. WallaceMei-Wei Cheng Non-Executive Chairman of the Board of Directors anda Director a Director /s/ Jonathan F. Foster Jonathan F. Foster a Director 111Exhibit 4.8DESCRIPTION OF THE REGISTRANT’S SECURITIESREGISTERED PURSUANT TO SECTION 12 OF THESECURITIES EXCHANGE ACT OF 1934The following summary of the capital stock of Lear Corporation does not purport to be complete and is qualified in its entirety by reference to our amended andrestated certificate of incorporation (as amended, our “charter”), our amended and restated bylaws (our “bylaws”, and together with our charter, our“organizational documents”), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit is a part, andcertain provisions of Delaware law. Unless the context requires otherwise, all references to “we”, “us,” “our” and “Lear” in this section refer solely to LearCorporation and not to our subsidiaries.GeneralUnder our charter, our authorized capital stock consists of 300,000,000 shares of common stock, $0.01 par value per share, and 100,000,000 shares of preferredstock, $0.01 par value per share. As of January 31, 2020, there were 60,472,179 shares of Lear common stock outstanding and no shares of Lear preferred stockoutstanding. All outstanding shares of Lear common stock are duly authorized, validly issued, fully paid and non-assessable.Our common stock is listed on the New York Stock Exchange under the symbol “LEA.”Common StockVoting Rights. All shares of our common stock have identical rights and privileges. With limited exceptions, holders of common stock are entitled to one vote foreach outstanding share of common stock held of record by each stockholder on all matters properly submitted for the vote of our stockholders.Dividend Rights. Subject to applicable law, any contractual restrictions and the rights of the holders of outstanding preferred stock, if any, holders of commonstock are entitled to receive ratably such dividends and other distributions that our board of directors, in its discretion, declares from time to time.Liquidation Rights. Upon our dissolution, liquidation or winding up, subject to the rights of the holders of outstanding preferred stock, if any, holders of commonstock are entitled to receive ratably our assets available for distribution to our stockholders in proportion to the number of shares of common stock held by eachstockholder.Conversion, Redemption and Preemptive Rights. Holders of common stock have no conversion, redemption, sinking fund, preemptive, subscription or similarrights.Registration Rights. Holders of common stock have no registration rights.Preferred Stock Our charter authorizes our board of directors, without further stockholder action, to provide for the issuance of up to 100,000,000 shares of preferred stock, in oneor more series, and to fix the designations, terms and relative rights and preferences, including the dividend rate, voting rights, conversion rights, redemption andsinking fund provisions and liquidation preferences of each of these series.The particular terms of any series of preferred stock that we offer under this prospectus will be described in the applicable prospectus supplement relating to thatseries of preferred stock. Those terms may include:•the title and liquidation preference per share of the preferred stock and the number of shares offered;•the purchase price of the preferred stock;•the dividend rate (or method of calculation), the dates on which dividends will be payable, whether dividends shall be cumulative and, if so, thedate from which dividends will begin to accumulate;•any redemption or sinking fund provisions of the preferredstock;•any conversion, redemption or exchange provisions of the preferredstock;•the voting rights, if any, of the preferred stock; and•any additional dividend, liquidation, redemption, sinking fund and other rights, preferences, privileges, limitations and restrictions of thepreferred stock. You should refer to the certificate of designations establishing a particular series of preferred stock which will be filed with the Secretary of State of the State ofDelaware and the Securities and Exchange Commission in connection with any offering of preferred stock. Each prospectus supplement relating to a series of preferred stock may describe material U.S. federal income tax considerations applicable to the purchase, holdingand disposition of such series of preferred stock. Provisions of the Certificate of Incorporation and Bylaws that May Have an Anti-Takeover Effect Certain provisions in the charter and the bylaws, as well as Delaware General Corporation Law (the “DGCL”), may have the effect of discouraging transactionsthat involve an actual or threatened change in control of Lear. In addition, provisions of the charter, the bylaws and the DGCL may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests. Special Meetings of Stockholders. Our board of directors may call a special meeting of stockholders at any time and for any purpose, but no stockholder or otherperson may call any such special meeting. No Written Consent of Stockholders. Any action taken by our stockholders must be effected at a duly held meeting of stockholders and may not be effected by thewritten consent of such stockholders.Blank Check Preferred Stock. The charter contains provisions that permit our board of directors to issue, without any further vote or action by the stockholders, upto 100,000,000 shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and thedesignation of the series, the voting powers, if any, of the shares of the series, and the preferences and relative, participating, optional and other special rights, ifany, and any qualifications, limitations or restrictions, of the shares of such series. Such provisions could have the effect of discouraging others from making tenderoffers or takeover attempts. Advance Notice of Stockholder Action at a Meeting. Stockholders seeking to nominate directors or to bring business before a stockholder meeting must complywith certain timing requirements and submit certain information to us in advance of such meeting. Business Combinations. We are subject to the provisions of Section 203 of the DGCL. Subject to certain exceptions, Section 203 prohibits a publicly heldDelaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interestedstockholder, unless the interested stockholder attained such status with the approval of the corporation’s board of directors or the business combination is approvedin a prescribed manner. A business combination includes, among other things, a merger or consolidation involving the corporation and the interested stockholderand the sale of more than 10% of the corporation’s assets. In general, an interested stockholder is an entity or person beneficially owning 15% or more of thecorporation’s outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.Limitation of Liability of Directors The charter contains a provision eliminating the personal liability of our directors to us and our stockholders to the fullest extent permitted by applicable law. Thecharter also contains provisions generally providing for indemnification and advancement of expenses to our directors and officers to the fullest extent permittedby applicable law.Transfer Agent and Registrar Computershare Trust Company, N.A. acts as transfer agent and registrar for our common stock.Exhibit 10.11LEAR CORPORATION2019 LONG-TERM STOCK INCENTIVE PLAN2019 RESTRICTED STOCK UNIT “CAREER SHARES” AWARD AGREEMENTThis RESTRICTED STOCK UNIT “CAREER SHARES” AWARD AGREEMENT (the “Award Agreement”) is enteredinto as of ____________ __, 2019 (the “Grant Date”), by and between Lear Corporation (the “Company”) and the individual whosename appears on the signature page hereof (the “Participant”). The parties hereto agree as follows:1.Definitions. Any term capitalized herein but not defined will have the meaning set forth in the LearCorporation 2019 Long-Term Stock Incentive Plan (the “Plan”).2.Grant and Vesting of Restricted Stock Units.(a)As of the Grant Date, the Participant will be credited with ___________ Restricted Stock Units. EachRestricted Stock Unit is a notional amount that represents one unvested Share. Each Restricted Stock Unit constitutes the right,subject to the terms and conditions of the Plan and this Award Agreement, to distribution of a Share following the vesting of suchRestricted Stock Units and satisfaction of the other requirements contained herein. If the Participant’s employment with theCompany and all of its Affiliates terminates before the date that all of the Restricted Stock Units vest and are distributed, his or herright to receive the Shares underlying Restricted Stock Units will be only as provided in Section 4.(b)The Restricted Stock Units will vest on the third anniversary of the Grant Date, subject to the provisions ofSection 4.3.Rights as a Stockholder.(a)Unless and until a Restricted Stock Unit has vested and the Share underlying it has been distributed to theParticipant, the Participant will not be entitled to vote in respect of that Restricted Stock Unit or that Share.(b)If the Company declares a cash dividend on its Shares, then, on the payment date of the dividend, theParticipant will be credited with dividend equivalents equal to the amount of cash dividend per Share multiplied by the number ofRestricted Stock Units credited to the Participant through the record date. The dollar amount credited to the Participant under thepreceding sentence will be credited to an account (“Account”) established for the Participant for bookkeeping purposes only on thebooks of the Company. The amounts credited to the Account will be credited as of the last day of each month with interest,compounded monthly, until the amount credited to the Account is paid to the Participant. The rate of interest credited under theprevious sentence will be the prime rate of interest as reported by the Midwest edition of the Wall Street Journal for the secondbusiness day of each quarter on an annual basis. The balance in the Account will be subject to the same terms regarding vesting,distribution and forfeiture as the Participant’s Restricted Stock Units awarded under this Award Agreement, and will be paid in cashin a single sum at the time that the Shares associated with the Participant’s Restricted Stock Units are delivered (or forfeited at thetime that the Participant’s Restricted Stock Units are forfeited).4.Termination of Employment. Notwithstanding any language in the Plan or the Participant’s employment agreementto the contrary, the Participant’s right to receive the Shares underlying his or her Restricted Stock Units after termination of his orher employment will be only as follows:(a)Qualifying Retirement; Termination Without Cause or for Good Reason. If the Participant experiences aQualifying Retirement, is terminated by the Company without Cause or terminates his or her employment for Good Reason prior tothe distribution of any Shares underlying any Restricted Stock Units, the Participant will be entitled to receive (subject to Sections4(d) and 5) the Shares underlying any Restricted Stock Units that have then vested. In addition, if the Participant experiences aQualifying Retirement, is terminated by the Company without Cause, or terminates his or her employment for GoodReason, in each case after the first anniversary of the Grant Date, the unvested Restricted Stock Units will continue to vest asscheduled following such termination. The Participant will forfeit the right to receive Shares underlying any Restricted Stock Unitsthat would not have vested in the twenty-four (24) month period following the Participant’s termination of employment by theCompany without Cause, by the Participant for Good Reason, or upon the Participant’s Qualifying Retirement. The Participant’s“Qualifying Retirement” date is the date of his or her retirement after (i) attaining a combination of years of age and service with theCompany and its Affiliates (including service with another company prior to it becoming an Affiliate) of at least 65, with a minimumage of 55 and at least five years of service with the Company and its Affiliates (only if an Affiliate at the time of service) or (ii)attaining age 62.(b)Death or Disability. If the Participant’s employment with the Company is terminated upon the Participant’sdeath or Disability, the Participant will be immediately entitled to receive the Shares underlying all of the Restricted Stock Units,whether vested or unvested. If the Participant is a party to an employment or severance agreement with the Company, for purposesof this Section 4, the term “Disability” shall mean “Incapacity” as defined in the Participant’s employment or severance agreement,as applicable.(c)Certain Terminations Following a Change in Control. Notwithstanding any language in the Plan or theParticipant’s employment agreement to the contrary, the Restricted Stock Units do not vest solely upon a Change in Control unlesssuch Award is not assumed by the Company’s successor or converted to equivalent value awards upon substantially the same termseffective immediately following the Change in Control. However, the Participant will be immediately entitled to receive the Sharesunderlying all of the Restricted Stock Units, whether vested or unvested, if the Participant experiences a Qualifying Termination. A“Qualifying Termination” occurs if, within twenty-four (24) months following a Change in Control, the Participant (i) is terminatedby the Company without Cause or (ii) terminates his or her employment with the Company for Good Reason.For purposes of this Award Agreement, “Good Reason” shall have the same meaning as set forth in the Participant’semployment agreement with the Company or any Affiliate. If the Participant is not a party to an employment agreement with theCompany or any Affiliate that defines such term, “Good Reason” shall mean the occurrence of any of the following circumstancesor events:(i) any reduction by the Company in the Participant’s base salary or adverse change in the manner ofcomputing the Participant’s incentive compensation opportunity, as in effect from time to time;(ii) the failure by the Company to pay or provide to the Participant any amounts of base salary or earnedincentive compensation or any benefits which are due, owing and payable to the Participant, or to pay to the Participant any portionof an installment of deferred compensation due under any deferred compensation program of the Company;(iii) the failure by the Company to continue to provide the Participant with benefits substantially similar inthe aggregate to the Company’s life insurance, medical, dental, health, accident or disability plans in which the Participant isparticipating at the date of this Award Agreement;(iv) except on a temporary basis due to the Participant’s Disability, a material adverse change in theParticipant’s responsibilities, position, reporting relationships, authority or duties. For purposes of clarification, the Participantagrees that it will not be a material adverse change for the Company to reassign the Participant to a position with at leastsubstantially similar responsibilities and authority; or(v) the transfer of the Participant’s principal place of employment to a location fifty (50) or more miles fromits location immediately preceding the transfer.Notwithstanding anything else herein, Good Reason shall not exist if, with regard to the circumstancesor events relied upon in the Participant’s notice of termination of employment given to the Company (the “Notice of Termination”):(x) the Participant failed to provide a Notice of Termination to the Company within sixty (60) days of the date the Participant knewor should have known of such circumstances or events, (y) the circumstances or events are fully corrected by the Company prior tothe date of termination of employment, or (z) the Participant gives his or her express written consent to the circumstances or events.(d)Other Termination of Employment; Violation of Restrictive Covenants. If the Participant violatesany of the restrictive covenants contained in Section 6 of this Award Agreement or any similar covenants in any employmentor severance agreement of the Participant, the Participant will forfeit the right to receive Shares underlying any RestrictedStock Units, whether vested or unvested. If the Participant’s employment with the Company is terminated for any reasonother than the reasons specified in subsections (a) - (c) above (including termination by the Company for Cause or his or hervoluntary termination of employment for any reason), the Participant will forfeit the right to receive Shares underlying anyRestricted Stock Units, whether vested or unvested.5.Timing and Form of Payment. Except as provided in Sections 4(b) or 4(c) and subject to compliance with Section4(d), a Share will be distributed for each Restricted Stock Unit on the later to occur of the date the Participant reaches age 62 and thevesting date for the Restricted Stock Unit; provided, that such distribution of Shares will occur (i) with respect to a Participant’sQualifying Retirement, on the earlier to occur of (A) the third anniversary of the Participant’s Qualifying Retirement date or (B) thedate that the Participant reaches age 62 (or such later Restricted Stock Unit vesting date, if applicable), or (ii) with respect to theParticipant’s termination of employment by the Company without Cause or by the Participant for Good Reason after the Participanthas attained a combination of years of age and service with the Company and its Affiliates of at least 65, with a minimum age of 55and at least five years of service with the Company and its Affiliates (only if an Affiliate at the time of service), on the earlier tooccur of (A) the third anniversary of the date of the Participant’s termination of employment; or (B) the date that the Participantreaches age 62 (or such later Restricted Stock Unit vesting date, if applicable). Delivery of the Share underlying such vestedRestricted Stock Unit will be made as soon as administratively feasible after it becomes distributable in accordance with thepreceding sentence. Shares will be credited to an account established for the benefit of the Participant with the Company’sadministrative agent. The Participant will have full legal and beneficial ownership with respect to the Shares at that time.6.Restrictive Covenants.(a)Noncompetition. The Participant agrees not to directly or indirectly engage in any Competitive Activityduring the period of his employment with the Company and its Affiliates and for a period of two (2) years after the termination ofthe Participant’s employment with the Company and its Affiliates (or such lesser period expiring upon final distribution of Shares inaccordance with the terms of this Award Agreement). For purposes of this Award Agreement, the term “Competitive Activity” shallmean the Participant’s participation as an employee, director or consultant, without the written consent of the Board or anyauthorized committee thereof, in the management of any business enterprise anywhere in the world if such enterprise is a“Significant Customer” of any product or service of the Company or any of its Affiliates or engages in competition with any productor service of the Company or any of its Affiliates (including without limitation any enterprise that is a supplier to an originalequipment automotive vehicle manufacturer) or is planning to engage in such competition. For purposes of this Award Agreement,the term “Significant Customer” shall mean any customer who represents in excess of 5% of the Company’s sales or any of itsAffiliate’s sales in any of the three calendar years prior to the date of determination. “Competitive Activity” shall not include themere ownership of, and exercise of rights appurtenant to, securities of a publicly-traded company representing 5% or less of the totalvoting power and 5% or less of the total value of such anenterprise. The Participant agrees that the Company is a global business and that it is appropriate for this Section 6(a) to apply toCompetitive Activity conducted anywhere in the world.The Participant acknowledges and agrees that damages in the event of a breach or threatened breach of the covenantnot to compete in this Section 6(a) will be difficult to determine and will not afford a full and adequate remedy, and therefore agreesthat the Company, in addition to seeking actual damages, may seek specific enforcement of the covenant not to compete in any courtof competent jurisdiction, including, without limitation, by the issuance of a temporary or permanent injunction, without thenecessity of a bond. The Participant and the Company agree that the provisions of this covenant not to compete are reasonable.However, should any court or arbitrator determine that any provision of this covenant not to compete is unreasonable, either inperiod of time, geographical area, or otherwise, the parties agree that this covenant not to compete should be interpreted andenforced to the maximum extent which such court or arbitrator deems reasonable.(b)Nonsolicitation. The Participant shall not directly or indirectly, either on the Participant’s ownaccount or with or for anyone else, solicit or attempt to solicit any of the Company’s customers or any of its Affiliate’scustomers, solicit or attempt to solicit for any business endeavor or hire or attempt to hire any employee of the Company orany of its Affiliates, or otherwise divert or attempt to divert from the Company or any of its Affiliates any businesswhatsoever or interfere with any business relationship between the Company or any of its Affiliates and any other person, fora period of two (2) years after the termination of the Participant’s employment with the Company and its Affiliates (or suchlesser period expiring upon final distribution of Shares in accordance with the terms of this Award Agreement).7.Assignment and Transfers. The Participant may not assign, encumber or transfer any of his or her rights andinterests under the Award described in this Award Agreement, except, in the event of his or her death, by will or the laws of descentand distribution. The Company may assign any of its rights and interests hereunder.8.Withholding Tax. The Company and any Affiliate will have the right to retain Shares or cash that are distributableto the Participant hereunder to the extent necessary to satisfy any withholding taxes, whether federal, state or local, triggered by thedistribution of Shares or cash pursuant to the Award reflected in this Award Agreement.9.Securities Law Requirements.(a)The Restricted Stock Units are subject to the further requirement that, if at any time the Committeedetermines in its discretion that the listing or qualification of the Shares subject to the Restricted Stock Units under any securitiesexchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary asa condition of, or in connection with, the issuance of Shares under it, then Shares will not be issued under the Restricted Stock Units,unless the necessary listing, qualification, consent or approval has been effected or obtained free of any conditions not acceptable tothe Committee.(b)No person who acquires Shares pursuant to the Award reflected in this Award Agreement may, during anyperiod of time that person is an affiliate of the Company (within the meaning of the rules and regulations of the Securities andExchange Commission under the Securities Act of 1933 (the “1933 Act”)) sell the Shares, unless the offer and sale is made pursuantto (i) an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) anappropriate exemption from the registration requirements of the 1933 Act, such as that set forth in Rule 144 promulgated under the1933 Act. With respect to individuals subject to Section 16 of the Exchange Act, transactions under this Award are intended tocomply with all applicable conditions of Rule 16b-3, or its successors under the Exchange Act. To the extent any provision of theAward or action by the Committee fails to so comply, the Committee may determine, to the extent permitted by law, that theprovision or action will be null and void.10.No Limitation on Rights of the Company. Subject to Sections 4.3 and 15.2 of the Plan, the grant of the Awarddescribed in this Award Agreement will not in any way affect the right or power of the Company to make adjustments,reclassification or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer all or anypart of its business or assets.11.Plan, Restricted Stock Units and Award Not a Contract of Employment. Neither the Plan, the Restricted StockUnits nor any other right or interest that is part of the Award reflected in this Award Agreement is a contract of employment, and noterms of employment of the Participant will be affected in any way by the Plan, the Restricted Stock Units, the Award, this AwardAgreement or related instruments, except as specifically provided therein. Neither the establishment of the Plan nor the Award willbe construed as conferring any legal rights upon the Participant for a continuation of employment, nor will it interfere with the rightof the Company or any Affiliate to discharge the Participant and to treat him or her without regard to the effect that treatment mighthave upon him or her as a Participant.12.No Guarantee of Future Awards. This Award Agreement does not guarantee the Participant the right to orexpectation of future Awards under the Plan or any future plan adopted by the Company.13.Participant to Have No Rights as a Stockholder. Except as provided in Section 3 above, the Participant will have norights as a stockholder with respect to any Shares subject to the Restricted Stock Units prior to the date on which he or she isrecorded as the holder of those Shares in the records of the Company.14.Notice. Any notice or other communication required or permitted hereunder must be in writing and must bedelivered personally, or sent by certified, registered or express mail, postage prepaid. Any such notice will be deemed given when sodelivered personally or, if mailed, three days after the date of deposit in the United States mail, in the case of the Company to 21557Telegraph Road, Southfield, Michigan, 48033, Attention: General Counsel and, in the case of the Participant, to the last knownaddress of the Participant in the Company’s records.15.Governing Law. Unless preempted by federal law, this Award Agreement and the Award will be construed andenforced in accordance with, and governed by, the laws of the State of Michigan, determined without regard to its conflict of lawrules.16.Code Section 409A. Notwithstanding any other provision in this Award Agreement, if the Participant is a“specified employee” (as such term is defined for purposes of Code Section 409A) at the time of his or her termination ofemployment, no amount that is subject to Code Section 409A and that becomes payable by reason of such termination ofemployment shall be paid to the Participant before the earlier of (i) the expiration of the six-month period measured from the date ofthe Participant’s termination of employment, and (ii) the date of the Participant’s death.17.Claims Procedures. The Participant may contact the Company’s Vice President, Compensation and Benefits at21557 Telegraph Road, Southfield, Michigan, 48033, Attention: Vice President, Compensation and Benefits for a copy of theCompany’s claims procedures with respect to this Award.18.Incentive Compensation Recoupment Policy. Notwithstanding any provision in the Plan or in Award Agreement tothe contrary, the Award is subject to the Incentive Compensation Recoupment Policy established by the Company, as amended fromtime to time.19.Plan Document Controls. The rights granted under this Award Agreement are subject to the provisions of the Planto the same extent and with the same effect as if they were set forth fully therein. Except with respect to the vesting, termination andchange in control provisions contained in Sections 2 and 4 of this Award Agreement (which expressly supersede contrary termscontained in the Plan), if the terms of this Award Agreement conflict with the terms of the Plan document, the Plan document willcontrol.20.Acceptance of Terms. The Company’s issuance to the Participant of the Restricted Stock Units hereunder isconditioned upon the Participant’s timely electronic acceptance of the terms and conditions set forth in this Award Agreement, in noevent later than sixty (60) days following the Grant Date (the “Acceptance Deadline”). Failure to accept this Award Agreement bythe Acceptance Deadline will result in cancellationof the Restricted Stock Units, and the Participant shall have no rights to the Restricted Stock Units if he or she does not accept theseterms by the Acceptance Deadline.* * *By signing below, the Participant expressly agrees to the terms of this Award Agreement. For purposes of this Award only,any contrary provisions in the Participant’s employment agreement or in the Plan regarding the vesting of equity awards in the eventof the Participant’s termination of employment or upon a Change in Control are hereby expressly superseded by the terms of thisAward Agreement.IN WITNESS WHEREOF, the parties have executed this Award Agreement as of the date and year first above written.LEAR CORPORATIONBy: ___________________________Name: ___________________________Title:___________________________PARTICIPANT:___________________________[NAME]Exhibit 10.33SECOND AMENDMENT TO THE LEAR CORPORATIONANNUAL INCENTIVE PLAN(Amended and Restated as of January 1, 2014)THIS SECOND AMENDMENT to the Lear Corporation Annual Incentive Plan (Amended and Restated as of January 1, 2014) (the“Plan”) was approved on December 19, 2019 by the Compensation Committee of the Board of Directors of Lear Corporation,pursuant to the authority reserved to it under Article 6 of the Plan, effective December 19, 2019.WITNESSETH THAT:1.The third sentence of Section 7.1 of the Plan is hereby deleted in its entirety. 2.Except to the extent hereby amended, the Plan shall remain in full force and effect.Exhibit 21.1List of Subsidiaries of the Company (1) AccuMED Corp. (Delaware)Lear Corporation France SAS (France)AccuMED Holdings Corp. (Delaware)Lear Corporation GmbH (Germany)Autotech Fund II, L.P. (Delaware) (5.56%)Lear Corporation Gothenburg AB (Sweden)Beijing BAI Lear Automotive Systems Co., Ltd. (China) (50%)Lear Corporation Holdings Spain S.L. (Spain)Beijing BHAP Lear Automotive Systems Co., Ltd. (China) (50%)Lear Corporation Hungary Automotive Manufacturing Kft. (Hungary)Beijing Lear Dymos Automotive Systems Co., Ltd. (China) (40%)Lear Corporation Ingenierie, S.A.S. (France)CelLink Corporation (Delaware) (0.79%)Lear Corporation Italia S.r.l. (Italy)Changchun Lear FAWSN Automotive Electrical and Electronics Co., Ltd. (China) (69%)Lear Corporation Japan K.K. (Japan)Changchun Lear FAWSN Automotive Seat Systems Co., Ltd. (China) (49%)Lear Corporation Jarny, S.A.S. (France)Chihuahua Electrical Wiring Systems S. de R.L. de C.V. (Mexico) (49%)Lear Corporation Loire, S.A.S. (France)Consorcio Industrial Mexicano de Autopartes S. de R.L. de C.V. (Mexico)Lear Corporation Macedonia DOOEL Tetovo (Macedonia)Cordelia Autoparts Sweden AB (Sweden)Lear Corporation Martorell, S.L. (Spain)Durango Automotive Wiring Systems, S. de R.L. de C.V. (Mexico) (49%)Lear Corporation Mexico S. de R.L. de C.V. (Mexico)Eagle Ottawa (Thailand) Co., Ltd. (Thailand)Lear Corporation Pension Scheme Trustees Limited (United Kingdom)Eagle Ottawa China Ltd. (China)Lear Corporation Poland II Sp. z.o.o. (Poland)Eagle Ottawa Fonseca S.A. (Argentina) (70%)Lear Corporation Pontevedra, S.L. (Spain)Eagle Ottawa Foreign Holdings ApS (Denmark)Lear Corporation Romania S.r.L. (Romania)Eagle Ottawa Holdings Ltd. (Cayman Islands)Lear Corporation S.r.L. (Moldova)Eagle Ottawa Hungary Kft. (Hungary)Lear Corporation Seating France Feignies SAS (France)Eagle Ottawa North America, LLC (Delaware)Lear Corporation Seating France SAS (France)Eagle Ottawa Warrington Ltd. (United Kingdom)Lear Corporation Seating Slovakia s.r.o. (Slovak Republic)Evolved by Nature Inc. (Delaware) (5%)Lear Corporation South East Asia Co., Ltd. (Thailand)EXO Technologies Ltd. (Israel)Lear Corporation Spain Alava, S.L. (Spain)Foshan Lear FAWSN Automotive Systems Co., Ltd. (China) (49%)Lear Corporation UK Holdings Limited (United Kingdom)Guangzhou Lear Automotive Components Co., Ltd (China) (50%)Lear Corporation UK Interior Systems Limited (United Kingdom)Guilford Europe Limited (United Kingdom)Lear Corporation Valenca, Lda. (Portugal)Guilford Europe Pension Trustees Limited (United Kingdom)Lear DFM Automotive Seating (Yancheng) Co., Ltd. (China) (50%)Guilford Mills Europe Limited (United Kingdom)Lear DFM Tachi-S Automotive Seating (Dalian) Co., Ltd. (China) (25.5%)Guilford Mills Limited (United Kingdom)Lear do Brasil Industria e Comercio de Interiores Automotivos Ltda. (Brazil)HB Polymer Company, LLC (Delaware) (10%)Lear Dongfeng Automotive Seating Co., Ltd. (China) (50%)Honduras Electrical Distribution Systems S. de R.L. de C.V. (Honduras) (49%)Lear Dongshi Tachi-S Automotive Seating (Wuhan) Co., Ltd. (China) (25.5%)Hyundai Transys Lear Automotive India Private Limited (India) (35%)Lear East European Operations S.a.r.l. (Luxembourg)Industrias Cousin Freres S.L. (Spain) (50%)Lear EEDS and Interiors, LLC (Delaware)Industrias Lear de Argentina SrL (Argentina)Lear Electrical Systems de Mexico S. de R.L. de C.V. (Mexico)Insys - Interior Systems SA (Argentina) (5%)Lear European Holding S.L. (Spain)Jiangxi Jiangling Lear Interior Systems Co. Ltd. (China) (50%)Lear Financial Services (Netherlands) B.V. (Netherlands)Kyungshin-Lear Sales and Engineering LLC (Delaware) (49%)Lear Global Operations S.a.r.l. (Luxembourg)Lear (China) Holding Limited (China)Lear Holdings, S. de R.L. de C.V. (Mexico)Lear (Luxembourg) S.a.r.l. (Luxembourg)Lear India Engineering, LLC (Delaware)Lear (Shanghai) Auto Parts Technology Co., Ltd. (China)Lear India Engineering, LLP (India)Lear Automotive (Malaysia) Sdn. Bhd. (Malaysia)Lear International Operations (Luxembourg)Lear Automotive (Thailand) Co., Ltd. (Thailand)Lear Israel Engineering, LLC (Delaware)Lear Automotive EEDS Honduras, S.A. (Honduras)Lear Japan Engineering, LLC (Delaware)Lear Automotive Electronics and Electrical Products (Shanghai) Co., Ltd. (China)Lear Korea Engineering Yuhan Hoesa (Korea)Lear Automotive Fabrics (Rui’An) Co., Ltd. (China)Lear Korea Engineering, LLC (Delaware)Lear Automotive India Private Limited (India)Lear Korea Yuhan Hoesa (Korea)Lear Automotive Interior Materials (Yangzhou) Co., Ltd. (China)Lear Mexican Seating Corporation (Delaware)Lear Automotive Manufacturing, L.L.C. (Delaware)Lear Mexican Trim Operations, S. de R.L. de C.V. (Mexico)Lear Automotive Metals (Wuhan) Co., Ltd. (China)Lear Morocco Engineering, LLC (Delaware)Lear Automotive Morocco SAS (Morocco)Lear Otomotiv Sanayi ve Ticaret Limited Sirketi (Turkey)Lear Automotive Operations Netherlands B.V. (Netherlands)Lear Philippines Engineering, LLC (Delaware)Lear Automotive Services (Netherlands) B.V. (Netherlands)Lear Seating (Thailand) Corp. Ltd. (Thailand)Lear Automotive Systems (Changshu) Co., Ltd. (China)Lear Sewing (Pty.) Ltd. (South Africa)Lear Automotive Systems (Chongqing) Co., Ltd. (China)Lear Shanghai Automotive Metals Co., Ltd. (China)Lear Automotive Systems (Shenyang) Co., Ltd. (China)Lear UK Acquisition Limited (United Kingdom)Lear Automotive Systems (Yangzhou) Co., Ltd. (China)Liuzhou Lear DFM Fangsheng Automotive Seating Co., Ltd. (China) (25.5%)Lear Canada (Canada)Maniv Mobility II A, LP (Delaware) (7.8%)Lear Canada Holding S.a.r.l. (Luxembourg)Markol Otomotiv Yan Sanayi ve Ticaret A.S. (Turkey) (35%)Lear Canada Investments ULC (Canada)Martur Sunger ve Koltuk Tesisleri Ticaret A.S. (Turkey) (0.7%)Lear Chang’an (Chongqing) Automotive System Co., Ltd. (China) (55%)Mezed Inversiones S.r.l. (Dominican Republic)Lear Chang’an (Hangzhou) Automotive Seating Co., Ltd. (China) (55%)MSeat Inc. (Korea) (0.186%)Lear China Engineering, LLC (Delaware)Navmatic, Inc. (Delaware) (20%)Lear Corporation (Mauritius) Limited (Mauritius)OOO Lear (Russia)Lear Corporation (Nottingham) Limited (United Kingdom)PT Lear Automotive Indonesia (Indonesia)Lear Corporation (UK) Limited (United Kingdom)PT Lear Corporation Indonesia (Indonesia) (51%)Lear Corporation (Vietnam) Limited (Vietnam)Qingdao Lear FAWSN Automotive Seat Systems Co., Ltd. (China) (49%)Lear Corporation Ara, S.L. (Spain)RevoLaze, LLC (Delaware) (20%)Lear Corporation Ardasa, S.L. (Spain)Shanghai Lear Automotive Systems Co., Ltd. (China)Lear Corporation Asientos S.L. (Spain)Shanghai Lear STEC Automotive Parts Co., Ltd. (China) (55%)Lear Corporation Belgium CVA (Belgium)Shenyang Lear Automotive Seating and Interior Systems Co., Ltd. (China)Lear Corporation Beteiligungs GmbH (Germany)Silk Medical Aesthetics, Inc. (Delaware) (3.56%)Lear Corporation Canada ULC (Canada)Softwear Automation, Inc. (Georgia) (7.71%)Lear Corporation Changchun Automotive Interior Systems Co., Ltd. (China)Tachi-S Lear DFM Automotive Seating (Xiangyang) Co., Ltd. (China) (24.5%)Lear Corporation China Ltd. (Mauritius)Tacle Guangzhou Automotive Seat Co., Ltd. (China) (20%)Lear Corporation Czech Republic s.r.o. (Czech Republic)Tacle Seating UK Limited (United Kingdom)Lear Corporation d.o.o. Novi Sad (Serbia)Techstars Corporate Partner 2017 LLC (Delaware) (37.5%)Lear Corporation Engineering (UK) Limited (United Kingdom)Tempronics, Inc. (Delaware) (9.8%)Lear Corporation Engineering Belgium B.V.B.A. (Belgium)The Nanosteel Company, Inc. (Delaware) (3.46%)Lear Corporation Engineering Czech Republic s.r.o. (Czech Republic)Tianjin FAWSN Lear Automotive Electrical & Electronics Co., Ltd. (China) (69%)Lear Corporation Engineering GmbH (Germany)Trucks Venture Fund 2, LP (Delaware) (19.23%)Lear Corporation Engineering Hungary Kft. (Hungary)Wuhan Lear DFM Yunhe Automotive Seating Co., Ltd. (China) (40%)Lear Corporation Engineering II GmbH (Germany)Wuhan Lear-DFM Auto Electric Company, Limited (China) (75%)Lear Corporation Engineering Italy S.r.l. (Italy)Xevo Inc. (Delaware)Lear Corporation Engineering Morocco S.a.r.l. (Morocco)Xevo Japan, LLC (Delaware)Lear Corporation Engineering Poland Sp. z.o.o. (Poland)Xevo K.K. (Japan)Lear Corporation Engineering Slovakia s.r.o. (Slovak Republic)Zhengzhou Lear DFM Taixin Automotive Seating Co., Ltd. (China) (25.5%)Lear Corporation Engineering Spain S.L. (Spain) (1) All subsidiaries are wholly owned unless otherwise indicated.Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1) Registration Statement (Form S-3 No. 333-219855) of Lear Corporation, and(2) Registration Statement (Form S-8 No. 333-163009) pertaining to the 2009 Long-Term Stock Incentive Plan of Lear Corporation;of our reports dated February 4, 2020, with respect to the consolidated financial statements and schedule of Lear Corporation and the effectiveness of internalcontrol over financial reporting of Lear Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 2019./s/ Ernst & Young LLPDetroit, MichiganFebruary 4, 2020Exhibit 31.1CERTIFICATIONI, Raymond E. Scott, certify that:1.I have reviewed this annual report on Form 10-K of LearCorporation;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 thestatements 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 thefinancial 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 ExchangeAct 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 theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant'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 reasonablylikely 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 controlover financial reporting.Date:February 4, 2020By:/s/ Raymond E. Scott Raymond E. Scott President and Chief Executive OfficerExhibit 31.2CERTIFICATIONI, Jason M. Cardew certify that:1.I have reviewed this annual report on Form 10-K of LearCorporation;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 thestatements 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 thefinancial 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 ExchangeAct 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 theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant'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 reasonablylikely 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 controlover financial reporting.Date:February 4, 2020By:/s/ Jason M. Cardew Jason M. Cardew Senior Vice President and Chief Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Lear Corporation (the "Company") on Form 10-K for the period ended December 31, 2019, as filed with the Securities andExchange Commission (the "Report"), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934;and2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date:February 4, 2020Signed:/s/ Raymond E. Scott Raymond E. Scott Chief Executive OfficerThis written statement accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by theSarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to theSecurities and Exchange Commission or its staff upon request.Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Lear Corporation (the "Company") on Form 10-K for the period ended December 31, 2019, as filed with the Securities andExchange Commission (the "Report"), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934;and2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date:February 4, 2020Signed:/s/ Jason M. Cardew Jason M. Cardew Chief Financial OfficerThis written statement accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by theSarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to theSecurities and Exchange Commission or its staff upon request.

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