LEAR CORP
For the period ended Jun 29, 2024. Filed Jul 25, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 29, 2024 · Filed Jul 25, 2024
LEA$110.28-3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-30; filed 2024-04-30.
0000842162-24-000032
Item 2. – Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-29; filed 2024-07-25.
0000842162-24-000049
Item 2. – Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 156 previous paragraphs and 182 current paragraphs.
112 unchanged; 39 reworded; 24 added; 4 removed; 1 previous and 7 current paragraphs rearranged.
Tables are not compared: 9 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
In the three and six months ended July 1, 2023, we recognized net tax benefits of $14 million and $17 million, respectively, related to the release of valuation allowances at a foreign subsidiary, the release of tax reserves at foreign subsidiaries, restructuring charges and various other items.
Current report
Net sales in the second quarter of both 2024 and 2023 were $6.0 billion. New business in every region favorably impacted net sales by $246 million. This increase was offset by lower production volumes on Lear platforms in every region, which reduced net sales by $236 million. Commercial recoveries were offset by the impact of foreign exchange rate fluctuations and selling price reductions.
Current report
Cost of sales was $5.6 billion in the second quarter of 2024, as compared to $5.5 billion in the second quarter of 2023. New business increased cost of sales. This increase was offset by lower production volumes on Lear platforms, which reduced cost of sales.
Current report
In the second quarters of 2024 and 2023, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In the second quarter of 2024, we recognized net tax benefits of $10 million related to the release of tax reserves and audit settlements at foreign subsidiaries, restructuring charges and various other items. In the second quarter of 2023, we recognized net tax benefits of $14 million related to the release of valuation allowances on the deferred tax assets of a foreign subsidiary, the release of tax reserves at foreign subsidiaries, restructuring charges and various other items.
Current report
Equity in net income of affiliates was $14 million in the second quarter of 2024, as compared to $16 million in the second quarter of 2023.
Current report
Seating net sales were $4.4 billion in the second quarter of 2024 , as compared to $4.5 billion in the second quarter of 2023. Lower production volumes on Lear platforms negatively impacted net sales by $183 million. This decrease was offset by new business, which increased net sales by $150 million. Commercial recoveries were offset by the impact of foreign exchange rate fluctuations and selling price reductions.
Current report
Segment earnings, including restructuring costs, and the related margin on net sales were $276 million and 6.2% in the second quarter of 2024, as compared to $293 million and 6.6% in the second quarter of 2023. Lower production volumes on Lear platforms, net of new business, reduced segment earnings by $23 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, was partially offset by selling price reductions and foreign exchange rate fluctuations.
Current report
Segment earnings, including restructuring costs, and the related margin on net sales were $70 million and 4.4% in the second quarter of 2024, as compared to $53 million and 3.5% in the second quarter of 2023. New business, net of lower production volumes on Lear platforms, increased segment earnings by $1 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, was partially offset by selling price reductions.
Current report
Six Months Ended June 29, 2024 vs. Six Months Ended July 1, 2023
Current report
Net sales for the six months ended June 29, 2024 were $12.0 billion, as compared to $11.8 billion for the six months ended July 1, 2023, an increase of $0.2 billion or 1%. New business in every region and our acquisition of IGB favorably impacted net sales by $360 million and $67 million, respectively. These increases were offset by lower production volumes on Lear platforms in Europe, Asia and South America, which reduced net sales by $300 million. Commercial recoveries were offset by the impact of selling price reductions and foreign exchange rate fluctuations.
Current report
Gross profit and gross margin were $847 million and 7.1% of net sales, respectively, for the six months ended June 29, 2024, as compared to $887 million and 7.5% of net sales, respectively, for the six months ended July 1, 2023. Higher restructuring costs and impairment charges related to Fisker reduced gross profit by $53 million. Lower production volumes on Lear platforms, net of new business, also reduced gross profit by $15 million. The impact of favorable operating performance, including the benefit of restructuring actions, was partially offset by selling price reductions and foreign exchange rate fluctuations. These factors had a corresponding impact on gross margin.
Current report
Amortization of intangible assets was $28 million in the first six months of 2024, as compared to $32 million, including a $2 million impairment charge, in the first six months of 2023.
Current report
Interest expense, net was $53 million in the first six months of 2024, as compared to $50 million in the first six months of 2023.
Current report
For the six months ended June 29, 2024, the provision for income taxes was $87 million, representing an effective tax rate of 22.6% on pretax income before equity in net income of affiliates of $383 million. For the six months ended July 1, 2023, the provision for income taxes was $87 million, representing an effective tax rate of 21.1% on pretax income before equity in net income of affiliates of $412 million, for reasons described below. For further information, see Note 13, "Income Taxes," to the condensed consolidated financial statements included in this Report.
Current report
Equity in net income of affiliates was $25 million in the first six months of 2024, as compared to $26 million in the first six months of 2023.
Current report
Net income attributable to Lear was $283 million, or $4.92 per diluted share, for the six months ended June 29, 2024, as compared to $312 million, or $5.25 per diluted share, for the six months ended July 1, 2023. Net income and diluted net income per share decreased for the reasons described above.
Current report
Reportable Operating Segments
Current report
Seating
Current report
Segment earnings, including restructuring costs, and the related margin on net sales were $518 million and 5.8% for the six months ended June 29, 2024, as compared to $579 million and 6.5% for the six months ended July 1, 2023. Lower production volumes on Lear platforms, net of new business, reduced segment earnings by $36 million. Higher restructuring costs also reduced segment earnings by $30 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, was partially offset by selling price reductions and foreign exchange rate fluctuations.
Current report
E-Systems
Current report
E-Systems net sales were $3.1 billion for the six months ended June 29, 2024, as compared to $2.9 billion for the six months ended July 1, 2023, an increase of $159 million or 5%. New business and higher production volumes on Lear platforms favorably impacted net sales by $130 million and $51 million, respectively. Commercial recoveries were offset by the impact of selling price reductions and foreign exchange rate fluctuations.
Current report
Segment earnings, including restructuring costs, and the related margin on net sales were $124 million and 4.0% for the six months ended June 29, 2024, as compared to $95 million and 3.3% for the six months ended July 1, 2023. New business and higher production volumes on Lear platforms increased segment earnings by $21 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, was partially offset by selling price reductions, impairment charges related to Fisker and higher restructuring costs.
Current report
Other
Current report
Segment earnings related to our other category were ($184) million in the first six months of 2024, as compared to ($178) million in the first six months of 2023.
Removed paragraphs (4)
Previous report
Net sales in the first quarter of 2024 were $6.0 billion, as compared to $5.8 billion in the first quarter of 2023, an increase of $149 million or 3%. New business in every region and our acquisition of I.G. Bauerhin ("IGB") favorably impacted net sales by $114 million and $51 million, respectively.
Previous report
Equity in net income of affiliates was $11 million in the first quarter of 2024, as compared to $10 million in the first quarter of 2023.
Previous report
Segment earnings, including restructuring costs, and the related margin on net sales were $242 million and 5.4% in the first quarter of 2024, as compared to $286 million and 6.4% in the first quarter of 2023. Higher restructuring costs and lower production volumes on Lear platforms negatively impacted segment earnings by $53 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, was largely offset by selling price reductions and foreign exchange fluctuations.
Previous report
Segment earnings, including restructuring costs, and the related margin on net sales were $54 million and 3.6% in the first quarter of 2024, as compared to $42 million and 3.0% in the first quarter of 2023. Higher production volumes on Lear platforms and new business positively impacted segment earnings by $20 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, was more than offset by selling price reductions, higher restructuring costs and impairment charges related to Fisker.
Reworded paragraphs (39)
Previous wording
•Build on our reputation for operational excellence through investment in automation technologies; and
Current wording
•Build on our reputation for operational excellence through investment in automation and digital technologies; and
Previous wording
IDEA by Lear - Innovative. Digital. Engineered. Automated. - is the evolution of our strategy to drive growth and improve profitability. IDEA reflects our commitment to continue to strengthen our competitive position in both of our business segments through the development of innovative products and the utilization of advanced technologies that extend our leadership position in operational excellence.
Current wording
IDEA by Lear - Innovative. Digital. Engineered. Automated. - is the evolution of our strategy to drive growth and improve profitability. IDEA reflects our commitment to continue to strengthen our competitive position in both of our business segments through the development of innovative products and the utilization of advanced technologies and process automation that improve our profitability through increased efficiency and extend our leadership position in operational excellence.
Previous wording
In 2020, the automotive industry experienced a significant decline in global production volumes as a result of the COVID-19 pandemic. Although 2023 industry production returned to pre-pandemic levels, 2024 industry production is expected to remain approximately 5% below 2017 peak levels (based on April 2024 S&P Global Mobility projections). Since 2020, the global economy, as well as the automotive industry, has been influenced directly and indirectly by macroeconomic events resulting in unfavorable conditions, including shortages of semiconductor chips and other components, elevated inflation levels on commodities and labor, higher interest rates, and labor and energy shortages in certain markets. Certain of these factors, among others, continue to impact consumer demand, as well as the ability of automotive manufacturers to produce vehicles to meet demand. Our strategy to mitigate the impact of these factors encompasses our comprehensive cost management process, including cost technology optimization, actions to further align our manufacturing capacity to the current industry production environment and investments in automation technologies. This will allow us to enhance operational efficiencies, improve the utilization of existing facilities and equipment to reduce future expenditures, and streamline administrative functions. For a description of related risks, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
In 2020, the automotive industry experienced a significant decline in global production volumes as a result of the COVID-19 pandemic. Although 2023 industry production returned to pre-pandemic levels, 2024 industry production is expected to remain approximately 7% below 2017 peak levels (based on July 2024 S&P Global Mobility projections). Since 2020, the global economy, as well as the automotive industry, has been influenced directly and indirectly by macroeconomic events resulting in unfavorable conditions, including shortages of semiconductor chips and other components, elevated inflation levels on commodities and labor, higher interest rates, and labor and energy shortages in certain markets. Certain of these factors, among others, continue to impact consumer demand, as well as the ability of automotive manufacturers to produce vehicles to meet demand. Our strategy to mitigate the impact of these factors encompasses our comprehensive cost management process, including cost technology optimization, actions to further align our manufacturing capacity to the current industry production environment and investments in automation technologies. This will allow us to enhance operational efficiencies, improve the utilization of existing facilities and equipment to reduce future expenditures, and streamline administrative functions. For a description of related risks, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Global automotive industry production volumes in the first three months of 2024, as compared to the first three months of 2023, are shown below (in thousands of units):
Current wording
Global automotive industry production volumes in the first six months of 2024, as compared to the first six months of 2023, are shown below (in thousands of units):
Previous wording
(2)Production data for 2023 have been updated from our first quarter 2023 Quarterly Report on Form 10-Q to reflect actual production levels
Current wording
(2)Production data for 2023 have been updated from our second quarter 2023 Quarterly Report on Form 10-Q to reflect actual production levels
Previous wording
Our percentage of consolidated net sales by region in the first three months of 2024 and 2023 is shown below:
Current wording
Our percentage of consolidated net sales by region in the first six months of 2024 and 2023 is shown below:
Previous wording
Our material cost as a percentage of net sales was 64.4% in the first three months of 2024, as compared to 66.1% in the first three months of 2023. Raw material, energy, commodity and product component costs can be volatile, reflecting, among other things, changes in supply and demand, logistics issues, global trade and tariff policies, and geopolitical issues. Our primary commodity cost exposures relate to steel, copper and leather. We have developed and implemented strategies to mitigate the impact of such costs through the selective in-sourcing of components, the continued consolidation of our supply base, longer-term purchase commitments, contractual recovery mechanisms and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking. Further, our exposure to changes in steel prices is primarily indirect, through purchased components, and a significant portion of our copper, leather and direct steel purchases are subject to price index agreements with our customers and suppliers. Certain of these strategies also may limit our opportunities in a declining price environment. In the current environment of elevated raw material, energy, commodity and product component costs, these strategies, together with commercial negotiations with our customers and suppliers, have offset a significant portion of the adverse impact. In addition, the availability of raw materials, energy, commodities and product components 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 on our operating results in the foreseeable future. See "— Forward-Looking Statements" below and Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
Our material cost as a percentage of net sales was 64.4% in the first six months of 2024, as compared to 65.7% in the first six months of 2023. Raw material, energy, commodity and product component costs can be volatile, reflecting, among other things, changes in supply and demand, logistics issues, global trade and tariff policies, and geopolitical issues. Our primary commodity cost exposures relate to steel, copper and leather. We have developed and implemented strategies to mitigate the impact of such costs through the selective in-sourcing of components, the continued consolidation of our supply base, longer-term purchase commitments, contractual recovery mechanisms and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking. Further, our exposure to changes in steel prices is primarily indirect, through purchased components, and a significant portion of our copper, leather and direct steel purchases are subject to price index agreements with our customers and suppliers. Certain of these strategies also may limit our opportunities in a declining price environment. In the current environment of elevated raw material, energy, commodity and product component costs, these strategies, together with commercial negotiations with our customers and suppliers, have offset a significant portion of the adverse impact. In addition, the availability of raw materials, energy, commodities and product components 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 on our operating results in the foreseeable future. See "— Forward-Looking Statements" below and Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
In the first three months of 2024, we incurred pretax restructuring costs of $54 million, as compared to pretax restructuring costs of $15 million in the first three months of 2023. None of the individual restructuring actions initiated in the first three months of 2024 were material. Further, there have been no changes in previously initiated restructuring actions that have resulted (or will result) in a material change to our restructuring costs.
Current wording
In the first six months of 2024, we incurred pretax restructuring costs of $84 million and related manufacturing inefficiency charges of approximately $3 million, as compared to pretax restructuring costs of $48 million and related manufacturing inefficiency charges of approximately $1 million in the first six months of 2023. None of the individual restructuring actions initiated in the first six months of 2024 were material. Further, there have been no changes in previously initiated restructuring actions that have resulted (or will result) in a material change to our restructuring costs.
Previous wording
Our restructuring actions include plant closures and workforce reductions and are initiated to maintain our competitive footprint or are in response to customer initiatives or changes in global and regional automotive markets. Our restructuring actions are designed to maintain or improve our operating results and profitability throughout the automotive industry cycles. Restructuring actions are generally funded within twelve months of initiation and are funded by cash flows from operating activities and existing cash balances. We expect to incur approximately $67 million of additional restructuring costs related to activities initiated as of March 30, 2024, all of which are expected to be incurred in the next twelve months. We plan to implement additional restructuring actions in order to align our manufacturing capacity and other costs with prevailing regional automotive production levels. Such future restructuring actions are dependent on market conditions, customer actions and other factors.
Current wording
Our restructuring actions include plant closures and workforce reductions and are initiated to maintain our competitive footprint or are in response to customer initiatives or changes in global and regional automotive markets. Our restructuring actions are designed to maintain or improve our operating results and profitability throughout the automotive industry cycles. Restructuring actions are generally funded within twelve months of initiation and are funded by cash flows from operating activities and existing cash balances. We expect to incur approximately $57 million of additional restructuring costs related to activities initiated as of June 29, 2024, all of which are expected to be incurred in the next twelve months. We plan to implement additional restructuring actions in order to align our manufacturing capacity and other costs with prevailing regional automotive production levels. Such future restructuring actions are dependent on market conditions, customer actions and other factors.
Previous wording
For further information, see Note 3, "Restructuring," to the condensed consolidated financial statements included in this Report.
Current wording
For further information, see Note 3, "Restructuring," to the condensed consolidated financial statements included in this Form 10-Q (this "Report").
Previous wording
Since the first quarter of 2011, our Board of Directors (the "Board") has authorized $6.7 billion in share repurchases under our common stock share repurchase program (the "Repurchase Program"), including an increase in our share repurchase authorization to $1.5 billion on February 16, 2024. In the first three months of 2024, we repurchased $30 million of shares. As of March 30, 2024, we have a remaining repurchase authorization of $1.5 billion, which expires on December 31, 2026.
Current wording
Since the first quarter of 2011, our Board of Directors (the "Board") has authorized $6.7 billion in share repurchases under our common stock share repurchase program (the "Repurchase Program"), including an increase in our share repurchase authorization to $1.5 billion on February 16, 2024. In the first six months of 2024, we repurchased $90 million of shares. As of June 29, 2024, we have a remaining repurchase authorization of $1.4 billion, which expires on December 31, 2026.
Previous wording
Our Board declared a quarterly cash dividend of $0.77 per share of common stock in the first quarter of 2024.
Current wording
Our Board declared a quarterly cash dividend of $0.77 per share of common stock in the first and second quarters of 2024.
Previous wording
For further information related to our common stock share repurchase program and our quarterly cash dividends, see "— Liquidity and Capital Resources — Capitalization" below and Note 15, "Comprehensive Income and Equity," to the condensed consolidated financial statements included in this Report.
Current wording
For further information related to our common stock share repurchase program and our quarterly cash dividends, see "— Liquidity and Capital Resources — Capitalization" below and Note 15, "Comprehensive Income (Loss) and Equity," to the condensed consolidated financial statements included in this Report.
Previous wording
In the three months ended March 30, 2024 and April 1, 2023, we recognized net tax benefits of $13 million and $3 million, respectively, related to restructuring charges and various other items.
Current wording
In the three and six months ended June 29, 2024, we recognized net tax benefits of $10 million and $23 million, respectively, related to the release of tax reserves and audit settlements at foreign subsidiaries, restructuring charges and various other items.
Previous wording
Our results for the three months ended March 30, 2024 and April 1, 2023, reflect the following items (in millions):
Current wording
Our results for the three and six months ended June 29, 2024 and July 1, 2023, reflect the following items (in millions):
Previous wording
For further information regarding these items, see Note 3, "Restructuring," Note 6, "Long-Lived Assets," Note 12, "Other Expense, Net," Note 13, "Income Taxes," and Note 18, "Financial Instruments," to the condensed consolidated financial statements included in this Report.
Current wording
For further information regarding these items, see Note 2, "Acquisition," Note 3, "Restructuring," Note 6, "Long-Lived Assets," Note 12, "Other Expense, Net," Note 13, "Income Taxes," and Note 18, "Financial Instruments," to the condensed consolidated financial statements included in this Report.
Previous wording
Gross profit and gross margin were $398 million and 6.6% of net sales, respectively, in the first quarter of 2024, as compared to $430 million and 7.4% of net sales, respectively, in the first quarter of 2023. Higher restructuring costs and impairment charges related to Fisker negatively impacted gross profit by $51 million. The impact of favorable operating performance, including the benefit of restructuring actions, and new business was partially offset by selling price reductions. These factors had a corresponding impact on gross margin.
Current wording
Gross profit and gross margin were $449 million and 7.5% of net sales, respectively, in the second quarter of 2024, as compared to $457 million and 7.6% of net sales, respectively, in the second quarter of 2023. Lower production volumes on Lear platforms, net of new business, reduced gross profit by $22 million. The impact of favorable operating performance, including the benefit of restructuring actions, was partially offset by the impact of selling price reductions and foreign exchange rate fluctuations. These factors had a corresponding impact on gross margin.
Previous wording
Selling, general and administrative expenses, including engineering and development expenses, were $187 million in the first quarter of 2024, as compared to $177 million in the first quarter of 2023, primarily reflecting expenses incurred by IGB and higher restructuring costs. As a percentage of net sales, selling, general and administrative expenses were 3.1% in the first quarter of 2024, as compared to 3.0% in the first quarter of 2023.
Current wording
Selling, general and administrative expenses, including engineering and development expenses, were $175 million in the second quarter of 2024, as compared to $183 million in the second quarter of 2023, primarily reflecting lower compensation-related expenses. As a percentage of net sales, selling, general and administrative expenses were 2.9% in the second quarter of 2024 and 3.0% in the second quarter of 2023.
Previous wording
Amortization of intangible assets was $15 million in the first quarter of 2024, as compared to $16 million, including an impairment charge of $1 million in the first quarter of 2023.
Current wording
Amortization of intangible assets was $13 million in the second quarter of 2024, as compared to $16 million, including a $1 million impairment charge, in the second quarter of 2023.
Previous wording
Interest expense, net was $26 million in the first quarter of 2024, as compared to $24 million in the first quarter of 2023.
Current wording
Interest expense, net was $27 million in the second quarter of 2024, as compared to $26 million in the second quarter of 2023.
Previous wording
In the first quarter of 2024, the provision for income taxes was $41 million, representing an effective tax rate of 25.8% on pretax income before equity in net income of affiliates of $157 million. In the first quarter of 2023, the provision for income taxes was $46 million, representing an effective tax rate of 22.9% on pretax income before equity in net income of affiliates of $199 million, for the reasons described below. For further information, see Note 13, "Income Taxes," to the condensed consolidated financial statements included in this Report.
Current wording
In the second quarter of 2024, the provision for income taxes was $46 million, representing an effective tax rate of 20.4% on pretax income before equity in net income of affiliates of $227 million. In the second quarter of 2023, the provision for income taxes was $42 million, representing an effective tax rate of 19.5% on pretax income before equity in net income of affiliates of $213 million, for the reasons described below. For further information, see Note 13, "Income Taxes," to the condensed consolidated financial statements included in this Report.
Previous wording
Excluding these items, the effective tax rate for the first quarters of 2024 and 2023 approximated the U.S. federal statutory income tax rate of 21%, adjusted for income taxes on foreign earnings, losses and remittances, valuation allowances, tax credits, income tax incentives and other permanent items.
Current wording
Excluding these items, the effective tax rate for the second quarters of 2024 and 2023 approximated the U.S. federal statutory income tax rate of 21%, adjusted for income taxes on foreign earnings, losses and remittances, valuation allowances, tax credits, income tax incentives and other permanent items.
Previous wording
Net income attributable to Lear was $110 million, or $1.90 per diluted share, in the first quarter of 2024, as compared to $144 million, or $2.41 per diluted share, in the first quarter of 2023. Net income and diluted net income per share decreased for the reasons described above.
Current wording
Net income attributable to Lear was $173 million, or $3.02 per diluted share, in the second quarter of 2024, as compared to $169 million, or $2.84 per diluted share, in the second quarter of 2023. Net income and diluted net income per share increased for the reasons described above.
Previous wording
E-Systems net sales were $1.5 billion in the first quarter of 2024, as compared to $1.4 billion in the first quarter of 2023, reflecting an increase of $125 million or 9%. Higher production volumes on Lear platforms and new business favorably impacted net sales by $104 million and $34 million, respectively. Foreign exchange rate fluctuations decreased net sales by $12 million.
Current wording
E-Systems net sales were $1.6 billion in the second quarter of 2024, as compared to $1.5 billion in the second quarter of 2023, reflecting an increase of $34 million or 2%. New business favorably impacted net sales by $96 million. This increase was offset by lower production volumes on Lear platforms, which reduced net sales by $53 million. Commercial recoveries were offset by the impact of foreign exchange rate fluctuations and selling price reductions.
Previous wording
Segment earnings related to our other category were ($99) million in the first quarter of 2024, as compared to ($91) million in the first quarter of 2023, primarily reflecting higher compensation-related costs and costs related to our efficiency initiatives.
Current wording
Segment earnings related to our other category were ($85) million in the second quarter of 2024, as compared to ($88) million in the second quarter of 2023.
Previous wording
Cost of sales was $5.6 billion in the first quarter of 2024, as compared to $5.4 billion in the first quarter of 2023. New business in every region and our acquisition of IGB increased cost of sales.
Current wording
Cost of sales in the first six months of 2024 was $11.2 billion, as compared to $11.0 billion in the first six months of 2023. New business and our acquisition of IGB increased cost of sales. These increases were offset by lower production volumes on Lear platforms, which reduced cost of sales.
Previous wording
Other expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, gains and losses on the disposal of fixed assets, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was $14 million in the first quarters of 2024 and 2023. In the first quarters of 2024 and 2023, we recognized foreign exchange losses of $11 million (including losses of $6 million related to the hyper-inflationary environment and significant currency devaluation in Argentina) and $5 million (net of gains of $1 million related to foreign exchange rate volatility in Russia), respectively. In the first quarter of 2023, we also recognized a loss of $5 million related to the impairment of an affiliate.
Current wording
Other expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, gains and losses on the disposal of fixed assets, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was $21 million in the six months ended June 29, 2024, as compared to $33 million in the six months ended July 1, 2023. In the first six months of 2024 and 2023, we recognized foreign exchange losses of $18 million and $21 million, respectively. In the first six months of 2023, we also recognized a loss of $5 million related to the impairment of an affiliate.
Previous wording
In the first quarters of 2024 and 2023, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In the first quarters of 2024 and 2023, we recognized net tax benefits of $13 million and $3 million, respectively, related to restructuring charges and various other items.
Current wording
In the first six months of 2024 and 2023, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In the first six months of 2024, we recognized net tax benefits of $23 million related to the release of tax reserves and audit settlements at foreign subsidiaries, restructuring charges and various other items. In the first six months of 2023, we recognized net tax benefits of $17 million related to the release of valuation allowances on deferred tax assets of a foreign subsidiary, the release of tax reserves at foreign subsidiaries, restructuring charges and various other items.
Previous wording
Seating net sales were $4.5 billion in the first quarters of 2024 and 2023, reflecting an increase of $25 million or 1%. New business and our acquisition of IGB favorably impacted net sales by $80 million and $51 million, respectively. The impact of lower production volumes on Lear platforms and selling price reductions was partially offset by commercial recoveries.
Current wording
Seating net sales were $8.9 billion for both the six months ended June 29, 2024 and July 1, 2023. New business and our acquisition of IGB favorably impacted net sales by $230 million and $67 million, respectively. These increases were offset by lower production volumes on Lear platforms, which reduced net sales by $327 million. Commercial recoveries were partially offset by the impact of selling price reductions and foreign exchange rate fluctuations.
Previous wording
As of March 30, 2024 and December 31, 2023, cash and cash equivalents of $721 million and $803 million, respectively, were held in foreign subsidiaries and can be repatriated, primarily through the repayment of intercompany loans and the payment of dividends. There are no restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Lear that would have a material impact on Lear.
Current wording
As of June 29, 2024 and December 31, 2023, cash and cash equivalents of $672 million and $803 million, respectively, were held in foreign subsidiaries and can be repatriated, primarily through the repayment of intercompany loans and the payment of dividends. There are no restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Lear that would have a material impact on Lear.
Previous wording
As of March 30, 2024, we had $930 million of cash and cash equivalents on hand and $2.0 billion in available borrowing capacity under our credit agreement. Together with cash provided by operating activities, we believe that this will enable us to meet our liquidity needs for the foreseeable future and to satisfy ordinary course business obligations. In addition, we expect to continue to pay quarterly cash dividends and repurchase shares of our common stock pursuant to our authorized common stock share repurchase program, although such actions are at the discretion of our Board and will depend upon our financial condition, results of operations, capital requirements, prevailing market conditions, alternative uses of capital and other factors that our Board may consider at its discretion.
Current wording
As of June 29, 2024, we had $950 million of cash and cash equivalents on hand and $2.0 billion in available borrowing capacity under our credit agreement. Together with cash provided by operating activities, we believe that this will enable us to meet our liquidity needs for the foreseeable future and to satisfy ordinary course business obligations. In addition, we expect to continue to pay quarterly cash dividends and repurchase shares of our common stock pursuant to our authorized common stock share repurchase program, although such actions are at the discretion of our Board and will depend upon our financial condition, results of operations, capital requirements, prevailing market conditions, alternative uses of capital and other factors that our Board may consider at its discretion.
Previous wording
In the first three months of 2024 and 2023, net cash used in operating activities was $35 million and $36 million, respectively.
Current wording
In the first six months of 2024 and 2023, net cash provided by operating activities was $257 million and $276 million, respectively.
Previous wording
Net cash used in investing activities was $111 million in the first three months of 2024, as compared to $110 million in the first three months of 2023. In the first three months of 2024, capital spending was $114 million, as compared to $112 million in the first three months of 2023. Capital spending is estimated to be $675 million in 2024.
Current wording
Net cash used in investing activities was $230 million in the first six months of 2024, as compared to $450 million in the first six months of 2023. In the first six months of 2023, we paid $175 million for our acquisition of IGB. Capital spending was $234 million in the first six months of 2024, as compared to $280 million in the first six months of 2023. Capital spending is estimated to be $650 million in 2024.
Previous wording
Net cash used in financing activities was $104 million in the first three months of 2024, as compared to $83 million in the first three months of 2023. In the first three months of 2024, we paid $45 million for repurchases of our common stock and $46 million in dividends to Lear stockholders. In the first three months of 2023, we paid $25 million for repurchases of our common stock and $47 million in dividends to Lear stockholders.
Current wording
Net cash used in financing activities was $251 million in the first six months of 2024, as compared to $48 million in the first six months of 2023. In the first six months of 2024, we paid $107 million for repurchases of our common stock, $89 million in dividends to Lear stockholders and $40 million in dividends to noncontrolling interest holders. In the first six months of 2023, we borrowed $150 million under our Term Loan and paid $53 million for repurchases of our common stock, $92 million in dividends to Lear stockholders and $46 million in dividends to noncontrolling interest holders.
Previous wording
We utilize uncommitted lines of credit as needed for our short-term working capital fluctuations. As of March 30, 2024 and December 31, 2023, we had lines of credit from banks totaling $331 million and $338 million, respectively. As of March 30, 2024 and December 31, 2023, we had short-term debt balances outstanding related to draws on our lines of credit of $27 million and $28 million, respectively.
Current wording
We utilize uncommitted lines of credit as needed for our short-term working capital fluctuations. As of June 29, 2024 and December 31, 2023, we had lines of credit from banks totaling $356 million and $338 million, respectively. As of June 29, 2024 and December 31, 2023, we had short-term debt balances outstanding related to draws on our lines of credit of $27 million and $28 million, respectively.
Previous wording
For information related to our common stock share repurchase program and dividends, see "— Executive Overview — Share Repurchase Program and Quarterly Cash Dividends" above, Note 15, "Comprehensive Income and Equity," to the condensed consolidated financial statements included in this Report and Note 12, "Capital Stock, Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
For information related to our common stock share repurchase program and dividends, see "— Executive Overview — Share Repurchase Program and Quarterly Cash Dividends" above, Note 15, "Comprehensive Income (Loss) and Equity," to the condensed consolidated financial statements included in this Report and Note 12, "Capital Stock, Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Raw material, energy and commodity costs can be volatile, reflecting, among other things, changes in supply and demand, logistics issues, global trade and tariff policies, and geopolitical issues. We have commodity price risk with respect to purchases of certain raw materials, including steel, copper, diesel fuel, chemicals, resins and leather. Our primary commodity cost exposures relate to steel, copper and leather. We have developed and implemented strategies to mitigate the impact of such costs through the selective in-sourcing of components, the continued consolidation of our supply base, longer-term purchase commitments, contractual recovery mechanisms and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking. Further, the majority of the steel used in our products is comprised of fabricated components that are integrated into a seat system, such as seat frames, recliner mechanisms, seat tracks and other mechanical components. Therefore, our exposure to changes in steel prices is primarily indirect, through purchased components. Additionally, approximately 90% of our copper purchases and a significant portion of our leather and direct steel purchases are subject to price index agreements with our customers and suppliers. Certain of these strategies also may limit our opportunities in a declining commodity price environment. In the current environment of elevated raw material, energy and commodity costs, these strategies, together with commercial negotiations with our customers and suppliers, have offset a significant portion of the adverse impact. If these costs increase, it could have an adverse impact on our operating results in the foreseeable future.
Current wording
Raw material, energy and commodity costs can be volatile, reflecting, among other things, changes in supply and demand, logistics issues, global trade and tariff policies, and geopolitical issues. We have commodity price risk with respect to purchases of certain raw materials, including steel, copper, diesel fuel, chemicals, resins and leather. Our primary commodity cost exposures relate to steel, copper and leather. We have developed and implemented strategies to mitigate the impact of such costs through the selective in-sourcing of components, the continued consolidation of our supply base, longer-term purchase commitments, contractual recovery mechanisms and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking. Further, the majority of the steel used in our products is comprised of fabricated components that are integrated into a seat system, such as seat frames, recliner mechanisms, seat tracks and other mechanical components. Therefore, our exposure to changes in steel prices is primarily indirect, through purchased components. Additionally, approximately 88% of our copper purchases and a significant portion of our leather and direct steel purchases are subject to price index agreements with our customers and suppliers. Certain of these strategies also may limit our opportunities in a declining commodity price environment. In the current environment of elevated raw material, energy and commodity costs, these strategies, together with commercial negotiations with our customers and suppliers, have offset a significant portion of the adverse impact. If these costs increase, it could have an adverse impact on our operating results in the foreseeable future.
Previous wording
We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial and contractual disputes, product liability claims, and environmental and other matters. As of March 30, 2024, we have recorded reserves for pending legal disputes, including commercial and contractual disputes, product liability claims and other legal matters, of $13 million. In addition, as of March 30, 2024, we have recorded reserves for warranty and recall matters of $31 million and environmental matters of $5 million. Although these reserves were determined in accordance with GAAP, the ultimate outcomes of these matters are inherently uncertain, and actual results may differ significantly from current estimates. For a description of risks related to various legal proceedings and claims, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023. For a more complete description of our outstanding material legal proceedings, see Note 16, "Legal and Other Contingencies," to the condensed consolidated financial statements included in this Report.
Current wording
We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial and contractual disputes, product liability claims, and environmental and other matters. As of June 29, 2024, we have recorded reserves for pending legal disputes, including commercial and contractual disputes, product liability claims and other legal matters, of $14 million. In addition, as of June 29, 2024, we have recorded reserves for warranty and recall matters of $32 million and environmental matters of $5 million. Although these reserves were determined in accordance with GAAP, the ultimate outcomes of these matters are inherently uncertain, and actual results may differ significantly from current estimates. For a description of risks related to various legal proceedings and claims, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023. For a more complete description of our outstanding material legal proceedings, see Note 16, "Legal and Other Contingencies," to the condensed consolidated financial statements included in this Report.
Previous wording
For a discussion of our significant accounting policies and critical accounting estimates, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations — Significant Accounting Policies and Critical Accounting Estimates," and Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes in our significant accounting policies or critical accounting estimates during the first three months of 2024.
Current wording
For a discussion of our significant accounting policies and critical accounting estimates, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations — Significant Accounting Policies and Critical Accounting Estimates," and Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes in our significant accounting policies or critical accounting estimates during the first six months of 2024.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Other expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, gains and losses on the disposal of fixed assets, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was $7 million in the second quarter of 2024, as compared to $20 million in the second quarter of 2023. In the second quarters of 2024 and 2023, we recognized foreign exchange losses of $7 million and $16 million, respectively.
Current report — wording carried from elsewhere
Selling, general and administrative expenses, including engineering and development expenses, were $362 million in the first six months of 2024, as compared to $360 million in the first six months of 2023. As a percentage of net sales, selling, general and administrative expenses were 3.0% in the first six months of 2024 and 2023.
Current report — wording carried from elsewhere
Excluding these items, the effective tax rate for the first six months of 2024 and 2023 approximated the U.S. federal statutory income tax rate of 21%, adjusted for income taxes on foreign earnings, losses and remittances, valuation allowances, tax credits, income tax incentives and other permanent items.
Current report — wording carried from elsewhere
We have two reportable operating segments: Seating and E-Systems. For a description of our reportable operating segments, see "Executive Overview" and "Three Months Ended June 29, 2024 vs. Three Months Ended July 1, 2023 — Reportable Operating Segments" above.
Current report — wording carried from elsewhere
A summary of the financial measures for our Seating segment is shown below (dollar amounts in millions):
Current report — wording carried from elsewhere
A summary of financial measures for our E-Systems segment is shown below (dollar amounts in millions):
Current report — wording carried from elsewhere
A summary of financial measures for our other category, which is not an operating segment, is shown below (dollar amounts in millions):
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND