What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-08 · 160 added, 138 removed, 386 unchanged (44% of the section changed)

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Lear Corporation is a global automotive technology leader in Seating and E-Systems, enabling superior in-vehicle experiences for consumers around the world.

We supply complete seat systems, key seat components, complete electrical distribution and connection systems, high-voltage power distribution products, including battery disconnect units ("BDUs"), low-voltage power distribution products, electronic controllers and other electronic products to all of the world's major automotive manufacturers.

We supply complete seat systems, key seat components, complete electrical distribution and connection systems, high-voltage power distribution products, including battery disconnect units ("BDUs"), low-voltage power distribution products and electronic controllers to all of the world's major automotive manufacturers.

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.

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 product and process innovations to drive business growth and profitability, maintaining a strong balance sheet with investment grade credit metrics, and consistently returning capital to our shareholders.

Further, we have aligned our strategy with key trends affecting our business.

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.

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Each of these segments has a varied product and technology portfolio across a number of component categories.

Further, we continuously evaluate this portfolio, aligning it with industry trends while balancing risk-adjusted returns, which allows us to offer value-added solutions to our customers.

Our Seating business consists of the design, development, engineering and manufacture of complete seat systems and key seat components.

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seat mechanisms;

thermal comfort systems such as seat heating, ventilation, active cooling, pneumatic lumbar and massage products;

and headrests.

and thermal comfort systems such as seat heating, ventilation, active cooling, pneumatic lumbar and massage products.

All of these products are compatible with traditional internal combustion engine ("ICE") architectures and electrified powertrains, including the full range of hybrid, plug-in hybrid and battery electric architectures.

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high-voltage power distribution products, including BDUs;

and low-voltage power distribution products, electronic controllers and other electronic products.

and low-voltage power distribution products and electronic controllers.

These capabilities enable us to provide our customers with customizable solutions with optimized designs at competitive costs for both low-voltage and high-voltage vehicle architectures.

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High-voltage power distribution products control the flow and distribution of high-voltage power throughout electrified vehicles and include BDUs which control all electrical energy flowing into and out of high-voltage batteries in electrified vehicles.

Low-voltage power distribution products, electronic controllers and other electronic products facilitate signal, data and/or power management within the vehicle and include the associated software required to facilitate these functions.

Key components of our other electronic products portfolio include zone control modules, body domain control modules and low-voltage and high-voltage power distribution modules.

• Low-voltage power distribution products and electronic controllers facilitate signal, data and/or power management within the vehicle and include the associated software required to facilitate these functions.

Key components of this portfolio include zonal controllers, body domain control modules and low-voltage and high-voltage power distribution modules.

Our software offerings include embedded control, cybersecurity software and software to control hardware devices.

Our customers traditionally have sourced our electronic hardware together with the software that we embed in it.

Our customers traditionally have sourced our electronic hardware together with the software that we integrate and embed in it.

We serve all of the world's major automotive manufacturers through both our Seating and E-Systems businesses, and we have automotive content on more than 480 vehicle nameplates worldwide.

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Our businesses benefit globally from leveraging common operating standards and disciplines, including world-class product development and manufacturing processes, as well as common customer support and regional infrastructures, all of which contribute to our reputation for operational excellence.

Our core capabilities are shared across component categories and include high-precision manufacturing and assembly with short lead times, complex, global supply chain management, global engineering and program management, the agility to establish and/or transfer production between facilities quickly, and a unique, customer-focused culture.

Our core capabilities are shared across component categories and include high-precision manufacturing and assembly with short lead times, complex, global supply chain management, global

engineering and program management, the agility to establish and/or transfer production between facilities quickly, and a unique, customer-focused culture.

In select instances, we are able to manufacture both Seating and E-Systems components in the same facility.

Our businesses also utilize proprietary, industry-specific processes and standards, leverage common low-cost engineering centers and share centralized operating support functions.

These functions include health and safety, logistics,

quality, supply chain management and all major administrative functions, such as corporate finance, executive administration, human resources, information technology and legal.

We continue to build on our reputation for operational excellence through investment in Industry 4.0 technologies.

Industry 4.0 refers to the current era of digital transformation in manufacturing.

These functions include health and safety, logistics, quality, supply chain management and all major administrative functions, such as corporate finance, executive administration, human resources, information technology and legal.

We continue to build on our reputation for operational excellence through organic and inorganic investments in automation and other advanced manufacturing technologies and the digital transformation of both our operations and administrative functions.

It involves the integration of new technologies, such as Industrial Internet of Things (IIoT), cloud computing, artificial intelligence (AI), machine learning and advanced automation, into production facilities and business operations.

These technologies enable smart and automated machines and smart factories to communicate, analyze and optimize processes and products, resulting in higher efficiency, quality and responsiveness to customers.

These technologies enable smart and automated machines and smart factories to communicate, analyze and optimize products and processes, resulting in higher efficiency, quality and responsiveness to customers.

Through our products, processes, technology and strategic initiatives, we are well-positioned to capitalize on business growth opportunities.

We are focused on profitably growing our businesses and have implemented a strategy designed to deliver industry-leading, long-term financial returns.

This strategy is based on the following four pillars designed to drive growth and profitability in both of our business segments:

• Extend our market leadership position in Seating with priceable features, including modularity and thermal comfort systems;

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

• Build on our reputation for operational excellence through organic and inorganic investments in automation and digital technologies;

• Prioritize people and the planet through our sustainability initiatives to drive business growth, cost reductions and improved employee retention.

IDEA by Lear - Innovative.

- supports 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.

For further information related to our strategy, see Part 1 — Item 1, "Business — Industry" and "— Strategy."

Industry Overview

Our sales are driven by the number of vehicles produced by the automotive manufacturers, which is ultimately dependent on consumer demand for automotive vehicles and the availability of raw materials and components, and our content per vehicle.

In 2020, the automotive industry experienced a significant decline in global production volumes as a result of the COVID-19 pandemic.

In 2022, industry production recovered modestly, increasing 8% compared to 2021.

In 2023, industry production increased 9% compared to 2022.

This reflects a return to 2019 pre-pandemic production levels but remains 5% below 2017 peak levels.

We supply all vehicle segments of the automotive light vehicle original equipment market in every major automotive producing region in the world.

Our sales are driven by the number of vehicles produced by the automotive manufacturers and our content per vehicle.

Although 2023 industry production returned to pre-pandemic levels, 2024 industry production remained approximately 6% below 2017 peak levels (based on January 2025 S&P Global Mobility projections), and 2024 industry production in North America and Europe, our two largest markets, remained approximately 9% and 24% , respectively, below prior peak levels (based on January 2025 S&P Global Mobility projections).

Since 2020, the global economy, as well as the automotive industry, have 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.

Beginning in the third quarter of 2023 and continuing into the fourth quarter of 2023, the automotive industry was impacted by labor strikes and related disruptions at certain facilities in the United States.

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 these impacts 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 Industry 4.0 technologies.

This will allow us to enhance operational efficiencies, improve the utilization of existing facilities and equipment to reduce future expenditures, and streamline and automate administrative functions.

Certain of these factors, among others, continue to impact consumer demand.

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 risks related to macroeconomic events, see Item 1A, "Risk Factors."

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(2) Production data for 2023 has been updated from our 2023 Annual Report on Form 10-K to reflect actual production levels.

Automotive sales and production can also be affected by the age of the vehicle fleet and related scrappage rates, labor relations issues and 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 needed to complete the production of vehicles, 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.

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 and incentives, trade agreements, tariffs and other non-tariff trade barriers (including recent U.S.

tariffs imposed or threatened to be imposed on Mexico, Canada and China, as well as other countries and any retaliatory actions taken by such countries), the availability and cost of credit, the availability and cost of raw materials and critical components, and logistics issues, as well as vehicle affordability and consumer preferences regarding vehicle powertrains (including preferences regarding hybrid and electric vehicles), size, configuration and features, among other factors.

The impact of potential tariffs on our business and financial condition, if any, is subject to a number of factors that are not yet known, including the effective date and duration of such tariffs, the scope and nature of any tariffs, the amount of any tariffs, any countermeasures that the target countries may take in response to such tariffs.

In light of these uncertainties, we can provide no assurance that any mitigating actions that may become available to us, such as our ability to pass along some or all of the costs of any tariffs to some or all of our customers, will be successful.

Our sales and production may be further affected by new entrants to the industry, including domestic automakers in certain regions and non-traditional automakers, and the restructuring actions, including facility closures, of our customers and suppliers.

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.

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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.

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.

Through our products, technology and strategic initiatives, we are well positioned to capitalize on business growth opportunities.

We are focused on profitably growing our businesses and have implemented a strategy designed to deliver industry-leading, long-term financial returns.

This strategy is based on the following four pillars designed to drive growth and profitability in both of our business segments:

• Extend our market leadership position in Seating with priceable features;

• 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;

• Build on our reputation for operational excellence through investment in Industry 4.0 technologies;

• Prioritize people and the planet through our sustainability initiatives to drive business growth, cost reductions and improved employee retention.

For further information related to our strategy, see Part 1 — Item 1, "Business — Industry" and "— Strategy."

Our customers typically require us to reduce our prices over the life of a vehicle model and, at the same time, assume significant responsibility for the design, development and engineering of our products.

Our financial performance is largely dependent on our ability to offset these price reductions with product cost reductions through product design enhancement, supply chain management, manufacturing efficiencies and restructuring actions.

We also seek to enhance our financial performance by investing in product development, design capabilities and new product initiatives that respond to and anticipate the needs of our customers and consumers.

We continually evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and major industry trends affecting our business.

The automotive industry, and our business, continue to be shaped by the broad trend of electrification.

Although the adoption of electrified vehicles has been slower than anticipated in certain regions, 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.

Our material cost as a percentage of net sales was 64.2% in 2024, as compared to 65.2% in 2023 and 66.1% in 2022.

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.

tariffs imposed or threatened to be imposed on Mexico, Canada and China, as well as other countries and any retaliatory actions taken by such countries), 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.

We have developed and implemented strategies to mitigate the impact of increases in 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.

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If these costs increase or availability is restricted, it could have an adverse impact on our operating results in the foreseeable future.

See Part I — Item 1A, "Risk Factors — Increases in the costs and restrictions on the availability of raw materials, energy, commodities, product components and labor could adversely affect our financial performance" and "Risk Factors — International trade policies, including protectionist trade policies, such as tariffs and sanctions, could adversely affect our financial performance," as well as "— Forward-Looking Statements" below.

Our financial performance is largely dependent on our ability to offset these price reductions with product cost reductions through product design enhancements, supply chain management, manufacturing efficiencies and restructuring actions.

Financial Measures

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Our strategy includes expanding our business with new and existing customers globally through new products, including those aligned with the trend toward electrification.

We have also 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.

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.

Our success in generating cash flow will depend, in part, on our ability to manage working capital effectively.

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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.

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.

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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.

In July 2024, we completed the acquisition of WIP Industrial Automation ("WIP"), a privately held company based in Valladolid, Spain.

WIP develops, integrates and deploys cutting-edge technologies to create customized automation solutions for production applications used in our business.

Our acquisition of WIP further strengthens our robotics and AI-based capabilities, which are important for production efficiency, quality and safety in a modern manufacturing environment.

In April 2023, we completed the acquisition of I.G.

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The acquisition furthers our comprehensive strategy to develop and integrate a complete portfolio of thermal comfort systems for automotive seating.

IGB provides active cooling, as well as additional scale to our seat heating and ventilation capabilities and complements the lumbar and massage capabilities obtained with our acquisition of Kongsberg Automotive's Interior Comfort Systems business unit ("Kongsberg ICS") in February 2022.

Further, the vertical integration opportunities provided by this acquisition help support our goal of achieving global market share gains in seat systems.

We paid approximately $175 million, net of cash acquired, in connection with the acquisition.

On May 1, 2023, we borrowed $150 million under our delayed-draw term loan facility (the "Term Loan") to finance, in part, the acquisition of IGB.

For further information, see Note 4, "Acquisitions," to the consolidated financial statements included in this Report.

In February 2022, we completed the acquisition of substantially all of Kongsberg ICS, which specializes in thermal comfort systems.

With almost 50 years of experience in thermal comfort systems, Kongsberg ICS has leading technology, a well-balanced customer portfolio built on longstanding relationships with leading premium automotive manufacturers, and an experienced team.

The Kongsberg ICS acquisition is advancing our seat component capabilities into specialized thermal comfort systems, such as seat heating, ventilation, lumbar and massage products that further differentiate our product offerings and improve vehicle performance and packaging — important features across various vehicle segments.

We paid approximately $188 million, on a cash and debt free basis, in connection with the acquisition.

For further information, see Note 4, "Acquisitions," to the consolidated financial statements included in this Report.

In May 2022, we completed the acquisition of Thagora Technology SRL ("Thagora"), a privately held company based in Iasi, Romania, to access scalable smart-manufacturing technology.

Thagora's proprietary solutions complement our sustainable manufacturing processes by improving the production yield of our Seating segment's surface materials operations and lowering energy usage during production.

In addition, Thagora's Industry 4.0 technologies bring significant advances to our manufacturing operations through engineering and logistics enhancements, including improved material traceability and facility footprint utilization capabilities.

The acquisition is not material to the consolidated financial statements included in this Report.

In November 2022, we completed the acquisition of InTouch Automation ("InTouch"), a privately held supplier of Industry 4.0 technologies and complex automated testing equipment critical in the production of automotive seats.

InTouch's product portfolio is aligned with our Industry 4.0 strategy to implement technologies designed to automate the testing and validation of seat components and complete seats.

The acquisition is not material to the consolidated financial statements included in this Report.

On May 1, 2023, we borrowed $150 million under our delayed-draw term loan facility (the

"Term Loan") to finance, in part, the acquisition of IGB.

For further information, see Note 3, "Acquisition," to the consolidated financial statements included in this Report.

Operational Restructuring

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In May 2023, we borrowed $150 million under our Term Loan to finance, in part, the acquisition of IGB.

In December 2024, we made a principal payment of $50 million under the Term Loan.

In November 2023, we extended the maturity date of our revolving credit facility by one year to October 28, 2027.

For further information related to our acquisition of IGB, see Note 4, "Acquisitions," to the consolidated financial statement included in this Report.

For further information related to our acquisition of IGB, see Note 3, "Acquisition," to the consolidated financial statements included in this Report.

For further information related to our Term Loan and our revolving credit facility, see "— Liquidity and Capital Resources — Capitalization — Credit Agreement" and "— Term Loan" below and Note 6, "Debt," to the consolidated financial statements included in this Report.

Share Repurchase Program and Quarterly Cash Dividends

Common Stock Share Repurchase Program and Quarterly Cash Dividends

We may implement share repurchases through a variety of methods, including, but not limited to, open market purchases, accelerated stock repurchase programs and structured repurchase transactions.

The extent to which we may repurchase our outstanding common stock and the timing of such repurchases will depend upon our financial condition, results of operations, capital requirements, prevailing market conditions, alternative uses of capital and other factors.

(see "— Forward-Looking Statements" below).

Since the first quarter of 2011, our Board of Directors (the "Board") has authorized $6.1 billion in share repurchases under our common stock share repurchase program.

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, including an increase in our share repurchase authorization to $1.5 billion on February 16, 2024.

In 2024, we repurchased $400 million of shares.

As of December 31, 2023, we have a remaining repurchase authorization of $916 million, which expires on December 31, 2024.

As of December 31, 2024, we have a remaining repurchase authorization of $1.1 billion, which expires on December 31, 2026.

In 2024, 2023 and 2022, our Board declared a quarterly cash dividend of $0.77 per share of common stock in all quarters.

In 2021, our Board declared a quarterly cash dividend of $0.25 per share of common stock in the first and second quarters, a quarterly cash dividend of $0.50 per share of common stock in the third quarter and a quarterly cash dividend of $0.77 per share of common stock in the fourth quarter.

For further information related to our common stock share repurchase program and our quarterly cash dividends, see Item 5, "Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities," "— Liquidity and Capital Resources — Capitalization" below and Note 11, "Capital Stock, Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in this Report.

Other Matters

In 2024, we recognized net tax benefits of $25 million related to restructuring charges, the release of tax reserves and audit settlements at foreign subsidiaries, the establishment of a valuation allowance on deferred tax assets of a foreign subsidiary and various other items.

In 2023, we recognized net tax benefits of $35 million related to restructuring charges, the release of valuation allowances on deferred tax assets of foreign subsidiaries, the release of tax reserves at several foreign subsidiaries and various other items.

In 2022, we recognized net tax benefits of $34 million related to restructuring charges and various other items.

In 2021, we recognized tax benefits of $39 million related to restructuring charges and various other items, partially offset by tax expense of $17 million related to the net increase in valuation allowances on deferred tax assets of foreign subsidiaries and $8 million on a $45 million gain related to a favorable indirect tax ruling in a foreign jurisdiction.

As discussed above, our results for the years ended December 31, 2024, 2023 and 2022, reflect the following items (in millions):

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Acquisition-related inventory fair value adjustment — 2 1

Impairments related to Russian operations 2 19 —

Non-cash loss related to pending disposal of a non-core business 24 — —

Costs related to CrowdStrike Holdings, Inc.

Impairments related to Fisker Inc.

("Fisker") 15 — —

Impairments (recoveries) related to Russian operations (2) 2 19

Intangible asset impairment — 2 9

Insurance (recoveries) costs related to typhoon in the Philippines, net (7) (1) 13

Insurance recoveries related to typhoon in the Philippines, net of costs — (7) (1)

Non-cash settlement loss on pension lump-sum payout 7 — —

Foreign exchange (gains) losses due to foreign exchange rate volatility related to Russia (2) (2) 10

Favorable indirect tax ruling in a foreign jurisdiction (1) — (45)

Gain on acquisition-related foreign exchange contracts — — (2)

Loss on extinguishment of debt — — 25

Loss related to investments

Favorable indirect tax ruling in a foreign jurisdiction — (1) —

Loss related to affiliates — 7 —

Tax benefits, net (25) (35) (34)

For further information regarding these items, see Note 3, "Summary of Significant Accounting Policies," Note 4, "Acquisitions," Note 5, "Restructuring," Note 6, "Investments in Affiliates and Other Related Party Transactions," Note 7, "Debt," Note 8, "Leases," and Note 9, "Income Taxes," to the consolidated financial statements included in this Report.

For further information regarding these items, see Note 2, "Summary of Significant Accounting Policies," Note 3, "Acquisition," Note 4, "Restructuring, Note 7, "Leases," Note 8, "Income Taxes," Note 9, Pension and Other Postretirement Benefit Plans," Note 13, "Legal and Other Contingencies," and Note 15, "Financial Instruments," to the consolidated financial statements included in this Report.

This section includes forward-looking statements that are subject to risks and uncertainties.

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Year Ended December 31, 2024, Compared With Year Ended December 31, 2023

Net sales for the year ended December 31, 2023 were $23.5 billion, as compared to $20.9 billion for the year ended December 31, 2022, an increase of $2.6 billion or 12%.

Higher production volumes on Lear platforms and new business in every region favorably impacted net sales by $1.4 billion and $0.9 billion, respectively.

Net sales for the year ended December 31, 2024 were $23.3 billion, as compared to $23.5 billion for the year ended December 31, 2023.

Lower production volumes on Lear platforms in North America, Europe and Africa, and Asia negatively impacted net sales by $1.1 billion.

This decrease was offset by new business in every region, which increased net sales by $0.9 billion.

Commercial recoveries were offset by the impact of selling price reductions and foreign exchange rate fluctuations.

(in millions) Cost of Sales

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Material cost (336.2)

Labor and other

Labor cost 98.1

Depreciation 30.6

2024 $ 21,666.7

Cost of sales in 2024 was $21.7 billion, as compared to $21.8 billion in 2023.

Higher production volumes on Lear platforms and new business in every region increased cost of sales.

Lower production volumes on Lear platforms reduced cost of sales.

This decrease was offset by new business, which increased cost of sales.

Gross profit and gross margin were $1.6 billion and 7.0% of net sales in 2024, as compared to $1.7 billion and 7.3% of net sales in 2023.

Higher production volumes on Lear platforms and new business positively impacted gross profit by $308 million.

The impact of favorable operating performance, including the benefit of restructuring actions, was offset by selling price reductions.

Lower production volumes on Lear platforms, net of new business, reduced gross profit by $106 million.

Higher restructuring costs and impairment charges related to Fisker also reduced gross profit by $23 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.

Selling, general and administrative expenses, including engineering and development expenses, were $715 million for the year ended December 31, 2023, as compared to $685 million for the year ended December 31, 2022, primarily reflecting higher sales and our acquisition of IGB in 2023.

As a percentage of net sales, selling, general and administrative expenses were 3.0% in 2023, as compared to 3.3% in 2022.

Amortization of intangible assets was $63 million in 2023, including an impairment charge of $2 million, as compared to $71 million in 2022, including an impairment charge of $9 million.

Selling, general and administrative expenses, including engineering and development expenses, were $703 million for the year ended December 31, 2024, as compared to $715 million for the year ended December 31, 2023, primarily reflecting lower compensation-related expenses.

As a percentage of net sales, selling, general and administrative expenses were 3.0% in 2024 and 2023.

Amortization of intangible assets was $49 million in 2024, as compared to $63 million in 2023, as certain of our intangible assets became fully amortized in 2024.

Amortization of intangible assets also includes an impairment charge of $2 million in 2023.

Interest expense, net was $106 million in 2024, as compared to $101 million in 2023.

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 $55 million in 2023, as compared to $46 million in 2022.

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 certain disposals of assets, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was $49 million in 2024, as compared to $55 million in 2023.

In 2024, we recognized a non-cash loss of $24 million on the pending disposal of a non-core business, a non-cash settlement loss of $7 million related to our pension lump-sum payout and foreign exchange losses of $21 million, including $16 million related to the hyper-inflationary environment and significant currency devaluation in Argentina.

In 2024, we also recognized a gain of $17 million related to sales of fixed assets.

In 2023, we recognized foreign exchange losses of $53 million, including $31 million related to the hyper-inflationary environment and significant currency devaluation in Argentina, and losses of $7 million related to impairments of affiliates.

In 2023, we also recognized gains of $18 million related to the sales of fixed assets and $4 million related to insurance recoveries.

In 2022, we recognized foreign exchange losses of $30 million, including losses of $10 million related to foreign exchange rate volatility in Russia and gains of $2 million related to foreign exchange contracts on the €140 million IGB purchase price.

In 2022, we also recognized a gain of $1 million related to insurance recoveries.

In 2023, we also recognized a gain of $17 million related to the sales of fixed assets and a gain of $4 million related to insurance recoveries.

For information related to our pension lump-sum payout, see Note 9, "Pension and Other Postretirement Benefit Plans," to the consolidated financial statements included in this Report.

In 2024, the provision for income taxes was $191 million, representing an effective tax rate of 26.1% on pretax income before equity in net income of affiliates of $733 million.

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In 2024 and 2023, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions.

In 2022, we recognized net tax benefits of $34 million related to restructuring charges and various other items.

For information related to our valuation allowances, see "— Other Matters — Significant Accounting Policies and Critical Accounting Estimates — Income Taxes" below.

Equity in net income of affiliates was $49 million for the year ended December 31, 2023, as compared to $33 million for the year ended December 31, 2022, primarily reflecting the higher earnings of certain of our joint ventures in Asia.

Equity in net income of affiliates was $50 million for the year ended December 31, 2024, as compared to $49 million for the year ended December 31, 2023.

Net income attributable to Lear was $507 million, or $8.97 per diluted share, in 2024, as compared to $573 million, or $9.68 per diluted share, in 2023.

Net income and diluted net income per share increased for the reasons described above.

Net income and diluted net income per share decreased for the reasons described above.

Reportable Operating Segments

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(1) See definition above.

Seating net sales were $17.5 billion for the year ended December 31, 2023, as compared to $15.7 billion for the year ended December 31, 2022, an increase of $1.8 billion or 12%.

Higher production volumes on Lear platforms and new business favorably impacted net sales by $1.0 billion and $0.6 billion, respectively.

Our acquisitions of IGB and Kongsberg ICS also increased net sales $0.2 billion.

Segment earnings, including restructuring costs, and the related margin on net sales were $1.1 billion and 6.1% in 2023, as compared to $893 million and 5.7% in 2022.

Higher production volumes on Lear platforms and new business positively impacted segment earnings by $215 million.

The impact of selling price reductions and higher restructuring costs were offset by favorable operating performance, including the benefit of commodity recoveries and operational restructuring actions.

Seating net sales were $17.2 billion for the year ended December 31, 2024, as compared to $17.5 billion for the year ended December 31, 2023, a decrease of $327 million or 2%.

Lower production volumes on Lear platforms negatively impacted net sales by $922 million.

This decrease was offset by new business, which increased net sales by $544 million.

Commercial recoveries were offset by the impact of selling price reductions and foreign exchange rate fluctuations.

Segment earnings, including restructuring costs, and the related margin on net sales were $1.0 billion and 5.7% in 2024, as compared to $1.1 billion and 6.1% in 2023.

Lower production volumes on Lear platforms, net of new business, reduced segment earnings by $114 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.

A summary of financial measures for our E-Systems segment is shown below (dollar amounts in millions):

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E-Systems net sales were $6.1 billion for the year ended December 31, 2024, as compared to $5.9 billion for the year ended December 31, 2023, an increase of $166 million or 3%.

Higher production volumes on Lear platforms and new business favorably impacted net sales by $0.4 billion and $0.3 billion, respectively.

New business favorably impacted net sales by $336 million.

This increase was offset by lower production volumes on Lear platforms, which decreased net sales by $167 million.

Commercial recoveries were offset by the impact of selling price reductions and foreign exchange rate fluctuations.

Segment earnings, including restructuring costs, and the related margin on net sales were $247 million and 4.1% in 2024, as compared to $229 million and 3.9% in 2023.

Higher production volumes on Lear platforms and new business positively impacted segment earnings by $93 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.

New business, net of lower production volumes on Lear platforms, increased segment earnings by $8 million.

The impact of favorable operating performance, including the benefit of operational restructuring actions, was largely offset by selling price reductions and impairment charges related to Fisker.

A summary of financial measures for our other category, which is not an operating segment, is shown below (dollar amounts in millions):

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(1) See definition above.

Segment earnings related to our other category were ($363) million in 2023, as compared to ($313) million in 2022, primarily reflecting higher compensation-related costs and costs related to our efficiency initiatives including investments in information technology.

Segment earnings related to our other category were ($348) million in 2024, as compared to ($363) million in 2023, reflecting lower compensation-related expenses.

Year Ended December 31, 2023, Compared With Year Ended December 31, 2022

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As of December 31, 2024 and 2023, cash and cash equivalents of $705 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 material restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Lear.

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.

For further information regarding potential dividends from our non-U.S.

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Accounts receivable (73) (148) 75

Inventory (118) (30) (88)

Inventories 77 (118) 195

Other current assets 11 (17) 28

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Net cash provided by operating activ ities was $1.1 billion i n 2024, as compared to $1.2 billion in 2023 .

The overall increase in operating cash flow primarily reflects our higher earnings in 2023 as compared to 2022.

The overall decrease in operating cash flow reflects incremental cash used related to accrued liabilities (reflecting higher cash restructuring costs and higher cash taxes) and accounts payable.

These decreases were partially offset by improvements in inventories and accounts receivable.

Net cash used in investing activities was $543 million in 2024, as compared to $762 million in 2023.

In 2023, we paid $175 million for our IGB acquisition.

In 2022, we paid $188 million for our Kongsberg ICS acquisition and $15 million related to investments in affiliates.

In 2024, capital spending was $559 million, as compared to $627 million in 2023.

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Net cash used in financing activities was $694 million in 2024, as compared to $420 million in 2023.

In 2023, we borrowed $150 million under our Term Loan and paid $297 million for repurchases of our common stock, $182 million in dividends to Lear stockholders and $79 million in dividends to noncontrolling interest holders.

In 2022, we paid $100 million for repurchases of our common stock, $186 million in dividends to Lear stockholders and $85 million in dividends to noncontrolling interest holders.

In 2024, we made a principal payment under our Term Loan of $50 million and paid $417 million for repurchases of our common stock, $174 million in dividends to Lear shareholders and $75 million in dividends to noncontrolling interest holders.

In 2023, we borrowed $150 million under our Term Loan and paid $297 million for repurchases of our common stock, $182 million in dividends to Lear shareholders and $79 million in dividends to noncontrolling interest holders.

For further information regarding our 2024 and 2023 financing transactions, see "— Capitalization" below and Note 6, "Debt," and Note 11, "Capital Stock, Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in this Report.

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2052 Notes November 2021 January 15, 2052 January 15 and July 15

In 2021, we issued $350 million in aggregate principal amount at maturity of 2032 Notes and $350 million in aggregate principal amount at maturity of 2052 Notes.

The 2032 Notes have a stated coupon rate of 2.6% and were issued at 99.782% of par, resulting in a yield to maturity of 2.624%.

The 2052 Notes have a stated coupon rate of 3.55% and were issued at 99.845% of par, resulting in a yield to maturity of 3.558%.

The net proceeds from the offering of $699 million, after original issue discount, were used, in part, to fund the tender of $200 million in aggregate principal amount of 2027 Notes and the repayment in full of $206 million outstanding on our term loan facility under our credit agreement (see "— Credit Agreement" below).

The remaining net proceeds were used to finance the 2022 acquisition of Kongsberg ICS and for general corporate purposes.

For further information related to the Kongsberg ICS acquisition, see Note 4, "Acquisitions," to the consolidated financial statements included in this Report.

In connection with these transactions, we recognized a loss of $24 million on the extinguishment of debt and paid related issuance costs of $7 million.

The indentures governing the Notes contain certain restrictive covenants and customary events of default.

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Credit Agreement

Our unsecured credit agreement, dated August 8, 2017, consisted of a $1.75 billion revolving credit facility (the "Revolving Credit Facility") and a $250 million term loan facility (the "Term Loan Facility").

In October 2021, we entered into an amended and restated credit agreement (the "Credit Agreement") that increased the Revolving Credit Facility to $2.0 billion and extended the maturity date to October 28, 2026.

In November 2021, we repaid in full $206 million outstanding on the Term Loan Facility.

In connection with these transactions, we recognized a loss of approximately $1 million on the extinguishment of debt and paid related issuance costs of approximately $3 million.

In November 2023, we extended the maturity date of the Revolving Credit Facility by one year to October 2 8, 2027.

Our amended and restated unsecured credit agreement (the "Credit Agreement") consists of a $2.0 billion revolving credit facility (the "Revolving Credit Facility") and matures on October 28, 2027.

In 2024 and 2023, there were no borrowings or repayments under the Revolving Credit Facility.

In 2022, aggregate borrowings and repayments under the Revolving Credit Facility were $65 million.

As of December 31, 2024 and 2023, there were no borrowings outstanding under the Revolving Credit Facility.

The Credit Agreement contains various financial and other covenants that require us to remain below a maximum leverage coverage ratio.

The Credit Agreement contains various financial and other covenants, including a maximum leverage coverage ratio.

As of December 31, 2024, we were in compliance with all covenants under the Credit Agreement .

For further information related to the Credit Agreement , including information on pricing, covenants and events of default, see Note 6, "Debt," to the consolidated financial statements included in this Report and the Credit Agreement , which has been incorporated by reference as an exhibit to this Report.

In May 2023, we borrowed $150 million under our Term Loan to finance, in part, the acquisition of IGB.

In 2023, we borrowed $150 million under our Term Loan to finance, in part, the acquisition of IGB.

In 2024, we made a principal payment under the Term Loan of $50 million.

The Term Loan contains the same covenants as the Credit Agreement.

As of December 31, 2024, we were in compliance with all covenants under the Term Loan.

For further information related to our acquisition of IGB, see Note 4, "Acquisitions," to the consolidated financial statements included in this Report.

For further information related to our acquisition of IGB, see Note 3, "Acquisition," to the consolidated financial statements included in this Report.

For further information related to our Term Loan, see Note 6, "Debt," to the consolidated financial statements included in this Report.

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In 2024, 2023 and 2022, our Board declared a quarterly cash dividend of $0.77 per share of common stock in all quarters.

We expect to continue to pay quarterly cash dividends in the future, although such payments 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.

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Commodity Prices

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.

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 (including recent U.S.

tariffs imposed or threatened to be imposed on Mexico, Canada and China, as well as other countries and any retaliatory actions taken by such countries), 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.

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.

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Debt obligations and interest expense associated with debt obligations

As of December 31, 2023, we had $2.6 billion of outstanding senior unsecured notes maturing in 2027 through 2052 and a $150 million outstanding Term Loan maturing in 2026, as well as $2.0 billion in available borrowing capacity under our Revolving Credit Facility maturing in 2027.

As of December 31, 2024, we had $2.6 billion of outstanding senior unsecured notes maturing in 2027 through 2052 and $100 million outstanding under our Term Loan maturing in 2026, as well as $2.0 billion in available borrowing capacity under our Revolving Credit Facility maturing in 2027.

Interest on the Notes is due biannually at varying dates.

Scheduled interest payments are shown below (in millions):

The scheduled interest payments on the Notes are shown below (in millions):

2025 2026 2027 2028 2029 Thereafter Total

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The Company has operating leases for production, office and warehouse facilities, manufacturing and office equipment, and vehicles with future lease obligations ranging from 2025 through 2047.

Maturities of operating leases obligations are shown below (in millions):

Maturities of undiscounted operating lease obligations are shown below (in millions):

2025 2026 2027 2028 2029 Thereafter Total

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Our minimum funding requirements may also be affected by changes in applicable legal requirements.

Contributions to our defined benefit pension plans are expected to be approximately $2 million in 2024.

Required contributions to our defined benefit pension plans are expected to be approximately $4 million in 2025.

We do not fund our postretirement benefit obligations and certain of our pension benefit obligations.

Rather, benefit payments

are made to eligible participants as incurred.

Rather, benefit payments are made to eligible participants as incurred.

We expect benefit payments related to our unfunded pension and postretirement benefit obligations to be approximately $7 million and $4 million, respectively, in 2025.

For further information related to our pension and other postretirement benefit plans, see "— Other Matters — Pension and Other Postretirement Benefit Plans" below and Note 10, "Pension and Other Postretirement Benefit Plans," to the consolidated financial statements included in this Report.

For further information related to our pension and other postretirement benefit plans, see Note 9, "Pension and Other Postretirement Benefit Plans," to the consolidated financial statements included in this Report.

Other Matters

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In addition, as of December 31, 2024, we had recorded reserves for warranty and recall matters of $27 million and environmental matters of $5 million.

We carry insurance for certain legal matters, including product liability claims, but such coverage may be limited.

We do not maintain insurance for warranty and recall matters.

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 Part I — Item 1A, "Risk Factors." For a more complete description of our outstanding material legal proceedings, see Note 14, "Legal and Other Contingencies," to the consolidated financial statements included in this Report.

For a description of risks related to various legal proceedings and claims,

see Part I — Item 1A, "Risk Factors." For a more complete description of our outstanding material legal proceedings, see Note 13, "Legal and Other Contingencies," to the consolidated financial statements included in this Report.

Critical Accounting Estimates

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Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that we collect from a customer are excluded from revenue.

Impairment of Goodwill

Goodwill is not amortized but is tested for impairment on at least an annual basis.

Impairment testing is required more often than annually if an event or circumstance indicates that an impairment is more likely than not to have occurred.

In conducting our annual impairment testing, we may first perform a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount.

If not, no further goodwill impairment testing is required.

If it is more likely than not that a reporting unit's fair value is less than its carrying amount, or if we elect not to perform a qualitative assessment of a reporting unit, we then compare the fair value of the reporting unit to the related net book value.

If the net book value of a reporting unit exceeds its fair value, an impairment loss is measured and recognized.

We utilize an income approach to estimate the fair value of each of our reporting units and a market valuation approach to further support this analysis.

The income approach is based on projected debt-free cash flow which is discounted to the present value using discount factors that consider the timing and risk of cash flows.

We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit's expected long-term operating cash flow performance.

This approach also mitigates the impact of cyclical trends that occur in the industry.

Fair value is estimated using recent automotive industry and specific platform production volume projections, which are based on both third-party and internally developed forecasts, as well as commercial and discount rate assumptions.

The discount rate used is the value-weighted average of our estimated cost of equity and of debt ("cost of capital") derived using both known and estimated customary market metrics.

Our weighted average cost of capital is adjusted by reporting unit to reflect a risk factor, if necessary.

Other significant assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures and changes in future working capital requirements.

While there are inherent uncertainties related to the assumptions used and to management's application of these assumptions to this analysis, we believe that the income approach provides a reasonable estimate of the fair

value of our reporting units.

The market valuation approach is used to further support our analysis and is based on recent transactions involving comparable companies.

The annual goodwill impairment assessment is completed as of the first day of our fourth quarter.

We performed a qualitative assessment for each reporting unit, except for one within the E-Systems operating segment and two within the Seating operating segment where quantitative analyses were performed.

The qualitative assessments indicated that it was more likely than not that the fair value of each reporting unit exceeded its respective carrying value.

The quantitative analyses indicated that the fair value of the respective reporting units exceeded its respective carrying value.

We account for income taxes in accordance with GAAP.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax loss and credit carryforwards.

Deferred tax assets and liabilities are measured

using enacted tax rates expected to apply to taxable income for the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income for the years in which those temporary differences are expected to be recovered or settled.

Our current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in certain countries.

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• the impact of changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities on our profitability;

• the impact of administrative policy, including protectionist trade policies, in the United States and related actions by countries in which we do business;

• the impact of administrative policy, including protectionist trade policies and tariffs, in the United States and related actions by countries in which we do business;

• other risks, described in Part I — Item 1A, "Risk Factors," as well as the risks and information provided from time to time in our other filings with the Securities and Exchange Commission.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis