LEAR CORP

Previous wording

Lear is built on a foundation and strong culture of innovation, operational excellence, and engineering and program management capabilities. We use our product, design and technological expertise, as well as our global reach and competitive manufacturing footprint, to achieve our financial goals and objectives. These include continuing to deliver profitable growth balancing risks and returns, investing in innovation to drive business growth and profitability, maintaining a strong balance sheet with investment grade credit metrics, and consistently returning capital to our stockholders. Further, we have aligned our strategy with key trends affecting our business — primarily electrification. At Lear, we are Making every drive better TM by providing technology for safer, smarter and more comfortable journeys, while adhering to our values —Be Inclusive. Be Inventive. Get Results the Right Way.

Current wording

Lear is built on a foundation and strong culture of innovation, operational excellence, and engineering and program management capabilities. We use our product and process design and technological expertise, as well as our global reach and competitive manufacturing footprint, to achieve our financial goals and objectives. These include continuing to deliver profitable growth balancing risks and returns, investing in innovation to drive business growth and profitability, maintaining a strong balance sheet with investment grade credit metrics, and consistently returning capital to our stockholders. Further, we have aligned our strategy with key trends affecting our business — primarily electrification. At Lear, we are Making every drive better TM by providing technology for safer, smarter and more comfortable journeys, while adhering to our values —Be Inclusive. Be Inventive. Get Results the Right Way.

Previous wording

•Transform our E-Systems business through accelerated growth in connection systems, vehicle architecture evolution and electrification, and the rationalization of our product portfolio to improve profitability;

Current wording

•Transform our E-Systems business through accelerated growth in connection systems and vehicle architecture evolution and electrification;

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 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.

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 October 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, as well as commercial recovery mechanisms. 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 six months of 2024, as compared to the first six months of 2023, are shown below (in thousands of units):

Current wording

Global automotive industry production volumes in the first nine months of 2024, as compared to the first nine months of 2023, are shown below (in thousands of units):

Previous 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

Current wording

(2)Production data for 2023 have been updated from our third quarter 2023 Quarterly Report on Form 10-Q to reflect actual production levels

Previous wording

Automotive sales and production can also be affected by the age of the vehicle fleet and related scrappage rates, labor relations issues, labor shortages, fuel prices, regulatory requirements, government initiatives, trade agreements, tariffs and other non-tariff trade barriers, the availability and cost of credit, the availability and cost of critical components, logistics issues, restructuring actions of our customers and suppliers, facility closures and increased competition, as well as consumer preferences regarding vehicle powertrains (including preferences regarding hybrid and electric vehicles), size, configuration and features, among other factors. Our operating results are also significantly impacted by the overall commercial success of the vehicle platforms for which we supply particular products, as well as the profitability of the products, including the level of vertical integration, that we supply for these platforms. The loss of business with respect to any vehicle model for which we are a significant supplier, 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 as vehicle platforms that offer more features and functionality, such as luxury, sport utility and crossover vehicles, typically have more content and, therefore, tend to have a more significant impact on our operating results.

Current wording

Automotive sales and production can also be affected by the age of the vehicle fleet and related scrappage rates, labor relations issues, labor shortages, fuel prices, regulatory requirements, government initiatives, trade agreements, tariffs and other non-tariff trade barriers, the availability and cost of credit, the availability and cost of critical components, logistics issues, restructuring actions of our customers and suppliers, facility closures and increased competition, as well as consumer preferences regarding vehicle powertrains (including preferences regarding hybrid and electric vehicles), size, configuration and features, among other factors. Our operating results are also significantly impacted by the overall commercial success of the vehicle platforms for which we supply particular products, as well as the profitability of the products that we supply for these platforms, which is determined, in part, by the level of vertical integration. The loss of business with respect to any vehicle model for which we are a significant supplier, 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 as vehicle platforms that offer more features and functionality, such as luxury, sport utility and crossover vehicles, typically have more content and, therefore, tend to have a more significant impact on our operating results.

Previous wording

Our percentage of consolidated net sales by region in the first six months of 2024 and 2023 is shown below:

Current wording

Our percentage of consolidated net sales by region in the first nine months of 2024 and 2023 is shown below:

Previous wording

Our ability to reduce the risks inherent in certain concentrations of our business, and thereby maintain our financial performance in the future, will depend, in part, on our ability to continue to diversify our sales on a customer, product, platform and geographic basis to reflect the market overall.

Current wording

Our ability to reduce the risks inherent in certain concentrations of our business, and thereby maintain our financial performance in the future, will depend, in part, on our ability to continue to diversify our sales on a customer, product, platform and geographic basis to better reflect the market overall.

Previous wording

The automotive industry, and our business, continue to be shaped by the broad trend of electrification, which is likely to be at the forefront of the industry for the foreseeable future. Demand for, and regulatory developments related to, improved energy efficiency and sustainability (e.g., government mandates related to fuel economy and carbon emissions) are significant drivers of this trend.

Current wording

The automotive industry, and our business, continue to be shaped by the broad trend of electrification, which is likely to be at the forefront of the industry for the foreseeable future. Although the adoption of electrified vehicles has been slower than anticipated, demand for, and regulatory developments related to, improved energy efficiency and sustainability (e.g., government mandates related to fuel economy and carbon emissions) remain significant drivers of this trend.

Previous 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.

Current wording

Our material cost as a percentage of net sales was 64.2% in the first nine months of 2024, as compared to 65.5% in the first nine 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, commercial 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 evaluating our financial condition and operating performance, we focus primarily on earnings, operating margins, cash flows and return on invested capital. Our strategy includes expanding our business with new and existing customers globally through new products, including those aligned with the trend toward electrification. We also have increased our vertical integration capabilities globally, as well as expanded our component manufacturing capacity in Asia, Eastern Europe, Mexico and Northern Africa and our low-cost engineering capabilities in Asia, Eastern Europe and Northern Africa.

Current wording

In evaluating our financial condition and operating performance, we focus primarily on earnings, operating margins, cash flows and return on invested capital. Our strategy includes expanding our business with new and existing customers globally through new products, including those aligned with the trend toward electrification. We also have increased our vertical integration capabilities globally, as well as expanded our component manufacturing capacity in Asia, Central America, Eastern Europe, Mexico and Northern Africa and our low-cost engineering capabilities in Asia, Eastern Europe and Northern Africa.

Previous wording

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 the timing of cash flows from sales and purchases. Historically, we generally have been successful in aligning our supplier payment terms with our customer payment terms. However, our ability to continue to do so may be impacted by adverse automotive industry conditions, including inconsistent production schedules due to supply shortages, changes to our customers' payment terms and the financial condition of our suppliers. In addition, our cash flow is impacted by our ability to manage our inventory and capital spending effectively. We utilize return on invested capital as a measure of the efficiency with which our assets generate earnings. Improvements in our return on invested capital will depend on our ability to maintain an appropriate asset base for our business and to increase productivity and operating efficiency.

Current wording

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 the timing of cash flows from sales and purchases. Historically, we generally have been successful in aligning our supplier payment terms with our customer payment terms. However, our ability to continue to do so may be impacted by adverse automotive industry conditions, including inconsistent production schedules due to supply shortages and lower consumer demand, changes to our customers' payment terms and the financial condition of our suppliers. In addition, our cash flow is impacted by our ability to manage our inventory and capital spending effectively. We utilize return on invested capital as a measure of the efficiency with which our assets generate earnings. Improvements in our return on invested capital will depend on our ability to maintain an appropriate asset base for our business and to increase productivity and operating efficiency.

Previous 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.

Current wording

In the first nine months of 2024, we incurred pretax restructuring costs of $108 million and related manufacturing inefficiency charges of approximately $4 million, as compared to pretax restructuring costs of $96 million and related manufacturing inefficiency charges of approximately $1 million in the first nine months of 2023. None of the individual restructuring actions initiated in the first nine 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 $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.

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 $50 million of additional restructuring costs related to activities initiated as of September 28, 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

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.

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 nine months of 2024, we repurchased $299 million of shares. As of September 28, 2024, we have a remaining repurchase authorization of $1.2 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 and second quarters of 2024.

Current wording

Our Board declared a quarterly cash dividend of $0.77 per share of common stock in the first, second and third quarters of 2024.

Previous 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.

Current wording

In the three and nine months ended September 28, 2024, we recognized net tax benefits of $5 million and $28 million, respectively, related to the release of tax reserves and audit settlements at foreign subsidiaries, restructuring charges and various other items.

Previous wording

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 wording

In the three months ended September 30, 2023, we recognized net tax benefits of $7 million related to the release of a valuation allowance on deferred tax assets of a foreign subsidiary, restructuring charges and various other items. In the nine months ended September 30, 2023, we recognized net tax benefits of $25 million related to the release of valuation allowances on deferred tax assets of foreign subsidiaries, the release of tax reserves at foreign subsidiaries, restructuring charges and various other items.

Previous wording

Our results for the three and six months ended June 29, 2024 and July 1, 2023, reflect the following items (in millions):

Current wording

Our results for the three and nine months ended September 28, 2024 and September 30, 2023, reflect the following items (in millions):

Previous wording

This Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," includes forward-looking statements that are subject to risks and uncertainties. For further information regarding other factors that have had, or may have in the future, a significant impact on our business, financial condition or results of operations, 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

This Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," includes forward-looking statements that are subject to risks and uncertainties. For further information regarding other factors that have had, or may have in the future, a significant impact on our business, financial condition or results of operations, see "— Forward-

Previous wording

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 wording

Cost of sales was $5.2 billion in the third quarter of 2024, as compared to $5.4 billion in the third quarter of 2023. Lower production volumes on Lear platforms reduced cost of sales. This decrease was offset by new business, which increased cost of sales.

Previous 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.

Current wording

Gross profit and gross margin were $405 million and 7.3% of net sales, respectively, in the third quarter of 2024, as compared to $418 million and 7.2% of net sales, respectively, in the third quarter of 2023. Lower production volumes on Lear platforms, net of new business, reduced gross profit by $50 million. The impact of favorable operating performance, including the benefit of restructuring actions, and lower restructuring costs was partially offset by selling price reductions. These factors had a corresponding impact on gross margin.

Previous 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.

Current wording

Selling, general and administrative expenses, including engineering and development expenses, were $174 million in the third quarter of 2024, as compared to $183 million in the third quarter of 2023, primarily reflecting lower compensation-related expenses. As a percentage of net sales, selling, general and administrative expenses were 3.1% in the third quarter of 2024 and 3.2% in the third quarter of 2023.

Previous 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.

Current wording

Amortization of intangible assets was $11 million in the third quarter of 2024, as compared to $16 million in the third quarter of 2023.

Previous wording

Interest expense, net was $27 million in the second quarter of 2024, as compared to $26 million in the second quarter of 2023.

Current wording

Interest expense, net was $27 million in the third quarter of 2024, as compared to $26 million in the third quarter of 2023.

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 $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 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 $3 million in the third quarter of 2024, as compared to $6 million in the third quarter of 2023.

Previous 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.

Current wording

In the third quarter of 2024, the provision for income taxes was $47 million, representing an effective tax rate of 24.7% on pretax income before equity in net income of affiliates of $191 million. In the third quarter of 2023, the provision for income taxes was $47 million, representing an effective tax rate of 24.9% on pretax income before equity in net income of affiliates of $189 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

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 wording

In the third 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 third quarter of 2024, we recognized net tax benefits of $5 million related to restructuring charges and various other items. In the third quarter of 2023, we recognized net tax benefits of $7 million related to the release of a valuation allowance on deferred tax assets of a foreign subsidiary, restructuring charges and various other items.

Previous 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.

Current wording

Excluding these items, the effective tax rate for the third 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 $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.

Current wording

Net income attributable to Lear was $136 million, or $2.41 per diluted share, in the third quarter of 2024, as compared to $133 million, or $2.25 per diluted share, in the third quarter of 2023. Net income decreased for the reasons described above, and diluted net income per share increased due to a reduction in shares outstanding as a result of our Repurchase Program.

Previous wording

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 wording

E-Systems net sales in the third quarter of both 2024 and 2023 were $1.5 billion. Lower production volumes on Lear platforms negatively impacted net sales by $145 million. This decrease was offset by new business, which increased net sales by $100 million. Commercial recoveries were offset by the impact of selling price reductions and foreign exchange rate fluctuations.

Previous wording

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 wording

Segment earnings, including restructuring costs, and the related margin on net sales were $65 million and 4.4% in the third quarter of 2024, as compared to $60 million and 4.0% in the third quarter of 2023. Lower production volumes on Lear platforms, net of new business, reduced segment earnings by $12 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, and lower restructuring costs was partially offset by selling price reductions.

Previous 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.

Current wording

Segment earnings related to our other category were ($87) million in the third quarter of 2024, as compared to ($85) million in the third quarter of 2023.

Previous wording

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 wording

Net sales for both the nine months ended September 28, 2024 and the nine months ended September 30, 2023 were $17.6 billion. Lower production volumes on Lear platforms in North America, Europe and Africa, and Asia negatively impacted net sales by $722 million. This decrease was offset by new business in every region, which increased net sales by $624 million. Commercial recoveries were offset by the impact of selling price reductions and foreign exchange rate fluctuations.

Previous 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.

Current wording

Cost of sales in the first nine months of both 2024 and 2023 was $16.3 billion. Lower production volumes on Lear platforms reduced cost of sales. This decrease was offset by new business, which increased cost of sales.

Previous wording

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 wording

Gross profit and gross margin were $1,252 million and 7.1% of net sales, respectively, for the nine months ended September 28, 2024, as compared to $1,305 million and 7.4% of net sales, respectively, for the nine months ended September 30, 2023. Lower production volumes on Lear platforms, net of new business, reduced gross profit by $65 million. Higher restructuring costs and impairment charges related to Fisker also reduced gross profit by $32 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.

Previous wording

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 wording

Selling, general and administrative expenses, including engineering and development expenses, were $536 million in the first nine months of 2024, as compared to $542 million in the first nine months of 2023. As a percentage of net sales, selling, general and administrative expenses were 3.0% in the first nine months of 2024, as compared to 3.1% in the first nine months of 2023.

Previous wording

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 wording

Amortization of intangible assets was $39 million in the first nine months of 2024, as compared to $47 million, including a $2 million impairment charge, in the first nine months of 2023.

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 $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.

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 $24 million in the nine months ended September 28, 2024, as compared to $39 million in the nine months ended September 30, 2023. In the first nine months of 2023, we recognized a loss of $5 million related to the impairment of an affiliate.

Previous wording

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 wording

For the nine months ended September 28, 2024, the provision for income taxes was $134 million, representing an effective tax rate of 23.3% on pretax income before equity in net income of affiliates of $574 million. For the nine months ended September 30, 2023, the provision for income taxes was $134 million, representing an effective tax rate of 22.3% on pretax income before equity in net income of affiliates of $601 million, for reasons described below. For further information, see Note 13, "Income Taxes," to the condensed consolidated financial statements included in this Report.